Statewide PA

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    Drilling in the PA Marcellus Shale Sets Blistering Pace in 2010, On Course for $7 Billion Investment

    The Philadelphia Inquirer has an excellent roundup of drilling activity in the Marcellus Shale, with a listing of the top 20 active energy companies in the PA Marcellus Shale. Well worth reading and bookmarking!

    The article starts with this:

    So far in 2010, natural gas exploration companies have broken ground on three Marcellus Shale wells in Pennsylvania every day, triple the pace of a year ago.

    The Marcellus Shale Coalition, the industry trade group, estimates that up to 1,750 wells will be drilled this year, up from 763 last year.

    At $4 million a well, that’s a $7 billion investment – not counting land-acquisition costs or royalties on gas produced.*

    New York needs to wake up NOW. Marcellus Shale drilling is here to stay, especially in Pennsylvania. It’s having a huge impact on jobs, investments and taxes. New York could use an extra $7 billion in investment right about now!

    *Philadelphia Inquirer (Mar 14) – Gas Drilling Going Deep

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    Landowners Beware of Post-Production Expenses Deducted from Your Royalty Checks

    An informative article with a lot of background on the issue of gas royalty payments and the practice of deducting post-production expenses from those payments is published in today’s The State Journal. The article covers in detail the case of Tawney v. Columbia Natural Resources that was settled by the West Virginia Supreme Court in 2006. That decision said, in essence:

    [G]as producers cannot deduct “post-production” expenses — those incurred between the wellhead and market, such as dehydration, compression and transportation — from royalty payments unless explicitly spelled out in the lease.*

    West Virginia is in the minority of states that have ruled against post-production expenses. Other states disallowing post-production expenses (unless specifically spelled out in the lease) include Arkansas, Colorado, Kansas and Oklahoma.

    However, because gas “at the wellhead” is not in “marketable condition,” a number of other states do allow deduction of post-production expenses from royalty payments in cases where it’s not specifically enumerated in the lease. Those states include Louisiana, Mississippi, Texas, California, Montana, New Mexico and some others.

    Kentucky and Pennsylvania have not yet ruled on the matter, although the Pennsylvania Supreme Court is due to rule soon in Kilmer v. Elexco Land Services Inc.

    The lesson for landowners: Make sure the language in your lease is spelled out in detail about what kinds of post-production expenses can and cannot be deducted from your royalty checks. And if you have a contract that is not specific, get legal advice and be sure you’re receiving the money you’re owed.

    *The State Journal (Mar 11) – State Courts Continue to Evaluate Gas Royalties

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    PA DEP Staffs Up with More Gas Well Inspectors

    The Pennsylvania Department of Environmental Protection is hiring more inspectors for gas and oil wells. Right now there are 125 inspectors statewide. By the summer, an additional 68 will be on board bringing the total to 193 inspectors. Which is a good thing according to the York (PA) Dispatch, which notes:

    In the last year, to cite two examples, inspectors noted that a brine pipeline operated by Range Resources Corp. was spilling production fluids into the ground at Cross Creek Park near Avella, resulting in a $23,500 penalty for the Texas-based company; and Atlas Resources was fined for violations at 13 of its wells in Washington, Fayette and Greene counties.*

    MDN agrees. More inspectors are a good thing. It keeps everyone honest, and reassures the general public that drilling can be done safely.

    *York Dispatch (Mar 10) – Marcellus Shale: Drilling inspectors welcome

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    MDN Editorial: PA Landowners Need to Continue Opposing a Shale Gas Severance Tax

    The severance tax, like a bad penny, keeps turning up. Pennsylvanians (and eventually New Yorkers) will have to stay vigilant against greedy politicians who can’t help themselves when there’s something nearby that can be taxed. Tax revenues equal money flowing through politicians’ hands, and that equals power. The latest example:

    State Sen. Andy Dinniman, D-19th, of West Whiteland, has introduced legislation that would impose a tax on Marcellus Shale natural gas extraction and use the revenues from that tax to give Pennsylvania homeowners property tax rebates.

    Dinniman said a 5 percent tax on the natural gas from the state’s Marcellus Shale reserves would, by 2014, provide the average homeowner $148 each year in property tax relief.

    “Every election, all the politicians stand up and say, ‘We understand your pain. We understand what’s going on. We will bring property tax reform. We will lower your property taxes,’” Dinniman said. “Well, the answer is beneath our feet. It’s a mile down, but it’s beneath our feet.”

    The tax, referred to as a severance tax, would be assessed per cubic foot of gas that is extracted, Dinniman said.*

    It is a bald-faced lie that the money will go for property tax relief. Hopefully the good citizens of PA know that by now. After having been lied to for a generation (lottery money goes to schools, Social Security money stays in its own trust fund, etc.), I am hopeful that people are starting to wise up. A severance tax, if instituted, will go to Harrisburg where it will disappear into politicians’ hands to be used for other “urgent” needs. And everyone knows it.

    Landowners are encouraged to continue to oppose the severance tax, which ultimately comes out of their own royalty checks.

    *The Delaware County Daily Times (Mar 3) – Chesco pol proposes tax on Marcellus Shale gas reserves

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    New Wastewater Treatment Plant Approved in Central PA

    Narrowsburg, NY – The River Reporter (Feb 25)
    ‘Unauthorized’ wastewater hearing brings flowback feedback

    The Pennsylvania Department of Environmental Protection (DEP) has granted its first permit to a wastewater treatment facility since new, stricter guidelines were recently implemented. From The River Reporter article:

    The DEP has issued its first new permit for treating drilling wastewater to TerrAqua Resource Management LLC of Williamsport, allowing the company to treat and discharge 400,000 gallons per day of gas well drilling wastewater into the West Branch Susquehanna River Watershed.

    According to the DEP, the permit requires TerrAqua to meet the proposed new regulatory standards of 500 parts per million for total dissolved solids (TDS) and 250 parts per million for chlorides and sulfates. TerrAqua has indicated that it will pursue a thermal treatment process capable of reducing TDS levels to less than 500 parts per million at all times.

    The discharge permit also requires TerrAqua to monitor for radioactivity, a large number of metals, including barium, strontium, iron, manganese and aluminum, as well as organics such as toluene, benzene, phenols, ethylene glycol and surfactants.

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    PA Gov. Rendell Predicts His Proposal to Tax Marcellus Shale Gas is DOA

    WTAE Pittsburgh (Feb 25)
    Rendell Talks Expanded Sales Tax Plan In Pittsburgh

    Pennsylvania Gov. Ed Rendell (Democrat), has proposed a severance tax on natural gas in the Marcellus Shale. But the Governor himself is not optimistic that the Pennsylvania Legislature will pass his proposals. From the WTAE news report:

    In addition, Rendell is reviving proposals he has offered before, including extending the tobacco tax to cigars and smokeless tobacco and adding a severance tax on natural gas extraction to capitalize on the industry’s hot pursuit of Marcellus Shale.

    However, Rendell said he’s not optimistic the state Legislature will vote for his changes.

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    New President of Marcellus Shale Coalition Says Drilling Will Bring 110,000 Jobs to PA in 2010

    Katie Klaber, the new President of the Marcellus Shale Coalition recently appeared on the Clean Skies News network to discuss the environmental issues of natural gas drilling. It’s an informative and short piece (under 10 minutes), and worth watching (embedded below).

    Among the things discussed that MDN found interesting:

    • Ms. Klaber says Marcellus Drilling will bring 110,000 jobs to Pennsylvania in 2010.
    • Some drillers recycle and reuse 100% of fracking water, but the industry average right now is recycling and reusing 60%.
    • Because of the high rate of recycling, a shortage of wastewater treatment facilities is not critical at the moment, but more facilities will be needed in the next few years.
    • Drilling companies already have an MSDS (Materials Safety Data Sheet) at the drilling site for each and every chemical used in the fracking process. That is right now, today. So the hue and cry that drillers are “hiding” the chemicals used in fracking is not true.
    • Ms. Klaber predicts that Pennsylvania will be a net exporter of natural gas by 2014.

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    Southwestern Energy Investing $145 Million and Drilling 35-40 Wells in the Marcellus in 2010

    MarketWatch/PR Newswire (Feb 25)
    Southwestern Energy Announces 2009 Financial and Operating Results

    Southerwestern Energy made it’s 2009 results known today in a press release. Of concern to landowners in the Marcellus, particularly in northeastern PA, is this paragraph:

    Appalachia – The company began leasing in northeastern Pennsylvania in 2007 in an effort to gain a position in the emerging Marcellus Shale play. At December 31, 2009, Southwestern had approximately 149,000 net acres in Pennsylvania under which it believes the Marcellus Shale is prospective. The company’s undeveloped acreage position as of December 31, 2009 had an average remaining lease term of 5 years, an average royalty interest of 13% and was obtained at an average cost of approximately $594 per acre. During 2009, Southwestern invested approximately $40 million in Pennsylvania, almost all of which was for acquisition of acreage. In 2010, the company plans to invest approximately $145 million in Appalachia, which includes drilling with one operated rig in the Marcellus Shale play in Pennsylvania and participating in a total of 35 to 40 wells, 21 to 24 of which will be operated.

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    PA Marcellus Shale Gas is Getting a Pipeline – To Canada!

    Vancouver Sun (Feb 22)
    Tertzakian: Lessons from a green ice resurfacer’s failure

    Will Marcellus Shale gas find a market over the border in Canada? It sure looks that way. An excerpt from an article published in the Vancouver Sun, says, in part:

    In fact, the real Energy Story of the Week came in the form of a couple of announcements: two corporate proposals hoping to bring natural gas and liquids from Pennsylvania’s Marcellus shale into Canadian markets. First Nova Chemicals and Buckeye Partners announced a joint memorandum of understanding to develop an NGL pipeline from Pittsburgh to Sarnia. Then, Union Gas announced that they would conduct an open season for a pipeline service that would allow for the shipping of up to 0.75 Bcf/d of natural gas from the Marcellus into Kirkwall, Ontario and through to Dawn.

    While there have been countless pipeline expansions and extensions announced recently to transport Marcellus gas into the US Northeast, this is the first major export proposal to pit Pennsylvania gas head-to-head with western Canadian gas, on Canadian soil.

    New York State shares one-third of its border with Canada! Unfortunately the Powers That Be in Albany are still diddling away while enterprising states like Pennsylvania are making money.

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    PA Game Commission Executive Director Reports on Problems with Marcellus Drilling on Public Lands

    PR Newswire (Feb 16)
    Game Commission Delivers Annual Report to Legislature

    Pennsylvania Game Commission Executive Director Carl G. Roe presented the agency’s annual report to the General Assembly, and delivered testimony before the House Game and Fisheries Committee on February 16. Below is an excerpt of his testimony as it touched on the subject of drilling on Game Commission (publicly owned) lands:

    I am sure there will be questions on Marcellus Shale, so I will quickly address the subject. During Fiscal Year 2008, the Game Commission approved three oil/gas leases within the Marcellus Shale development areas of the Commonwealth.  These leases totaled 2,693.43 acres and were worth an average upfront payment of $907.38 dollars per acre to the Commission constituting an additional 10 acres of State Game Lands acquisition as well as revenues to the game fund. The average royalty per acre for these leases was 23.08 percent. During Fiscal Year 2008, there were no Marcellus wells drilled on any of these leases but there were four wells planned for drilling in the Fiscal Year 2009. On all other currently active leases on State Game Lands, there were two Marcellus wells commenced and placed into production in Fiscal Year 2008. The Game Commission received a total of $113,336.26 royalty revenues during Fiscal Year 2008 from Marcellus gas production, with the average approximate well production being only 250 mcf/day, rather than the 2,000-3,000 mcf/day production some have assumed would occur. Unfortunately, there have also been two separate environmental degradation incidents which occurred during these wells development causing the need for increased Game Commission coordination, and oversight management scrutiny.

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    Chesapeake Energy Continues to Expand Production in the Marcellus Shale

    Houston Star-Telegram (Feb 16)
    Chesapeake reports 19 percent production increase

    Chesapeake Energy, one of the largest gas drilling companies in the U.S., recently reported a 19% increase in its natural gas production across all of its shale plays. With respect to the Marcellus, we learn from a Houston Star-Telegram article that:

    • Chesapeake has a huge leasehold of 1.6 million net acres in the Marcellus
    • Current net Marcellus production equals 65 million cubic feet of gas per day
    • Chesapeake expects its Marcellus output will rise to 270 million cubic feet of gas per day by year-end 2010 (over 4x current levels)
    • Chesapeake expects its Marcellus output will rise to 450 million cubic feet of gas per day by year-end 2011 (nearly 7x current levels)
    • Three recent wells drilled in Susquehanna County (PA) had peak 24-hour rates of 8.7 million, 8.6 million and 8.4 million cubic feet of gas
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    Mitsui Investment in Anadarko Projected to Grow from $1.4 to $4 Billion in Next 10 Years

    Philly.com – Philadelphia Inquirer (Feb 17)
    Japanese firm to invest $1.4 billion in Marcellus operation

    The Philadelphia Inquirer has posted a story about the huge investment from Mitsui in Anadarko. As Marcellus Drilling News reported yesterday, Mitsui has purchased a 32.5% stake in Anadarko for $1.4 billion. What was not in the original news release is this tidbit:

    The Tokyo company expects to invest up to $4 billion over 10 years in the partnership, which would produce up to 460 million cubic feet of natural gas a day at its peak.

    We also learn from the article that 768 Marcellus wells were drilled in Pennsylvania in 2009. Anadarko alone, with Mitsui’s new investment, projects drilling 4,500 wells in PA “in the coming years.”

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    Anadarko Takes on Mitsui as Partner in Marcellus Drilling

    Anadarko Press Release (Feb 16)
    Anadarko Announces Joint Venture with Mitsui in the Marcellus Shale

    The full text of the press release from Anadarko is below. It announces they have taken on a partner for their Marcellus drilling interests, mostly in north-central Pennsylvania.

    Anadarko Petroleum Corporation (NYSE:APC) today announced a joint-venture agreement with Mitsui E&P USA LLC, an affiliate of Mitsui & Co., Ltd. (NSDQ: MITSY), whereby Mitsui will participate with Anadarko as a 32.5-percent partner in Anadarko’s Marcellus Shale assets, primarily located in north-central Pennsylvania, for approximately $1.4 billion. Mitsui will earn approximately 100,000 net acres in exchange for funding 100 percent of Anadarko’s share of development costs in 2010, and 90 percent of these costs thereafter, with an estimated completion of all obligations by 2013. In addition, Mitsui will have the opportunity to purchase a 32.5-percent share of Anadarko’s existing wells and additional acreage acquisitions by reimbursing a proportionate share of Anadarko’s prior expenditures, currently estimated to be approximately $100 million.

    "We are very pleased to have Mitsui as a partner in the Marcellus Shale," Anadarko Chairman and CEO Jim Hackett said. "This transaction reflects the significant value of Anadarko’s fairway position in the Marcellus Shale, which has a gross unrisked resource potential of more than 30 Tcf (trillion cubic feet) of natural gas and spans more than 715,000 gross acres. We continue to ramp up our activities in the Marcellus and anticipate drilling more than 4,500 wells over the coming years. We have successfully partnered with Mitsui in other parts of the world and look forward to working with them and our other partners in the Marcellus, as we continue to develop and deliver these domestically produced, clean-burning natural gas resources to American consumers."

    The joint-venture agreement is effective Jan. 1, 2010. Closing of the transaction is subject to applicable regulatory approvals and other contractual conditions, and is anticipated on March 15, 2010.

    A map of Anadarko’s Marcellus Shale acreage, primarily located in north-central Pennsylvania, will be available under the "Media Center/Anadarko News" tab at //www.anadarko.com.

    Anadarko Petroleum Corporation’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. As of year-end 2009, the company had approximately 2.3 billion barrels-equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies. For more information about Anadarko, please visit //www.anadarko.com.

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    A Balanced View of Waste Water Treatment from Marcellus Shale Drilling

    Towanda Daily Review (Nov 18):
    Treatment plant for gas drilling waste water subject of Athens Twp. hearing tonight

    An informative article about the waste water treatment plants proposed for northeastern Pennsylvania. Some tidbits from the article:

    The North Central Regional Office of the DEP, which serves Bradford, Cameron, Centre, Clearfield, Clinton, Columbia, Lycoming, Montour, Northumberland, Potter, Snyder, Sullivan, Tioga, and Union counties, has received 10 applications for NPDES permits, according to spokesman Dan Spadoni. Of those 10 applications, four are for plants proposed on the west branch of the Susquehanna River, one is for the Somerset plant on the Chemung River, one is proposed on the Tioga River, and the remainder are for various creeks and streams, he said.

    Somerset Regional Water Resources is requesting a discharge permit for around a million gallons a day, which makes it the largest in the North Central Region, Spadoni said. The other proposed plants are requesting permits for between 50,000 to 500,000 gallons per day, he said.

    The article discusses naturally occuring radioactive substances that might be concentrated in waste water, and how the plants would deal with it. The article also points out the plan is for the plants to recycle and re-use most of the water for other shale drilling instead of discharging it all into the environment. However, there will necessarily be some water discharged into tributaries and streams.

    I found this article very enlightening and balanced in its coverage–a good read for landowners and other interested parties.

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    Pennsylvania Offers 32,000 Acres of State Land for Drilling Leases

    Wellsboro Gazette (Nov 18):
    Marcellus Shale, climate change, money, politics and the environment

    Pennsylvania is offering state-owned land for lease to energy companies interested in drilling in the Marcellus Shale. According to the article:

    Monday, the secretary of the Department of Conservation and Natural Resources (DCNR), John Quigley, announced that six tracts of land are being offered for lease. The lease offering amounts to 31,967 acres.

    Nearly 22,000 of the acres for lease lie in Tioga and Potter counties.

    The 31,967 acres represents 1.5% of the total amount of state-owned forest land, a very small fraction.

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    Feds Deny Private Landowers the Right to Drill in PA

    Kangaroo News Service (Nov 2):
    Local Citizens, Civic and Business Leaders Launch Petition to Resume Oil and Gas Development in the Allegheny National Forest

    This one should make every landowner shudder–with anger and fear. The Obama Administration has illegally shut down drilling on private land in Pennsylvania. Landowners who own land in the Allegheny National Forest are now denied access to drill and sell the natural gas under their own land by fiat from the U.S. Forest Service, part of the executive branch of the federal government (i.e., Obama). This naked and forceful grab of individuals’ rights by the federal government cannot go unanswered. Make your voices heard!!

    We have to go all the way to an Australian news service for this one folks:

    In a petition distributed by the Pennsylvania Oil & Gas Association (POGAM) and Allegheny Forest Alliance (AFA), nearly 2,000 citizens, and civic and business leaders from Elk, Forest, Warren and McKean counties have called for President Obama and the U.S. Department of Agriculture to lift a ban on oil and gas development by the U.S. Forest Service, which effectively has halted drilling on privately owned mineral lands underlying the Allegheny National Forest. The petition was also mailed to Pennsylvania Governor Ed Rendell to encourage a greater effort by the Commonwealth to support a critical element of northwestern Pennsylvania’s economy.

    In a historically unprecedented action, local and regional managers of the Allegheny National Forest have banned oil and natural gas exploration and barred mineral owners from accessing their property throughout the forest, effectively seizing the development rights to privately owned oil, gas and mineral resources. The ban has shut down oil and natural gas exploration and stymied production in the forest, where the industry has operated for decades in cooperation with the U.S. government. The petition maintains that the ban illegally violates Pennsylvania’s grant of consent to the United States in 1921 to acquire the forest and also violates the protection of private property rights in the federal law, the Weeks Act of 1911, under which it was acquired.

    “The behavior by the Forest Service is most irresponsible, and it amounts to the unlawful taking of private property,” said Stephen W. Rhoads, POGAM president. “State records show that fewer than 50 wells, all of them permitted prior to the drilling ban imposed on January 1, have been drilled in the Allegheny National Forest during 2009. The Forest Service has prevented the drilling of between 200-300 wells that would have otherwise occurred. These undrilled wells translate into private investment of nearly $100 million and jeopardize hundreds of good-paying jobs in the region. The action of the Forest Service amounts to a full-scale assault on the economic health of the families and communities living in and around the Allegheny National Forest.”

    Private oil and gas development within the Allegheny National Forest accounts for at least 20 percent of Pennsylvania’s oil production and as much as 10 percent of Pennsylvania’s natural gas production. It contributes tens of millions of dollars annually into the regional economy of northwest Pennsylvania and western New York.

    For decades, the U.S. Forest Service and the oil and natural gas industry have worked cooperatively to manage oil and gas development. The petition represents a strong consensus among citizens and local community leaders about the importance of this industry and the condemnation of the Forest Services’ current management practices to immobilize the region’s economic recovery and progress.