Chesapeake Energy Offers Estimate of Production from Ohio Wells

Chesapeake Energy, the No. 1 driller in Ohio’s Utica Shale formation, projected an estimated ultimate recovery (EUR) of 5 billion to 10 billion cubic feet of equivalents over the lifetime of each of its wells drilled into the Utica Shale in Carroll County and the surrounding areas. Those EUR estimates are pointedly higher than what has been reported from wells drilled in the Marcellus Shale formation in Pennsylvania, where Chesapeake Energy has only reported EURs as high as 4.2 billion cubic feet of equivalents and the U.S. Geological Survey has reported an average EUR of 1.1 billion cubic feet of equivalents.

Muskingum Watershed Conservancy District Approves Lease with Antero Resources

The Muskingum Watershed Conservancy District approved a lease with Antero Resources covering 6,500 acres located at Seneca Lake in Guernsey and Noble counties.  The district, which stretches from southern Akron to the Ohio River, is now one of the biggest beneficiaries of the Utica Shale as a result of this lease and two prior leases executed in 2011 and 2012.  The district has used initial leasing bonuses for debt payment and investments in public access and recreational facility improvement, with plans to utilize further payments for an additional $80 million worth of improvements and deferred maintenance.

Ohio Agencies Unveil New Legislation on Drilling Wastes

Ohio’s rules governing naturally occurring radioactive waste, already among the most restrictive in the country, may be getting even tighter.  Several Ohio government agencies are proposing legislation that would tighten regulations dealing with radioactive waste generated during oil and gas drilling activities.  Such low-level radioactive material is naturally occurring, and poses little risk to human health.  However, the new rules would require materials with elevated levels of radiation to be disposed of in special landfills, or be treated and undergo testing before being disposed of in regular landfills under the supervision of the state EPA.

New Study Underway Investigating Water Usage in Marcellus Development

West Virginia Public Broadcasting reports that a new study has begun regarding the use of water in hydraulic fracturing in the Marcellus Shale in West Virginia, Pennsylvania, and Ohio.  The Robert and Patricia Switzer Foundation is providing funding for the study, which is being undertaken by Downstream Strategies and the non-profit organization Earthworks, as well as Switzer Foundation scholars.  The goal of the study is to develop a life cycle analysis of water involved in drilling and hydraulic fracturing.  In addition to the amount of water used, the study will identify the source and the final destination of the water in order to compare water use for hydraulic fracturing to the water used for other types of energy production.  The findings of the study are expected to be available by the end of 2013.

Houston Firm Increasing Investment in Ohio's Utica Shale Play

Early results from producers operating within eastern Ohio’s Utica shale play have spurred additional investment from other firms. Energy & Minerals Group, a Houston investment firm, recently increased its investment in a joint venture with MarkWest Energy Partners LP by an additional $450 million, bringing the total investment of both companies in MarkWest Utica EMG LLC to $950 million, with plans for pipelines and a processing plant in Harrison County.

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Antero Resources Increases Investment in Marcellus and Utica

The Intelligencer reports that Antero Resources will spend $1.65 billion in 2013 on development of the Utica Shale in Ohio and Marcellus Shale in West Virginia.  Antero will reportedly operate two Utica rigs and 12 Marcellus rigs.  Antero also plans to build an 80-mile freshwater pipeline in West Virginia across Doddridge, Harrison, and Ritchie Counties.  The pipeline will not only reduce costs for the company but will also help reduce its impact on rural West Virginia. The West Virginia Department of Environmental Protection has received several drilling applications from Antero for Tyler, Doddridge, and Ritchie counties in recent days.

Ohio Court Rules State Laws Preempt Conflicting Local Ordinances on Drilling

In a case of first impression, an Ohio appeals court issued an opinion today holding that state laws concerning oil and gas drilling preempt conflicting local ordinances. A trial court in Summit County ordered a driller to stop construction of a well because it had not complied with local ordinances concerning permitting, application fees, public hearings and zoning certifications. The driller had, however, complied with the applicable state laws. The appeals court reversed the decision of the trial court and found that the state laws control over the local ordinances.
The case could be appealled to the Ohio Supreme Court.

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Ohio Oil and Gas Industry Against Proposed Increase in Severance Tax

The Ohio Petroleum Council (OPC) and the Ohio Oil & Gas Association (OOGA) maintained their stance against Governor John Kasich’s proposal to increase the severance tax on oil and natural gas in a press release issued Monday.  Kasich first proposed hiking the severance tax last year.  By increasing the severance tax to 4%, Governor Kasich believes that all Ohioans will benefit from development of the Utica Shale. OPC and OOGA maintain that Ohioans are already benefiting from shale energy development by putting people to work, paying high wages and generating billions in revenue for the State. OPC and OOGA also cite a report saying that Ohio oil and gas companies paid more than $910 million in state and local taxes in 2011.

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Ohio Landowners Seek Lease Invalidation

In a case with significant implications for oil and gas operators in Ohio, two landowners have asked the U.S. District Court for the Southern District of Ohio to rule that their leases, signed with Mason Dixon Corporation and now held by Hess Energy Corporation, are invalid due to irregularities in signing and the failure of the gas company to drill wells during the primary term.  The landowners, David Cameron and Stephen and Melissa Griffith, have moved for summary judgment in the case.
Three issues were presented to the court, including two signing irregularities.  Mr. Cameron claims his signature was not notarized, and Mr. Griffith claims he signed his wife’s name on her behalf, without her being present.  Further, the landowners are refusing to cash their delay rental checks.  Delay rentals are paid to extend the primary term of the lease, thereby allowing the gas company to delay drilling a well.  Payment of delay rentals may extend the leases for as long as ten years before a well must be drilled.  The landowners have asked the court to declare this time period to be unreasonable, despite the terms of the lease.
This case illustrates the importance of having each lease validly signed and notarized by all interested parties.  Any irregularity can be used by landowners to contest a lease they are no longer satisfied with, even if the landowner may not ultimately prevail.  Further, oil and gas operators should make sure that landowners understand the binding nature of a lease, and the full term thereof.

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Ohio Supreme Court: Drill Permit Not an "Order of the Chief"

On January 30, 2013, the Ohio Supreme Court ruled that the issuance of a permit to drill a new well, deepen a well, reopen, convert, or plug a well is not considered to be an “order of the chief.”  As such, the Ohio Oil and Gas Commission has no jurisdiction to hear an appeal of such permit under Ohio’s oil and gas law.  The Court’s decision reconciled one provision of the statute authorizing the Commission to hear appeals of any “order” of the chief of the Ohio Department of Natural Resources’ Division of Oil and Gas Resources Management with another provision of the statute stating that the issuance of a permit to drill “shall not be considered an order of the chief.”  The Court did not address whether a permit to drill could be appealed to a state court.

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Wastewater Transportation, Management, and Disposal in Ohio

Ohio law currently authorizes two options for the disposal of the wastewater generated from natural gas production operations – injection into a Class II underground injection control (UIC) well or spreading on roads as a deicer. However, with the development of the Utica Shale in Ohio on the rise, and a significant percentage of the wastewater already being disposed in Ohio’s 179 operating UIC wells coming from out of state, alternative means for the transportation, temporary management, and disposal of the wastewater are being considered.
Industry is advocating the transportation of brine and other liquid wastes by river barge as more efficient, economical, and environmentally sound than transportation by tanker trucks. The U.S. Coast Guard, the agency authorized to regulate the nation’s waterways, plans to issue a decision on the permissibility of wastewater transport via barge in the near future. With respect to the temporary management of wastewater prior to disposal, the Ohio Department of Natural Resources (ODNR) is expected to initiate rulemakings addressing storage in pits and impoundments. ODNR currently requires wastewater to be stored in steel tanks.
The disposal capacity of Ohio’s UIC wells has also been an issue of concern. While no permits for new UIC wells were issued for nearly 11 months after seismic events in Youngstown, Ohio were connected to a nearby UIC well, ODNR has issued 10 permits for new UIC wells since November 2012 with another 30 permit applications pending. ODNR also encourages the recycling and re-use of wastewater from one well site for drilling and production operations at other well sites. Another recent development with the potential to alleviate the burden on UIC wells is the disposal of solidified brine in Ohio’s solid waste landfills. Interest in the process of accepting brine for solidification and, ultimately, disposal at solid waste landfills has increased since an Advisory contemplating the practice was issued by Ohio EPA in September 2012. Currently, one landfill in Stark County, one in Mahoning County, and two in Fairfield County have permitted solidification facilities.

City of Brunswick Voices Displeasure With Ohio Drilling Law

City Council members in Brunswick, Ohio, the largest city in Medina County, are voicing concerns regarding state laws which give the Ohio Department of Natural Resources the sole authority to issue oil and gas drilling permits throughout the state. Council members are concerned that the laws do not take local zoning into consideration and effectively pre-empt any authority to regulate hydraulic fracturing operations at the local level. The mayor of Brunswick has urged the council to consider the economic benefits brought to the area by oil and gas exploration prior to voting on a proposed resolution which would formally voice their disapproval on the issue.

Ohio Judge Issues Injunction Prohibiting Well Construction

A Belmont County Common Pleas Court judge recently issued a temporary restraining order and a preliminary injunction against Oxford Oil Company prohibiting the company from constructing a well pad on a landowner’s property.  According to court documents, the company had plans to construct an entrance and well pad on the property on December 11, 2012, but could not reach an agreement with the landowners regarding the location of the well pad.  The landowners filed suit in December, and were granted injunctive relief temporarily stopping the construction plans.
Like many other “lease busting” lawsuits, the landowners also claim that the lease is void due to improper notarization and accuse the company of withholding information regarding the development of the Marcellus and Utica Shale that would have impacted their decision to agree to the lease in 2008.

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Ohio's Utica Shale – Additional Permits and New Production Reports

The Ohio Department of Natural Resources (ODNR) reports that during the week of January 13 through January 19, 2013, it approved 3 new horizontal well drilling permits regarding the Utica/Point Pleasant Shale, all of which were issued to Chesapeake Exploration LLC for its operations in Carroll County.  Through January 19, ODNR has issued 500 horizontal well permits for the Utica/Point Pleasant Shale, 212 horizontal wells have been drilled under such permits, and 48 wells are in production.  Of the producing wells, Gulfport Energy Corp. has released production data from two new Utica Shale wells; one in Belmont county and one in Harrison County that are showing impressive numbers.  Gulfport’s Stutzman well in Belmont County ranks fourth in production totals among all wells in Ohio, and its Clay well in Harrison County ranks eighth among all producing wells.   Gulfport also operates Ohio’s most productive well, the Shugert well in Belmont County which reportedly is producing 7,482 barrels of oil equivalents per day, which includes 28.5 million cubic feet of natural gas per day, plus 300 barrels of oil and 2,907 barrels of natural gas liquids per day.

Report Estimates $10 Trillion Dollars in New Economic Activity in Shale States

West Virginia, Pennsylvania, Ohio and New York could benefit from more than $10 trillion dollars in new economic activity as a result of the full development of the Marcellus and Utica shale plays, according to an analysis from New York-based Kroll Bond Rating Agency that was reviewed by Business First.  Kroll’s economic prediction is based on the sale of shale gas and indirect economic benefits, such as higher employment, increased tax revenues and improved infrastructure.

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