PA “Rule of Capture” Case has Power to Limit Marcellus Drilling
As we indicated in our post yesterday, the Pennsylvania Superior Court has handed down a decision that has the power to greatly restrict, even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well). This is a legal issue–and MDN is not written by a lawyer. Hence our earlier misreading of the importance and facts in the Superior Court decision. The issue, in brief, is that Monday’s court decision disallows using an age-old principle called the rule of capture, which we previously described. The rule of capture works for conventional drilling where underground deposits of oil and gas are in pools and the pool may exist underneath multiple surface property owners. Whoever gets there first and sucks the oil/gas out, wins. That’s the rule of capture in a nutshell. And it makes sense. You can’t be held responsible for oil and gas moving from one place to another as it’s extracted. And who knows how much of the pool is located under your property, or your neighbor’s property? The Superior Court justices ruled that the rule of capture doesn’t work for hydraulic fracturing because gas (and oil) trapped in shale rock does not freely move from one place to another as it does in a pool. The judges say the gas would “stay forever” where it is without fracking. In the case of Briggs v. Southwestern Energy, the Briggs family (in Susquehanna County, PA) alleges that when Southwestern drilled and fracked on the Briggs’ neighbor, the fracking was done close enough to their property that some of the gas located under their property (unleased) was released and extracted through the Southwestern well–a “trepass.” Southwestern countered that IF such a “trespass” took place, it falls under the rule of capture. The ultimate issue boils down to this: How far do fractures extend from a lateral well? An expert energy attorney told MDN off the record that Monday’s decision “could change the entire Pennsylvania shale industry” in two important ways…
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Cabot Oil & Gas, one of our favorite Marcellus drillers, has just published a new PowerPoint slide deck presentation as part of an investor’s conference they attended earlier this week (the Scotia Howard Weil Energy Conference). Normally a new slide deck isn’t all that big a deal. However, thanks to MDN friend Chris Acker who pointed it out to us, there is some new information in the deck worthy of note. Back in December MDN brought you the news that Cabot had signed a deal to sell off their Texas Eagle Ford Shale assets in order to concentrate solely on the Marcellus (see 
The following guest post was written by Rick Hiduk:
A little-known (outside of northeast Pennsylvania) anti-driller, Vera Scroggins, was fined $1,000 in April 2015 in Susquehanna County court (see 
Cabot Oil & Gas is tired of being sued, and slandered, by people like Dimock resident Ray Kemble and his ambulance-chasing lawyers. So in August Cabot sued back–for $5 million (see 
Invenergy is currently building a state-of-the-art, combined cycle 1,480 megawatt Marcellus-fired electric generating plant in Jessup, PA, just outside Scranton. Construction on the plant–called the Lackawanna Energy Center–has been under way for well over a year now. Some 1,200 people are currently working at the site. MDN previously reported that Cabot Oil & Gas with their prolific Susquehanna County production will feed the plant (see 
The Pennsylvania Dept. of Environmental Protection (DEP) is picking on Cabot Oil & Gas–or more properly, shaking them down for some cash. Yesterday the DEP announced it had reached an “agreement” with Cabot whereby Cabot will pay the DEP $99,000 “for air quality violations related to equipment at natural gas wells throughout Susquehanna County.” But that’s not all, Cabot failed to file some paperwork–a far more egregious violation for the DEP: “Cabot failed to submit complete compliance demonstration reports for 20 gas wells.” Bad, bad Cabot. Here’s news of the DEP’s latest shakedown of a company that has (so far) invested over $4.6 billion in a single northeast PA county…
Cabot Oil & Gas, one of our favorite Marcellus drillers, released its third quarter 2017 update on Friday. Some of the things we learn from the report and the analyst phone call held by Cabot’s top brass: Production grew another 12% during 3Q17. In the Marcellus, Cabot’s natural gas production averaged just over 2 billion cubic feet per day gross (Bcf/d). If you use U.S. Energy Information Administration numbers from the most recent monthly drilling report, Cabot’s 2 Bcf/d equals 8% of all Marcellus production, and 3.3% of all shale gas production in the U.S! That’s truly amazing, considering it all comes from Susquehanna County (with a couple of wells in neighboring Wyoming County), in northeast PA. Profitability returned in 3Q17 with net income of $32 million, versus a net loss of $16.7 million in 3Q16. In the Marcellus, Cabot drilled and completed 13 net wells and placed online into production 15 net wells. They now have 49 “fourth generation” wells online and producing at an average of 4.4 Bcf per 1,000 feet. They also have 12 “fifth generation” wells online. One of the highlights for Cabot during 3Q17 was the announcement that Williams is now building their $3 billion, 198-mile Atlantic Sunrise natural gas pipeline project. Cabot says when the pipeline is done in mid-2018, Cabot will flow 1 Bcf/d of gas to new markets. Cha ching! New markets equal higher prices and more profitability for the company. Below is the full 3Q17 update, followed by remarks from CEO Dan Dinges made during the analyst call…
Cabot Oil & Gas has long been one of our favorite Marcellus drillers. We are friends with several members of the Cabot team. We are impressed with their many acts of philanthropy in northeastern Pennsylvania–donating millions of dollars to worthy causes in the local community where they drill. As we’ve pointed out many times, Cabot somehow spins gold out of hay in Susquehanna County–producing something like 2.5% of all the natural gas that’s produced in the U.S. from a single county. They have some of the best rocks in the shale business. Cabot’s assets have not gone unnoticed on Wall Street, where investors and analysts call the company “a unicorn.” While the term unicorn as applied to a company can have several meanings, as applied to Cabot the meaning is clear: the company is rare, and desirable. In an Investor’s Business Daily article, several analysts gush about Cabot in light of the beginning of construction of the Atlantic Sunrise Pipeline project. Cabot will be the main shipper on the new pipeline. Analysts are predicting next year, in 2018, Cabot’s production will increase 23% from this year. And in 2019, one analyst says Cabot production will be up a whopping 47%! You begin to see why Cabot has a reputation as a unicorn on Wall Street…
Williams representatives were on hand earlier this week in Tunhannock, PA (Wyoming County) to present a briefing to local politicians and community leaders on the status of the now-under construction Atlantic Sunrise Pipeline project. Atlantic Sunrise is a $3 billion, 198-mile natural gas pipeline project running through 10 Pennsylvania counties to connect Marcellus Shale natural gas from northeastern PA with the Williams’ Transco pipeline in southern Lancaster County. Much of the attention has focused on Lancaster County and a small group of antis who oppose the project there. However, Atlantic Sunrise will begin its journey to Lancaster in Susquehanna County, PA–in the northeastern tip of the state. Construction in Susquehanna and adjacent counties is scheduled to begin “very soon,” according to Williams rep Mike Atchie. When it does begin, some of the people working on it will come from the same counties where it’s getting built. Last week the Teamsters held a job fair in Harrisburg (see 
Reliance Industries Limited (RIL) is the single largest company in India, and one of the largest energy companies in the world. RIL invested $3.5 billion in a Marcellus joint venture with Atlas Energy in 2010, and later battled Chevron to buy Atlas–but Chevron won, so RIL became a jv partner with Chevron. RIL currently has 3 U.S. shale joint ventures: the Chevron jv in the Marcellus (owns 40% of that acreage), a jv with Carrizo Oil & Gas in the northeast PA Marcellus (owns 60% of that acreage), and a jv with Pioneer Natural Resources in the Texas Eagle Ford (owns 45% of that acreage). Back in 2015, RIL signaled they are looking to dump all of their U.S. shale assets (see 
Some big news that both Cabot Oil & Gas and the two families suing them seem to want to keep quiet: they’ve settled out of court. Brief background for those new to MDN and to the “Dimock” story: There were 14 families along the Carter Road area of Dimock Township, PA (Susquehanna County) that reportedly experienced turbidity in their water from methane migrating, supposedly from Cabot’s drilling operations nearby. The state Dept. of Environmental Protection (DEP) investigated in 2010 and declared Cabot guilty and imposed stiff fines and requirements, including a requirement to install permanent water treatment systems at each home and even an offer to each of the families to pay twice what their property was worth at the time (see 
Hoping to pressure the Republican legislature to adopt a budget with a new severance tax, Pennsylvania Gov. Tom Wolf (Democrat) visited two towns in northeast PA yesterday that are in the heart of Marcellus Shale country. One of those towns is the bucolic village of Tunkhannock, in Wyoming County. MDN editor Jim Willis visited Tunkhannock a few months ago to attend an Atlantic Sunrise Pipeline rally (see 
Iroquois Gas Transmission is not waiting for the Constitution Pipeline to get built–they’ve found a way around it. At least for some of the supply they hopped to get from the Constitution. Iroquois is a 416-mile interstate natural gas pipeline extending from the U.S.-Canadian border at Waddington, NY, through New York State and western Connecticut to a terminus in Commack, NY (Long Island), and from Huntington (on Long Island) to the Bronx, NY. It is an important pipeline in the Empire State. Iroquois was in line to receive some of the 650 million cubic feet per day (MMcf/d) of natural gas the Constitution would flow from northeast PA to Schoharie County, NY, where the Constitution would connect to both the Iroquois and Tennessee Gas Pipeline. We’re not sure how much of the 650 MMcf/d Iroquois was supposed to get, but right now and for the foreseeable future, they’re getting nothing, thanks to a corrupt governor who has corrupted New York’s environmental agency which has denied the Constitution a necessary permit to build. Iroquois has found a way to replace at least some of that volume–by trucking it in. That is, a “virtual pipeline” which is now feeding the Iroquois, and in-the-ground pipeline. Usually it’s the other way around! Iroquois is getting up to 50 MMcf/d from Xpress Natural Gas (XNG), which is trucking the gas from a facility in northeastern PA (Susquehanna County). Here’s a story you’ll read first (perhaps only) on MDN–of how a virtual pipeline is now feeding an interstate pipeline in New York State with fracked gas from Pennsylvania…
We have to confess, we are not only shocked, but somewhat distressed at news we are reading that Cabot Oil & Gas is considering all options, including a sale of its Marcellus acreage in Susquehanna County, PA. To be fair, and to keep it in balance, it seems that the company would prefer to add to its Marcellus acreage, rather than sell it. However, chief financial officer Scott Schroeder said at a conference in Denver yesterday that all options are on the table, including a Marcellus acreage sale “if the terms are right.” MDN editor Jim Willis lives next door to Susquehanna County (and regularly visits Montrose, PA), and knows landowners in the county signed with Cabot. You have to understand how fundamentally Cabot has changed the county, by investing $1.5 billion into the pockets of landowners over the past 10 years, along with spending another $3.1 billion to do the drilling (see