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    Mesa Energy Adds Another New York Heavyweight Politico to Advisory Board

    Mesa Energy, with drilling operations in Western NY, continues to add major firepower from New York’s political class to their advisory board. Previously it was former New York Gov. George Pataki (see this post). Today, Mesa has added former NY State Senator Nicholas Spano to the board. Mr. Spano knows the people, and the system in Albany, and he will no doubt help Mesa navigate the rough regulatory seas once horizontal drilling is approved in New York.

    From the press release on Mesa’s website:

    Dallas, TX – Mesa Energy Holdings, Inc. (the “Company”) (OTCBB: MSEH.OB), an exploration stage oil and gas exploration and production company with a focus on the Marcellus Shale in western New York, announced today that Nicholas A. Spano, former New York Senator, has been named to the Company’s Advisory Board. Senator Spano brings to the Company over 27 yeas of experience as a New York political leader and advocate for New York related matters.

    “We welcome Senator Spano to our Advisory Board," said CEO of Mesa Energy Holdings, Inc., Randy M. Griffin. "With his strong background as a former New York State Senator and Assemblyman, he is a recognized authority in political issues. His support and guidance will be invaluable."

    "I look forward to providing Randy with support and strategic guidance as he commences drilling activities in western New York," said Nicholas A. Spano. "With the Marcellus Shale in our backyard, there are great opportunities for the State to benefit from the Company’s activities. The Company intends to develop and produce natural gas in western New York which can potentially provide the local region with new jobs, tax dollars and a supply of natural gas."

    As New York State Assemblyman (between 1979 and 1986), Mr. Spano served as chief executive of the Office of General Services (OGS), a large State agency that provides a broad range of support services that facilitate the operations of State government and that assist local governments, public authorities, public and private agencies. He ensured OGS provided government and nonprofit agencies with innovative solutions, integrated service, and best value, enabling the State of New York to function optimally.

    In 1986, Mr. Spano was elected to New York State Senate as Senior Assistant Majority Leader. He also held various positions including Chairman of the Senate’s powerful Committee on Investigations and Government Operations; and Chairman of the Committees on Labor, Mental Health and Developmental Disabilities. Senator Spano represented District 35 in the New York State Senate until 2006.

    Since retiring from the New York State Senate in 2006, Senator Spano has maintained his vast network of relationships with New York political and business leaders. Today he serves as president of Empire Strategic Planning, an experienced lobbying and government relations firm specializing in state and local advocacy in New York. He is also an Executive Director of Rand Commercial Services, a full service real estate financial institution with expertise in commercial and investment real estate.

    Senator Spano is a member of the Richmond Children’s Center, Westchester Mental Health Association and Enrico Fermi Educational Foundation. He received a B.A. in Political Science at Iona College in New Rochelle, New York.

    Mesa Energy (Mar 26) – Mesa Energy Holdings, Inc. Names Nicholas A. Spano, Former New York Senator, to the Advisory Board

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    Another Cool Idea from Kane, PA – Turn Old Schools into Marcellus Shale Training Centers

    Must be something in the water in Kane, Pennsylvania. They just keep having great ideas! Not long ago we learned that the Kane Borough Sewer Authority is going sell (for money!) sewer water to drillers in the Marcellus, which will create a nice, new revenue stream for the township. Now they’re talking about possibly converting empty school buildings into training centers for those who will need job training to work in the Marcellus Shale.

    With Kane located in the middle of a key Marcellus Shale gas location, could its vacant schools provide sites for training or other services for the well-drilling bonanza?

    This question was explored Thursday by the Ad Hoc Committee that is looking at options for utilizing the vacant Mt. Jewett Elementary School and the soon-to-be vacant Chestnut Street Elementary School in Kane.

    Dr. Maryann Anderson, superintendent of the Kane Area School District, said the companies involved in drilling Marcellus Shale gas wells “need to have a ready workforce.”

    It was suggested that perhaps the vacant schools in Kane and Mt. Jewett could house training centers for the companies that need workers for various jobs associated with the Marcellus wells.*

    The great ideas just keep coming—from Kane!

    *The Kane Republican (Mar 26) – Could schools provide services for area drilling boom?

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    Another Short-Line Railroad Revived by Marcellus Shale Drilling

    Chalk up the resurrection of another short-line railroad to drilling in the Marcellus Shale. As MDN previously reported, the Wellsboro & Corning Railroad tripled its cargo traffic in just a few short years from drillers who need carloads of sand. We now have word of a rail line brought back from the dead in Luzerne County, PA due to Marcellus drilling activity:

    DURYEA – Investment spurred by Marcellus Shale natural gas exploration has transformed an antiquated, weed-ridden rail yard just north of Pittston into a state-of-the-art transloading terminal teeming with rail and trucking activity on an almost daily basis.

    Over the last year, Reading & Northern Railroad Co. sunk $100,000 into Pittston Yard, laying new track to accommodate 100 new rail cars and constructing a facility to store and hold up to 800 cars of sand to be used in hydraulic fracturing, or “fracking,” operations at Marcellus Shale drill sites throughout Northeastern Pennsylvania, said Reading & Northern President Warren A. Michel.

    “The reason for our success is that we are the largest facility in the region capable of handling hundreds of rail cars of sand. We now have 130 (sand) rail cars at the yard and we’ll be expanding substantially over the next six months,” Michel said.*

    *Wilkes-Barre Times Leader (Mar 26) – Old Duryea railroad yard taking on new life

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    Statoil Takes Over Another 59,000 Acres from Chesapeake, Pays $4,325 Per Acre

    Norwegian energy giant Statoil, which has a deal with Chesapeake Energy to develop some of Chesapeake’s acreage in the Marcellus Shale, has just transferred 59,000 acres from Chesapeake’s lease holdings to their own.

    From a press statement issued by Statoil on Friday, March 26:

    Statoil has signed an agreement with Chesapeake which will add approximately 59,000 net acres to Statoil’s current 600,000 net acre positions in the Marcellus Shale.

    The cost to Statoil of the transaction is $253 million, with an average acreage cost of $4,325 per acre.

    As part of Statoil’s joint venture agreement with Chesapeake in 2008, Statoil has the right to periodically acquire its share of leasehold that Chesapeake continues to acquire in the Marcellus Shale. Statoil has now exercised such acquisition rights on a series of Chesapeake Marcellus Shale acquisitions.

    Statoil has seen very encouraging production performance since the entry into the Marcellus play in late 2008. This new acreage is expected to strengthen the position of Statoil and our cooperation with Chesapeake as the largest lease holders in one of the most prospective US shale gas plays.

    This acquisition will enable the partnership to optimize its development activity and secure additional developments in the play. Statoil expects to continue to grow its Marcellus position together with Chesapeake.

    Andy Winkle, VP for the Marcellus Asset, says “We were an early mover into the Marcellus and we will continue to build a long term position in what we expect will become a legacy asset and reach our goal of 50,000 boepd production by 2012.”

    *Statoil Website (Mar 26) – Statoil strengthens US shale gas position

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    Binghamton Press & Sun-Bulletin Runs Wall-to-Wall Coverage of Marcellus Drilling Debate

    The Sunday, March 28 Binghamton Press & Sun-Bulletin (Broome County, NY) devoted a number of pages to the issue of drilling in the Marcellus Shale. The chief writer for the P&SB on these matters, Tom Wilbur, is anti-drilling, and it shows in his articles. As people on the anti-drilling side of the debate often do, they resort to unsubstantiated “facts” and vague nightmare scenarios. Today’s articles were no exception.

    On the front page we have the following articles:

    Marcellus Shale: Is it safe to drill?
    An abridged (and mostly one-sided) history of the shale gas drilling debate in the Southern Tier region of New York and Northeastern PA. Wilbur identifies some of the issues being debated, with the obligatory mention of Dimock, PA and the the isolated (only?) case of a driller who didn’t follow procedure and methane (not chemicals, but natural gas) migrated into drinking water supplies for 12 families. Dimock is the rallying cry for many who oppose drilling. He ends the article with the vague threat that anti-drillers will tie up the right to drill with legal harassment for as long as they possibly can. I believe him on that one.

    Landowners face fight over NYC watershed
    Politicians in New York City are making political hay out of the prospect of drilling with statements that drilling anywhere in the Catskill watershed area must be prevented at all costs because if the water supply for NYC is contaminated, they would have to install filters costing into the billions. The politicians from NYC want horizontal drilling banned in New York State as a preventative measure. And they’re threatening to tie up drilling with lawsuits. No one wants to pollute the City’s water supply! And no one will. What’s conveniently left out of the story by Wilbur is the fact that there is only one company, Chesapeake Energy, with any leases signed in the watershed, and that’s for 5,000 acres. Oh, and Chesapeake voluntarily said they would not drill in the watershed.

    Read More “Binghamton Press & Sun-Bulletin Runs Wall-to-Wall Coverage of Marcellus Drilling Debate”

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    Binghamton Natural Gas Summit: National Association of Royalty Owners Executive Director Jerry Simmons

    Jerry Simmons, NARO Jerry Simons was the final presenter at the March 18 Binghamton Natural Gas Development Summit. He is the executive director of the National Association of Royalty Owners (NARO). According to Mr. Simmons, NARO is the only organization to represent landowners that is completely independent and not attached to energy companies in any way.

    NARO was founded in 1980 after the “windfall profits tax” was passed by the 96th Congress, a 35 percent tax on oil royalties. NARO fought against the tax, and it was eventually repealed in 1988.

    NARO is an educational and advocacy group, chartered as a 501(c)3 and 501(c)6 non-profit organization. There are state chapters of NARO. New York and Pennsylvania fall under the Appalachia Chapter which covers the Mid-Atlantic and Northeast areas of the country.

    As an example of what NARO does for royalty owners: Mr. Simmons said the Depletion Tax Allowance, part of federal law since the 1920s, is under assault by the Obama Administration. They tried to take the allowance away last year but were unsuccessful. They are trying again this year, as part of the 2011 budget. NARO is fighting against it. [MDN Comment: The Depletion Tax Allowance treats royalty owners as part owners of an asset, allowing them to “write down” the value of the asset as it is used up, in this case mineral deposits being the asset. Bottom line—if this allowance is taken away, taxes to the federal government go way up for royalty owners.]

    Read More “Binghamton Natural Gas Summit: National Association of Royalty Owners Executive Director Jerry Simmons”

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    Newfield Exploration Set to Drill 10 Wells in Wayne County, PA This Summer

    Drilling is coming to Wayne County, Pennsylvania this summer according to officials with Newfield Exploration. They are waiting for approvals from regulators to begin drilling up to 10 exploration wells. If those wells show promising results, they will likely be turned into full production wells.

    A Houston-based natural gas production company is laying the groundwork to fulfill its promise to drill up to 10 exploration wells in northern Wayne County this summer, with permits now trickling into the state Department of Environmental Protection.

    Newfield Exploration Co., which partnered with international oil and gas production firm Hess Corp. to develop a 140,000-acre leasehold in Wayne and Susquehanna counties, recently filed for its first four natural gas drilling permits in Damascus and Manchester Twps.

    The company has three pending drilling permits in Damascus Twp. [Wayne County] and one pending permit in Manchester Twp. [York County], according to state environmental regulator records. These permits, filed in late February and March, are on track to be approved by late April or May.*

    *The Scranton Times Tribune (Mar 24) – Gas driller seeks permits for Wayne County wells

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    Mesa Energy Fracking Two Wells in NY, Plans to Drill Additional 80 Vertical Marcellus Shale Wells in Java Field

    As MDN previously reported, Mesa Energy, which owns the Java Field in Wyoming County, NY, is planning to convert two of the 19 gas wells on the property from Medina sandstone wells to Marcellus Shale wells. These are already drilled, vertical wells. We now have more details about what Mesa plans to do with these two wells, and with the Java Field. They are moving aggressively with Marcellus Shale gas using vertical drilling, giving them a head start on other energy companies.

    From a press release by Mesa Energy issued today:

    Mesa Energy Holdings, Inc. (the “Company”), an exploration stage oil and gas exploration and production company with a focus on the Marcellus Shale in western New York has announced that it has begun initial testing in its Java Field natural gas development project in Wyoming County, New York.

    The Company has selected two of its nineteen existing Medina wells for testing of the Marcellus Shale. The two wells selected are approximately three miles apart. The testing process began in December 2009 with an initial round of location maintenance, logging and evaluation and the two wells will be re-completed once the required permits have been approved. The data obtained in December 2009 will be combined with additional data to design a frac program for both wells with these operations expected to be completed in the second quarter of 2010.

    The Company believes that there are multiple stacked pay zones present in the field, including the Medina and Marcellus Shale zones and, possibly, the Utica Shale zone, and that there is also significant potential to enhance the production and lifespan of the existing Medina wells using modern technology.

    The Company recently announced the results of an independent engineering review of its material assets in the Java Field. Based on this review, as modified by the Company to better reflect the actual acreage acquired, the potential gas in place in the Marcellus and associated shales is believed to be in a range from 106 billion cubic feet (BCF) at 50 feet of shale thickness to 425 BCF at 200 feet of shale thickness. Based on these numbers, potential recoverable gas reserves using a 25% recovery factor and 200 feet of shale thickness would be approximately 106 BCF. The Company projects total potential net revenue over the life of the project to be as much as $405 million gross before expenses, or $332 million net of expenses ($151 million at PV 10). These projections are based on a price of $5 per thousand cubic feet (MCF) of gas.

    CEO of Mesa Energy Holdings, Inc., Randy M. Griffin said, “The test results from the first two wells will be an integral part of our evaluation to determine the potential production capability of additional existing wells in the Marcellus Shale. We have already submitted permit applications and expect to receive approval shortly. We will update our shareholders on our progress.”

    The Company believes that, in addition to enhancing its existing 19 wells, it can potentially drill and complete up to 80 new vertical Marcellus Shale wells on the project acreage and that the shales in the Java Field and surrounding area could provide an excellent opportunity to achieve significant daily production rates.

    *Business Wire (Mar 25) – Mesa Energy Holdings, Inc. Announces Initial Testing in the Java Field

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    Binghamton Natural Gas Summit: Millennium Pipeline President Richard Leehr

    richard-leehr-millennium One of the speakers at the Natural Gas Development Summit held in Binghamton on March 18th was Richard Leehr, president of Millennium Pipeline (MP), a major natural gas pipeline running from Western New York State almost to New York City. What follows are MDN’s notes from his presentation. Unfortunately Millennium has a policy against sharing their PowerPoint slides on the web (we asked and were turned down). It’s unfortunate because there were a number of good slides that would be of interest to landowners. However, MDN located two PDF maps showing the MP and its interconnect points with other pipelines, and a pipeline system map for Upstate New York and the Northern Tier of Pennsylvania (see bottom of this post for the links).

    Dick Leehr started his presentation with a “thank you” to landowners for their patience and inconvenience during the recent construction of the pipeline. The MP has its home office in Pearl River, NY, almost on the border with New Jersey and not far from metro New York City. The MP is an underground steel 30-inch diameter pipeline with 1 inch thick walls. The steel is coated and should last at least 100 years.

    The MP has the capacity to move 1/2 BCF (billion cubic feet) of natural gas over the entire length of the pipeline per day. On January 4th, the MP hit its current high in delivery with 714,000 dekatherms.

    Mr. Leehr said to think of pipelines as Interstate Highways. Shippers contract or “reserve” capacity on the pipeline. The pipeline picks gas up at one point and delivers it to a different point specified by the customer. Pipelines are among the safest forms of energy transportation in the country according to Leehr.

    Read More “Binghamton Natural Gas Summit: Millennium Pipeline President Richard Leehr”

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    SRBC Fines Southwestern Energy $50K for Lack of Proper Approvals

    Although the details are somewhat slim in the newspaper account, the known facts are that Southwestern Energy started construction on a well conductor pipe at a site in Wyalusing Township (Bradford County, PA) in early January, before the Susquehanna River Basin Commission (SRBC) had given its approval for said construction—something required by law. So the SRBC slapped them with a fine:

    Under a settlement agreement between Southwestern and the commission, which was approved by both sides, Southwestern was required to make a $50,000 “payment in lieu of a penalty” to the commission.*

    MDN firmly believes drilling companies need to be responsible and follow the rules, especially since the issue of drilling has been so distorted by anti-drilling propaganda. On the other hand, was this just an oversight on Southwestern’s part? Did someone not get the paperwork filed properly? Who knows. It does seem to be a case of “Simon Says” or “Mother May I?” Since the SRBC didn’t give the go-ahead, Southwestern was fined. Now that the paperwork is filed, have they gone ahead with construction at the site? Did the SRBC find any problems with the application once it was reviewed?

    So, is SRBC’s action vigilant oversight of the public interest? Or a shakedown? You decide.

    *Towanda Daily Review (Mar 24) – Southwestern Energy fined $50,000 for violation in Wyalusing Township

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    Breaking News: PA Supreme Court Rules Against Landowner Seeking to Invalidate Lease

    Last year, Susquehanna County landowner Herbert Kilmer sued ElexCo Land Services Inc. and Southwestern Energy Production to invalidate his lease. The reason? He said that by deducting drilling costs from his royalty payments, his payments fell below Pennsylvania’s law that a minimum one-eighth share of royalties are guaranteed to the landowner. A Susquehanna County judge ruled against the landowner and in favor of the energy companies. Other people started filing lawsuits, so the energy companies asked the PA Supreme Court to take up the matter. The Supremes did, and today they also ruled in favor of the energy companies:

    Pennsylvania’s high court sided Wednesday with the natural gas industry in a dispute with landowners who had sought to invalidate the leases they signed before the Marcellus Shale rush intensified and drove up land values.

    In a 6-0 decision, the Supreme Court upheld a Susquehanna County judge’s ruling that validated lease agreements that subtract drilling costs from the calculation of landowners’ natural gas royalties.

    Justice Max Baer, who wrote the court’s decision, noted that the term “royalty” and the method of calculating a one-eighth share is not defined by the state’s Guaranteed Minimum Royalty Act. However, he cited various texts on the industry that say a royalty is paid from the net amount remaining after deduction of certain production and well development costs.*

    This case will now force similar pending cases to be settled or dismissed. Landowners beware: (1) There is no such thing as a “standard” contract, and (2) Always have an attorney review a lease agreement first.

    *BND.com (Mar 24) – Pa. justices side with gas industry over landowner

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    Lackawanna College, PA College of Technology Offer Programs to Train Marcellus-Related Workers

    Colleges in Pennsylvania are adding programs to train workers for Marcellus Shale jobs. And a lot of workers will be required. MDN wrote about the presentation by Larry Michael (Pennsylvania College of Technology, PCT) and James Ladlee (Penn State Cooperative Extension) at the Binghamton Natural Gas Development Summit and their study that says every well drilled translates into 12 full-time jobs. Larry and James helped establish the Marcellus Shale Education & Training Center at PCT in Williamsport, where they are training students for a variety of careers:

    Careers include welders, construction workers, drivers and machine operators and fabricators.Tracy Brundage, [PCT’s] managing director of the Workforce Development and Continuing Education programs, said that as the landscape of the Northern Tier changes, so too do course offerings at the college.

    She said input from energy companies has been influential in the design of 21 new courses.*

    In Scranton, Lackawanna College established an applied science degree in Oil and Gas Production Technology program in December 2008.

    To prepare potential employees for [Marcellus-related gas] jobs, Lackawanna College offers an associate’s degree in natural gas technology and is developing an operating and maintenance degree program in compression technology that could debut next fall.

    In addition, the college will soon start giving accounting students at its Towanda Center the option of customizing their degree to prepare them to work in the accounting side of the natural gas industry.

    Last week, Chesapeake Energy donated $50,000 to help Lackawanna College expand its Natural Gas Technology Program at its New Milford Center campus in Susquehanna County. The college plans to use the money for capital-equipment costs in fitting out their new facilities for the program that began last fall.*

    As drilling in the Marcellus Shale continues to expand in Pennsylvania (and when it finally begins in New York), many thousands of new jobs will need to be filled by local people. And those people will need to be trained. Forward-thinking colleges and technical schools are expanding now to meet the demand.

    *Wilkes-Barre Times Leader (Mar 24) – Some colleges add programs to train workers

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    Three Upstate Landowners on New York City Public Radio Discuss Drilling in the Marcellus

    An interesting radio segment from WNYC Public Radio. Leonard Lopate conducted an interview with three Upstate landowners. From the program description:

    We’ll look into the controversy over drilling for natural gas in Marcellus shale in Upstate New York, and discuss the challenges landowners face when deciding whether to lease their land to gas companies, the role of landowners coalitions, and how public officials are managing the drilling already occurring in their towns. We’ll speak with Mark Dunau, organic farmer from Delaware County; Jim Bays, Supervisor of the Town of Smyrna, in Chenango County; and Abby Tamber, steering committee member of the Central New York Landowners Coalition.*

    While Mr. Dunau is clearly anti-drilling and Mr. Bays is somewhat anti-drilling, Ms. Tamber does a good job of representing local landowner groups and the concerns of landowners. The questions by the host are pretty good, and as far as public radio goes, this is about as fair and balanced as it gets. Overall, a B+ from MDN. Worth listening to as it does discuss some very important issues for landowners. Embedded player below—give it a listen! The segment is 34 minutes in length.

    *WNYC (Mar 23) – The Lenoard Lopate Show

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    Lots of Marcellus Leases Signed in “Shallow” Yates and Schuyler Counties in NY

    At a recent presentation in Penn Yan and Watkins Glen, NY, Tony Ingraffea, professor at Cornell University, and Peter Landre, director of Yates County Cornell Cooperative Extension, said Yates and Schuyler Counties (NY) are not “ideal” for drilling in the Marcellus Shale because the shale deposit in those counties is relatively shallow. Even so, energy companies have signed a number of leases:

    There are currently 1,342 signed gas leases in Yates County, from 2005 to 2009.  Colby Peterson, Yates County Soil and Water Conservation District technician, said the leases make up 20 percent, or 44,076 acres, of the acres in Yates County.

    According to Lloyd Wetherbee, Schuyler County Soil and Water Conservation District technician, there are up to 50,000 acres leased in Schuyler, or 13 percent of the land in the county. Wetherbee said this equals between 1,600 to 1,700 leased parcels.*

    *Dundee The Observer Review (Mar 23) – Marcellus Shale drilling: ‘Not ideal’ here

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    EPA Director of Drinking Water Protection says States are “Doing a Good Job Already” Regulating Hydraulic Fracturing

    Brad Gill, executive director of the Independent Oil & Gas Association of New York, recently responded to an article in The Buffalo News supporting regulation of hydraulic fracturing by the federal Environmental Protection Agency (EPA). Marcellus Drilling News considers the EPA proposal way out of line and a federal power grab that is unwarranted and illegal. Seems that Mr. Gill thinks so too. From his letter to the editor:

    All processes related to natural gas exploration and extraction are regulated by the states which, because of their vast geological differences, can do a more thorough job. The U. S. Environmental Protection Agency would never be able to regulate these processes efficiently or cost-effectively. In fact, Steve Heare, director of EPA’s drinking water protection office, recently said states are “doing a good job already” regulating hydraulic fracturing, adding that there is no evidence that suggests the process contaminates water.*

    Be sure to click through and read the rest of the letter. Great summary of why hydraulic fracturing is safe, and why drilling should move forward now.

    *The Buffalo News (Mar 22) – Brad Gill: Hydraulic fracturing issues are already answered

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    Mesa Energy Using Conventional Vertical Drilling for Two Marcellus Gas Wells in Western NY

    It seems hardly a day doesn’t go by that Marcellus Drilling News doesn’t observe a new press release, interview or other mention of Mesa Energy and their recent drive into gas drilling in Western New York State. The latest is a clever move by Mesa—they’re converting two of 19 gas wells they own in the Java Field from Medina sandstone to Marcellus Shale wells.

    For about 30 years, the 3,235-acre site called Java Field has been home to 19 natural-gas wells, all of them sunk into Medina sandstone. Mesa Energy Holdings recently took ownership of the site, and it has submitted applications to the state Department of Environmental Conservation to convert two of those wells into Marcellus Shale wells.

    The DEC hasn’t issued the permits yet, but has posted a notice saying it intends to.

    Because Mesa is proposing traditional wells, rather than a deep horizontal well that would use hydraulic fracturing, its project can move ahead.*

    What remains to be seen is if the vertical well transformation will yield production levels profitable enough to make it worthwhile.

    *Rochester City Newspaper (Mar 22) – Marcellus Shale’s northern promise