Statewide PA

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    PA Marcellus Shale Coalition Responds to EPA Plan to “Study” Hydraulic Fracturing

    The following is a press release issued by the Pennsylvania Marcellus Shale Coalition in response to the rogue EPA’s announcement that they will study hydraulic fracturing (again):

    The Marcellus Shale Coalition today issued the following statement regarding a plan by the U.S. Environmental Protection Agency to study hydraulic fracturing:

    “The members of the Marcellus Shale Coalition develop and drill wells in an environmentally responsible manner, including the use of hydraulic fracturing to complete a well for production. Hydraulic fracturing has been an established and proven practice for 60 years in Pennsylvania and around the country, and has been regulated successfully by state agencies. There have been no identified groundwater contamination incidents due to hydraulic fracturing, as noted by the Pennsylvania Department of Environmental Protection, other state regulators and the U.S. Groundwater Protection Council.

    “Similarly, there have not been impacts to surface water sources due to the practice. Water withdrawals in Pennsylvania are highly regulated by state agencies and water commissions, with a typical permitted withdrawal amounting to about one-half of one percent of the average flow of a stream or river.

    “The MSC will provide information and participate as appropriate in EPA’s study. Our industry is confident that an objective evaluation of hydraulic fracturing will reach the same conclusion as other studies – that it is a safe and well-regulated process that is essential to the development of natural gas.”*

    *PA Marcellus Shale Coalition (Mar 18) – MSC Statement on EPA Study of Hydraulic Fracturing

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    Chesapeake Drilled 94 Wells in PA in 2009, Plans to Drill 200 Wells in PA in 2010

    An article in the Wilkes-Barre Times Leader reveals this interesting information about Chesapeake Energy’s activity in Pennsylvania:

    Chesapeake Energy has invested significantly in not only leasing land in Pennsylvania, but in doing business with private companies.

    With 94 wells drilled in the state in 2009 and more than 200 additional wells planned for this year, the company has paid subcontractors and vendors in Pennsylvania $269 million since January 2009, company spokesman Rory Sweeney said in an e-mail.*

    *Wilkes-Barre Times Leader (Mar 21) – Law, engineering firms will be the first for jobs

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    Marcellus Shale Drilling – Revival for Short-Line Railroads?

    You can add short-line railroads to the list of businesses that benefit from drilling in the Marcellus Shale. And it’s all because of sand. Drillers like to use a special kind of sand found in the Midwest. They need railroad cars full of the stuff when drilling. The sand aids in the process of opening or “fracking” horizontally drilled wells. And lots of sand means drillers need a way to get it to the drill site. Enter short-line railroads.

    Two years ago Tom Myles purchased the 35-mile Wellsboro & Corning Railroad, not knowing that a drilling boom would be a boom for his company.

    In the two years since Myles took over the Wellsboro & Corning line, cargo traffic has nearly tripled, to 849 railcars last year, the most in its modern history. In a recession, Myles has hired 10 people to transfer sand from the cars into trucks.

    He anticipates that business will nearly double this year, to 1,600 railcars. Almost all of that is sand used in hydraulic fracturing, the process that shatters the dense Marcellus Shale under high pressure to unlock its stores of natural gas.

    “We sold $40 million of sand last year,” O’Neill said. “This is now our primary business.”*

    *The Philadelphia Inquirer (Mar 21) – Marcellus Shale sends short-line railroad booming

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    Energy Companies in PA Must Now Disclose Gas Well Production Numbers Every Six Months

    Faster disclosure of gas well production data is coming to Pennsylvania. On Tuesday, March 16 the PA Senate passed a bill already passed by the PA House that would force drilling companies to disclose gas well production data every six months. The existing law, passed 25 years ago, allows drillers to keep production numbers secret for five years. No more. Gov. Ed Rendell has said he will sign the new measure into law.

    What does it mean for landowners in PA? You’ll now have access to the numbers to ensure your royalty payments are timely—and accurate.

    For more, see: Binghamton Press & Sun-Bulletin (Mar 16) – Pa. to reveal drillers’ secrets in gas shale rush

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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.”