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Chief Oil & Gas Drilling Wells in Dauphin and Somerset Counties, PA

Chief Oil & Gas (based in Dallas), is in the process of drilling wells in Jefferson Township in Dauphin County, and Addison Township in Somerset County, both in Pennsylvania. According to a Chief spokesman, if those wells do well, it “could lead to large-scale development in the region.” Chief owns the rights to 580,000 acres across the entire Marcellus Shale area.

For more details on Chief and a recent meeting they held for area residents, see:
Somerset Daily American (Mar 11) – Gas reps seek community support

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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

Number of Gas Drilling Rigs in U.S. Up 11 Weeks in a Row, New One-Year High

According to oil services firm Baker Hughes, the number of rigs drilling for natural gas in the U.S. is now at a one-year high of 927 active rigs. That number includes all three types of drilling: directional, vertical and horizontal. The number also includes all gas drilling in the U.S., not just the Marcellus Shale. Still, it is encouraging and the trend has been up 11 weeks in a row.

For more details on the recent numbers, see this article:
Reuters (Mar 12) – US natural gas rig count up for 11th straight week

For more data on rig counts, including downloadable spreadsheets & PDF files, see:
Baker Hughes – Investor Relations – Rig Counts

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New Marcellus Wastewater Treatment Plant Set to Open in Westmoreland County, PA

The Pennsylvania State Department of Environmental Protection has issued a permit for a new Marcellus drilling wastewater treatment facility to begin operations in April in western PA.

Stephen Frobouck, a partner in Reserve Environmental Services Inc., said the treatment facility at the former American Video Glass plant in East Huntingdon, Westmoreland County, is ready for operations to begin in April.

"We will have the capacity to handle (water from) 500 to 600 wells a year," Frobouck said Friday, declining to say how much the firm paid to prepare the plant for its new use.*

*Pittsburgh Tribune-Review (Mar 13) – Plant near New Stanton to treat gas wastewater

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Nytis Exploration Sells Lease for 11,657 Acres in the PA Marcellus to Northeast Natural Energy

From a press release* dated March 11:

Northeast Natural Energy LLC (“NNE”) announced today that it has closed the acquisition of 11,657 net acres in the core of the Marcellus Shale and associated shallow conventional oil and gas wells from Nytis Exploration Company LLC and from Nytis Exploration of Pennsylvania LLC (“Nytis”), both private exploration and production companies. Financial terms were not disclosed.

“We are very pleased to establish a significant acreage position in the core of the Marcellus Shale,” said Mike John, NNE’s President. “The acreage, which is very high in quality, is located in some of the most attractive areas in the Marcellus including Armstrong, Clearfield and Westmoreland Counties, Pennsylvania. This transaction provides a platform for future bolt-on positions in the region and establishes NNE’s position as a key participant in the development of the Marcellus Shale. We look forward to drilling this acreage as we continue to evaluate many other substantial opportunities in the Marcellus.”

*Business Wire (Mar 11) – Northeast Natural Energy Acquires 11,657 Net Acres in the Marcellus Shale from Nytis Exploration Company

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PA Gas Compressor Facility Causing Grief for Some Neighbors

In states where drilling is now happening, particularly Pennsylvania, there appears to be issues with some (not all) compressor stations used to pump gas from local wells to nearby processing facilities. One such station is located in Mount Pleasant Township in Washington County, PA. Mount Pleasant is the location of the very first horizontal gas well drilled in the Marcellus.

The compressor station in Mount Pleasant is operated by MarkWest Energy, a company that operates more than 100 other such facilities in the U.S. MarkWest has made application to add a fifth compressor to the facility to meet increasing demand, and some of the nearby neighbors are objecting to the noise, lights and odors that come from the facility. An article in the Pittsburgh Post-Gazette, although taking an anti-drilling tone, exposes the tensions that occur in some locations between compressor operators and the people that live close by. It also highlights the debate over where regulation of these facilities lies—with local municipalities? Or with the state?

Read the article for more details:
Pittsburg Post-Gazette (Mar 14) – Neighbors take a stand on noise, odor of gas drilling

New Directory of Marcellus Landowner Groups

Marcellus Drilling News has just posted an online directory of landowner groups. One of the best ways for landowners to protect themselves and obtain favorable terms for leasing their land, and protecting their land environmentally, is to collectively negotiate with energy companies. Many landowner groups have sprung up in the Marcellus Shale region over the past 2-3 years for just that purpose. This new directory aims to provide the most up-to-date listing of these groups.

If you belong to a landowner group and do not see your group listed, please email us! And if your group is listed but the entry needs updating, send along the changes.

If you have suggestions for how to make the Directory better, or if there are other resources you would like to see added to the MDN website, drop us a line at: jim@marcellusdrilling.com.

The address for the new MDN Directory of Marcellus Landowner Groups is:
//marcellusdrilling.com/landowner-groups/

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New Drilling to Begin in Luzerne County, PA in May or June

According to an article in the Wilkes-Barre Times Leader, drilling company Encana Energy Corp (from Canada) will begin drilling a Marcellus gas well in Lake Township, PA (Luzerne County) starting in May or June. At a recent town meeting, some residents expressed concerns about trucking activity on local roadways. More meetings are planned to answer local residents’ concerns.

For more information, see: Times Leader (Mar 11) – Lake Twp. antsy about gas drilling

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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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Morrisville State College Creating New Program to Train Workers for Marcellus Shale Drilling

SUNY Morrisville Morrisville State College, part of the State University of New York system and located in Morrisville, NY with a satellite campus in Norwich, NY, is looking to launch a program to train workers for drilling in the Marcellus Shale. According to an article in the Norwich, NY Evening Sun we get this interesting comment:

Many natural gas industry followers are predicting a June release date for the state’s revised hydrofracking regulations. Energy companies and their suppliers have been waiting in the wings for 18 months for the state Department of Environmental Conservation’s Supplemental Generic Environmental Impact Statement to be released.*

If and when drilling commences starting in June as predicted:

[I]f it’s anything like what happened when the Marcellus Shale action began heating up two years ago in neighboring Pennsylvania, there will be hundreds of jobs available at well sites within the first 18 months.*

Initially, Morrisville is looking to create a 2-year program, with the possibility of extending that into a 4-year program. Let’s hope Morrisville has many students in their program, and that those students will have jobs drilling in the Marcellus when they graduate.

*Norwich Evening Sun (Mar 10) – Morrisville readies to train natural gas drilling workforce

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New Pipelines Coming to Lycoming, Tioga and Bradford Counties in Pennsylvania

PVR Midstream, a division of Penn Virginia Resource Partners, has signed an agreement with Range Resources to construct and operate pipelines and compression facilities for Range’s drilling in the Marcellus shale in PA.

According to the press release:

PVR Midstream and Range have agreed to an area of mutual interest (AMI) that covers parts of Lycoming, Tioga and Bradford Counties in north central Pennsylvania, in which Range currently holds a substantial acreage position. Within this AMI, PVR Midstream will construct approximately 16 miles of 24- and 30-inch gathering trunklines, smaller-diameter field gathering lines and compression facilities required to gather Range’s production from the AMI. The gathering system will have over 700 million cubic feet per day (MMcf per day) of throughput capacity, and the initial phase is expected to become operational in the fourth quarter of 2010. The agreement provides Range significant firm gathering capacity in the system, and PVR Midstream will be compensated for the gathering and compression services provided to Range through a combination of volumetric fees, with no direct commodity exposure. Excess capacity on the system and the location within a core area of Marcellus Shale development should allow PVR Midstream to develop additional revenue by providing gathering and compression services to area producers.

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AOP Clearwater Plant in WV a Big Success in Treating Marcellus Shale Wastewater

AOP Clearwater Plant, Fairmont, WV A lesson for Owego and Tioga County, NY from Marion County, West Virginia where a new wastewater treatment plant is a big success. The AOP Clearwater Plant is located just outside of Fairmont.

According to AOP Clearwater President Louis Bonasso, they have had no problems getting customers from oil and gas drilling companies in the Marcellus Shale. In fact, the trucks are “lining up” at the facility.

“We are a distillation-crystallization process, available to the oil and gas producing community in the area for clean-up of flow back and production brine waters,” said Bonasso.

Which means, the contaminated water is brought in on trucks, put through an extensive cleaning process, and pumped back out–as clean water for the oil and gas companies to reuse.

“We offer a very rapid unload-reload opportunity for trucking companies. Instead of sitting in line, we unload in about 11 minutes and we can reload in about the same time,” said Bonasso.*

Beside creating 16 jobs and bringing revenue to the county, there is this positive side benefit:

Through the cleaning process, salt is removed from the contaminated water and is able to be re-used to treat winter roads.

“All the salt that we produced since the plant started operations in November was sold in Marion County to independent contractors and the city,” explained Bonasso.*

*The State Journal (Mar 9) – AOP Clearwater Plant Open in Marion County

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Patriot Water Decides Not to Build Marcellus Wastewater Treatment Plant in Owego, NY

Last week, Patriot Water LLC withdrew their application to convert a former car dealership on the edge of the Village of Owego, NY (in Tioga County) into a wastewater treatment plant to deal specifically with wastewater from Marcellus Shale drilling in Pennsylvania, and from New York, when drilling finally begins there.

Each well drilled in the Marcellus will use approximately 3 million gallons of water during the process of hydro fracturing. Much of that water comes back out of the ground and needs to be treated so it can be re-used in drilling. Some of it will be treated and returned to area waterways, which is no different than the local sewage treatment plant. The fluids entering the environment from any wastewater plant must pass rigid tests to ensure no pollution occurs.

So the news that Patriot Water was planning to build and operate such a plant was good news for the Southern Tier of New York, bringing jobs and tax revenue to Tioga County. But one problem: The proposed site was very close to residential areas. Yes, it is zoned industrial, but it would mean four trucks an hour, 24 hours a day running down residential streets, and local folks didn’t want it. Can’t blame them.

But! Could Tioga County not have come back with a counter offer? Another location nearby that is not close to residential areas? Was there any kind of effort made at all? It appears not. And so, on March 3, Patriot Water said “no thanks” to Owego and Tioga County.

MDN recommends Patriot have a look at nearby Broome County, NY. There’s a couple of industrial parks close to Interstates 81 & 86 (NY Route 17) in the Conklin and Kirkwood areas, and those locations have truck traffic all the time. Perhaps the members of the town planning boards in Broome County will actually show up for meetings (unlike the Tioga County Planning Board, five members of whom abrogated their duties by not showing up for a crucial meeting on the Patriot request). Come on over to Broome, Patriot!

Owego Pennysaver (Mar 3) – Patriot Water, LLC withdraws application for Taylor Road site

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William Zagorski, “Father of the Marcellus Shale”

William Zagorski, geologist and musician, is credited as being the “Father of the Marcellus Shale.” It’s an interesting story how he convinced Range Resources to try drilling in the Marcellus using hydraulic fracturing. Mr. Zagorski even has a music CD! Read the story of the beginning of drilling in the Marcellus Shale and about the man who pioneered it:

PA Observer-Reporter (Mar 7) – Riding high on the range, the ‘Father of the Marcellus Shale’ leading a busy life these days

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While Albany Dithers on Marcellus Drilling, Landowner Profits Evaporate

George Phillips, a Republican candidate for the 22nd Congressional District in New York State, penned a viewpoint article in today’s Binghamton Press & Sun-Bulletin on the topic of drilling in the Marcellus Shale. In short, Mr. Phillips is pro-drilling while the man who currently holds that office, Maurice Hinchey (Democrat) is anti-drilling and supports federal government interference. While the article takes political aim at his opponent, Mr. Phillips makes strong arguments on why drilling should commence—now.

He closes his article with this:

But the window of opportunity may be closing. As more areas of the country move forward with plans to develop these types of resources, prices naturally fall as supply increases. This leaves our residents waiting, watching potential profits and opportunities evaporate as others reap these benefits while our government dithers.*

Ah yes, the dithering officials in Albany. Albany needs to move forward now. Other shale plays are becoming active, and the Pennsylvania Marcellus is red hot. If Albany drags on much longer with their obstruction of drilling, landowners will be the ones who suffer.

We also hope, along with Mr. Phillips, that the federal government (and Mr. Hinchey) stay out of states’ business.

*Binghamton Press & Sun Bulletin (Mar 8th) – Clear way for drilling