One more economic benefit from Marcellus shale drilling in Pennsylvania: Shale cuttings, the bits of rock that are left over after drilling gas wells in the Marcellus Shale, are paying for new equipment and training for first responders in Bradford County, PA.
A critical component in the federal Environmental Protection Agency’s (EPA) plan to study hydraulic fracturing is where they will conduct case studies. Starting on page 42 of the draft proposal, we find out.
There were 48 proposed locations suggested to the EPA, from which they will select between five and eight locations. We know five likely locations right now, and two of those are in the Marcellus Shale region—the other three are in other shale formations around the country.
Read More “Dimock, PA Among Likely Locations for EPA Study of Hydraulic Fracturing”
A nice series of photographs with commentary from David Murphy (The Oil Drum blog) who recently visited a Marcellus drilling site in Troy, PA: //www.theoildrum.com/node/6488.
Little, rural Bradford County located in northeastern Pennsylvania is seeing a boom in new jobs:
According to the Pennsylvania Department of Labor and Industry and the Center for Workforce Information and Analysis, Bradford County led the Commonwealth of Pennsylvania in net job growth from March of 2009 to March 2010.
According to the Northern Tier Regional Planning & Development Commission (NTRPDC), the 2,000 jobs gained represented a 7.2 percent increase while most counties suffered losses in employment. Bradford County saw the unemployment rate drop from 10 percent a year ago to 7.4 percent now.*
And also this:
Tioga County [PA] gained 800 jobs, the third-best improvement of the Commonwealth’s 67 counties.*
How can that be? Simple: Both counties have very active Marcellus Shale drilling.
*Wyalusing Rocket-Courier (May 13) – Bradford County Leads Commonwealth in Job Growth
To it’s credit, the Susquehanna River Basin Commission (SRBC) has established a field office in Northeastern PA specifically to monitor compliance with Marcellus drillers in the Susquehanna River watershed. Too bad the Delaware River Basin Commission is not as industrious and sensitive to landowners’ rights as the SRBC (no drilling allowed in the Delaware River watershed for the foreseeable future).
From the SRBC press release:
HARRISBURG, Pa. – Susquehanna River Basin Commission (SRBC) today announced the start-up of its first-ever field office aimed exclusively at enhancing compliance through increased on-site inspections, particularly of natural gas well development projects in the Marcellus and Utica shale regions. The field office is located on 1760 Elmira Street, Sayre, Bradford County, Pennsylvania.
This location strategically places SRBC’s compliance staff in and around the most active drilling areas in the upper basin region. It also allows staff to follow up more quickly on problems and concerns reported by basin citizens in Pennsylvania and New York.
Prior to the Sayre field office, staff drove from SRBC’s headquarters in Harrisburg to inspect natural gas well development sites and to meet with citizens and industry officials.
“Having our compliance staff closer to project areas to conduct inspections and to the citizens affected by the boom in natural gas drilling is intended to enhance our effectiveness and day-today efficiency,” said SRBC Executive Director Paul Swartz.
“For each and every water withdrawal or water use project the Commission approves, there are many subsequent and ongoing compliance requirements we impose on project sponsors such as monitoring and reporting. Because we take very seriously our obligations to verifying compliance, the Commission took the extraordinary and historic step of establishing the Sayre field office.”
The Pennsylvania College of Technology (part of the Penn State University system) continues to innovate by offering training for those interested in jobs and careers in the gas drilling industry. This time, they’re offering courses to high schoolers:
The National Science Foundation has awarded a $294,689 grant to the Pennsylvania College of Technology to educate and train high school and college students for careers in the Marcellus Shale natural gas industry, according to officials from the college and a press release issued this week by U.S. Rep. Chris Carney’s office.
The college will use much of the money to develop and implement college-level courses that will be offered at high schools in Bradford, Sullivan and other counties to provide training that will be useful in jobs in the natural gas extraction industry, said Jenette Carter, Pennsylvania College of Technology’s director of outreach for K-12.
The high school courses will benefit students from 23 school districts in central and northern Pennsylvania…The high school courses for which college credit will be granted are technical or vo-tech courses in areas such as welding, electronics, diesel technology, heavy equipment operation and repair, forestry, and information technology (networking).*
*Towanda Daily Review (May 6) – High school courses that will lead to careers in gas industry being implemented locally
This bit of information about Chesapeake’s Marcellus Shale activities from a recent operational update:
With approximately 1.5 million net acres, Chesapeake is the largest leasehold owner in the Marcellus Shale play that spans from northern West Virginia across much of Pennsylvania into southern New York. On its Marcellus leasehold, Chesapeake estimates it has approximately 26 tcfe of risked unproved resources and 66 tcfe of unrisked unproved resources.
During the 2010 first quarter, Chesapeake’s average daily net production of 65 mmcfe in the Marcellus increased approximately 40% over the 2009 fourth quarter and approximately 815% over the 2009 first quarter. Chesapeake is currently producing approximately 100 mmcfe net per day from the Marcellus. Chesapeake is currently drilling with 24 operated rigs in the Marcellus and anticipates operating an average of approximately 31 rigs in 2010 to drill approximately 170 net wells. During the 2010 first quarter, approximately $90 million of Chesapeake’s drilling costs in the Marcellus were paid for by its joint venture partner Statoil. From April 2010 through 2012, 75% of Chesapeake’s drilling costs in the Marcellus, or approximately $1.9 billion, will be paid for by Statoil.
Three notable recent wells completed by Chesapeake in the Marcellus are as follows:
*Business Wire (May 3) – Chesapeake Energy Corporation Provides Quarterly Operational Update
The Pennsylvania Department of Environmental Protection (DEP) is not happy with what it says is lack of progress on the part of Cabot Oil & Gas in the remediation of methane contamination of water supplies in Dimock Township, PA. The DEP blames Cabot for the methane contamination. Cabot claims they really aren’t at fault and are being unfairly blamed for a naturally occurring phenomenon (migrating natural gas).*
Today’s consent order from the DEP stipulates that Cabot must:
In addition:
From the DEP press release:
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
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
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
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
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.
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)
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.
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.