PA House Beginning to Cave on Severance Tax? Maybe…
MDN has covered the ongoing budget debate in Pennsylvania for months. The PA Senate and House are controlled by Republican majorities–but not necessarily conservative majorities. The Republicans fell into a trap set by the Democrats. They passed a ~$32 billion budget with only enough revenue to pay for $30 billion–meaning there’s a $2 billion gap that needs to be filled. Instead of doing the adult thing–cut spending–they decided to allow more spending and figure out how to pay for it “later on.” Later on came, and of course pressure intensified to punish a single industry–natural gas–in order to make up the shortfall. At the end of July MDN brought you the sad news that Republicans in the Senate sold out and voted for a severance tax (see Traitorous PA Senate Republicans Pass Severance Tax Bill). Now the House remains. Will they sell out too? Under the leadership of Speaker Mike Turzai, we had hoped it would not happen. But a comment made yesterday by House Majority Leader Dave Reed has us wondering. Reed said higher taxes on energy sources used by homeowners, like natural gas, telephone, etc. (called a gross receipts tax) is going nowhere fast. However, as for a Marcellus Shale severance tax, Reed indicated they may deal. Although not an exact quote, one news source said Reed expressed this sentiment in his remarks yesterday: “A tax on Marcellus Shale natural gas extraction, which was in the Senate revenue package and projected to raise about $108 million in the current budget year, could come into play in a compromise plan.” The compromise appears to be if Republicans can get Democrats to privatize state liquor sales and/or legalize video gaming terminals, they would be willing to throw the Marcellus industry under the bus with a severance tax. Nice people, those House Republicans. Let’s hope it’s only Reed who feels that way…
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EXCO Resources was once a sizable player in the Marcellus. They still have 184,000 net acres in the Marcellus, with 124 horizontal Marcellus wells drilled and in production. However, EXCO, as we pointed out a year ago, has abandoned the Marcellus at this point (see 
Everyone wants to know where the price of natural gas will go in the future. Ask one analyst, and he/she will tell you it’s going lower. Another? Staying where it is–for a long time. And yet another will tell you the price just HAS to go higher. Of course “the price” of natural gas is not just one price. Most people refer to the benchmark Henry Hub price, used for trading futures contracts on the NYMEX exchange. All other prices where gas is bought and sold are somehow compared to or even connected with the price of gas at the Henry Hub. We spotted a speculative post on the Seeking Alpha investor’s website from someone we often read, Andrew Hecht, muses that he thinks the price of natgas is heading higher. He makes a convincing case. We boil it down and simplify it to this: an increase in LNG exports, of which we wrote about yesterday (see US Exports Now 2.4% of NatGas Production, Heading for 11% in 2019 //marcellusdrilling.com/2017/08/us-exports-now-2-4-of-natgas-production-heading-for-11-in-2019/), plus scads of new natgas-fired electric plants coming online, which we write about all the time, plus a cold snap across the country, but particularly in the northeast, would necessarily drive natural gas prices at the Henry Hub and other locations MUCH higher. Is he right?…
The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Will shareholders vote ‘yes’ on EQT/Rice merger?; no drilling mud reached Canton, OH water supply; Utica Shale counties show highest income growth in OH; Bowling Green charter amendment to ban fossil fuel infrastructure in trouble; judge tells Vermont AG to hand over email in anti-Exxon case; Indians want Dakota pipeline shut down; EPA casts doubt on climate change threat; NYT admits faking climate change article; cronyism rampant in Obama Energy Dept.; shale oil breakeven price is $50; ‘Keep it in the Ground’ is not the green option; and more!
Those opposing two major Energy Transfer projects–Rover Pipeline and Mariner East 2–will not be happy with the good news coming from ET this week. The company issued its second quarter update and held a conference call yesterday. During the call we learned that Phase 1 of Rover, a $3.7 billion, 711-mile Rover Pipeline project that will run from PA, WV and eastern OH through OH into Michigan and eventually into Canada, is “substantially complete” with Phase 1A expected to be done next week and online asap. Phase 1A stretches from Cadiz to Defiance, which is most of Ohio. Phase 1B is a short segment from Seneca to Cadiz, and once ET gets clearance from FERC to drill horizontally under Captina Creek, it will only take them about 40 days to complete Phase 1B. If ET can convince FERC to allow them to restart more horizontal directional drilling (HDD) work, Phase 2 will be done soon as well–and the entire project will be up and running by the end of the year. More good news for Rover: The temporary ban on HDD work for Rover in two West Virginia counties that began two weeks ago has now been lifted by the WV Dept. of Environmental Protection. As for ET’s Mariner East 2 (ME2) pipeline project that stretches across Pennsylvania, 80% of the pipeline has been strung, more than 70% is welded and over half has been lowered in and covered up. As we reported yesterday and again today, ET subsidiary Sunoco Logistics Partners (building ME2) has brokered a deal with several radical environmental groups that will slow the project down some, but slow and done is better than no progress at all. Here’s an update on the good news about Rover and ME2…
Gulfport Energy, which is the second most active driller in the Ohio Utica, behind Chesapeake Energy, has (so far) drilled 303 Utica wells and owns 211,000 acres of leases in the Buckeye State. Gulfport, which drills mainly in the Utica (but also the SCOOP, in Oklahoma) reported their second quarter 2017 production numbers on July 31 (see 
Earlier this week Rex Energy issued its second quarter 2017 update. During 2Q17 Rex drilled 2, completed 6 and put online into sales 4 wells in their Butler County, PA acreage. They also began drilling a new 4-well pad in Butler. In the company’s Carroll County, OH acreage, Rex drilled a 3 wells on a single pad. The big news from the update was a deal with BP to market Rex’s natural gas liquids (or C3+) production, and the sale of a water pipeline owned by Rex in Salineville, OH for $8 million. Rex’s finances didn’t do so well. In 2Q17 the company lost $10 million versus making a $16 million profit in 2Q16. Production picked up a bit, from 173.4 million cubic feet equivalent per day (MMcfe/d) in 1Q17 to 177.1 MMcfe/d in 2Q17. The official statement said 2Q17 production was “constrained” during the quarter “due to unplanned maintenance downtime in the company’s midstream services.” Which means they had hoped it would have been higher than 177.1 MMcfe/d. Looking forward to 3Q17 Rex says they plan to bring 12 new wells in Butler County online…
Yesterday MDN brought you the news that Sunoco Logistics Partners had cut a deal with the devil, meaning three radical Big Green groups, to slow down but eventually complete work on the Mariner East 2 natural gas liquids (NGL) pipeline project in Pennsylvania (see 
In May, MDN told you that virulent anti-drillers in Youngstown, OH, puppets of the Community Environmental Legal Defense Fund (CELDF), have once again circulated a petition to put a so-called Community Bill of Rights ballot measure on the ballot this November (see 
In 2014 MDN told you about a rural school district in northeastern Pennsylvania–the Elk Lake School District in Susquehanna County–that had (gasp) drilled two Marcellus Shale wells right on the school campus (see 
We wonder if the residents of Massachusetts, which is hellbent on blocking ANY new natural gas pipeline–local or interstate–know that since the year 2000 some 200,000 Massachusetts households have switched to/added natural gas for heating and other uses. We also wonder if Mass. residents know that the the Brayton Point coal plant in Somerset, a plant that closed two months ago, provided enough power to keep the lights on for 1.5 million Mass. residents. Or that the sole surviving nuclear power plant in Plymouth, the Pilgrim nuclear plant, is closing in two years. And that 11 more electric generating plants (coal-fired) in the region are in danger of closing over the next few years. It doesn’t take a lot of brain power to predict (a) electric rates will go even higher for New England residents, people already paying 4x what other areas of the country pay for electricity, and (b) at some point there just won’t be enough electricity, meaning brownouts and blackouts. Singing kumbaya and fantasizing that wind mills and solar panels (which make up less than 3% of our national electric supply) will ride in to save the day is dangerously stupid. Stephen Dodge, executive director of the Massachusetts Petroleum Council, makes a convincing case for more natural gas via pipelines in New England…
A sharp MDN reader recently brought to our attention some exciting news. The only export facility currently in operation is Cheniere Energy’s Sabine Pass facility. In July Sabine Pass (in southwestern Louisiana, right on the border with Texas) exported 2.19 billion cubic feet per day (Bcf/d) of American-produced natural gas to other countries. The U.S. Energy Information Administration (EIA) reports that in May (most recent month available) the entire production of natural gas in the U.S. was 89.5 Bcf/d. When you run the math, you find that Cheniere alone, with that one facility, exported 2.4% of all U.S. natgas production. The EIA published an article yesterday (below) that predicts the U.S. will become a net exporter of natural gas–exporting more than we import–THIS YEAR. EIA also predicts by the end of 2019 we will be exporting 9.5 Bcf/d of natural gas. If overall production stays about the same, which is a pretty safe guess, that means we will be exporting 10.6% of the natgas we produce, to other countries. Amazing! Of course, production may increase as prices increase, so that 10.6% may be under 10%. But you get the idea. With just LNG exports alone an important new market is opening up over the next two years for our shale gas. One of those export facilities coming online (later this year) is Cove Point, Maryland, which will be exporting Marcellus/Utica gas…
It’s about time. Cabot Oil & Gas is tired of being sued, and slandered, by people like Dimock resident Ray Kemble and his ambulance-chasing lawyers. So Cabot has sued back–for $5 million. Kemble lives in Dimock Township, in Susquehanna County, PA. Kemble and other families claimed Cabot’s drilling in the area (nearly 10 years ago) caused problems with their water wells–a claim strongly refuted by Cabot. Cabot settled with most of the landowners, including Kemble.
Last week one of the Marcellus Shale’s largest drillers, Southwestern Energy, issued its second quarter 2017 update. While production fell slightly from 2Q16 to 2Q17, the fall was due to Southwestern’s Fayetteville Shale production. In both the northeast and southwest Marcellus, Southwestern’s production went up year over year by 12 billion cubic feet equivalent (Bcfe). Southwestern continues to drill and concentrate solely on Marcellus wells–at least in 2Q17. In northeast Marcellus, Southwestern drilled and brought 21 wells online with an average lateral length of 5,530 feet and an average cost of $5.1 million per well. Perhaps we’d characterize them as “short but cheap” wells. Southwestern also drilled an experimental Marcellus well in Bradford County with a lateral of 12,000 feet. That well, the Seymour 1H, is among the top 10% of Southwestern’s wells, with an initial production rate of 37.7 million cubic feet feet (MMcf) per day. Also of note in the northeast–Southwestern added an additional 140 MMcf/d of pipeline capacity, to get their gas to better-paying markets. In southwest Marcellus Southwestern drilled and brought online 15 new wells, with an average lateral length of 7,627 feet and an average cost of $7.1 million per well. The company reported drilling one Utica well in 2Q17–in Washington County, PA. That well will not be completed and online until later this year. The company’s first Utica well, the O.E. Burge 501H in Marshall County, WV, “continues to exhibit strong productivity, with cumulative production of over 2 Bcf in its first six flowing months.” Here’s the lowdown on Southwestern Energy for 2Q17…