Positive Signs that Shale Drilling is Coming Back in Central PA

As MDN has noted over the past several months, the signs have been positive that Marcellus/Utica drilling is picking up once again. But that doesn’t mean it’s picking up in every location. Or does it? One of the hotbeds of drilling activity “back in the day” was in several northeastern/central Pennsylvania counties, including Tioga, Bradford, Lycoming and Sullivan. But then the bottom fell out of the industry (with super low prices) and drilling all but dried up in those counties. The good news is that there are signs of life, once again, in the central counties of PA. Between Nov. 1 and Mar. 6, 30 drilling permits were issued in Tioga County, 12 permits in Lycoming County, and (somewhat surprising), 8 permits issued in Sullivan County. Shale is coming back!…
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Northeastern PA Counties Explore Alliance to Pass Royalty Reform

One of the issues that isn’t going away is the demand by landowners in some Pennsylvania counties, like Bradford, for lawmakers in the state to pass a bill that guarantees them what they believe they are already guaranteed–a 12.5% minimum royalty, based on a 1979 law that states they should get such a royalty. We’ve extensively covered what we call a civil war between two parties who are otherwise friendly toward each other–landowners and shale drillers. Last year the issue came to a head with House Bill (HB) 1391 (see our list of stories here). In a nutshell, landowners say Chesapeake Energy and some other drillers are taking post-production deductions out of landowners’ royalty checks, resulting in royalty payments far below 12.5%. In some cases landowners are receiving bills for money owed to the driller–after the driller pulled the gas out of the ground! Who in their right minds leases land for drilling so they can PAY the driller! It is an outrage and landowners want it stopped. Drillers, on the other hand, say you can’t just change contracts after they’ve been signed, punishing the entire industry for the bad actions of a few. Drillers say the proper response is for landowners to sue the bad apples. Frankly, it’s all a mess. The new news is that landowners from Bradford and several other northeastern PA counties, tired of being outmaneuvered by drillers, are actively talking about forming an alliance to try and garner enough support in Harrisburg to get a bill like HB 1391 passed this year…
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PA Game Commission Cuts $15.5M in Deals to Lease State Land for Drilling

PA Game CommissionThis is something you don’t see often these days: The Pennsylvania Game Commission is getting $15.5 million of revenue from new Marcellus leases with Chief Oil & Gas and EQT. The bulk of the money will come from a deal with Chief to lease 5,870 acres in Bradford and Sullivan counties. Terms of the lease? Chief is paying $2,500 per acre as a signing bonus and 20.55% in royalties when/if they drill and the gas and oil begin to flow. It just about floored us to see this deal! We though all deals were done until the price of gas goes up again. We’d not heard of any new deals being cut. As for EQT, they are paying the Game Commission $917,000 for the right to drill under a 306-acre parcel in Washington County, PA. Details on the per acre bonus and royalty for the EQT deal below…
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‘Minimum Royalty’ Language was Part of Wolf’s Poisonous Budget

sugarIf you stick a cube of sugar in a batch of poison, the poison will still kill you, although it will taste better. Part of PA Gov. Tom Wolf’s poisonous budget that went down in flames last week (see PA Gov Wolf’s High Tax Budget Goes Down to Defeat – 9 Dems Against) included some sugar to make it taste better–something landowners have very much wanted for the past couple of years. Wolf included language in his poisonous budget bill found in House Bill (HB) 1391, a bill that guarantees landowners will receive a minimum 12.5% in royalty payments (see New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties). Republican legislators from Marcellus drilling counties (like Bradford) have been pushing for such a bill to correct abuses by Chesapeake Energy in shorting landowners in royalty payments. Wolf’s budget was wrong on many levels and needed to be voted down. But the inclusion of HB1391’s language gives hope to Republicans that the royalty issue will be part of a final budget, whenever that happens, or that Wolf will be favorable to signing HB1391 when and if the legislature votes on it…
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PA Gov. Wolf Talks to Shell About Beaver County Cracker Plant

PA Gov. Tom Wolf is bullish on the possibility of an ethane cracker coming to Beaver County, PA. He thinks a cracker is “inevitable.” In what can only be described as a faux pas for Wolf, he spoke about his love of a cracker yesterday, on Earth Day (oops). Earth Day is all about Democrats professing love of Mother Earth and hatred of fossil fuels. Must be Wolf didn’t get the memo. Wolf says he’s spoken to Shell muckety-mucks to let them know PA still wants a cracker. He said the Shell muckety-mucks say the project is “still on track” although there’s no timetable for a decision–which we take to mean no decision will be made for the foreseeable future…
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Southwestern’s 5th Anniversary in Marcellus, Joins 1 Bcf/d Club

While researching another story for today about DTE Energy expanding their pipeline system for Southwestern Energy, we noticed a bit of news from Southwestern that had (until now) slipped by us. Southwestern is one of the oldest and top exploration & production companies in northeast Pennsylvania. On September 30, the company marked their fifth year of drilling in NEPA. So far the company has, according to their records, produced 348 billion cubic feet of natural gas in NEPA. The big news: Southwestern figures by the end of this year they will have spent $700 million on, and will be producing an average 1 billion cubic feet of natural gas per day in, the Marcellus. Welcome to the 1 Bcf/d Club!…
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Save the Loyalsock Coalition Attempts a New Spin Job Against DCNR

Another anti-drilling spin job by the partisan, biased “reporters” at PBS’ StateImpact Pennsyvlania. The reliably anti-drilling Marie Cusick–who (going by her previous articles) hasn’t encountered a fossil fuel she likes–is once again trying to stir the anti-drilling pot against legitimate, legal and ethical drilling in the Loyalsock State Forest in central Pennsylvania. Anadarko Petroleum owns mineral rights for 25,000 acres of the Forest. Anadarko presented a plan in March 2012 (!) to drill there, a plan that STILL has not been approved by the Dept. of Conservation and Natural Resources (see PA DCNR Blocks Drilling in Loyalsock State Forest – For Now). Finally, there have been some baby steps toward granting Anadarko access to what they legally have a right to do…
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Chief O&G Buys 210K Acres/Operations in NE PA from Chesapeake

Chief Oil & Gas announced yesterday that they’ve purchased 210,000 Marcellus Shale acres from Chesapeake Energy in northeast Pennsylvania. Along with the acreage comes 130,000 million cubic feet per day of natural gas production and 40 wells waiting to be completed and/or connected to a pipeline. This doubles the amount of Marcellus acreage for Chief.

The big question is, does this mean Chesapeake has now completely exited the Marcellus in northeast PA? It may well (we’re not sure). Here’s the statement by Chief about their deal with Chesapeake:
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Southwestern Energy’s Board Changes, Marcellus Plans for 2014

Some fairly big news from one of the Marcellus Shale’s largest drillers–Southwestern Energy. In a flurry of announcements issued yesterday, we learn that Southwestern’s President & CEO, Steve Mueller, will take over as Chairman of the Board next May when current Chairman Harold Korell retires. Mueller plans to keep the title of CEO but apparently he will shed the title of President, so that begs the question, who will become Southwestern’s new president next year? Interestingly (perhaps related?) Southwestern also announced yesterday the promotion of Jeffrey Sherrick to the position of Executive Vice President for Corporate Development. Hmmm.

In addition to personnel announcements, Southwestern issued a guidance statement about their plans for capital spending in 2014. The statement indicates Marcellus production will increase by a whopping 60% next year. Southwestern’s estimated Marcellus production for 2013 is 148-149 billion cubic feet (Bcf). Next year they expect it will be 244-249 Bcf based on superb well performance in Bradford, Lycoming and Susquehanna counties. Southwestern boasts that one of their Susquehanna County wells achieved an initial production of 32 million cubic feet per day! In 2014 Southwestern plans to begin drilling in three additional northeastern PA counties…
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PA DCNR Blocks Drilling in Loyalsock State Forest – For Now

Back in April, MDN told you about a ginned-up “controversy” over Anadarko Petroleum’s plan to drill in the Loyalsock State Forest that covers parts of Lycoming, Sullivan and Bradford counties in PA (see Manufactured Controversy over Drilling in Loyalsock State Forest). Anadarko owns the lease rights to 25,000 acres underneath the Loyalsock. Even though Anadarko provided the state with their plan to drill (as requested, in March 2012), the state Dept. of Conservation and Natural Resources (DCNR) last week temporarily refused their application to begin drilling. Why? Not because of any problems with the proposed plan, but because another driller, Southwestern Energy, owns the rights to about the same amount of acreage and has not submitted a plan to drill on their acreage.

Is it fair that Anadarko be held back because Southwestern isn’t ready to drill yet? Did the DCNR stipulate that all drillers must supply a drilling plan first, when Anadarko submitted their plan back in March 2012? Why did it take until October 2013 for the DCNR to tell Anadarko that Southwestern has to file too? Troubling questions…
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USGS Tests PA Water Wells Before Drilling, Finds Methane

Thank you U.S. Geological Survey and the scientific method for once again proving what we’ve known all along–there’s a LOT of naturally-occurring methane in Pennsylvania well water. On Tuesday, the USGS released their latest testing survey of 20 water wells in Sullivan County, PA–in the northeastern part of the state (full copy of the report embedded below). What did the survey find? Seven of the 20 water wells contain dissolved methane. Two of the wells (10% of all wells tested) had “elevated concentrations of naturally dissolved methane.”

Oh, and there hasn’t been any Marcellus Shale drilling in those areas. This is a pre-drilling baseline test…
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Manufactured Controversy over Drilling in Loyalsock State Forest

A new manufactured “controversy” is being ginned up by PA Democrat officials and anti-drillers over Anadarko Petroleum’s plan to drill on land they legally own the mineral rights to—25,000 acres in Loyalsock State Forest that covers parts of Lycoming, Sullivan and Bradford counties in PA. Here’s the first time we’ve heard this phrase: The forest contains a “critical bird nursery.” I mean, who could possibly drill in a nursery? Drilling will also happen underneath part of the Old Logger’s Path—not the New Logger’s Path, not the Plain and Simple Logger’s path, but the Old Logger’s Path. And drilling may include portions of the exceptional value stream known as Rock Run. We wonder, are other streams unexceptional? And (OMG!) it may include the lumber ghost town of Masten. DO NOT disturb ghosts—they don’t like it.

Isn’t language in an anti-drilling demagogue’s hands a marvel to behold?…

[Please see an update/note at the end of this article.]

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Updated Study: Marcellus Drilling Economic Benefits in NE PA

Several colleges in northeast Pennsylvania including Keystone College, King’s College, Luzerne County Community College, Misericordia University, Penn State Wilkes-Barre, University of Scranton and Wilkes University belong to, support and form an organization called the Institute for Public Policy and Economic Development. In 2008 the Institute published a study comparing economic and demographic changes of three shale plays in three specific areas of three shale plays: the Barnett, the Fayettville and the Marcellus.

The purpose of the original study was to show what may lie ahead in northeast PA should it follow a similar track to the then far more mature shale plays in the South and Southwest. The Institute has just released an update to the original study in a new report titled “A Review of Changes in Selected Economic & Demographic Indicators in Particular Counties in the Barnett, Fayetteville and Marcellus Shale Play” (embedded below). Wow, what a difference four years makes! The Marcellus in many ways has eclipsed the Barnett and Fayettville and continues to grow. But has that growth translated into good things in northeast PA? That’s the question asked and answered in this latest update by the Institute.

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Court Clears Way to Build MARC 1 Marcellus Pipeline in PA

A federal appeals court has cleared the way for the construction of the MARC 1 Marcellus Shale pipeline to be built in northeastern Pennsylvania. The court released a decision yesterday rejecting claims by “environmental” groups to stop the pipeline. Part of their argument revolved around “the broader impacts” caused by natural gas drilling—that is, pipelines make more drilling likely and that’s not a good thing (according to them). The court rejected that argument.

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PA Landowners Fight MARC 1 Pipeline Eminent Domain

Pipelines are a necessary part of drilling for and transporting shale gas. But they can also be one of the most contentious parts—especially when the government confers the power of eminent domain to a pipeline company who then can force landowners to accept the pipeline, weakening their bargaining position. A recent example is the MARC 1 in northeast Pennsylvania, a key piece of infrastructure for the Marcellus Shale. The MARC 1 is a high-pressure 30 inch steel pipeline that will connect to major interstate pipelines and to a gas storage facility in southern New York state.

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Some Drillers Using Questionable Tactics to Hold Land Under Lease Beyond Original Term

A number of landowners in Pennsylvania signed gas leases with energy companies more than five years ago for very low amounts—$2 per acre in some cases—as a signing bonus. Landowners, realizing that a contract is a contract, waited patiently for the expiration of the lease—typically five years. But then, at the last possible moment, sometimes just hours before the lease is due to expire, the energy company would clear a few trees or park a bulldozer on the land in order to comply with the terms of lease, thereby extending the lease indefinitely because they had “made an effort” to start drilling.

Case in point: Dave and Karen Beinlich. They signed a lease for $2 an acre, for a grand total of $234 signing bonus on their 117 acre farm.

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