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Chesapeake Energy’s Permit to Use State Route 1007 in Bradford County Revoked Until Damage is Repaired

Bradford-County-SR-1007 Chesapeake Energy’s permit to use a PA State Route in Bradford County has been revoked—now a second time—by the Pennsylvania Department of Transportation (PennDOT).

From the PennDOT press release:

HARRISBURG, Pa., April 15 — A road use permit issued to Chesapeake Energy Corporation for moving its drilling trucks and other equipment over State Route 1007 in Bradford County was revoked because of the company’s failure to deal with severe damage to the roadway, Transportation Secretary Allen D. Biehler, P.E., announced today.

Chesapeake was granted a permit to put heavy trucks and equipment on the road, known locally as Spring Hill Road in Tuscarora and Stevens townships. The road normally has a 10-ton weight restriction, and Chesapeake’s permit carried the understanding the company would be responsible for repairs.

“Chesapeake may not use this route until it makes the required repairs,” Biehler said. “We understand the importance of Marcellus Shale drilling to the region’s economy, but we will remain vigilant in requiring action to keep the roads safe and properly maintained for public use.”

PennDOT revoked the permit after Chesapeake failed to respond to two notices of unsafe conditions on the roadway. Under the terms of the permit, Chesapeake is to proactively monitor pavement conditions and immediately begin repairs as needed to keep the road safe.

On March 1, PennDOT revoked Chesapeake’s permit for State Route 1001 in Bradford County for the same reasons. The permit was restored after the road was closed for about one week and the company made the required repairs.

*PR Newswire (Apr 15) – PennDOT Revokes Road Use Permit for Chesapeake Energy Corporation on State Route 1007 in Bradford County Until Repairs Are Made

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Proposed New Marcellus Wastewater Treatment Plant Shifts from Athens Township to Tuscarora Township

After getting turned down by the supervisors in Athens Township, PA, Somerset Regional Water Resources is now planning to build a Marcellus wastewater treatment plant in nearby Tuscarora Township. Both Athens and Tuscarora are located in Bradford County in Northeastern Pennsylvania.

A search of DEP permit applications confirms that Somerset has applied for a permit to use the former Cornell Manufacturing building (more recently Pendu Manufacturing) just off Route 6 in Tuscarora Township at the intersection of Township Roads 524 and 494. The new name for the facility, as stated in the permit application, is the Tuscarora Township Wastewater Treatment Facility. It is actually in the first phase of the permitting process, having completed the preliminary administrative review and now into what is known as the technical review.*

Supervisors in Tuscarora have not yet been approached by Somerset to officially request permission to proceed, a step that will have to come soon in the process. If the supervisors approve the facility, it will also require approval from the PA State Department of Environmental Protection, which is estimated to take between 12-18 months.

If all goes according to plan, the facility will employ about 40 people. It is projected there will be about 180 truck trips in and out of the facility per day once it’s operational.

*Wyalusing Rocket-Courier (Apr 1) – Gas Well Water Treatment Plant Proposed at Former Cornell Plant in Tuscarora Township

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SRBC Fines Southwestern Energy $50K for Lack of Proper Approvals

Although the details are somewhat slim in the newspaper account, the known facts are that Southwestern Energy started construction on a well conductor pipe at a site in Wyalusing Township (Bradford County, PA) in early January, before the Susquehanna River Basin Commission (SRBC) had given its approval for said construction—something required by law. So the SRBC slapped them with a fine:

Under a settlement agreement between Southwestern and the commission, which was approved by both sides, Southwestern was required to make a $50,000 “payment in lieu of a penalty” to the commission.*

MDN firmly believes drilling companies need to be responsible and follow the rules, especially since the issue of drilling has been so distorted by anti-drilling propaganda. On the other hand, was this just an oversight on Southwestern’s part? Did someone not get the paperwork filed properly? Who knows. It does seem to be a case of “Simon Says” or “Mother May I?” Since the SRBC didn’t give the go-ahead, Southwestern was fined. Now that the paperwork is filed, have they gone ahead with construction at the site? Did the SRBC find any problems with the application once it was reviewed?

So, is SRBC’s action vigilant oversight of the public interest? Or a shakedown? You decide.

*Towanda Daily Review (Mar 24) – Southwestern Energy fined $50,000 for violation in Wyalusing Township

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A Novel Approach to Signing New Landowners by Chesapeake Energy in Bradford County, PA

Forget the landmen, Chesapeake Energy wants to talk directly to landowners and is throwing a “signing party” hoping to convince landowners in Bradford County to show up and sign up at the Wysox Fire Hall on March 20th.

Chesapeake sent letters to unsigned landowners in Towanda, North Towanda, Wysox, Standing Stone, Monroeton, Asylum, Wyalusing and Herrick, inviting them to the event.

Chesapeake tells landowners in the letter:

“Our records indicate that you own certain oil and gas rights that Chesapeake is interested in leasing,” the copy of the letter states. “We will have personnel on hand to discuss with you an offer to lease [the oil and gas rights on] your property that will potentially allow you to share in the royalty pool to be established for wells to be drilled in your area.”*

The letter offers unsigned landowners a 10-year lease for $5,000 per acre and 20% royalties. By comparison, just last September Chesapeake signed a deal with the Wyoming County Landowners group for $5,750 per acre and 20% royalties. Chesapeake has made an offer to Wysox Township to lease town land for the same terms ($5,750 per acre, 20% royalties). However, in January 2010, Northern Tier Career Center in North Towanda approved a five-year lease with Chesapeake for $6,500 per acre and 20% royalties on the school’s 73 acres.

MDN has not seen a copy of the full letter, but a commenter on The Daily Review website states the Chesapeake letter was sent to landowners with less than 3 acres of land. Landowners with small parcels do not have as much negotiating clout as larger landowners or groups. Even so, MDN cautions landowners about just showing up and signing up. While it may be a good deal, the devil is in the details of a contract. There is no substitute for having a contract reviewed by legal counsel before signing. Landowner groups (who retain legal counsel) are often the best way to ensure your interests as a landowner are protected. If you cannot find a landowner group to join, make sure you retain a good lawyer with experience in mineral rights leases.

Go enjoy the free coffee and donuts, but be careful about signing anything on the spot.

*Towanda The Daily Review (Mar 17) – Chesapeake to hold lease-signing event for Towanda-area landholders

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New Pipelines Coming to Lycoming, Tioga and Bradford Counties in Pennsylvania

PVR Midstream, a division of Penn Virginia Resource Partners, has signed an agreement with Range Resources to construct and operate pipelines and compression facilities for Range’s drilling in the Marcellus shale in PA.

According to the press release:

PVR Midstream and Range have agreed to an area of mutual interest (AMI) that covers parts of Lycoming, Tioga and Bradford Counties in north central Pennsylvania, in which Range currently holds a substantial acreage position. Within this AMI, PVR Midstream will construct approximately 16 miles of 24- and 30-inch gathering trunklines, smaller-diameter field gathering lines and compression facilities required to gather Range’s production from the AMI. The gathering system will have over 700 million cubic feet per day (MMcf per day) of throughput capacity, and the initial phase is expected to become operational in the fourth quarter of 2010. The agreement provides Range significant firm gathering capacity in the system, and PVR Midstream will be compensated for the gathering and compression services provided to Range through a combination of volumetric fees, with no direct commodity exposure. Excess capacity on the system and the location within a core area of Marcellus Shale development should allow PVR Midstream to develop additional revenue by providing gathering and compression services to area producers.

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More Details on Southwestern Energy’s Marcellus Shale Plans from Earnings Call

From a Q4 2009 earnings call* held on Feb. 26, we learn the following about Southwestern Energy’s involvement in the Marcellus Shale:

At December 31, 2009, we had approximately 149,000 net acres in Pennsylvania prospective for the Marcellus Shale. Our undeveloped acreage position as of December 31, 2009 had an average remaining lease term of five years, an average royalty interest of 13%, and was obtained at an average cost of $594 per acre.

During 2009, we invested $40 million in Pennsylvania, almost all of which was for acquisition of acreage, including approximately 22,800 net acres in Lycoming County that was purchased for $8.7 million, or $382 per acre.

We are currently drilling our first horizontal well since 2008 in Pennsylvania. The Heckman Camp #1 well is located in Bradford County, and first gas production is expected in the area in the second quarter of 2010.

Later in the call was this exchange between Jeff Hayden, an analyst with Rodman & Renshaw, and Steve Mueller, CEO of Southwestern Energy:

Jeff Hayden: Okay, appreciate that. And then, jumping up to the Marcellus really quickly, I just wonder if you could give us an update kind of how you’re looking at the drilling program for 2010 in terms of where you’re going to spot the wells, whether it’s Bradford, Susquehanna, Lycoming, et cetera. And then, kind of building on that, sort of an update on the takeaway capacity that you’re looking at and how you’re going to manage that.

Steve Mueller: Well, the rig that we’re running, we’ll drill between 20 and 24 wells this year. It is going to be all in Bradford County. It’s right on top of–I want to say right on top or within a mile or two of the Stagecoach Pipeline. And we have firm on that pipeline today of 20 million cubic foot and we’re building that going forward. And that’s the reason we’re drilling where we’re at, because we do have the capacity on that line to be able to do that. We’ll participate probably in another 20 wells. Most of those will probably be–a little bit maybe in the Bradford, but most will be in Susquehanna. And we’ll have a minority in those wells. And whatever the operator there is will have the takeaway, so we don’t have to worry about that portion.

Over the next year, we’ll keep one rig running, and then you’ll see us build that activity into the future. We’ll say the one area that will have the less drilling over the next couple of years will be in Lycoming County. That’s more 2012 and beyond before you see much drilling there.

*Southwestern Energy (Mar 1) – SWN 4Q 2009 Earnings Teleconference Transcript (PDF)

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Ultra Petroleum Expands Marcellus Leases to 486,000 Acres and 110 Active Wells in 2010

Ultra Petroleum News Release (Feb 12)
Ultra Petroleum Reports Strong Financial and Operating Results and Record Production for 2009

A portion of the release relating to its operations in the Marcellus in PA is extracted below:

During 2009, Ultra drilled 37 gross (22.5 net) wells in Pennsylvania. The company’s first production in the Marcellus program began in July 2009, and by year-end 13 wells were producing. Initial production (IP) rates for the producing wells average 7,500 Mcf per day with an average lateral length of just over 3,800 feet. Preliminary estimated ultimate recoveries affirm Ultra’s 3.75 Bcfe type-curve, with some preliminary EURs exceeding 6.0 Bcfe. The cost to drill and complete a horizontal Marcellus well during 2009 was $3.5 million.

The company’s four pipeline interconnects to major interstate pipelines remain well ahead of the drilling campaign. By mid-year, this interconnect capacity is expected to exceed 560 MMcf per day.

The company began 2009 with 288,000 gross (152,000 net) acres in the Marcellus. Through a combination of land acquisitions, trades and swaps, Ultra increased its holdings to 326,000 gross (169,000 net) acres by year-end. On December 21, 2009, Ultra announced that it had signed a purchase and sale agreement to acquire approximately 160,000 gross (80,000 net) acres in the Marcellus Shale. Upon closing of the acquisition in late February 2010, the company will hold approximately 486,000 gross (249,000 net) acres. With the acquisition, the company’s core position in Tioga, Bradford, Lycoming, and Potter counties in north-central Pennsylvania will expand to include the adjacent counties of Clinton and Centre.

In 2009, we initiated our horizontal Marcellus activity with above expectation results. Accordingly, we believe that we have substantially de-risked our Marcellus acreage due to these results. Well performance is improving along with our returns. Of the horizontal wells that we have completed so far, IP rates have ranged from over 3,400 Mcf per day to 10,400 Mcf per day, including two wells that are producing over 7,500 Mcf per day after 30 days. Examining our early wells, the first six have 30-day production averaging over 3,000 Mcf per day with the next seven wells averaging over 5,700 Mcf per day. In 2010, our Marcellus development program will expand with a drilling program exceeding 110 wells.

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Six Regulators Police Drilling in Eastern Half of PA

Wayne Independent (Nov 2):
Few regulators in place for natural-gas drilling

At a recent meeting in Preston Township (Pennsylvania), Department of Environmental Protection (DEP) officials talked about their role in inspecting gas drilling operations in the Marcellus Shale. The article attempts to make the case there are far too few inspectors for the growing number of drilling locations. In the eastern half of Pennslvania there are only six DEP officers whose job it is to monitor drilling activity and water supplies. The DEP is requesting three more, but with the recent state budget cuts, the additional positions are not assured.

There was one bit of interesting information for landowners in Wayne and surrounding counties in the article:

Although Wayne County has had only two natural gas wells drilled in the past two years, other areas in the region have experienced a rapid proliferation of production sites including in Susquehanna, Bradford, and Tioga counties. Hundreds of drill sites are expected to come online by the end of next year in the eastern office’s jurisdiction.

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Lackawanna College Predicts 90,000 New Jobs from Marcellus Drilling, Offers New Degree in Oil & Gas Production Technology

It seems drilling in the Marcellus is not only good for landowners and energy companies, but also for education and jobs. From an article published on iStockAnalyst (reprinted from The Daily Review, Towanda, PA):

Lackawanna College will begin offering an associate’s degree this fall in natural gas technology to prepare students to work in the growing local natural gas industry, and many of the required courses for the degree will be offered at the college’s Towanda Center.

In addition, Lackawanna College will soon start giving accounting students at the college’s Towanda Center the option of customizing their degree to prepare them to work in the accounting side of the natural gas industry, said Larry D. Milliken, director of energy programs at the college.

And the college is in the process of contracting with Sage Technical Services of Vestal, N.Y., so that its Towanda Center can again offer training to students who wish to obtain a commercial driver’s license, as there will be a large number of trucks required when drilling for gas, he said.

And this on the number of new jobs that will be created from Marcellus drilling activities:

“Development of the Marcellus Shale gas is expected to generate over 90,000 jobs over the next 20 years,” states a press release from Lackawanna College, which this week announced the launching of the natural gas technology program. “This kind of job growth and economic stimulus to northeastern Pennsylvania will be transforming to our region and to the lives of those people who get the technical education and training needed to take advantage of the best job opportunities as they arise.”

The new applied science degree in Oil and Gas Production Technology will be available at the college’s main campus in Scranton, and some of the other satellite locations, in addition to Towanda.

For more information about the new program, read the article Lackawanna College to Offer Natural Gas Technology Degree, read Lackawanna College’s news release, or contact Lackawanna College’s Department of Continuing Education at (570) 961-7883.