Departing PA DEP Attacks Conventional O&G in So-Called Report
Last July, Pennsylvania Gov. Tom Wolf, controlled by the extreme left in the Democrat Party, allowed PA House Bill (HB) 2644 to become law without his signature (see New PA Act 96 Helps Boost Plugging Orphan Wells – Left Goes Nuts). Wolf took a big hit from those in his own party following his inaction on 2644. He tried to make up for it by publishing a notice in the Pennsylvania Bulletin to justify his action of allowing 2644 to become law (now called Act 96) by instructing the Dept. of Environmental Protection (DEP) to conduct a comprehensive review of conventional oil and gas driller compliance (see PA Gov. Wolf Instructs DEP to Draft New Regs Following Act 96). The DEP issued its report on Dec. 29th (it was due on Sept. 1), just as the upper echelon of the DEP is heading for the door to make way for Shapiro’s crazy squad to take over. The report the DEP issued was essentially a hit piece against the conventional oil and gas industry in the state.
1/5/23 UPDATE: See below for a comment added by PIOGA.
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The Marcellus/Utica is THE number one natural gas-producing region in the country–by far. Much of the country, including the M-U, was affected by the bomb cyclone called Winter Storm Elliott over the Christmas break. The bitter cold froze off wells and caused the M-U region collectively to experience a temporary drop in production of roughly 27%. Pennsylvania’s production dropped around 20%, while Ohio’s production dropped 50%.
We came “this close” to a major electricity blackout in New England over the Christmas break, during the bomb cyclone cold snap called Winter Storm Elliott. The ONLY thing that prevented a major blackout (with people freezing to death) was…oil. Fuel oil, specifically. So-called renewable energy–solar and wind–bombed out during the bomb cyclone. Natural gas did what it could, but there wasn’t enough natgas to keep the power generators turning because people like newly-elected Gov. Maura Healey (Massachusetts wacko leftist) blocked new natgas pipelines during her tenure as the state’s Attorney General. What was left was to burn to keep the lights on and to keep people from freezing to death was fuel oil (much dirtier than natural gas). Welcome to the leftist utopia of New England. During the next bomb cyclone, New England may not be so lucky.
Last Thursday, the Pennsylvania Department of Environmental Protection (DEP) published its 2021 Oil and Gas Annual Report (about five months late). This is the sixth year in a row the DEP has published the report in an interactive, electronic (i.e. online only) format. Don’t worry, we’ve turned the report into a convenient PDF for MDN readers. What does the 2021 report show? Permits issued went down, but the number of new wells drilled went up. Natural gas production has gone up (again)–to another new all-time record high.
What a difference three years can make! Three years ago, Henry Hub prices were hovering around $2 per thousand cubic feet (Mcf). Stock valuations for Marcellus/Utica drillers were majorly depressed (down 80-90% from previous highs), and gas producers were struggling. Fast forward to today. Balance sheets and earnings statements are through the roof. Most experts believe $4-$5/Mcf gas is sustainable–at least for the next X years. What does the future look like for M-U drillers? What are the risks? And can we keep the current bright outlook going?
OTHER U.S. REGIONS: Report notes major Permian Basin methane emissions drop; NATIONAL: 3 Energy Macro Themes For 2023; Dallas Fed energy survey shows growing pessimism; Biden effort to cap gas flaring hangs on 15 little words; Shale bosses worried about US labor shortages going into 2023; Oil and gas stocks shine in miserable year for U.S. equities; Shale oil wraps up an underwhelming year, girds for lower growth; 2022 the year the U.S. became the world’s largest LNG exporter; INTERNATIONAL: Canada drops 100+ rigs; Germany returns to coal as energy security trumps climate goals; European LNG import capacity to expand by one-third by end of 2024; German finance minister calls for reverse of fracking ban.
It’s rare these days to come across information about the terms of a lease deal. Back in the day, when leasing was still going strong and there were a number of landowner coalitions, we would learn of lease terms and share them here on MDN. When we hear of lease terms nowadays, it’s almost always a deal between a municipality or governmental entity and a driller, forcing the information to be made public. We have one such deal to share today. Earlier this week, the East Guernsey Local School District Board of Education (in Lore City, Guernsey County, Ohio) voted to approve an oil/gas lease with Encino Energy.
It’s been a while since we’ve updated rig count numbers–mainly because the most reliable source we can find about basin numbers comes from S&P Global Commodity Insights (based on Enverus rig data), and S&P has not provided an update for a few months. This week they did update the number, and they are interesting. According to S&P’s analysis, based on Enverus data, the Haynesville Shale in northern Louisiana and eastern Texas (the main competitor to the Marcellus/Utica) is showing 81 active drilling rigs. That is an astonishing number, up some 37% over the same time last year. The current active rig count in the M-U, according to S&P, is 47 (with 33 rigs operating in the Marcellus and 14 in the Utica). The Haynesville is running 1.7 rigs for every 1 rig in the M-U. This is the worst imbalance we’ve seen to date.
The best gifts we give to each other during this holiday season are intangible: Time spent with family and friends, a kind word, attending a church service. But hey, toys and gadgets and gear are a close second! 🙂 Have you ever stopped to ponder what Christmas morning without fossil energy would look like? We’ll tell you what it would look like–men and women wearing animal skins sitting around a wood or dung fire in a cave. There would be no gifts. Just about every (physical, tangible) gift you either give or get this holiday season will have plastic as part of it, and plastic comes from oil and gas. No fossil fuels, no gifts. The Pennsylvania Independent Oil & Gas Association (PIOGA) has put together a holiday gift guide to remind you of the importance of oil and gas this holiday season.
Last week (Dec. 12-18), the number of permits issued to drill new shale wells in the Marcellus/Utica bumped up nicely to 32, up from the prior week’s 20. Both Pennsylvania and Ohio issued 16 new shale permits each. West Virginia got skunked and issued none.
We wish you a Merry Christmas…and a Happy New Year! MDN will take off (i.e. no new stories posted) between Dec. 26th and Jan. 2nd in observance of the holiday season. Don’t worry, we’ll still keep an eye on the news, and if anything earth-shattering happens, we’ll post about it. However, our intent is to take a break from writing for an entire week. We will see you again on Tuesday, January 3rd.