Pennsylvania

  • | | | | |

    Penn Virginia Corporation Acquires 10,000 Marcellus Shale Acres in PA for $19.5M

    Penn Virginia Corporation (“PVA”) announced it has acquired approximately 10,000 net Marcellus Shale acres primarily in Potter, Somerset and Tioga Counties, Pennsylvania in two transactions for approximately $19.5 million in cash and overriding royalty interests on a portion of the acquired acreage.

    The first acquisition was from a private oil and gas firm who was PVA’s joint venture partner. The acquired leases were located primarily in Potter, Somerset and Tioga Counties, including approximately 7,900 net acres with Marcellus Shale rights and approximately 23,000 net acres with deeper rights. In connection with the acquisition, PVA granted the seller a 1.5 percent overriding royalty interest on the acquired acreage. After taking into account the override, PVA’s net revenue interest in the joint venture acreage is approximately 84 percent.

    The second acquisition was from another private oil and gas firm of leases primarily in Potter County covering approximately 2,100 net acres, with rights to the Marcellus Shale and all other formations.

    A. James Dearlove, President and Chief Executive Officer, said, “We are pleased to have expanded our Marcellus Shale acreage position from approximately 35,000 net acres to 45,000 net acres, and to have accomplished this expansion at a very attractive cost. We plan to begin testing the acreage in these areas later in 2010. In addition, we continue our leasing efforts and our review of other acquisition opportunities, as we seek to establish a significant presence in this emerging play over the next few years.”

    Source: Penn Virginia Corporation Announces Acquisitions in the Marcellus Shale (May 28)

  • | | | | | | | | |

    East Resources Sells to Royal Dutch Shell for $4.7 Billion, Deal Includes All of East’s Marcellus Shale Operations

    East Resources, a major drilling company in the Marcellus Shale, especially in Pennsylvania, is selling itself to Royal Dutch Shell for a whopping $4.7 billion. From drilling a single horizontal Marcellus Shale gas well in 2009, East has drilled some 75 horizontal wells in the past 12 months. East did have plans to drill 6,000-7,000 wells in Tioga County, PA over the next “several years” (see this MDN story). No word on the planned drilling for Tioga County and other regions, but MDN assume Shell did not invest in East to not drill. In fact, the pace of drilling may well pick up with Shell’s investment.

    From the East Resources press release:

    East Resources, Inc., a Pennsylvania-based independent oil and gas producer and one of the most active explorers in the Marcellus Shale, along with its private equity investor Kohlberg Kravis Roberts & Company, signed a definitive agreement to sell the company’s principal subsidiaries to an affiliate of Royal Dutch Shell plc (“Shell”) for cash consideration of $4.7 billion. The sale includes East’s natural gas and oil exploration and production operations and most of its holdings in related businesses. With the purchase of East Resources, Shell will acquire approximately 650,000 net acres of Marcellus Shale rights in Pennsylvania, West Virginia and New York, and 1.05 million acres in total.

    East Resources, founded in 1983 by Terrence M. Pegula, has been one of the Appalachian Basin’s most active exploration and production companies for more than 25 years. Since its inception, East has grown primarily through its exploration successes, several strategic acquisitions, and most recently the development of the Marcellus Shale.

    East Resources employs approximately 300 office and field personnel in Pennsylvania, West Virginia, New York and Colorado. Its principal offices are located in Warrendale, PA, Broomfield, CO and Parkersburg, WV. Shell will continue to operate with East’s workforce to ensure continuing success in the growth and development of the reserves it will acquire in the purchase.

    The sale of East Resources to Shell is expected to close in two phases. The first phase of the sale will be completed in mid- to late summer. The second phase of the sale, including the sale of the West Virginia business, will close later this year, pending certain regulatory approvals.

    “The sale of the company to Shell will ensure that the capital needed to develop East’s significant Marcellus Shale holdings will be available,” says Mr. Pegula, East’s owner and Chief Executive Officer. “Shell’s entry into the region should benefit Pennsylvania, West Virginia and New York through significant new capital investment, new jobs and new business opportunities. I am very proud that this transaction has brought Shell into the Appalachian Basin.”

    President of Shell Oil Company, Marvin Odum commented, “East Resources’ management has built an excellent organization which we are pleased to have as we enter the northeast US and specifically the Marcellus Shale play.”*

    *East Resources Press Release (May 28) – East Resources Inc announces sales agreement with Royal Dutch Shell plc

  • | | | | | |

    Gas Drilling & Compressor Plants in DISH, TX Not Poisoning Local Population

    Since February of this year, Mayor Calvin Tillman from DISH, Texas has visited—several times—the Marcellus Shale regions of New York and Pennsylvania, sponsored by groups like Shaleshock and other anti-drilling organizations. Mayor Tillman claims that his small town in Texas, north of the Dallas-Fort Worth metroplex area, has been contaminated by shale gas drilling. DISH is located in the Barnett Shale deposit. Some of the drilled gas wells are within the city limits, and others sit just outside of town. MDN attended one of Mayor Tillman’s presentations back in February and you can read about my impressions here. It’s a fair statement that Mayor Tillman has been a popular speaker for those opposed to drilling in the Marcellus Shale, drawing sizable crowds.

    One of the claims made by Mayor Tillman in his talks is that either local gas wells, or the compressor plants used to pressurize shale gas for area pipelines, or both is polluting DISH and its citizens. DISH is unusual in that there are 11 large pipelines in the DISH area, far more than normally found in a single location (the most in one area for shale gas that MDN is aware of). Odors are coming from the compressor plants, so it’s certainly not a stretch to think that if you can smell it, it may be polluting or causing harm. That was Mayor Tillman’s suspicion, so he used city funds to conduct environmental testing in the DISH area, and separately another organization performed a health “survey” of current and former DISH residents (for free). Problem is, both the environmental testing and the health survey were flawed in their methodologies, which casts doubt on the findings. So the Texas Department of State Health Services stepped in to do a scientific health study using blood and tissue samples.

    Agency officials collected biological samples from 28 Dish residents in late January to see whether levels of volatile organic compounds (VOCs) in their blood were higher than those in the broader population. “We were looking to see whether a single contaminant or a handful of contaminants were notably elevated in many or all of the people we tested,” said Dr. Carrie Bradford, the toxicologist who led the investigation.*

    And what was the conclusion of the Department of State Health?

    Texas health officials found no connection between pollution from a natural gas compressor station in Dish, Texas and levels of toxins in the blood of people living nearby.*

    The new report from the Department of State Health Services says levels of benzene and other contaminants was no higher in Dish residents than in the nation’s population in general.**

    MDN wonders if the now less than credible Mayor Tillman will still be such a large draw when he comes calling again?

    *Elimra Star-Gazette (May 26) – Texas gas study finds no pattern of elevated toxins near compressor
    **Dallas Fort Worth – Channel 33 News (May 12) – DISH Report: No evidence gas well hurting residents of Dish, Texas

  • |

    New Website Resource for Marcellus Shale Workers Coming to PA

    Marcellus Shale drilling in Pennsylvania continues to bring business, and people, to the state. Now there’s a new website to assist out-of-staters who need a place to stay:

    STATE COLLEGE, Pa.—Workers traveling to the Marcellus Shale natural gas deposit in Pennsylvania now have a valuable online travel guide dedicated to helping find accommodations in Pennsylvania’s Marcellus Shale region.

    MarcellusShaleHotels.com offers those coming to stay in the area information on hotels with short and long-term stay options. All the hotels featured on the site offer special rates to those coming to work on the Marcellus Shale.

    Michael Szczesny is the Director of Operations at the State College hotels featured on the resource site. He’s eager to assist Marcellus Shale companies with their lodging needs.

    “All our State College properties are either adjacent to or within walking distance to restaurants such as Outback Steakhouse, Olive Garden, Otto’s Microbrewery and Texas Roadhouse,” Szczesny said. “We are offering both short and long-term stays to accommodate the requirements of each company.”

    Each of the hotels featured on the site is just minutes away from various locations in Pennsylvania’s Marcellus Shale region and offers amenities designed to accommodate every guest.

    Locations of properties on the site range from Lock Haven to State College and down to Pittsburgh. To learn more about hotels in the Marcellus Shale region of Pennsylvania, visit MarcellusShaleHotels.com today.*

    *Business Wire (May 26) – Marcellus Shale Website a Resource to Those Traveling to Work Pennsylvania’s Gas Field

  • | | |

    PA Gas Driller Bonds Will Skyrocket from $2,500 to $150,000 per Marcellus Gas Well Under Proposed Legislation

    Pennsylvania lawmakers, both Democrat and Republican, agree that bonds posted by drillers need to increase—dramatically. The bonds are used to cover the costs of plugging or closing natural gas wells. The current bond requirements date back to 1984.

    Drillers are required to post a $2,500 bond for a single well and $25,000 blanket bond to cover any number of wells under current law. A measure sponsored by Rep. Camille George, D-74, Houtzdale, would require a $150,000-per-well bond for any well in the Marcellus Shale formation and $12,000 bond on other oil and gas wells. George, chairman of the House Environmental Resources and Energy Committee, also proposes setting a $240,000 blanket bond, while prohibiting blanket bonds for wells in the Marcellus Shale formation. He suggested those amounts would cover the actual costs of decommissioning.

    *Hazelton Standard Speaker (May 23) – Marcellus drilling spurs calls for higher bonds

  • | | |

    PA DEP Secretary Hanger Summons Marcellus Shale Drillers to Meeting, Asks Them to Comply with Unratified New Drilling Rules

    After the PA Secretary for the Department of Environmental Protection, John Hanger, summoned Marcellus Shale drilling companies to a meeting, he proceeded to “challenge” them to comply with new drilling rules that likely won’t be adopted until this fall. Talk about arrogant.

    “I urged the industry to implement the stronger standards immediately and not wait for the rule to be finalized,” Mr. Hanger said. “I challenged the industry to set a world-class example.”

    The summit came ahead of action by the state Environmental Quality Board on Monday on several proposed regulations to require that oil field-grade cement be used in Marcellus Shale wells, to delineate responsibility and notification procedures for gas migration problems and to strengthen requirements for treating drilling wastewater and limiting sediment erosion from wells. Mr. Hanger expects the rules to be adopted by fall.*

    Certainly nothing wrong with new rules to help prevent a repeat of the situation in Dimock, PA from recurring, which supposedly the new rules will help guard against. However, MDN continues to notice that Hanger’s tone is increasingly confrontational rather than collaborative.

    *Scranton Times Tribune (May 14) – DEP head asks gas drillers to comply with new rules

  • | | | |

    Bradford County, PA Experiencing a Job Boom, Leads Entire State in Net Job Growth

    Bradford County, PA 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

  • | | | | | |

    MarkWest Request to Expand Gas Compressor Facilities in Washington County, PA Denied

    As MDN has previously reported (see this story), MarkWest Energy operates more than 100 gas compressor facilities, including two in Mount Pleasant Township in Washington County, PA—the location of the very first horizontally drilled Marcellus Shale gas well. There has been tension between area residents and MarkWest about the facilities over issues of noise, lights and odors coming from the facilities. A few months ago MarkWest made application to expand the facilities but the Mt. Pleasant Township Zoning board has just turned them down:

    The board denied a request from Mark West Liberty Midstream to expand its Fulton and Stewart compressing stations.

    The company had made the request to add two engines at each site and expand the steel structures. The company processes gas for Range Resources.*

    MDN doubts this will be the end of this story. There is an ongoing debate about just who has authority to regulate pipelines and compressor facilities, and the matter is far from settled. Does regulation for these types of facilities lie with local governments? Or is it a “utility” that is/should be regulated by the state rather than local authorities? Stay tuned.

    *Washington Observer-Reporter (May 12) – Board nixes expansion for gas compressing stations in Mt. Pleasant Township

  • | | |

    Will PA Landowners Pay Higher Property Taxes When Drilling Begins? Maybe

    Landowners in Pennsylvania have gotten property tax relief in recent years from a PA law known as “Clean and Green.” If landowners keep their property use as agricultural, open space or forest-land, they are taxed at a lower rate (for those uses) rather than the higher fair market value the land might bring for other uses. But there’s a catch—if a landowner starts using the land for another non-agricultural use, they not only start paying higher taxes on it now, they also have to pay the difference in the tax rate between Clean and Green and fair market value going back up to seven years—as a penalty.

    The intent of the program, which is administered through county government, is to encourage property owners to retain their land in agricultural, open-space or forest-land use by providing real estate tax relief.

    Property owners benefit through lower taxes as long as their land isn’t used for housing developments or other uses inconsistent with agricultural production, open-space or forest-land use.

    If a property owner decided to use the land for a purpose inconsistent with the program, the landowner would have to pay “rollback taxes” – the difference between fair market value and use value of the land – for as many years as the property had been designated Clean and Green, up to a maximum of seven years.*

    So the million dollar question: If landowners allow drilling on their land, is that land disqualified from the Clean and Green lower tax rate? Right now, as things stand, each county will interpret the law the way they see fit. There is a bill that has passed the PA Senate and is now before for the House for consideration that would allow gas drilling on Clean and Green land without penalty.

    Landowners who have signed leases where drilling will soon begin (or has already begun) need to monitor this situation. Landowners in PA who have not yet signed a lease would do well to be sure there is a clause requiring the driller to pay the difference in taxes should the bill not get signed into law.

    *Wilkes-Barre Times Leader (May 11) – Drilling’s effect on ‘Clean and Green’ land uncertain

  • | | |

    Susquehanna River Basin Commission Establishes Marcellus Shale Field Office in Northeast PA

    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.”

    Read More “Susquehanna River Basin Commission Establishes Marcellus Shale Field Office in Northeast PA”

  • | | | | | |

    The Two (Drilling) Faces of PA Gov. Ed Rendell

    Is Pennsylvania Gov. Ed Rendell pro- or anti-drilling? Darned if I can tell. In some ways he has encouraged and allowed drilling to flourish in PA under his watch, something PA landowners should be thankful for. But it seems he has to keep some in his own party appeased, so he often talks down drilling. In typical politician fashion, he talks out of both sides of his mouth. The latest example is today. One headline trumpets that Rendell has signed a deal with Anadarko for $120 million (Anadarko to pay Pennsylvania $120 mln for drilling – Reuters) to allow drilling on an additional 33K acres. But another headline says Rendell backs a stop to further leasing of PA public lands (Rendell backs halt to gas leasing in public lands – CBS/Channel 21), as if he’s champion of the anti-drillers. What gives?

    Well, it’s the same Ed Rendell on the same day walking a tightrope. He did indeed sign a deal with Anadarko to lease land that is supposedly surrounded by other public land already leased for drilling and so, as the thinking goes, the newly leased land won’t be “disturbed” all that much since most of the drilling operations will be from adjacent land. But now that he’s got his fist-full of $120 million, he immediately announces he’s now on board with no further leasing (after today, of course). Methinks he’s not going to make either side happy—but then he’s not running for re-election. What a strange character, that Gov. Rendell.

    Press release from Gov. Rendell’s office putting the master spin on today’s high-wire act:

    Harrisburg – Governor Edward G. Rendell announced today that the Department of Conservation and Natural Resources has finalized a responsible natural gas lease agreement by which Pennsylvania will meet its need for revenue from drilling next year, while also fulfilling its obligation to protect Pennsylvania’s natural resources.

    Under the agreement, Anadarko Petroleum Corp. has paid the commonwealth $120 million to access 32,896 acres that are surrounded by tracts of land for which drilling companies already hold lease agreements. Because these newly leased tracts can largely be accessed by gas operations on the adjacent tracts, the amount of new state forest surface area that must be disturbed is minimized.

    Other than the agreement, the commonwealth will not have to make any additional state forest land available to reach its revenue goals for natural gas drilling in the 2010-11 fiscal year.

    Read More “The Two (Drilling) Faces of PA Gov. Ed Rendell”

  • | | | |

    PA College of Technology to Offer Marcellus Gas Drilling Courses to High Schoolers in Northern and Central PA

    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

  • | | | |

    Northeastern PA Experiencing a Boom for Local Businesses from Marcellus Shale Drilling

    A recent meeting of the Wyoming County (PA) Chamber of Commerce saw over 400 members, mostly from area small businesses, networking and listening to presenters who have already reaped financial rewards from Marcellus drilling activity in the area. Two examples:

    Early on as the industry developed in Susquehanna County about 18 months ahead of Wyoming County, [Bill Kelley of Taylor Rental] noted an occasional need for drillers to borrow rental equipment when something broke down. Not only did Kelley enhance his inventory, but in the intervening months he saw a need and created a new spinoff business known as BX3 Oilfield Supply. He enlarged his workforce to handle the clients.

    Art Carpenter who oversees the Skidder Shop just out Rt. 92 south of Tunkhannock said his business has become a franchise dealer for water tankers and frankly can’t keep the rigs that run around $170,000 on the lot long enough.*

    It’s not only landowners and energy companies who benefit from drilling—the entire community benefits.

    *The Susquehanna Independent Weekender (May 5) – Gas boom creating opportunity

  • | | |

    Talisman Energy Selling Conventional Gas Properties, Investing in Marcellus Shale Instead

    Talisman Energy is selling off its conventional gas properties and shifting investment to shale gas properties:

    Talisman Energy Inc, Canada’s No.4 independent oil and gas explorer, said on Wednesday it is boosting its U.S. shale gas holdings, as it reported an operating profit that trumped expectations.

    Shale gas regions have emerged as the leading source of new natural gas supplies over the past few years, pushing up production of the fuel as new drilling techniques lower the cost of exploiting the massive reserves locked in the shale.

    Talisman is selling off much of its conventional gas properties to concentrate on its shale holdings, with the bulk of its spending on the Marcellus shale region around Pennsylvania and the Montney region of northeastern British Columbia.*

    *MSN/Reuters (May 5) – Talisman says shale strategy at turning point

  • | | | | |

    Rex Energy has Already Drilled 4 Wells in Butler County, PA in 2010, On Track to Complete 6 More by Year’s End

    The following operational updates about Rex Energy Corporation’s Marcellus drilling activity thus far in 2010, from a company press release:

    Butler County, Pennsylvania Marcellus Project Area

    Drilling and completion activity in Rex Energy’s Marcellus Shale project area in Butler County, Pennsylvania is continuing to progress on schedule. The two ‘Magill’ horizontal wells completed by the company earlier this year have been flow-testing for approximately 20 days. The combined peak 24 hour rate of the two Magill wells to date has been 5.9 MMcfe per day. The company expects these rates to continue to rise as additional water is returned to the surface. The company’s refrigeration processing plant, and therefore its gas sales in Butler County, Pennsylvania, is currently shut-in for pipeline maintenance. The company expects the plant and sales to resume during May 2010 and to connect the Magill wells to the plant at that time.

    [Rex Energy President & CEO Benjamin] Hulburt remarked, “When we compare the initial flow rates of the Magill wells to our P. Knauff #1H well, our first horizontal Marcellus Shale well completed in Butler County, Pennsylvania during 2009, we are very encouraged by the results. The P. Knauff #1H well took approximately 90 days to achieve its peak rate, and thereafter, the rate remained relatively flat for the next 180 days. Although the results of the Magill wells are still preliminary, we are encouraged by what appears to be a similar profile.”

    Read More “Rex Energy has Already Drilled 4 Wells in Butler County, PA in 2010, On Track to Complete 6 More by Year’s End”