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    More Delay Tactics, Elected Officials in NY Actively Oppose Drilling in the Marcellus Shale

    New York State’s future with drilling in the Marcellus Shale continues to be cloudy at best. While MDN believes drilling should start—now—hoping and wishing will not make it happen and New York landowners have to face the cold, hard reality it may not happen until summer 2011 at the very earliest (if indeed it ever happens). Now that the NY Department of Environmental Conservation is proposing two sets of rules for drilling—one for the New York City and Syracuse watershed areas, the other for everyone else—anti-drillers are using it as a wedge issue.

    Must be fun being an anti-drilling person in NY. First, you say over and over and over again that drilling in the Marcellus in the watershed may contaminate New York City’s water supply. And so, when finally the DEC throws up its hands and says, “OK, we’ll take drilling in the watershed off the table,” the new argument becomes, “See! See! If it’s not safe for the watershed, it’s not safe anywhere!” Gotta love that twisted logic. Point of fact: Hydraulic fracturing is safe everywhere, including the watersheds.

    Here’s some of the latest opposition to drilling from New York’s elected leaders:

    Assemblyman Kevin Cahill, D-Kingston, chairman of the Assembly’s Energy Committee, and Assemblywoman Barbara Lifton, D-Ithaca, are preparing legislation that will require the same drilling regulations for all state watersheds, including the Delaware.

    Assemblywoman Aileen Gunther, D-Forestburgh, recently co-sponsored a bill calling for a moratorium on drilling at least until a federal study on the impact of “fracking” on drinking water is complete — in about two years.

    And on Friday, Rep. Maurice Hinchey, D-Hurley, called on the Delaware Basin Commission, which approves withdrawals of Delaware River water used for “fracking,” to conduct an environmental impact study on the cumulative effects of those withdrawals before it considers any applications.*

    So, let’s recite the playbook: Claim it’s not safe. Claim it pollutes water supplies. And when all else fails, call for “let’s go slow and do more studies” and try to delay drilling for at least 2-3 more years to give the anti-drilling forces time to solidify opposition and completely kill it forever.

    And lest PA thinks they’re clear of all this, you’re not. The Delaware River Basic Commission has effectively blocked drilling in the Delaware River watershed for now. And your own U.S. Senator, Bob Casey, is asking the U.S. Environmental Protection Agency to get involved in the situation in Dimock, PA.

    *Middletown Times Herald-Record (May 2) – Legislators want drilling rules fairly crafted

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    PA League of Women Voters Comes Out Against Drilling in the Marcellus

    The League of Women Voters of Pennsylvania is anti-drilling. Although they pretend to be a non-partisan group, they are anything but. Not only do they sponsor forums with anti-drilling speakers on a regular basis, they have now issued an official position in favor of an extraction tax on drilling in PA, and they have gone on record favoring strict new regulations for drilling in PA. While they don’t categorically say “don’t drill,” their positions and statements essentially do say it. Here’s the opening (alarmist) paragraph from the press statement announcing their official position on drilling in the Marcellus:

    FRAC is a four-letter word, F, R, A, C. FRAC impacts everyone in Pennsylvania. It requires the immediate attention of all–from young and old, from rich to poor, from Pittsburgh to Easton, and from Philadelphia to Erie. Why? Fracturing is an explosive process that expels natural gas from Marcellus Shale, a rock that lies deep beneath two-thirds of our Commonwealth. Natural gas extraction impacts our water, our land, our air, our communities, our public health, and our economy.*

    Yes, fracturing is an explosive process—small, controlled explosions that happen a mile below solid rock (conveniently left out of the statement). The language used in the press statement is distorting and pejorative about the process of drilling. But hey, it’ll bring in the contributions and it whips up the faithful!

    *Statement by Olivia Thorne, President, PALWV (May 3) – Press Conference on Marcellus Shale Natural Gas Extraction

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    Anadarko Now Operating Four Drilling Rigs in Marcellus, Drilled First Lycoming County, PA Well in 1Q 2010

    An update on Anadarko’s Marcellus drilling activities from a recent operations report released to investors:

    Anadarko entered into a joint venture with Mitsui E&P USA LLC. Under the terms of the agreement, Mitsui will participate with Anadarko as a 32.5% partner in Anadarko’s Marcellus Shale assets in exchange for providing a $1.4 billion capital carry to Anadarko that covers 100% of its capital in 2010 and 90% thereafter. The carry is expected to be fully utilized by 2013. In addition, Mitsui committed to approximately $100 million to normalize its position with respect to Anadarko’s historical costs.

    At the end of the 1st quarter, Anadarko was operating four rigs and participating in an additional 12 non-operated rigs. The company spud ten operated wells and completed two wells during the quarter. Anadarko expects to be operating six rigs by the end of the 2nd quarter 2010.

    The Company completed and tested its first Lycoming County well (Larry’s Creek 3H) in January. The well was tested at a peak rate of approximately 6.1 MMcf/d.*

    *Anadarko Operations Report First-Quarter 2010

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    Hess Net Marcellus Shale Acreage 80K, Mostly in Wayne County, PA – Will Drill 5-10 Test Wells in Second Half of 2010

    An update from Greg Hill, President, Worldwide Exploration and Production with Hess Corporation, about their activities in the Marcellus (from a recent earnings call):

    “We’re continuing to build our position in the Marcellus. We’re at about 80,000 net acres now in the Marcellus, primarily in Wayne County, Pennsylvania. About 50,000 of that is Hess operated and the balance is part of this joint venture we have with Newfield. Our plan this year are to drill five to 10 wells during the second half of 2010 in order to evaluate the resource potential on the acreage.”*

    *Seeking Alpha (Apr 29) – Hess Corp. Q1 2010 Earnings Call Transcript

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    Penn Virginia Marcellus Shale Acreage Stands at 35,000 – Looking to Invest $48 Million in 2010 to Add More

    We get the following details on Penn Virginia Corporation’s Marcellus drilling activities from their quarterly operational report:

    Marcellus Shale – [PVC spent] approximately $17 million, or six percent, to drill five (3.8 net) horizontal and vertical wells primarily to test our acreage position in Potter and Tioga Counties, Pennsylvania.

    During the first quarter of 2010, we drilled one (0.8 net) Marcellus Shale vertical exploratory well which was recently stimulated with approximately one million pounds of sand. The well is currently cleaning up and being evaluated. We continue to add to our acreage position in the Marcellus Shale, increasing our acreage position to approximately 35,000 net acres, and we expect to spend up to $48 million in 2010 to add leasehold acreage in our existing and new prospect areas.*

    *Penn Virginia Corporation Press Release – Penn Virginia Corporation Provides Operational Update (PDF file)

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    Marcellus Shale Companies in Pennsylvania Looking to Fill Jobs and Contract with Local Businesses

    Companies involved in drilling, processing and transporting Marcellus Shale gas in Pennsylvania are looking to contract with local businesses and hire local people to work for them. On the list are…

    • Contractors for:
      • clearing land
      • constructing well pads
      • setting up rigs
      • running wirelines
      • hauling waste
      • hauling dirt
      • mechanical work
      • civil work
      • electrical work
      • environmental surveyors
      • installers
    • Real estate/office space
    • Drilling crews
    • Frac crews
    • Right-of-way agents
    • Suppliers for:
      • drilling mud
      • frac fluid
      • steel pipes
      • valves and fittings
      • natural gas compressors
    • Engineering firms
    • Environmental firms
    • Professionals:
      • geologists
      • geophysicists
      • environmental engineers

    The companies looking to hire include:

    • East Resources
    • Chief Oil & Gas
    • Laurel Mountain Midstream
    • MarkWest Energy
    • Talisman Energy

    For more details, along with contact names and inside tips for submitting a bid or applying for a job, see the article linked below.

    *Pittsburgh Business Times (Apr 29) – The Marcellus Shale: How your company could get in on the action

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    CONSOL/CNX Gas Will Drill Two Dozen Horizontal Marcellus Gas Wells in 2010, Now Holds Leases on 760,000 Acres

    Highlights from the CONSOL Energy quarterly earnings report as it touches on their operations in the Marcellus Shale:

    On March 15, CONSOL Energy announced a $3.475 billion acquisition of the Appalachian gas exploration and production business of Dominion Resources. We expect to close the transaction tomorrow. The assets include approximately 1 trillion cubic feet of proved reserves and approximately 500,000 acres of Marcellus Shale. Additional assets include an overriding royalty interest from farm-outs, 300,000 acres of Huron Shale, and extensive Utica Shale acreage.

    On March 22, CONSOL Energy announced its intention to acquire the approximately 25 million shares of CNX Gas that it does not already own for $38.25 per share. We commenced the tender offer on April 28. As previously announced, T.Rowe Price has already agreed to tender the 9.47 million shares held for its investment advisory clients into the offer at the offer price of $38.25 per share.

    During the quarter, CNX Gas achieved record initial production from one of its latest Marcellus Shale wells. Well GH 2B CV, has averaged 5.0 MMcf per day for the first 47 days of production. It peaked at 5.7 MMcf per day. This well has a lateral of 2,300 feet.*

    Read More “CONSOL/CNX Gas Will Drill Two Dozen Horizontal Marcellus Gas Wells in 2010, Now Holds Leases on 760,000 Acres”

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    National Fuel Does Pipeline Deal with Statoil and East Resources to Move Marcellus Shale Gas to Canadian & Northeast US Markets

    National Fuel has struck a deal with Statoil and East Resources and is expanding two pipelines to handle Pennsylvania Marcellus Shale gas, sending it to markets in Canada and the Northeastern U.S. The announcement says National Fuel will build 16 miles of new pipeline from Corning, NY to Tioga County, PA, and construct a new interconnection with the Tennessee Gas Pipeline in Ontario County, NY, among other improvements.

    From the National Fuel press release:

    WILLIAMSVILLE, N.Y.–(BUSINESS WIRE)–National Fuel Gas Supply Corporation (“Supply”) and Empire Pipeline, Inc. (“Empire”), the companies that comprise the Pipeline and Storage segment of National Fuel Gas Company (NYSE: NFG) (“National Fuel”), have reached major milestones on two pipeline expansion projects that are the first in the industry designed to receive natural gas produced from the Marcellus Shale and transport it to key markets of Canada and the Northeast U.S. Supply has entered into a binding precedent agreement with Statoil Natural Gas LLC (“Statoil”) for 100 percent of the capacity on Supply’s “Northern Access” expansion project. Empire also has a binding precedent agreement in place with anchor shipper East Resources, Inc. (“East”) for Empire’s “Tioga County Extension” project, and is concluding negotiations for additional capacity with a second shipper. The precedent agreements provide for Statoil and East to sign, after satisfaction of conditions, firm transportation service agreements under which Supply and Empire will transport natural gas for Statoil and East.

    Read More “National Fuel Does Pipeline Deal with Statoil and East Resources to Move Marcellus Shale Gas to Canadian & Northeast US Markets”

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    NY DEC Message to Landowners in New York’s Watersheds: Forget About Drilling

    These are the bald facts of life for New York landowners who own land in either the New York City or Syracuse watershed areas and may want to lease their land for Marcellus Shale gas drilling: Forget it. That’s the loud and clear message from NY Department of Environmental Conservation (DEC) Commissioner Pete Grannis. After the DEC’s announcement of last week, no energy company in their right mind will be willing to drill in New York’s watersheds (although drilling companies currently drill safely in the Susquehanna River watershed in PA, and are trying to drill in the Delaware River watershed in PA).

    Reaction from landowners in New York has been mixed. While some believe watershed landowners are being unfairly penalized, others think this may speed up the process of drilling for everyone else by removing a key objection to drilling—that drilling may contaminate city water supplies.

    From a press release issued by the NY DEC last week:

    April 23 – New York State Department of Environmental Conservation (DEC) Commissioner Pete Grannis today announced that due to the unique issues related to the protection of New York City and Syracuse drinking water supplies, these watersheds will be excluded from the pending generic environmental review process for natural gas drilling using high-volume horizontal drilling in the Marcellus shale formation. Instead, applications to drill in these watersheds will require a case-by-case environmental review process to establish whether appropriate measures to mitigate potential impacts can be developed. There are 58 pending applications for horizontal drilling in the Marcellus shale; no applications are located in either the New York City or the Skaneateles Lake watersheds (Syracuse utilizes the Skaneateles watershed).

    Read More “NY DEC Message to Landowners in New York’s Watersheds: Forget About Drilling”

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    Joint Landowner’s Coalition of NY Makes Appeal to Landowners

    The Joint Landowner’s Coalition of NY has put out a plea for donations. Drilling in New York may not happen unless landowners can generate enough noise to break through the resistance in Albany. Here is the letter reproduced in full from the JLCNY:

    A Message from the JLCNY President Dan Fitzsimmons – April 27, 2010

    Fellow Landowners – I don’t have to tell you we have much at stake.  But I do need to sound an alarm:  the time for us to act is NOW.  We are organized.  We are prepared.  And although we have worked intensely over the last two plus years, we are outmanned, outspent, outmaneuvered.  We need to step up our game, and we have a plan to get it done.  But we desperately need your financial support.  Some of you have given generously financially.  Some of you have poured blood, sweat and tears into this effort.  And some of you will make your first donation right now.  We need as much as you can afford to give to fund our efforts to:

    • Hire professionals in Albany who can represent us and make sure our voices are not drowned out by the better-funded extremists.  These professionals can open doors, cut through clutter and red-tape for us and focus us on the most effective strategy for being heard where it counts.

    • Get the word out:  you’ve heard the same arguments I hear:  more people are against drilling than are for it.  We know that’s not true – but we have to erase that perception.  The best way to do that is to blanket our area with lawn signs, drown our airwaves with pro-drilling ads, promote speakers at public forums who can support our issues with facts, erect billboards with clear messages, etc.

    • Continue to support landowners.  In some respect, the work begins when the moratorium is lifted and leases are signed.  Who will advocate for landowners in their negotiations and relations with energy companies?  Who will be a watchdog with the regulatory agencies?  Who will make sure we have the best and latest information on and about the industry and the technology surrounding us?  Landowners will need the JLC more and more as time goes by and as the stakes continue to rise. We cannot sustain it without your support.

    We are seeking support from a number of channels:  from corporations and industry; from foundations and other organizations who may provide grants for our work; from local business and farm organizations.  But the most important support we need RIGHT NOW is from you.  Please give what you can today – $10, $20, $100, $500 or more.  See if your company has a matching donation program – or if you know of any other source you can approach for us – please do.  Use PAYPAL on our website: JLCNY.org or send a check to:

    PO Box 2839
    Binghamton, NY 13902

    Thank you from the bottom of my heart.  We will get there, but only if we stay together on this.

    Dan Fitzsimmons
    President JLCNY

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    EQT has Already Drilled 21 Wells in PA Marcellus Shale in 2010 – On Track for 100 Wells This Year

    Even though the price of natural gas worldwide is down, EQT Corp saw a big jump in net income (ie profits) largely due to their large increase in gas production in the Marcellus Shale formation in Pennsylvania. In a Pittsburgh Tribune-Review article we learn this about their drilling activities:

    EQT drilled 21 horizontal wells in the Marcellus formation in the first quarter, and plans to drill 100 such wells this year, at an average cost of $3.3 million to $3.5 million per well.*

    If EQT drills 100 wells in PA in 2010, that’s a $330-$350 million investment in PA with all of the jobs that kind of investment creates.

    *Pittsburgh Tribute-Review (Apr 28) – EQT tallies $88.1 million 1Q profit

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    Kinder Morgan Building New Marcellus Shale Pipeline from Pennsylvania to Michigan

    Kinder Morgan, a pipeline and energy storage company, will build a new 250-mile pipeline from Pennsylvania to the Cochin Pipeline in Michigan to move Marcellus Shale gas to processing facilities and markets in the Midwestern U.S. and Canada.

    From the Kinder Morgan press release:

    HOUSTON, April 20, 2010 – Kinder Morgan Energy Partners, L.P. today announced plans to modify and expand the existing Cochin Pipeline system to provide a solution for transporting natural gas liquids (NGL) from the Marcellus Shale Basin to fractionation plants and chemical markets near Sarnia, Ontario, and Chicago, Ill.

    Kinder Morgan plans to build approximately 250 miles of NGL pipeline from the Marcellus Shale Basin in southern Pennsylvania to the Cochin interconnect at Riga, Mich. From Riga, Kinder Morgan anticipates that product will be transported through the existing Cochin Pipeline system to Windsor, Ontario, and then through the Windsor-Sarnia Pipeline to Sarnia. Kinder Morgan also plans to reverse the eastern leg of its Cochin pipeline in order to move NGLs from Riga to the Chicago area, where it expects to build an additional pipeline to connect to existing fractionation facilities and chemical plants.

    “Our proposed pipeline and key existing infrastructure offers NGL producers the quickest and most efficient solution to get their product to the market,” said Don Lindley, vice president of business development for Kinder Morgan’s Products Pipeline group.

    The pipeline will be designed to transport mixed NGLs (Y-grade), as well as purity NGLs such as ethane, and will have an initial throughput capacity of 75,000 barrels per day and can be expanded to handle up to 175,000 barrels per day.

    The recent decision by Canada’s National Energy Board directing the reconnection of the Cochin Pipeline to the Windsor-Sarnia Pipeline will enable Cochin Pipeline shippers to have access to the Sarnia chemical complex. Kinder Morgan anticipates offering transportation from Marcellus to Sarnia for under 14 cents per gallon.

    Kinder Morgan expects to move forward with an open season in the second quarter of 2010.

    Kinder Morgan Press Release (Apr 20) – Kinder Morgan Offers Quick and Efficient Solution to Move Marcellus NGLs to Market

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    A New and Potentially Safer Way to Treat Marcellus Shale Wastewater

    A Pittsburgh startup company formed at the Pittsburgh Allegheny-Singer Research Institute believes it has developed a better solution than current alternatives for treating wastewater from drilling Marcellus Shale gas wells. Frac Biologics Inc. was founded by physicians, so it’s no surprise the technology comes from the medical community:

    “The idea for the company came from our work with biofilms, which are (cell) communities that we try to manipulate or get rid of to treat human disease,” said Christopher Post, a physician and CEO of the 3-month-old company. Other founders are physician William Costerton and Garth Ehrlich. All three are Allegheny-Singer directors.

    Allegheny-Singer researchers found the biofilms love to eat heavy metals, such as strontium, nickel, even uranium. The metals, in effect, fuel the biofilms, Post said.*

    Water used in drilling Marcellus wells often comes out of the well containing small quantities of heavy metals. One of the objections to hydraulic fracturing is that wastewater from drilling eventually needs to be returned to the environment, and if it’s laced with heavy metals it is not safe. If Frac Biologics is successful with their concept, perhaps some of those objections can be addressed.

    *Pittsburgh Tribute-Review (Apr 22) – New company says it can safely handle Marcellus wastewater

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    Atlas Energy/Reliance Industries Pay $192 Million for Leases on 42K Acres in PA Marcellus Shale

    The recently announced joint venture between Atlas Energy and Indian energy giant Reliance Industries (a deal worth $3.5 billion over 10 years) is already bearing fruit. Together they’ve just forked over $192 million to secure leases for more land in Pennsylvania.

    Independent oil and gas company Atlas Energy will buy 42,344 acres in the gas-rich Marcellus shale along with Reliance Industries Ltd (RIL), weeks after the two announced a joint venture.

    The companies will buy the acreage in Fayette, Washington, Indiana, Westmoreland, Armstrong and Clarion Counties of Pennsylvania at an average price of $4,532 per acre.

    Following Wednesday’s deal, the Atlas-RIL joint venture will control about 343,000 Marcellus Shale acres, of which about 206,000 acres are net to Atlas.*

    According to the Atlas Energy website:

    Substantially all of the acreage to be acquired is held by production and is either contiguous with the joint venture’s existing acreage or is in concentrated blocks of acreage. [Atlas] believes that it will be able to drill over 450 horizontal wells on this acquired acreage assuming 1,000 foot spacing between lateral wells.**

    *Hindustan Times/Reuters (Apr 22) – Atlas, RIL to buy more shale acreage for $4,532 per acre

    **Atlas Energy Press Release (Apr 21) – Atlas Energy, Inc. and Reliance Industries Jointly Acquire over 42,000 Additional Acres within Their Core Marcellus Shale Position

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    Speakers at Marcellus Midstream Conference: Infrastructure Critical to Future Success

    According to speakers at today’s Marcellus Midstream Conference and Exhibition in Pittsburgh, infrastructure will be play a key role, and if not ramped up quickly, may create problems for drillers in the Pennsylvania Marcellus Shale.

    “The opportunity for Marcellus Shale production growth can be overwhelmed by a lack of infrastructure,” said Scott Soler, managing director of Houston-based private equity firm Quantum Energy Partners.

    Soler said an estimated $10 billion must be spent on pipelines, processing and storage facilities within five years to keep up with projected production.*

    Bentek Energy, also presenting at the conference, said the industry has announced or already begun more than 30 pipeline projects, including new pipelines or expansion of existing pipelines.

    MDN recently reported on new processing, fractionation and storage facilities announced by both Dominion and MarkWest. Infrastructure will play a key role in drilling in the Marcellus for years to come.

    *Pittsburg Tribune-Review (Apr 21) – Marcellus Shale infrastructure inadequate, energy exec says

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    Encana Paying for Water Testing up to One Mile from Proposed Drilling Site in Luzerne County, PA

    To address concerns of area residents, Encana is paying for a baseline water study to be performed for any household up to one mile away from a proposed natural gas well Encana will start drilling in Luzerne County, PA this year:

    EnCana is attempting to establish a baseline for water quality and quantity conditions by requesting property owners participate in a water sampling assessment, which will be collected by Rettew Associates, a third-party environmental-testing firm based in Lancaster.

    Letters were mailed April 8 to landowners located within a mile radius of the well covering Lake and Lehman townships, and Harveys Lake borough.*

    Encana spoke to area residents at a recent meeting in the Lehman Township fire hall to describe the testing procedure and their desire to, “Take every safeguard to not impact your water.”

    *Wikes-Barre Times-Leader (Apr 21) – Residents worry about gas drillers contaminating water