As reported by Law360, Representative Rick Mirabito, D-Lycoming, recently introduced House Bill 2318, which, if passed into law, would require the Pennsylvania Department of Conservation and Natural Resources to provide notice and require public input before leasing state forest lands for unconventional gas development. Specifically, the bill provides for a public comment period and at least one public hearing or meeting before any land could be leased by the DCNR. In addition, the public would have access to detailed development plans, including locations of well pads, impoundments, access roads, pipelines, compressor stations and other related structures and facilities, during the comment period. The DCNR would also have to provide an analysis of potential impacts of the proposed development on ecological, recreational, cultural and aesthetic resources.
“The 2014 Babst Calland Report – Appalachian Shale Industry in Transition: Evolving Challenges for Producers and Midstream Operators” comments on key issues facing producers and midstream operators from a legal and regulatory perspective, including:
- Governments and politics are playing a major role in shale energy. State elections will shape how the industry operates. In Ohio and Pennsylvania, the tax debate is still very much alive. In West Virginia, a gas severance tax has been in effect and has remained unchanged despite attempts to raise it. The industry faces increased budgetary and operational challenges from legislative sessions in all three states. Politically-driven developments continue to impact the prospects for new and existing underground injection wells, ranging from new seismic testing requirements to public objections to pending permit applications.
- Regulatory issues remain fluid for the Appalachian shale gas industry. There is no shortage of regulation for the burgeoning shale gas industry, particularly given the degree of transparency, public scrutiny and political influence for and against the extractive industries. A large number of regulatory issues remain, requiring constant attention to developments and details across a spectrum of subjects including: reporting, permitting, well site construction, impacts to species, and unique standards for water and air quality.
- Local government regulation of the industry is expanding. The line between state and local control is still being tested in the state of Ohio, while the implications of Post-Robinson Twp. (Act 13) local regulation in Pennsylvania will not be evident until later in 2014.
- Property rights and land use present more challenges than ever before. Myriad unresolved property rights, royalty disputes and land-related issues are pending in the courts. Producers in Ohio, West Virginia and Pennsylvania are facing a continuously evolving environment concerning property rights and land use.
- Safety and labor remain priorities. The industry’s workforce and supply chain partners are keys to productivity gains and maintaining the all-important license to operate. As the oil and gas industry must protect its workers 24/7, it must remain vigilant on safety compliance and labor matters.
- Next step in the transition: we are at the threshold of a manufacturing renaissance. The Appalachian Basin is playing a leading role in the United States’ production of record amounts of oil, gas and natural gas liquids. New business opportunities are rapidly developing, and the Appalachian Basin has the potential to evolve from our vastly successful resource extraction activities to reclaim its historic reputation as a manufacturing juggernaut.
To request a copy of “The 2014 Babst Calland Report,” contact info@babstcalland.com.
Plans by Moundsville Power LLC to build a natural gas power plant were approved by members of the Marshall County Commission on April 22, 2014. The proposed 549 megawatt natural gas power plant is considered the first “downstream” project of its kind in West Virginia, is expected to use more than $100 million worth of natural gas per year, and will replace recently closed and retiring power plants in the area. As planned, the plant will generate power 24 hours a day and enough electricity to power approximately 549,000 homes. Current plans for construction are expected to begin in 2015 to bring the plant online in 2018, with the estimated cost of the plant to be $615 million. The project still requires state and federal approvals prior to development.
As reported by the Akron Beacon Journal Online on April 4, 2014, the Ohio Environmental Protection Agency issued revised general permits for the installation and operation of air contaminant sources at oil and gas horizontal well sites to address methane gas released from valves, connectors and other equipment. Under the new permits, operators are required to scan all the equipment at a well site on a quarterly basis for any leaks of hydrocarbons. The purpose of the new permits is to quickly identify and correct potential gas leaks at well sites and to prevent unnecessary emissions. Colorado and Wyoming have recently adopted similar air emissions requirements.
As Reported by MetroNews on March 26, the proposed Wood County, West Virginia, petrochemical “Cracker” plant project, called Project Ascent, took a significant step forward on Wednesday with an announcement from Antero Resources that it would contribute 30,000 barrels of ethane per day to the proposed plant, which represents approximately one half of the ethane needed to operate the plant. The proposed Cracker plant will use ethane to manufacture polyethylene, which is used to making various plastics. Further information on the agreement between Antero and Ascent is expected to be announced on Wednesday, March 26, at the West Virginia Manufacturers Association’s Marcellus to Manufacturing Ethane Development Conference being held at the Charleston Civic Center in Charleston, West Virginia.
The Charleston Daily Mail reports that a 130-foot, 255 ton de-ethanizer tower was scheduled to arrive at the Williams Energy Oak Grove site in Marshall County on Monday or Tuesday. The tower is the second of three “Superload” installments being delivered to the Williams Energy site and indicates the growing impact of Marcellus and Utica Shale development on West Virginia. According to The Intelligencer/Wheeling News-Register, the de-ethanizer strips ethane from the natural gas stream prior to pipeline transport. In its processed form, ethane is a Natural Gas Liquid (NGL) and can be used to make plastics and medical and chemical products. The de-ethanizer is the first at the Oak Grove site and the third in Marshall County. The stripped ethane will likely be shipped via pipeline to the Gulf Coast or to Canada. That may change, however, if the proposed Cracker Plants in Beaver County, Pennsylvania and Wood County, West Virginia are completed.
As reported in the Pittsburgh Business Times, the proposed ethane cracker plant near Parkersburg, West Virginia, could potentially have a multi-billion dollar positive effect on the state’s economy. Emeritus Professor of Economics Tom S. Witt of West Virginia University authored a report, entitled “Building Value from Shale Gas: The Promise of Expanding Petrochemicals in West Virginia,” wherein he analyzed the short and long term impact of the proposed facility on West Virginia’s economy. Based upon the conclusions of Professor Witt’s report, the construction and operation of the proposed ethane cracker plant could generate a total of 19,710 jobs, representing employee compensation of $1.047 Billion and total economic output of $2.261 Billion. Professor Witt, in his report and in an interview with the Charleston Daily Mail, gives specific policy and legislative recommendations for West Virginia to successfully attract large scale projects, such as the ethane cracker.
The Times Leader reports that natural gas produced within Pennsylvania from the Marcellus Shale exceeded 3 trillion cubic feet in 2013. This total exceeds the production total from 2012. According to the report, the U.S. Department of Energy estimates that the Marcellus Shale provides about 18 percent of the nation’s natural gas.
The U.S. Environmental Protection Agency (EPA) recently issued an Interim Chemical Accident Prevention Advisory concerning the design of liquefied petroleum gas (LPG) installations at natural gas processing plants. EPA has found that some existing plants were constructed in accordance with National Fire Protection Association 58, Liquefied Petroleum Gas Code (NFPA 58). EPA notes in the advisory announcement that NFPA 58 does not apply to natural gas processing plants and that more specific industry standards would apply in determining compliance with the requirements of the risk management provisions of Section 112(r) of the Clean Air Act, and the Chemical Accident Prevention Provisions of 40 CFR Part 68. EPA has suggested that American Petroleum Institute 2510, Design and Construction of Liquefied Petroleum Gas (LPG) Installations (API 2510) and its companion document API 2510A, Fire Protection Considerations for the Design and Operation of LPG Storage Facilities (API 2510A), are more widely recognized standards for the design of LPG installations at natural gas power plants. EPA is accepting comments on this interim advisory until July 31, 2014.
Consol Energy has announced that it expects to spend $1.5 billion this year to further its natural gas exploration and production activities. The company also announced that it has selected the former vice president of the Appalachia South Business Unit for Chesapeake Energy, Timothy Dugan, to serve as CEO of its exploration and production unit. Part of the investment will go to drill 32 wells in Harrison, Belmont, Guernsey and Noble Counties, Ohio.
On December 12, 2013, several Pennsylvania state representatives announced their plan to introduce a bill creating a severance tax on unconventional natural gas extraction. The proposed tax, which would replace Act 13’s existing impact fee, would be 4.9% of the value of natural gas sold from an unconventional well. Of the proceeds, 40% would be distributed to the impacted municipalities, and the remaining 60% would fund various statewide programs such as basic education (40%), the Growing Greener environmental stewardship fund (10%), investment in public lands (10%), programs for adults with special needs (8%), drug and alcohol programs (8%), the human services development fund (5%), behavioral health programs (5%), solar energy-Pennsylvania Sunshine Program (4%), the Homeowner’s Emergency Mortgage Assistance Program (3%), rape and domestic violence programs (2%), industry partnerships (3%), and veterans’ homes (2%). The sponsors of the proposal include Representatives DiGirolamo, Murt, DeLissio, and Readshaw.
The Pittsburgh Business Times reported yesterday that Rice Energy Inc. is planning for an initial public offering sometime during the first quarter of 2014. Rice confirmed that it filed a Form S-1 with the Securities and Exchange Commission. Pipeline reports that Rice’s registration statement will be made public in a few weeks. The Business Times further reports that Alpha Natural Resources will be selling its 50 percent stake in a joint venture, Alpha shale Resources, to Rice for $300 million. A portion of the payment for that transaction will include stock from the upcoming IPO.
On a conference call following the announcement of CONSOL Energy Inc.’s $3.5 billion sale of its longwall coal mines in West Virginia to Murray Energy, CONSOL President Nick DeIuliis stated that the deal would allow CONSOL to go from a coal company with natural gas exploration and production to a natural gas exploration and production company that now has coal, reported the Charleston Daily Mail. CONSOL’s press release for the deal states that it will enable the company to extend its gas growth production targets beyond 2014, citing expected 30% annual gas production growth rates in 2015 and 2016.
Chem.info reports that GreenHunter Water has obtained all of the permits necessary to begin removing old structures at a former oil service site in Warwood, West Virginia. Development of the site for its frack water recycling plant could be finished as soon as February of 2014. John Jack, vice president of business development of GreenHunter Water, indicated that the site will contain 19 storage tanks, and that GreenHunter Water is expecting approximately 30 trucks per day to arrive at the site, with each truck carrying 100 barrels of fracking brine water. Eventually, GreenHunter Water would like to implement a barging aspect to the plant, which would help alleviate road traffic. GreenHunter Water hopes to hire 12 to 20 employees to work at the site.
Aubrey McClendon, former CEO of Chesapeake Energy, is planning to close on $1.8 billion in equity and debt financing to fund American Energy Utica, his new exploration and production company, as reported by CNBC. American Energy Utica will buy and develop land in Ohio’s southern Utica Shale area. The company expects to close on the purchase of 80,000 acres in three separate transactions and hopes to have 12 rigs operating within the next two to three years.