According to a report published by Pennsylvania Business Daily, Reading-based UGI Utilities, Inc. recently became Pennsylvania’s first natural gas utility to connect one of its pipelines to a Utica Shale well, thereby increasing the supply of natural gas available to customers in Tioga and Potter counties. The expansion required UGI to construct a new meter and regulator station system, but it is estimated that the natural gas resources in the expanded system, which includes one Utica well and two Marcellus wells, can meet the energy needs of more than 50,000 households. According to a statement by Kelly Beaver, UGI’s Vice President of Supply, “[m]ore than 70 percent of the natural gas we deliver through our system is produced in the Marcellus Shale region. We are pleased to add volumes of lower-cost Utica Shale natural gas to our portfolio as another supply source.”
On October 22, 2014, Pennsylvania Governor Tom Corbett signed House Bill 2278, The Unconventional Well Report Act, into law. The Act requires operators of unconventional wells to submit monthly production reports to the Department of Environmental Protection. The change is to revise Act 13, which had required semi-annual production reporting for unconventional wells. The initial report under the Act is due to the DEP on March 31, 2015, and thereafter monthly production reports are due 45 days after the close of the reporting period. The DEP will make the submitted reports available on its website and may use the reports in enforcement proceedings.
On October 22, 2014, Pennsylvania Governor Tom Corbett signed House Bill 402, also known as the Recording of Surrender Documents from Oil and Natural Gas Lease Act, into law. The Act imposes a duty on a lessee to deliver a surrender document to a lessor within 30 days of the termination, expiration or cancellation of an oil and gas lease. Read our Administrative Watch to learn more.
On September 26, 2014, the Commonwealth Court of Pennsylvania issued an opinion in favor of MarkWest Liberty Midstream & Resources, LLC. MarkWest had purchased a 71.5 acre parcel of undeveloped land in Cecil Township, Pennsylvania, and had applied to the township’s zoning hearing board for a special exception under the zoning ordinance to construct and operate a natural gas compressor station.
The zoning hearing board denied MarkWest’s special exception application holding that MarkWest failed to satisfy the zoning ordinance’s requirements that the compressor station would be of the same general character as other permitted uses, and that its impact would be equal to or less than other permitted uses. MarkWest appealed to the trial court, which affirmed the zoning board’s decision. MarkWest then appealed to the Commonwealth Court.
On appeal, MarkWest argued that the zoning board erred because the compressor station is of the same general character as an “essential service” and because it meets the standards for permitted uses in the Township’s I-1 Light Industrial District. The zoning hearing board argued that MarkWest is a commercial enterprise that is neither a public utility nor an entity that provides an essential service to the public. The Commonwealth Court noted that the issue is not whether MarkWest’s proposed use is an “essential service” as defined, but rather, whether MarkWest’s proposed use is of the same general character as any essential service. The court then held that the zoning hearing board did not make any finding that the proposed compressor station was not of “the same general character” as other permitted uses. Instead, the court found that the zoning hearing board applied the wrong legal standard by requiring the use to be “of the same character” rather than “the same general character.”
Accordingly, the Commonwealth Court concluded that the zoning hearing board’s position was an unreasonable interpretation and application of the zoning ordinance, and it reversed the portion of the trial court’s decision affirming the denial of the special exception application. The Commonwealth Court remanded the case to the trial court and directed it to immediately remand the case to the zoning hearing board with the direction to grant MarkWest’s special exception application within 45 days of receiving the remand order.
A bill that would amend taxation on oil and gas drilling was referred to the Pennsylvania House Committee on Environmental Resources and Energy on Monday. House Bill 2508, which was introduced by Margo Davidson (Democrat, Delaware County) and others, seeks to impose a severance tax of 5% of the gross value of units severed at the wellhead during a reporting period, plus 5 cents per unit severed. Filing of a tax return would be required within 15 days following the end of a reporting period. Oil and gas producers would also be required under the Bill to apply to the Department of Revenue for a severance tax registration certificate prior to conducting operations, which must include, among other items, a declaration of all producing sites and nonproducing sites used by the producer for severance of natural gas. The Department may refuse to issue or revoke a registration certificate, and the Bill provides a process for appealing such determination. The violation of such provisions under the Bill would result in a producer being found guilty of a summary offense and sentenced to pay a fine. The Bill includes additional provisions regarding assessments, interest, and penalties. The Bill in its entirety can be found here.
PowerSource of the Pittsburgh Post-Gazette provided commentary discussing future economic opportunities regarding natural gas liquids (NGLs). Olefins plants or cracker facilities transform NGLs into products that are used in many industrial and consumer end applications. The commentary discussed the infrastructure challenge facing many regional policymakers, education institutions, thought leaders and business groups. The commentary suggested the development of an open-access midstream system will guarantee delivery of the region’s NGLs, specifically ethane, to planned Olefins plants and cracker facilities in the Appalachian Valley region to support downstream manufacturing within the local region.
As reported on Bloomberg.com, Spectra Energy Corporation, a Houston-based pipeline operator, and Northeast Utilities, a Connecticut-based utility provider, have partnered in proposing a $3 billion pipeline expansion that will increase natural gas supply to the six New England states. The project, known as “Access Northeast,” will provide fuel for power plants and home heating in an attempt to combat soaring energy prices in the New England region. According to the report, power prices in New England reached a 6-year high last spring due to extreme cold temperatures and a shortfall in pipeline capacity, which restricted gas supply. The proposed Access Northeast project plans to boost the capacity of Spectra’s existing Algonquin and Maritimes pipelines, by as much as 1 billion cubic feet per day and create additional delivery points for local distribution. The project is expected to be in service by November 2018.
According to the report, Access Northeast is not the only pipeline project aimed at connecting the booming Marcellus Shale gas formation with other states: (i) Kinder Morgan Energy Partners LP’s proposed “Northeast Energy Direct” project will also supply natural gas to New England, (ii) Duke Energy Corp., Dominion Resources, Inc., Piedmont Natural Gas Co. and AGL Resources Inc. have partnered to construct a $5 billion pipeline from West Virginia to North Carolina, (iii) NextEra Energy Inc. and EQT have paired up to build a 330-mile pipeline from West Virginia to the southeastern states, and (iv) Spectra is also seeking to expand its Texas Eastern pipeline system in Ohio pursuant to an agreement with American Electric Power Co. and Chesapeake Energy Corp.
The Pittsburgh Tribune Review reports that colleges located in Western Pennsylvania are creating programs to prepare students for jobs in the energy industry. For example, Kennedy Township’s Rosedale Technical Institute (soon to be re-named Rosedale Technical College) currently offers an industrial technician associate degree program, and it will add additional programs next year. Westmoreland County Community College offers an energy degree program and Butler County Community College recently added four energy classes to its course offerings. Allegheny County and Beaver County Community Colleges also offer classes geared toward the energy industry. According to the Pennsylvania Department of Labor and Industry, shale-related industries employed approximately 238,000 people in 2013.
The Pittsburgh Business Times reported that Shell has drilled two producing wells in the Utica Shale formation in Tioga County, Pennsylvania. Shell credited its success to “solid technical work in [its] onshore business.” The two wells are many miles away from the majority of existing Utica wells and illustrate the potential of the Appalachian basin. The wells have demonstrated flowback rates of 11.2 million cubic feet per day and 26.5 million cubic feet per day. Shell is currently awaiting production results on four more recently drilled wells in Tioga County.
On August 25th, Rep. White (D-Allegheny, Beaver and Washington) introduced House Bill 2403 (2014) in order to repeal Section 2318 of Title 58 (Oil and Gas) of the Pennsylvania Consolidated Statutes. Section 2318 provides that upon the imposition of a severance tax on unconventional gas wells in the Commonwealth of Pennsylvania, the Secretary of the Commonwealth shall submit for publication a notice of the imposition of the severance tax and that Chapter 23 (Unconventional Gas Well Fee) shall expire upon the publication of the notice. Repealing Section 2318 would allow a severance tax and the impact fee to co-exist.
Veteran attorneys Timothy Miller from Robinson & McElwee, and Christopher ‘Kip” Power, Mychal Schulz and Robert Stonestreet from the Charleston office of Dinsmore & Shohl have joined forces with Babst Calland in providing senior-level legal counsel in key practice areas including environmental, litigation and employment. The addition of the new attorneys and staff will double the size of Babst Calland’s Charleston office which opened in 2011. For more information, please visit the firm’s website.
Pittsburgh Tribune-Review reports that the Kiskiminetas Township supervisors unanimously enacted an ordinance that will allow for oil and natural gas exploration. The ordinance allows for “reasonable development of land for oil and gas drilling while providing adequate health, safety and general welfare protections of the township’s residents.” It includes restrictions for noise, traffic and setbacks, among other things.
As reported in the Pittsburgh Business Times, Pennsylvania’s reported natural gas production in the first six months of 2014 reached 1.9 trillion cubic feet. Production is up from 1.7 trillion cubic feet reported over the second half of 2013 and 1.4 trillion over the first half of 2013. The largest contributors to the gas production increase are wells located in Greene and Washington counties.
Natural Gas Intelligence reports that a new truck-to-rail transloading facility owned by Denver-based Concord Energy LLC, has opened in Parkersburg, West Virginia. The facility is capable of handling more than 150,000 bbl of crude oil condensate and natural gas liquids, and is expected to primarily serve E&P companies operating in southeast Ohio and northwest West Virginia. The facility will load light condensates, stabilized condensate, raw natural gas liquids (NGL) and purity NGL products, and includes warehouse space, a lay-down area and its location provides access to highways and the Ohio River. This announcement is the latest in a series of similar facilities that have revived dormant railroads and industrial sites throughout the region.
The State Journal reports that American Energy – Marcellus LLC, a subsidiary of Oklahoma City based American Energy Partners LP, has agreed to acquire 48,000 leasehold acres in Doddridge, Harrison, Marion, Tyler and Wetzel Counties in West Virginia from East Resources, Inc. and an unnamed third party. The deal to acquire West Virginia leasehold properties is part of a larger $4 billion effort by American Energy Partners to enter the Southern Marcellus and Permian Basin plays in West Virginia and West Texas and to expand its holdings in the Utica Shale in Ohio. The companies plan to operate four to six rigs on the newest West Virginia and Ohio acquisitions by the end of 2014. American Energy – Marcellus LLC expects the West Virginia property to produce 135 million cubic feet of natural gas equivalent per day by the time the deal closes.