New Research Finds PA Lease Deals Not Tied to Well Productivity
Purely by happenstance, we stumbled across an interesting “working paper” published by the National Bureau of Economic Research. The paper (we’d call it a study) is titled “Negotiations of Oil and Gas Auxiliary Lease Clauses: Evidence from Pennsylvania’s Marcellus Shale” (full copy below), first published in December but subsequently updated in January. Researchers scanned and (using software) analyzed nearly 60,000 leases signed in the Marcellus Shale Play of Pennsylvania. They learned some interesting things about PA leases. One of the main conclusions (eye-opening for us) is that getting more money for your lease is not necessarily tied to whether or not nearby wells are good producers. At best, better lease terms have a “weak relationship” to the performance of other wells in a given geography. What is the secret to getting more favorable lease terms?
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The Marcellus/Utica region is becoming a booming real estate market and manufacturing destination in the U.S., with manufacturing investment currently estimated at over $100 billion, according to Bryce Custer from NAI Spring Commercial Realty. What’s drawing manufacturers to the M-U region? Geopolitical instability, supply chain disruption, the reshoring trend, and abundant raw materials, including cheap (and clean) M-U natural gas.
It hasn’t been a problem-free startup for the mighty Shell ethane cracker plant in Monaca (Beaver County), PA, now called the Shell Polymers Monaca facility. We’ve noted some of the more prominent issues as we’ve spotted them in the news. Things like the plant exceeding allowed air emissions (see 
Last Thursday, the Pennsylvania Commonwealth Court dismissed the Dept. of Environmental Protection’s (DEP) claim that the Regional Greenhouse Gas Initiative (RGGI), an obscene carbon tax on gas-fired power plants being forced on PA businesses (and electricity consumers) by former Gov. Tom Wolf and his henchman DEP Secretary Pat McDonnell, was unlawfully delayed by the PA Senate. It is a good news/bad news decision.
On January 18, every single Republican member of the Pennsylvania State Senate signed (and sent) a joint letter to newly-minted Gov. Josh Shapiro urging him to take steps “immediately” to undo PA’s entrance into the insane Regional Greenhouse Gas Initiative (RGGI) carbon tax, a plan forced on the state by Shapiro’s wacky predecessor Tom Wolf. During the campaign, Shapiro prevaricated on whether or not he would pull PA’s plan to enter RGGI.
New shale permits issued for Jan. 9-15 in the Marcellus/Utica included 18 new permits in Pennsylvania, 5 new permits in Ohio, and 2 new permits in West Virginia. The top recipient of permits for last week was PennEnergy Resources, grabbing 6 permits to drill on a single pad in Butler County, PA. Right behind PennEnergy was Southwestern Energy with 5 permits total spread across all three states–3 in PA, and 1 each in OH and WV.
We have two related lawsuits to report on involving landowners in Susquehanna County, PA, and Callon Petroleum. As most lawsuits are, these two are complicated. But, at a very high level, the concept is simple. The landowners allege that Callon Marcellus (formerly Carrizo Marcellus) shorted them on royalty payments. The landowners sued, but Callon sold its assets in northeastern PA (to BKV) and engaged in a shell game to move the proceeds of that sale ($74 million) directly to the mothership, Callon Petroleum, as a way of avoiding liability to pay, just in case they lose the royalty lawsuit.
Newly enthroned Governor of Pennsylvania, Josh Shapiro, has done a good job of crafting his image as that of a moderate. At least on the issue of energy. He supposedly has voiced support for natural gas production and an “all-of-the-above” energy policy. Members of the natural gas industry in the state are mouthing their own platitudes of willingness to “work with the new governor” on energy issues–to find “common ground.” But right now, just a day after he took office, everyone is waiting and watching to see what he actually does. Will Shapiro tackle important issues like permitting delays and regulatory roadblocks? Or will he revert to his Attorney General days of attacking the industry? We know which one we think he’ll do.
PJM is the largest electric grid operator in the U.S. It serves 65 million people in 13 states plus the District of Columbia (including PA, OH, and WV). PJM is coming under criticism for an almost-blackout during the recent Christmas cold snap. If not for certain gas-fired peaker plants, like that in the Little Town of Bethlehem, the lights would have gone out during a brutal cold snap (see 
Pennsylvania General Energy (PGE) is constructing a natural gas pipeline, a freshwater pipeline, and facilities to withdraw fresh water at a site along the Loyalsock Creek, north of Montoursville in Lycoming County, PA. The company’s work resulted in a sediment plume that appeared in Loyalsock Creek for several miles downstream of the construction site, caused by the failure of erosion and sediment controls following a heavy rainstorm. The state Dept. of Environmental Protection (DEP) issued notices of violation (NOVs) on three separate occasions from September to November (see 
The Upper Delaware Council (UDC) hosted a public presentation titled “Water Resource and Environmental Considerations with Shale Gas Development in the Appalachian Basin” last week at the Upper Delaware Council office in Narrowsburg, NY. The program was delivered virtually by Dr. David Yoxtheimer, Ph.D., P.G., assistant research professor and Extension associate with the Marcellus Center for Outreach and Research at Penn State University. Yoxtheimer did a great job of laying out the facts of Marcellus drilling–both the good and the not-so-good, with an eye on how to mitigate the risks.