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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

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

    From a press release* dated March 11:

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

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

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

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    PA Gas Compressor Facility Causing Grief for Some Neighbors

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

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

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

  • New Directory of Marcellus Landowner Groups

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

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

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

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

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

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

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