| |

Is Drilling in the Marcellus Forcing Land Prices Higher?

The Centre Daily Times (State College, PA) implies that a recent auction of property in Centre County which had been seized for tax liens had higher than expected prices due to drilling in the Marcellus. The article begins thus:

BELLEFONTE — Property at Wednesday’s Centre County auction started selling at $1,000, but it didn’t take long for bidding on the first piece of land to reach $82,000.

Ditto for the next few parcels — all large pieces of Snow Shoe Township property in the Marcellus Shale natural gas region.

“Do I hear $150,000?” asked Chuck Salvanish, who works in the county tax assessment office and doubled as an auctioneer at Wednesday morning’s lien-free property sale in the county Courthouse Annex.

The winning bid on one 264-acre property quickly reached $300,000. Altogether, the sale brought in about $509,000, and drew upward of 100 people…

“I’m amazed at how many people are here,” said Sue Crowley, of Howard Township.

And this:

[Bill] Shreffler bid on a 76-acre Carlin Inc. property in Snow Shoe Township, but stopped at $49,000. The winning bid was $50,000.

Tarry Bratton, of York County, bid $20,000 for 163 acres of Carlin Inc. property in Snow Shoe Township that had at one time been a landfill.

I don’t live anywhere near Centre County, so I don’t know if those prices are high or not. How about you? Have land prices climbed in your area because of the Marcellus and the prospect of drilling? If they have (or haven’t), leave a comment.

Read the full article: County gets $509,000 in auction of property

| | |

Centre Daily Times Runs Anti-Marcellus Editorial

The Centre Daily Times (State College, PA) recently ran an editorial with typical scare-tactic, kindergarten logic, while at the same time supporting the obscene taxation of drilling in the Marcellus in Pennsylvania.

The editorial recounts how a number of so-called conservation groups have their greedy hands out and want a piece of the pie (my words, not theirs). So in the tortured logic of these groups, they want to tax tax tax the Marcellus. On one hand conservation groups and the Centre Daily Times decry drilling and paint a nightmarish picture of water and noise pollution, road damage, and general malaise. In the next breath they say, “Oh well, if it’s gonna happen, let’s at least grab a piece of the action for ourselves.” It’s thuggish thinking and thuggish behavior. A protection racket–pay to play. And newspapers like the Centre Daily Times fall right in line, along with their Democrat co-conspirators in Pennsylvania state government.

Perhaps this is a teachable moment? The taxarati (the taxing class), will tell you energy companies will have to pay the tax, and that there’s more than enough money going around that “a little tax won’t hurt anyone,” with the justification that “39 other states do it too.” Wrong. Natural gas prices have come down dramatically in the past 12 months and new exploration is at best a break-even affair at this point.

Point #1: Drilling will slow or stop. Making drilling more expensive by adding more tax may tip the scales and make it an unprofitable venture, and the drilling will stop. There are already indications that new drilling has slowed throughout the Marcellus.

Point #2: Landowners will not escape the tax. Do you think energy companies alone will bear the tax? Wrong! Landowners will also be part of this tax. The energy companies will not bear the burden alone. More tax means less in landowners’ pockets.

Point #3: Consumers will ultimately pay. Do you think corporations simply “live” with making smaller margins of profit? They do not. They pass along increases in higher prices. There truly is no such thing as a tax increase on business that is paid by anyone other than the consumer. It is always the case. You may think you’re “soaking the rich” by increasing taxes on businesses, but those taxes are treated as a cost of business and factored into the price consumers will pay. By taxing business, you have just taxed yourself. Doh!

Wake up PA, and reject the notion of a severance tax on Marcellus drilling.

Read the Centre Daily Times editorial: Tax the source of the mess

| | | | |

Central New York Starting to Heat Up with Marcellus Drilling

A recent article published in The Oneonta Star covered two gas drilling “forums” that were conducted in Otsego County by the anti-drilling group Sustainable Otsego. The article is a lazy, biased view of a complicated issue–but there’s no surprise there. The mainstream media is not an impartial, investigative source of information as it once was. For example, the “reporter” didn’t bother to interview people attending the forums, but instead interviewed the people presenting the biased material. Go figure.

Amidst the standard talking points and mountain of…(ahem) less than objective information (ahem)…in the article, are a few nuggets of useful intelligence on drilling activities in the central region of New York State. Forthwith:

According to geologists, Otsego, Delaware and Chenango counties are potentially rich in gas deposited in the Marcellus Shale formation below ground. Groups representing landowners and gas company representatives have said the findings may make some landowners wealthy.

On how much land has been leased in Otsego County:

The Otsego County Conservation Association reports that 8.7 percent of acreage in Otsego County is leased for natural gas drilling, according to a media release from the group issued Monday. The rate is up from 7 percent reported previously by OCCA.

OCCA said since the beginning of the year, an additional 204 parcels have been signed, totaling 12,190 acres. Parcels now under lease contract number 839, with total acreage rising to 54,443 acres.

And on test wells:

Test wells several thousand feet deep have already been drilled in Springfield and Cherry Valley.

And this on applications for new drilling:

The DEC has received 31 applications for horizontal drilling wells, [Yancey] Roy [DEC spokesman] said, and the breakdown by county is Delaware 23; Tioga, four; Chenango two, and Chemung, two.

Read the full article: Gas drilling forums wrap up

|

Pennsylvania Democrats Still Hell-bent on Taxing Natural Gas

The Scranton Times-Tribune reports that Pennsylvania Democrats, including Gov. Ed Rendell, are on a mission to tax natural gas drilling in the Marcellus. Let’s name some names, shall we?

House Finance Chairman David Levdansky, D-39, Pittsburgh, and Environmental Resources Chairman Camille George, D-74, Houtzdale, joined with statewide conservation groups Monday to widen the debate over proposed state taxation of natural gas produced by drilling deep pockets in the Marcellus Shale formation, underlying much of western and Northeast Pennsylvania.

Gov. Ed Rendell has proposed a 5 percent severance tax in hopes of generating an estimated $107 million for state coffers. The tax would be levied on the value of natural gas at the well.

Not to be outdone by the government, the so-called conservation groups have their hands out too:

The conservation groups, including PennFuture and Pennsylvania Federation of Sportsmen’s Clubs, say some of that revenue should go for conservation projects, the state Game and Fish and Boat Commissions and to help local governments repair roads.

The coalition isn’t suggesting a specific amount at this point, said Andy Loza, an official with the Pennsylvania Land Trust Association.

And the pièce de résistance:

“Implementing a severance tax on natural gas is a no-brainer,” said Mr. George, who is drafting legislation to set standards for treating water used in drilling.

Taxing the fledgling PA gas industry into oblivion is a real no-brainer for those with no brains!

Read the full article: Shale tax ideas debated

| | |

Susquehanna River Basin Commission Approves 26 Applications for Water Use

At a recent meeting of the Susquehanna River Basin Commission held in Scranton, PA, the group approved 26 applications to use water from the Susquehanna River watershed for drilling in the Marcellus Shale deposit. At the meeting, the Commission imposed new rules about posting signs at sites along rivers and creeks where water is drawn for use in drilling.

Among the permits approved by the commission, according to the Susquehanna Independent Weekend, is permission for ALTA Operating “to draw up to 3 million gallons per day from the Susquehanna River and 99,000 gallons per day from Snake Creek, both in Susquehanna County.”

Read the full article: New rules for gas drillers

| |

Europe Invests Heavily in American Natural Gas Drilling in the Marcellus, Details of Chesapeake/StatoilHydro Deal

The Fort Worth Business Press reports European companies are making major investments in American shale plays, including the Marcellus. The article reports the following details about Chesapeake Energy’s new partner Norwegian-based StatoilHydro:

Norwegian state-controlled energy company StatoilHydro would pay $3.375 billion for a 32.5-percent stake in [Chesapeake’s] 1.8 million net acres of Marcellus Shale assets, according to a November 2008 agreement. StatoilHydro paid $1.25 billion in cash at closing, and the remaining $2.125 billion over the next three years “by funding 75 percent of Chesapeake’s 67.5 percent share of drilling and completion expenditures until the $2.125 billion obligation has been funded,” according to the Nov. 11 statement.

“This deal adds a major building block to the gas value chain position we have established in the U.S., the world’s largest and most liquid gas market,” said StatoilHydro President and CEO Helge Lund in a statement. “This is a significant step in strengthening our U.S. gas position, building on our existing capacity rights for the Cove Point LNG terminal, our gas trading and marketing organization and the gas producing assets in the Gulf of Mexico.”

Read the full article: Europeans see benefits in U.S. shale

Is Shale Drilling in Trouble at Current Market Prices?

As part of an opinion article published on OilOnline, several data points of interest are quoted about how much it costs to produce natural gas from shale plays like the Marcellus. The article paints a rather grim picture in the near future for shale drilling if prices for natural gas do not climb again. Among the comments made:

Wells in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale well may not be able to sustain production at prices below breakeven for long. Community tax bases will suffer. Resources and personnel could be forced to move on to other locations, domestic and international. Royalty owners will lose income. Exploration, drilling and production will quickly dry up. Production costs in most of these plays exceed the current $4/MMBtu market price. Most operators require at least $5-$6/MMBtu as a minimum to maintain profitable production.

OilOnline’s proposed solution to this crisis? The government:

A $7-$10/MMBtu price should be a policy objective that keeps the domestic industry healthy and contributes to further exploration and US energy independence. The US economy and security may depend on bringing these clean burning gas discoveries in the Barnett Shale, Haynesville Shale, Marcellus Shale, and Fayetteville Shale to market profitably. With price a function of supply and demand, we are seeing a greater supply than demand. That has to change.

Excuse me, but this is AMERICA. We are capitalists. We value freedom as our most prized and cherished possession, handed down to us by the Founders of our country. Freedom includes a free marketplace with prices set by competition and supply and demand. Every time the government interferes in the free markets (as can be seen in the current financial markets crisis), government makes matters worse. Natural gas, and indeed all forms of energy supply, must openly compete on the free market. If it costs too much to drill for natural gas, then the drilling should stop until such time it becomes profitable. That is the American way.

In fairness to OilOnline, they do make a strong case in the article for developing local markets for natural gas–a good idea. But inviting the government to micromanage the energy market is a prescription for disaster. Let natural gas stand on its own merits!

Read the full article: Natural gas needs to build local markets

| | | | |

Gastar Exploration’s 42,000 Acres in the Marcellus – No Development Until a Partner is Found

Energy company Gastar Exploration reports the following about their Marcellus commitment in a recent quarterly financial filing:

In the Marcellus Shale we hold approximately 42,000 net acres in northern West Virginia and southwestern Pennsylvania. To date, we have drilled 10 shallow wells, which will allow us to hold the related leases with production. Currently, we are seeking a joint venture partner to help us further develop this play. We do not expect to drill additional shallow wells until we secure a joint venture partner or until natural gas prices improve. We will continue to maintain our leases through renewals, extensions and renegotiations of drilling commitments.

Read the press release: Gastar Exploration Reports Fourth Quarter and Full Year 2008 Financial and Operational Results

| | |

Range Resources Looks for Gas Deposits in Beaver County, PA

The Beaver County & Allegheny Times Online news site reports Range Resources has hired Conquest Seismic Services to vibrate the ground around Hopewell and Independence Townships, located in Beaver County, Pennsylvania (near Pittsburgh).

For now, Range is looking along Route 151, according to Dave Schieck, a geophysicist for Range Resources. But don’t look for production wells for quite a few years:

“We’re looking here, and we’ll be looking in the northern part of Beaver County later on,” Schieck said of a stretch between Zelienople and the Beaver River. “It may be as much as a decade before any extraction takes place here, but I’d bet we’ll see some once the area is ready.”

Read the full article: Company vibrating ground in search of natural gas

|

Drilling in the Monongahela National Forest Put on Hold

Recently the U.S. Bureau of Land Management stopped a proposed auction for new oil and gas leases in the Monongahela National Forest (W. Va.) after protests from the Friends of Blackwater Canyon and The Wilderness Society. However, just because the auction is canceled for now, it doesn’t mean there won’t be an auction in the future, according to Bureau spokesman Terry Lewis. An article in The Charleston Gazette reports:

There are an estimated 280 billion cubic feet of federally owned natural gas beneath the forest. When combined with privately held resources, there could be as much as 860 billion cubic feet, according to the forest’s latest land and resource management plan.

Forest officials say there are 17 production wells on forest property, 16 of them tapping federally owned gas deposits.

For the past 50 years, drilling has focused on the Oriskany and other formations. It’s unknown how much gas is held in the Marcellus shale, which stretches from New York to West Virginia and is thought to hold trillions of cubic feet of natural gas. There are no Marcellus wells in the forest.

Read the full article: Monongahela drilling debate continues

|

Capital City Energy Group’s Hotwell Services Subsidiary Ramps up Activity in Marcellus Shale

From a press release issued by Capital City Energy Group:

COLUMBUS, Ohio–(March 10, 2009)–Capital City Energy Group (OTCBB: CETG) announced today that Hotwell Services, its wholly owned subsidiary and a provider of oil filed services in the Appalachian Basin, has significantly increased its cased hole service activity in the Marcellus Shale, one of the most active areas for natural gas exploration and production in the continental United States. More than 800 wells are expected to be drilled in the prolific Marcellus Shale in 2009, a projected increase of 400% from 2008. In this environment, the Company anticipates the opportunity to rapidly grow its business by increasing its presence in the basin and expanding its market share. Hotwell’s clients include many of the major independent producer’s active in the Marcellus Shale play.

“Despite the significant decline in the price of natural gas, we continue to see strong activity in the Marcellus Shale. The reason for this increase may be from hedging and budgets that have already been approved and the overall project economics of the Marcellus Shale play. Hedged production ensures a strong pricing environment throughout 2009,” said Joseph Sites, President of Hotwell Services, Inc. “Through our extensive experience in servicing the major independents; we are well positioned to capitalize on the strong activity in the area. Clients have found that our equipment, personnel, service, quality, and safety processes provide a very high value and reliable wireline service”

About Capital City Energy Group Inc.

Based in Columbus, Ohio, Capital City is a diversified oil and natural gas company with three separate divisions. Capital City has evolved from being an innovative leader in the design, management and sponsorship of retail and institutional direct participation energy programs to become one of the few vertically integrated independent oil and natural gas companies, which is publicly-traded. Its strategy is to continue to grow a portfolio of core areas which provide growth opportunities through drilling, operating, oil field service companies, acquisitions and fund management.

Will the U.S. Become Addicted to Imported Natural Gas Like We Have Imported Oil?

An interesting article recently ran in the Fort Worth Weekly (Texas), discussing the looming competition that is about to arrive from imported liquefied natural gas (LNG). The context of the article is mostly about how an increase in imports will affect energy companies and workers in the Barnett Shale play in Texas. However, the coming competition will affect all natural gas plays in the U.S., including the Marcellus.

The United States has imported natural gas for decades — it’s already the fourth largest importer of natural gas in the world, buying mostly from Canada and Mexico. This country has also been importing LNG for about 20 years, primarily from Algeria and the Caribbean nation of Trinidad and Tobago.

In the last few years, however, several factors have combined to make LNG importing much easier. The three new LNG terminals and 15 more in the planning or construction stages — on the East, West, and Gulf coasts — will triple the United States’ capacity for handling such imports. The prices of building LNG carrier ships has dropped sharply in the last decade, and the newest ships use much less fuel to get across the ocean than the older generation of such tankers, leading to a tripling of the worldwide LNG fleet. For those reasons and others, bigger players have entered the game: Egypt, Nigeria, and Qatar — home to the world’s largest natural gas field — have also begun selling to the United States. And they are delivering LNG at rates competitive with what it costs to produce the gas domestically.

The author of the article concludes this situation is good for consumers (lower prices), but potentially bad for those in the industry. But is continued dependency on foreign sources for our domestic energy needs really good for consumers–indeed all Americans? The beauty of horizontal drilling and plays like the Marcellus are to get us away from our energy dependence on potentially hostile foreign countries. In this author’s opinion, it would be a tragedy to repeat the same mistakes with natural gas that we have with oil.

Read the full article: Cool Competition: A new wave of imports could undercut Barnett Shale drillers

| | |

Westmoreland County, PA Supervisors Vote to Approve Drilling on County Land

On Thursday, March 12, the board of supervisors for Westmoreland County (Pennsylvania) voted to let drilling commence on an area of county-owned land. According to the Valley News Dispatch:

The board approved five natural gas wells to be drilled on Municipal Authority of Westmoreland County property near the Beaver Run Reservoir.

James McKinstry of Dominion Exploration detailed plans for the wells to be drilled into the Marcellus Shale in an area bordered by Fox Road, Walker Road and Route 286.

Resident John Doyle asked if drinking water in the reservoir will be protected, particularly from material such as disposable brine. McKinstry said waste, such as brine, will be trucked away. There is a site in Indiana County that accepts brine.

McKinstry added that the state Department of Environmental Protection regulations must be followed.

Supervisors unanimously granted the request, attaching conditions such as submitting a plot plan, posting 24-hour emergency numbers and keeping roads passable at all times.

Dominion feels the wells can be built in about seven or eight months once approval is granted.

Full article: Washington Township hopes for state sewerage dollars

| | |

Times Leader Update on Dimock, PA Water Well Contamination

The Wilkes-Barre Times Leader is following the story of the natural gas-contaminated water wells in Dimock, PA. Overall the article is pretty even-handed in its treatment of the issue and worth a read. In covering “both sides” of the issue, they reveal some of the facts in the case:

The company [Cabot Oil & Gas] and DEP [PA Department of Environmental Protection] agree that the gas isn’t from Marcellus Shale, a pipeline leak or naturally occurring sources above ground. They also concur that the gas is likely from a gas-laden upper layer of underground Devonian shale, of which the Marcellus Shale is a component but thousands of feet deeper, [DEP spokesman Mark] Carmon said. Marcellus Shale is generally at least 5,000 feet underground, while DEP determined the gas contaminating the water wells came from a shale layer roughly between 1,500 feet and 2,000 feet deep, Carmon said.

The company has cemented the upper Devonian shale layers of several wells, effectively extending the cement seals from the bottom of the water-bearing region, where the seals usually stop, to the bottom of the upper shale layers. The department has been trying to isolate the exact source of gas, seeing whether the extended seals produce a drop in water-contamination levels, Carmon said.

Because the method of contamination hasn’t been determined, Carmon said it’s too early to tell if Cabot knowingly violated regulations. “I’m not aware of anything blatant or anything like that, but, again, we want to know how did it happen,” he said.

Other news outlets would do well to follow the Times Leader’s example and get their facts straight before running stories about the Dimock situation.

Read the full article: Consequences of gas drilling still unknown

| | |

Drilling Begins in Somerset County, PA

The Somerset County Daily American newspaper reports drilling by Samson Investment Co. has commenced in the county:

Paul Menhorn is among the very first area landowners to get an in-person look at natural gas drilling operations. A drilling rig is now boring a gas well on his 157-acre dairy farm, which is located a few miles from Berlin.

It was last August when a representative from the Tulsa, Okla.-based firm told Menhorn that they would in fact begin to explore his property. By November, trucks were on the land, moving dirt and preparing the drilling site.

Equipment was shuttled onto his land March 2. A drilling rig now towers over a telephone pole near one of his barns.

According to Menhorn, it’s been life as usual, despite the sudden additions to his farm.

As for noise:

“When they’re drilling you can hear a little chattering, but it’s not bad,” Menhorn said, adding that his sleep has been unaffected by the sounds.

The newspaper article also reports:

The rig on Menhorn’s property could be the first of many. According Samson’s Web site, the company has doubled its work force over the past five years – a sign of growth and production.

The article gives an honest and frank view of what life has been like for the Menhorns since drilling started, along with a talk about the Menhorns’ concern about their water supply and how they approached ensuring there would be no problems with water contamination. The article is well written and worth your time to read all of it.

Read the full article: Drilling company taps Marcellus shale

| | |

$25K Per Acre for Lease Deals? Not in the Marcellus — Yet

An interesting tidbit from a story about energy giant ConocoPhillips. The article, published on the Houston Chronicle’s website, was about recent efforts by ConocoPhillips to “debunk Wall Street’s view that the Houston-based oil major grows by acquisition rather than finding its own oil and gas.” Buried far down the story is a statement (not a direct quote but a summary statement) from Larry Archibald, company vice president of exploration and production. The statement, as summarized by the reporter, was this:

He [Archibald] said ConocoPhillips shied away from “feeding frenzies” at high-profile shale plays where some companies rushed in and spent $25,000 or more per acre amid the pre-recession boom in gas production. Those plays included the Haynesville in East Texas and northern Louisiana, and the Marcellus in Pennsylvania, New York, Ohio and West Virginia.

He said ConocoPhillips will keep spending in more established plays, such as the Barnett shale near Fort Worth, and the lesser-known Eagle Ford in South Texas, where the company has a leading acreage position.

Everyone drools to see energy companies spending $25K per acre for leasing rights. But don’t get your hopes up too high. Marcellus Drilling News has not (so far) found any instances of leasing deals that approach anything near $25K per arce. It’s been more like $5K per acre on the high side in the Southern Tier of New York. If you know of high paying deals in the Marcellus, please let us know!

The other interesting point about the statement is this: It looks like ConocoPhillips will not be a major player in the Marcellus anytime soon, which is unfortunate.

Read the full article: ConocoPhillips flaunts its exploration finds