Steered by an executive of Philadelphia Energy Solutions, a group of business and political leaders is discussing the extent to which a natural gas pipeline can be constructed that would connect the natural gas fields of the Marcellus Shale to the City of Philadelphia. According to the group, “We’re trying to work on how to get that gas here to valorize it.” The group, however, recognizes that there will be challenges, including how to feed the pipeline through the city’s densely populated suburbs. The Philadelphia Inquirer has more here.
Utilizing technologies that created the Marcellus Shale boom in Western Pennsylvania, smaller operators in the region are beginning to rework their shallow wells, as well as drill new ones, to explore and produce shallower formations. Rather than drilling to depths up to or greater than one mile to reach the oil and gas in the unconventional shale plays like the Marcellus and the Utica Shale, some companies are stopping at shallower depths, and continuing to produce the once robust conventional sandstones, such as the Elk Sandstone and the Upper Devonian Shale.
While the production isn’t as great as the more compact and larger Marcellus Shale, the cost to drill (or rework) a shallow well is markedly cheaper, potentially coming in at under $1 million (versus the nearly $10 million it costs to drill a horizontal Marcellus well). Similarly, the shallow wells, thanks in part to the rock into which the wells are drilled being more porous, require far less fluids – shallow wells are using, on average, less than 3% of the frac fluid during the drilling process.
The shallow formations, once the only known formations for area drillers, are seeing a renewed interest thanks in part to the technology and processes that allowed larger companies to drill much deeper into the Marcellus Shale. Early results on the shallow wells is difficult to analyze, as reporting requirements for conventional wells only compel companies to release production data once per year.
In one example of how development of the Utica and Marcellus shale formations are contributing to the Ohio economy, one expanding business has recently been awarded approval to use microbes to rehabilitate soil contaminated by petroleum products. Long used to reclaim soil from gas stations and other industrial sites, Ohio Soil Recycling of Columbus, Ohio is now using microbes to reclaim drill cuttings from well sites, preserving material that would otherwise be taken to a landfill. The process uses naturally occurring bacteria to break down the petroleum products in as quickly as 24 hours. Ohio Soil Recycling has only recently received approval for the process, but is reporting great interest from oil and gas producers in Ohio.
On September 4, 2013, in the case of Whiteman v. Chesapeake Appalachia, L. L. C. (2013 U.S. App. LEXIS 18359 (4th Cir. W. va. 2013)), the United States Court of Appeals for the Fourth Circuit upheld a District Court ruling from the Northern District of West Virginia regarding claims of trespass against Chesapeake Appalachia, L. L. C. brought by the surface owners of a 101 acre parcel in Wetzel County. The Fourth Circuit Opinion, written by Judge Faber, concluded that the District Court properly granted summary judgment to Chesapeake. The Opinion specifically stated “that creating drill waste pits was reasonably necessary for recovery of natural gas and did not impose a substantial burden on the [Plaintiffs] surface property, that creation of the pits was consistent with Chesapeake’s rights under its lease, was a practice common to natural gas wells in West Virginia, and consistent with requirements of applicable rules and regulations for the protection of the environment.”
Consol Energy, Inc., the local energy company that was granted a lease covering the Allegheny County Airport Authority’s nearly 9,300 acres in Moon and Findlay Townships, announced preliminary plans to drill 47 horizontal wells from six well pads, with production expected to occur in 2015. Along with Allegheny County and Airport Authority officials, Consol unveiled the plans on Tuesday. The six well pads are on or near the borders of the Pittsburgh International Airport, and plans could include additional wells in the future into the Upper Devonian Shale, a formation above the targeted Marcellus Shale formation. Consol reported the price tag for the 47 wells could reach $500 million.
Consol was granted the lease earlier in 2013 after Allegheny County council approved the terms of the lease, which included a $50 million bonus payment and 18% royalty. Early estimates indicate the royalties to the county could reach as high as $450 million over 20 years. Airport and county officials are hopeful that, in addition to the direct monetary benefits from the natural gas wells, companies in the area, especially aviation-based employers, will see an increase in business.
Following the announcement, Consol held an open meeting where concerned citizens had the opportunity to voice concerns, ask questions, and see the initial plans. With the proposed wells, plans also include 17 miles of gas pipeline, 12 miles of water lines, and three water impoundments, each of which will be utilized to store fresh water as well as flowback water, as necessary.
Additionally, the Tribune-Review reports that Consol will purchase approximately 300 million gallons of water from the Moon Township Municipal Authority and the Findlay Township Municipal Authority between 2015 and 2018. Consol will be the largest customers for both municipal authorities.
The Pittsburgh Post-Gazette reports that Shell Chemical, a division of Royal Dutch Shell, has begun to solicit ethane commitments from Marcellus Shale operators for its proposed Beaver County, Pennsylvania cracker plant. The company has already secured commitments from CONSOL Energy Inc., Noble Energy Inc., Seneca Resources Corp. and Hilcorp Energy Co. Shell has indicated that the response from bidders will help to determine whether it will build the first world-scale cracker plant in the Marcellus region. The bidding period will last two months.
As expected, the recent increase in shale production and exploration has caused a major increase in job creation in the oil and gas industry, recent reports show. According to data released by the Energy Information Administration and the U.S. Department of Labor, over a six year period ending in 2012, industry employment jumped 40%, or approximately 162,000 jobs. By comparison, the entire private sector in America grew by just 1%, or approximately one million jobs.
The Labor Department numbers show that the job creation seen in the “extraction” and “support” subcategories of the industry have grown the most. Extraction jobs, which range from exploration through some aspects of production, grew by nearly 40%. Similarly, support jobs, which are limited to areas like excavation and well construction and maintenance, and do not include housing and manufacturing data, grew by approximately 55% between 2007 and 2012.
The growth in industry employment is necessary to sustain the nation’s rising energy production; over the same six-year period, domestic crude oil production grew 39%, while natural gas production increased by 25%.
According to the Charleston Gazette, the Lewis Wetzel Wildlife Management Area in Wetzel County is now contains several natural gas drilling operations by various companies operating in the State of West Virginia. The Lewis Wetzel Wildlife Management area is approximately 13,590 acres; however, the West Virginia Department of Natural Resources only owns a fraction of the mineral rights underlying the preserve. Private owners of those mineral rights are now leasing to various companies who are, or will be, drilling wells in the area. While the natural gas is being extracted from beneath the preserve, operators will be working in conjunction with the WVDEP and other agencies to minimize the impact of any drilling operations on both the preserve and its human visitors.
The Republic reports that a public meeting has been scheduled for July 18 at 6:00 p.m. at the Tyler County courthouse to discuss issues with land records searches in the county. Currently, only 16 people at one time are able to enter the records vault in the County Clerk’s Office, leading to extremely long lines and waiting times to access the records. The courthouse extended its hours and limited access to abstractors to two-hour timeframes, but this has not solved the problem as there are still lines of abstractors outside of the courthouse waiting in line for their turn around the clock. Tyler County Clerk Theresa Hamilton has indicated that the process to digitize the records has commenced, which would enable abstractors to access the records via the internet, but that there is no set time for the process to be completed. It is expected that representatives from the oil and gas industry, the Tyler County Clerk and commissioners and residents will be in attendance at the meeting.
The Scranton Times-Tribune reports that UGI Penn Natural Gas customers continue to pay one-third less to heat their homes than they paid five years ago. According to the Marcellus Shale Coalition, this is a nationwide trend. The lower rates are a direct result of the natural gas production from the Marcellus and Utica shales.
The Akron Beacon Journal has profiled the proposed Bluegrass Pipeline, a proposed pipeline that would deliver gas from the Utica and Marcellus gas fields to processing facilities on the gulf coast. The pipeline would be constructed by Williams and Pipeline Partners under a partnership known as Bluegrass Pipeline, LLC. If approved by federal regulators, it would pass through Ohio and Kentucky to reach parts of Pennsylvania and West Virginia. Producers hope the pipeline will help alleviate infrastructure constraints that are limiting production in the Utica and Marcellus gas regions.
The Maryland Departments of the Environment (MDE) and Natural Resources (MDNR) recently released a draft report on recommended best practices for Marcellus Shale development in Maryland, pursuant to Maryland’s Marcellus Shale Safe Drilling Initiative. The Initiative, established in accordance with Governor O’Malley’s January 2011 executive order, requires MDE and MDNR to conduct, in consultation with an Advisory Commission, a three-part study and report the findings and recommendations. The Commission is comprised of policymakers, academics, regulators, industry representatives, and environmental group representatives. The three parts of the study are: 1) findings and recommendations regarding sources of revenue and standards of liability for damages caused by gas exploration and production; 2) recommendations for best practices for natural gas exploration and production in the Marcellus Shale; and 3) findings and recommendations regarding the potential impact of Marcellus Shale drilling. (The recently-released joint agency report represents Part II.) The Part II study was based on a survey of exploration, production, and midstream practices from several states by the University of Maryland Center for Environmental Science, Appalachian Laboratory. Part III is expected to be completed in August 2014.
A unique recommendation of the Part II study is that producers would be required to have a “Comprehensive Gas Development Plan” (CGDP) as a prerequisite to a well permit application. The CGDP would need to address comprehensive planning for foreseeable gas development activities in an area including pipelines, pads, roads, and other ancillary activities, rather than considering each well individually. The CGDP would be subject to public comment and submitted to the State for approval.
MDE is accepting public comment on the draft Part II report until August 9, 2013.
As indicated in a recent press release, NiSource Midstream Services has initiated service on the Big Pine Gathering System in Southwestern Pennsylvania. The system, which spans 57 miles in total length, will transport natural gas from Marcellus Shale production to three different transmission lines.
Natural gas producers will pay $202.47 million in Marcellus Shale impact fees from 2012 activity, according to a June 13, 2013 Pennsylvania PUC press release. The Pittsburgh Post-Gazette reports that the number is down less than 1 percent from the $204.2 million collected from 2011 activity. Bradford County will collect the largest portion of the fees ($7.3 million) and Washington County will collect the second largest ($4.7 million). Chesapeake Appalachia paid the largest portion of the fees ($27.4 million), followed by Range Resources (nearly $24 million). The 2012 fees will be allocated as follows: county and local governments directly affected by drilling will receive $102.68 million, state agencies impacted by drilling will receive $28 million, and the Marcellus Legacy Fund will receive $71.79 million. Following the PUC’s release, Marcellus Shale Coalition CEO Kathryn Z. Klaber issued a press release, stating that the “[w]hile the impact fee represents a new and substantial revenue stream for local and state government agencies, the natural gas industry has also generated more than $1.8 billion in tax revenues since 2006 and has invested more than $500 million in road and infrastructure improvements, while contributing hundreds of thousands of dollars for emergency response training and other community-based programing.”
Pennant Midstream, a joint venture between NiSource Midstream Services and Hilcorp Energy Co., will build a processing facility and a new pipeline as part of its $300 million project to serve the Utica and Marcellus shale plays in Ohio and Pennsylvania. The pipeline will move natural gas to a cryogenic natural gas processing plant, located near Youngstown in Mahoning County, which should be in service by the end of the year. According to NiSource Midstream Chief Operating Officer, Chad Zamarin, gas will start flowing through the first section of the pipeline within the next few weeks and the project will be finished by the second quarter of 2014.