Marketwatch.com reports that most consumers living in West Virginia believe shale exploration will provide economic opportunity. Of those polled, nearly a quarter already reported seeing economic impact. The poll, conducted as Huntington Bank’s Midwest Economic Index, shows that populations with the most exploration activity, Pennsylvania, Ohio, and West Virginia had the highest expectation for economic opportunity. Huntington Bank predicts that natural gas production, particularly from the Utica and Marcellus Shale formations, will increase dramatically over the next 25 years and that job growth will continue as well. According to the report, Huntington plans to expand its commercial banking services to serve the energy sector to meet new demand in the energy sector.
Magnum Hunter Resources has announced plans to drill a minimum of four test wells in Ohio’s Utica formation this year. Magnum Hunter holds mineral rights to 107,000 acres of Utica potential in Ohio. It is currently building its first Utica pad in Washington County. The pad is designed for possibly drilling four horizontal Utica wells. Magnum Hunter expects highly productive results based on its own geological interpretations and the results of nearby operators.
Energy companies are expected to pour billions of dollars into Ohio’s Utica Shale this year, not only for drilling costs, but also for moving and refining the liquids and gases resulting from production. Companies have reportedly already budgeted more than $1.2 billion for drilling costs in Ohio this year, with a predicted $6 billion to be spent on drilling and completing wells by the end of 2014. Several projects have also been slated to improve the infrastructure necessary for the transport and refining of gas, in order to ease capacity concerns.
On January 18, 2013, the Muskingum Watershed Conservancy District (MWCD) announced that it has negotiated a 6,700 acre non-developmental oil and gas lease with Antero Resources. The lease will prohibit drilling or surface development on MWCD property, but will allow Antero to drill under MWCD land from other nearby wells. Financial terms of the lease are still being negotiated. The MWCD staff plans to recommend to the Board of Directors to enter into the lease with Antero at the Board’s February 15, 2013 meeting.
Ohio law allows the citizens of a political subdivision (i.e. town, city, or county) to unite and purchase their natural gas and electricy as a single group. This practice, which is called Governmental Aggregation and regulated by the Public Utilities Commission of Ohio (PUCO), provides an opportunity to solicit the lowest price for the group’s natural gas and electricity requirements.
After receiving certification from PUCO, Trumbull County, Ohio entered into an agreement with Constellation Energy Resources, LLC, an Exelon Corporation company for the supply of natural gas to residential and small business clients at a discounted rate. Per the agreement, such residential and small business customers, who are participating in the Trumbull County natural gas program, will pay a fixed rate of $4.46 per thousand cubic feet (“Mcf”) for all natural gas supply consumption from March 2013 to October 2013, a price which is almost 190% lower than market price in October 2012. After this 8-month period, the price for the natural gas will be determined based on Trumbull County’s choice to secure a new fixed-price rate for the service period from October 2013 to February 2015.
The Ohio Department of Natural Resources (ODNR) reports that during the week of January 6 through January 12, 2013, it approved 17 new horizontal well drilling permits regarding the Utica/Point Pleasant Shale, 6 of which were issued to Chesapeake Exploration LLC for its operations in Carroll, Harrison and Jefferson Counties. Through January 12, ODNR has issued 498 horizontal well permits for the Utica/Point Pleasant Shale, 208 horizontal wells have been drilled under such permits, and 48 wells are in production. Carroll County remains at the top of the list for permits issued with 179.
Houston-based energy company, Carrizo Oil and Gas, Inc., announced its 2013 capital spending plan for land, seismic, and related activities. The plan includes the purchase of additional acreage in the southern Utica play. After the purchase, Carrizo will own approximately 14,000 acres predominantly located in Guernsey, Noble, and Tuscarawas Counties, Ohio. Carrizo is encouraged by recent drilling results and expects an increase in production.
Drilling for oil and gas in the Utica shale underlying eastern Ohio has led to an increase in plentiful, well-paying jobs in the region, with established operations actively seeking local workers rather than outsiders. While some companies used experienced workers from other states to begin drilling operations, jobs for drivers, welders, diesel mechanics and other trades will be going to local workers in areas where wells have been drilled. Utica shale development has been credited as a factor in Ohio’s unemployment rate dropping from 8.6% in 2011 to 6.5% in November of 2012, and there are projections that development of the Utica will generate more than 140,000 jobs in Ohio by 2020.
As shale gas development continues to fuel economic activity in Ohio, one group of companies already experiencing business growth is the railroad industry. In December 2012, Hannibal Real Estate and Carload Express announced plans to revive a short line in Monroe County, Ohio. Now, more railway companies, such as Norfolk Southern Railway and CSX Transportation, are touting the benefits of Utica gas wells for their short line rails. Not only are trains hauling sand and other aggregates to development sites, but wet gas and oil production presents the opportunity to haul products from the well site to industrial centers. The demand for rail services is expected to increase in 2013 and 2014 as the number of wells drilled in the Utica grows.
Confident in the future of the Utica Shale play, Kansas based Lario Oil & Gas Company has acquired an interest in 25,000 acres situated in the oil-rich northern portion of the Utica/Point Pleasant Formation in eastern Ohio with an un-named industry partner. The announcement comes on the heels of Lario’s recent drilling success in North Dakota and Colorado. In a statement released via its website, Lario detailed that it intends to drill a scientific well in the second quarter of 2013, with horizontal wells to drilled later.
The Ohio Department of Natural Resources (ODNR) reports that during the week of December 30, 2012 through January 5, 2013, it approved 8 new horizontal well drilling permits, 4 of which were issued to Gulfport Energy Corporation for operations in Harrison County, bringing the total up to 63 Utica/Point Pleasant Shale well permits issued for activity in Harrison County. Through January 5, the ODNR has issued 487 horizontal well permits, and 205 horizontal wells were drilled under such permits, 47 of which are in production.
After being lobbied by the Laborers International Union, the Jefferson County commissioners signed a road use maintenance agreement (RUMA) with Enterprise Liquids Pipeline that requires contractors to pay prevailing wages to repair county and township roads used during the construction of a pipeline across the county. County Engineer James Branagan indicated that, pursuant to a recent Ohio attorney general opinion addressing counties entering into RUMAs with oil and gas companies, the prevailing wage requirement will be included in all Jefferson County RUMAs. The RUMA with Enterprise Liquids Pipeline includes a $221,000 bond and requires the company to upgrade county and township roads prior to construction or make repairs after the works is completed.
The formation of an Ohio commission responsible for developing rules for leasing park and forest mineral rights has been delayed for more than a year. A state law designated a November 2011 deadline for Governor Kasich to appoint the five-member Oil and Gas Leasing Commission to facilitate the leasing of state-owned mineral rights to the highest bidders. The commission was to draft rules for leasing by June of 2012. The governor’s office says the delay was necessary to find good commissioners and that an announcement would be made soon. A recent analysis indicates that state-held mineral rights could fetch up to $183 million in lease-signing bonuses.
The Ohio Department of Natural Resources (ODNR) reports that during the week of December 23 through December 29, it approved 4 new horizontal well drilling permits regarding the Utica/Point Pleasant Shale, all of which were issued to Mountaineer Keystone, LLC for operations in Portage County. ODNR issued 14 permits for horizontal wells in Portage County in 2012. Through December 29, the ODNR has issued 485 horizontal well permits, and 199 horizontal wells were drilled under such permits, 45 of which are in production.
Triad Hunter LLC, a subsidiary of Magnum Hunter Resources Corp., and Eclipse Resources I LP, of State College, PA, have formed a joint venture in order to develop 1,950 mineral acres in Monroe County, OH. Triad, as operator, will drill a total of 24 wells into the Marcellus and Utica formations over a three year period. Another Magnum subsidiary, Eureka Hunter Pipeline LLC, is expected to carry the production through a midstream pipeline, which is currently under construction.