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Rogue EPA Takes a Second Run at Regulating Hydraulic Fracturing

Here we go again. The federal Environmental Protection Agency (EPA) announced today they would once again study hydraulic fracturing (“fracking”) as a mining method to extract natural gas. The EPA already spent considerable time and expense in 2004 to study it and found no evidence that fracking threatens drinking water. But Democrats in Congress, led by Congressman Maurice Hinchey (Democrat from Upstate New York), now have control of the EPA and they want a new study. Their claim is that the original study was “flawed” and unduly influenced by then Vice President Dick Cheney.

The EPA is upset that Congress passed a law in 2005 that prevents them from regulating fracking. And the EPA now has a sympathetic ear in Congress, so they’re trying once again to grab hold of an entire industry not within their jurisdiction or charter to regulate. This is their back door way of doing it.

On the matter of fracking and safety, an ABC News article about the EPA announcement today says:

Arthur E. Berman, a Houston-based petroleum geologist who’s questioned the headlong rush to open up shale fields on economic grounds, said the environmental risks have been overblown.

“We have been doing hydraulic fracturing for 50, 60 years and there is no evidence whatsoever that there has been ground or surface water contamination,” he said.

He said only “point-5 percent” of what goes into a well were chemicals, and those were mostly “common chemicals that you would put in your swimming pool or hot tub, something like chlorine.”*

The EPA is spending $1.9 million on the study, and expects to complete it in 2012. MDN sincerely hopes a likely change in the balance of power in Congress after November 2010 will mean a Congress willing to keep a rogue EPA in check.

*ABC News (Mar 18) – EPA to Study ‘Fracking’ Gas Drilling Method

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Binghamton Natural Gas Summit: Opening Remarks and Scene-Setting with Scott Kurkoski

Scott Kurkoski Marcellus Drilling News attended the Natural Gas Development Summit held in Binghamton on March 18th at the Regency Hotel. The event was organized and sponsored by the Joint Landowners Coalition of New York. There were about 150 people in the audience, made up of landowners, people from the drilling industry (lawyers, energy companies, engineering companies and others), and the press. It was a half day event, starting at 9:30 am and ending at 12:45 pm. MDN will run a series of posts to cover the presentations. This article contains the opening remarks delivered by Scott Kurkoski, a lawyer specializing in mineral rights with Levene, Gouldin & Thompson. Scott was one of the chief organizers of the event and master of ceremonies.

He opened by stating the purpose of the meeting is to have a discussion about the issues, with an aim to move the issue of drilling in New York State forward. He thanked Broome County Executive Barbara Fiala for hosting the event and for her efforts on behalf of landowners.

Scott next provided the background for where we are now in New York, and how we got here. In 1992, the New York Department of Environmental Conservation created a Generic Environmental Impact Statement (GEIS) to govern oil and gas drilling in New York. Since then, newer technologies (horizontal drilling and hydraulic fracturing or “fracing”) have come along and the DEC, under direction from the Governor’s office, drafted Supplemental (new) regulations to account for these new technologies and their use.

Read More “Binghamton Natural Gas Summit: Opening Remarks and Scene-Setting with Scott Kurkoski”

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How Long Will Drilling in the Marcellus Shale Last?

Nothing lasts forever, as the old cliché goes, and neither will drilling. While we are at the very beginning of what will be a life-changing event for many landowners, a natural question is, How long will it last? How long before the natural gas locked away in the Marcellus is largely mined from the ground?

One person to address that question is Marty Muggleton, spokesman for The Larson Design Group and TerrAqua Resource Management, a wastewater processor newly permitted to handle flowback from Marcellus drilling operators. At a recent meeting of the Tioga County (PA) Development Corporation Board of Directors, he said:

Drilling will last about 20 years…and locals should try to use the resulting income wisely. There will be new opportunities for jobs, culture, education, health care and more. Communities just need to plan so those benefits remain when the drillers leave.*

So there you have it. Once drilling begins, plan to see drilling operators for about 20 years.

*The Wellsboro Gazette (Mar 17) – Natural gas dominates TCDC agenda

UPDATE: At the Natural Gas Development Summit held in Binghamton, NY on March 18, one of the speakers also addressed this issue. Larry Michael, Executive Director for Workforce Economic Development at the PA College of Technology, has studied jobs and drilling in the Marcellus extensively. He said while a single well may produce for 15-20 years, the activity of drilling in the various shales in our region will go on for 80-100 years total. It will span several generations, before all shale gas is mined.

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Landowner Pipeline Group Forms in Northeast PA

Some Susquehanna and Wyoming County, PA landowners are forming a group to force drilling and pipeline companies to “behave responsibly” with installation and operation of new pipelines as more and more Marcellus Shale gas wells are drilled and go online in Northeast PA. The group wants to arm landowners with information about their rights when negotiating “right-of-way” agreements for pipelines.

Excerpts from an article in today’s WC Press Examiner:

The Lemon Township Pipeline Group has been meeting for months and its members are looking at a range of easement and right-of-way agreements that leaseholders need to consider as more and more drilling companies come into the area looking to get the gas from the Marcellus shale to market.

Such issues as price, nature, location, type, pipeline depth below surface, installation, road repair, pressure, timetable, abandonment, rights, restrictions and environmental responsibilities are among the many issues that individuals need to consider.*

An email address is given for those interested in joining or finding out more: pipelinerowinfo@yahoo.com.

*Wyoming County Press Examiner (Mar 17) – Landowners’ pipeline group forms

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A Novel Approach to Signing New Landowners by Chesapeake Energy in Bradford County, PA

Forget the landmen, Chesapeake Energy wants to talk directly to landowners and is throwing a “signing party” hoping to convince landowners in Bradford County to show up and sign up at the Wysox Fire Hall on March 20th.

Chesapeake sent letters to unsigned landowners in Towanda, North Towanda, Wysox, Standing Stone, Monroeton, Asylum, Wyalusing and Herrick, inviting them to the event.

Chesapeake tells landowners in the letter:

“Our records indicate that you own certain oil and gas rights that Chesapeake is interested in leasing,” the copy of the letter states. “We will have personnel on hand to discuss with you an offer to lease [the oil and gas rights on] your property that will potentially allow you to share in the royalty pool to be established for wells to be drilled in your area.”*

The letter offers unsigned landowners a 10-year lease for $5,000 per acre and 20% royalties. By comparison, just last September Chesapeake signed a deal with the Wyoming County Landowners group for $5,750 per acre and 20% royalties. Chesapeake has made an offer to Wysox Township to lease town land for the same terms ($5,750 per acre, 20% royalties). However, in January 2010, Northern Tier Career Center in North Towanda approved a five-year lease with Chesapeake for $6,500 per acre and 20% royalties on the school’s 73 acres.

MDN has not seen a copy of the full letter, but a commenter on The Daily Review website states the Chesapeake letter was sent to landowners with less than 3 acres of land. Landowners with small parcels do not have as much negotiating clout as larger landowners or groups. Even so, MDN cautions landowners about just showing up and signing up. While it may be a good deal, the devil is in the details of a contract. There is no substitute for having a contract reviewed by legal counsel before signing. Landowner groups (who retain legal counsel) are often the best way to ensure your interests as a landowner are protected. If you cannot find a landowner group to join, make sure you retain a good lawyer with experience in mineral rights leases.

Go enjoy the free coffee and donuts, but be careful about signing anything on the spot.

*Towanda The Daily Review (Mar 17) – Chesapeake to hold lease-signing event for Towanda-area landholders

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Kane Borough Sewer Authority Making Money from Selling Effluent to Marcellus Shale Driller

Kane Borough Sewer Authority in McKean County, Pennsylvania is planning to sell (sell!) sewer effluent to Seneca Resources for drilling gas wells. Seneca is the oil and gas drilling division of National Fuel Gas Company. Effluent is the treated water discharged from sewage treatment plants.

According to a report given by Phil Lingenfelter, the foreman for the [Kane Borough] sewage treatment plants, more than 700,000 gallons of effluent is discharged daily from the two plants in “dry weather.”

Jim Salvamoser, chairman of the five-member authority, endorses the plan to sell the effluent to Seneca Resources.

“I think it’s a good idea,” Salvamoser said Monday. “It may give us a good source of revenue.”

Lingenfelter said he still is talking with Seneca about the proposal. He said a price for the effluent has not been set. He said the state Department of Environmental Protection (DEP) has been made aware of the proposal and has not ruled against the effluent sale.

“DEP thinks it’s a great idea,” he told the authority.*

Seneca has already drilled one gas well in the area and is now drilling another, with plans to drill more wells in the near future.

There are many municipal sewage treatment facilities located throughout the northeast and mid-Atlantic in the Marcellus Shale. Perhaps some other enterprising managers can tap this new revenue source for their cities and towns.

*Kane Republican (Mar 16) – Kane plans to sell sewer effluent for well drilling

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PVR Midstream Building New Pipeline and Compression Facilities in Wyoming County, PA

From a Penn Virginia Resource Partners press release issued today:

The midstream division of Penn Virginia Resource Partners, L.P. (NYSE: PVR), PVR Midstream, announced today that it has entered into an agreement to construct and operate gas gathering pipelines and compression facilities servicing a private firm’s Marcellus Shale natural gas production in Wyoming County, Pennsylvania.

PVR Midstream will construct a 12-inch gathering pipeline and compression facilities with 25 million cubic feet (MMcf) per day of throughput capacity. This system is expected to become operational during the second quarter of 2010, with the potential for additional system extensions.

PVR Midstream’s 2010 capital investment in this system is anticipated to range from $6 to $7 million, with potential future system extensions costing up to $10 million. PVR Midstream expects its investment to be accretive to distributable cash flow once the system is operational.

See the full press release (Mar 16): Penn Virginia Resource Partners, L.P. Announces Gathering and Compression Agreement with Private Producer in the Marcellus Shale

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Energy Companies in PA Must Now Disclose Gas Well Production Numbers Every Six Months

Faster disclosure of gas well production data is coming to Pennsylvania. On Tuesday, March 16 the PA Senate passed a bill already passed by the PA House that would force drilling companies to disclose gas well production data every six months. The existing law, passed 25 years ago, allows drillers to keep production numbers secret for five years. No more. Gov. Ed Rendell has said he will sign the new measure into law.

What does it mean for landowners in PA? You’ll now have access to the numbers to ensure your royalty payments are timely—and accurate.

For more, see: Binghamton Press & Sun-Bulletin (Mar 16) – Pa. to reveal drillers’ secrets in gas shale rush

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Atlas Energy Talking to Reliance Industries About Marcellus Shale Partnership – Billion Dollar Deal in the Making?

As MDN reported on Feb. 24, Atlas Energy is looking for a partner to help fund its operations in the Marcellus Shale. They may have found one, Indian energy giant Reliance Industries:

Reliance Industries Ltd., the owner of the world’s largest fuel-making complex, is in talks with Atlas Energy Inc. to invest in the U.S. natural-gas producer’s shale assets, a person familiar with the negotiations said.

The talks between Reliance, controlled by Indian billionaire Mukesh Ambani, and Moon Township, Pennsylvania-based Atlas are in preliminary stages, the person said yesterday, asking not to be identified because the discussions are private.*

The deal is likely to be worth several billion dollars, if recent deals are any indicator: CONSOL’s impending purchase of Dominion’s Marcellus Shale operations for $3.475 billion; Mitsui’s investment of $1.4 billion in Anadarko earlier this year; and Statoil’s investment of $3.4 billion in Chesapeake last year. If the Reliance/Atlas deal pans out and fetches the same rate of $14,000 per acre investment that the Mitsui/Anadarko deal did, it would be a $3.7 billion deal—the largest Marcellus deal yet.

*Bloomberg (Mar 16) – Reliance Said to Be in Talks With Atlas to Buy Shale Gas Assets

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Talisman Energy Will Invest $1 Billion in PA Marcellus Shale, Opening Regional Office near Pittsburgh

Talisman Energy (headquartered in Calgary, Canada) says it will invest $1 billion in Pennsylvania’s Marcellus Shale.

Part of that investment is the creating of a regional office in Cranberry Township, in Butler County, PA. The new office will employ 125 people by the end of 2010. And Talisman is looking to hire:

The company is in the process of recruiting and hiring geologists, landsmen, regulatory and legal experts, among others. It will relocate 35 from its New York office and 15 from the Calgary headquarters, and hire the rest.*

Although Talisman’s 214,000 net acres in the Marcellus Shale are in northeastern Pennsylvania, the company decided to locate its regional office near Pittsburgh.

*Pittsburgh Business Times (Mar 12) – Talisman Energy opening office north of Pittsburgh

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Former NY Gov. George Pataki Joins Advisory Board of Mesa Energy

Former New York Gov. George Pataki has joined the advisory board of Mesa Energy Holdings (headquartered in Dallas). Mesa holds leases and has active gas drilling operations in Wyoming County in Western New York State. Gov. Pataki, since leaving office, joined a law firm and started a consulting practice with a focus on environmental and energy issues.

According to the press release:

Headquartered in Dallas, TX, Mesa Energy Holdings, Inc. is a growth-oriented, exploration stage oil and gas exploration and production (E&P) company with a definitive focus on growing reserves and net asset value per share, primarily through the development of highly diversified, multi-well developmental and defined-risk exploratory drilling opportunities and the acquisition of solid, long-term existing production with enhancement potential. Although the Company is constantly evaluating opportunities in the nation’s most productive basins, the Company’s primary focus is currently on the Devonian Black (Marcellus) shale in the northern Appalachian Basin in western New York.*

Never mind the press release gobbledygook. What it means is this: Right now Mesa owns pipelines and active vertical wells in Western NY, but they’re betting big-time that horizontal drilling and hydro fracturing is coming to New York in the not-too-distant future, and they want an ace in the hole when it does. Welcome George.

*Business Wire (Mar 15) – Mesa Energy Holdings, Inc. Names Former New York Governor George E. Pataki to the Advisory Board

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Major Transaction: CONSOL Energy Buys Dominion Resources Appalachian Business, Including Marcellus Gas Operations, for $3.475 Billion

CONSOL Energy of Pittsburgh today announced it is buying the Appalachian exploration and production operation of Dominion Resources. Dominion’s Marcellus Shale drilling operations are part of the transaction. CONSOL is paying $3.475 billion in cash.

Dominion currently has leases on approximately 500,000 acres in the Marcellus Shale. Added to CONSOL’s existing 250,000 acres (which belong to CNX Gas, another CONSOL company), the new total acreage controlled by CONSOL will be 750,000. Dominion’s large Marcellus acreage was one of the key attractions for CONSOL.

The total acreage CONSOL is buying from Dominion for both oil and gas totals 1.46 million acres, along with 9,000 active oil and gas wells. Dominion’s operation was once part of John D. Rockefeller’s Standard Oil company.

CONSOL will add 193 employees from Dominion’s Appalachian operation to its own payroll when the deal closes, which is expected to happen at the end of April.

For more details, see the press release:
CONSOL Energy to Acquire Dominion’s Appalachian E&P Business for $3.475 Billion In Cash

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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