William Kinney of the Twinsburg-based Summit Petroleum Inc. was the winner of the 2013 Oilfield Patriot Award given by the Ohio Oil and Gas Association. The award recognizes individuals who “protect, promote and advance the common interests” of Ohio’s crude oil and natural gas industry. Kinney describes the award as the high point in his career because it is awarded by his peers in the industry. Kinney is a former president of OOGA and founded Summit Petroleum in 1984. He continues to expect that shale energy develop will provide an economic boost to Ohio and will contribute to job growth.
Essroc Cement Corporation, with locations scattered across the Midwest and Northeast, has filed a federal lawsuit in Pittsburgh, seeking to stop a planned pipeline from crossing property in Lawrence County. The pipeline is a joint venture operation between NiSource Inc., of Indiana, and Hilcorp Energy Co., of Texas, and is planned to travel upwards of 50 miles from Utica Shale wells in Pennsylvania and Ohio to a liquids processing plant in Ohio.
According to Essroc, the 20-inch pipeline would materially affect its ability to extract valuable coal and limestone from Essroc’s property. The company, which holds nearly 4,000 acres of subsurface rights around the North Beaver plant, is attempting to sell the property, according to the lawsuit.
The Ohio Department of Natural Resources has released information regarding oil and gas permitting and drilling activity, indicating that 32 drilling rigs are currently operating in the state and that 832 total horizontal well permits have been issued since record keeping began. The ODNR issued 80 new horizontal drilling permits in July of 2013, the highest number of which (15) were issued in Belmont County.
EnerVest announced details of the sale of over 22,500 acres in Harrison, Guernsey and Noble counties. EnerVest did not identify the buyer of the acreage, but confirmed the sale amount of $284.3 million or $12,900 per acre. The publicly held portion of EnerVest, EV Energy, will retain an overriding royalty interest on the property.
A midstream joint venture between Houston-based Kinder Morgan Energy Partners LP and Denver-based MarkWest Utica EMG LLC announced Wednesday that it has plans to build Ohio’s sixth natural gas-processing plant and a new pipeline to carry liquids from Ohio, Pennsylvania and West Virginia to the Gulf Coast for processing. Although a price tag has yet to be disclosed, industry experts expect the cost for the two projects would approach $1 billion, with the first phase set to begin in the fourth quarter of 2014. At its conclusion, MarkWest chairman, Frank Semple, believes the pipeline will be “the most efficient project for the Marcellus and Utica producers to access the Gulf Coast natural gas liquid markets.”
A newly constructed natural gas processing and fractionation complex is now online in Columbiana County. The plant was constructed by M3 Midstream and includes an extensive gathering system, a 200-million cubic-feet-per-day cryogenic processing facility and a 45,000-barrel-per-day natural gas liquids fractionation facility. M3 Midstream is planning two additional phases to the complex which will greatly increase processing capacity.
Rockies Express Pipeline LLC, owners of the 1,698 mile long Rockies Express Pipeline, announced that it has executed an agreement for the transmission of processed gas from the Utica Shale formation, adding significant natural gas supply to the pipeline for transport both to the east and to the west. The pipeline is one of the largest ever constructed in North America, with the capability of carrying up to 1.8 billion cubic feet of natural gas daily.
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.
Ohio’s biennial budget was signed into law on June 30. The new budget legislation does not include an increase to the oil and gas severance tax, which would have only applied to operators of horizontal wells. The budget also includes several changes to oil and gas industry regulations. The changes include:
- Horizontal well owners must report production on a quarterly basis rather than an annual basis;
- Beginning on March 31, 2015, well owners must disclose the country of origin of all steel pipes used in the drilling process;
- Only synthetically lined pits or impoundments may be used for temporary storage of brine and other fluids;
- The owner or operator of a solid waste facility may accept material containing technologically enhanced naturally occurring radioactive materials (TENORM) if the material contains less than five picocuries per gram above natural background of radium-226 or radium-228; and,
- After January 1, 2014, the storage, recycling, treatment, processing or disposal of brine or other waste substances must be in accordance with a permit issued by the chief of ODNR.
Several other changes oil and gas industry regulations were signed into law in addition to those summarized above.
The Ohio Supreme Court accepted jurisdiction over the closely watched “home rule” case State ex rel. Morrison v. Beck Energy Corp. At issue are the state laws which give the Ohio Department of Natural Resources sole and exclusive authority to regulate oil and gas permitting, stimulation, production and completion over local ordinances to the contrary. Initially a trial court in Summit County determined that the City of Monroe Falls had the right to enforce its own application and permit requirements for oil and gas wells. The court of appeals disagreed and ruled that only ODNR had such powers. The Ohio Supreme Court is poised to make the final determination in a ruling that can be expected in the next year.
The Ohio Department of Natural Resources has published guidelines for the unitization application process. The guidelines clarify the application process that is required before the division chief of ODNR’s Oil and Gas Resources Management can make a ruling on unitization applications. Of note, applicants are required to submit the following:
- An affidavit providing a detailed account of all attempts to lease the unleased properties,
- A copy of a joint operating agreement for working interest partners (if applicable),
- Properly scaled maps and aerial photographs of the proposed unit area, and;
- Large exhibits for use at the hearing on the application.
The new guidelines are intended to clarify and expedite the process due to the large increase in the number of unitization applications.
Consol Energy, a company that has roots in coal mining in Columbiana County, Ohio since the 1860s, now sees a promising future in natural gas production in the area. Speaking at the 5th annual Columbiana Chamber of Commerce Business Breakfast on June 14, 2013, Harry Schurr, general manager of Utica shale operations for Consol Energy, indicated that Consol is being “methodical” in their drilling program, but is excited about the prospects in Columbiana and its neighboring counties. To date, Consol has drilled 200 horizontal shale wells, between the Marcellus and Utica, and, together with its joint ventures, plans on drilling another 27 Utica wells in 2013.
The Fifth District Court of Appeals held in a recent decision that a general disclaimer of implied covenants in a lease effectively disclaims any implied covenants to reasonably develop the leased property. In Bilbaran Farm, Inc. v. Bakerwell, Inc., the plaintiffs claimed that the lessees to the oil and gas lease breached the lease by not developing all portions of a 275 acre tract of land. The trial court dismissed the plaintiffs’ complaint citing the general disclaimer language in the lease. The Court of Appeals agreed that the general disclaimer was sufficient to disclaim any obligation to reasonably develop the undeveloped portions of the leasehold.
Ohio’s drilling rig count currently stands at 32 according to Ohio Oil and Gas Association Executive Vice President Tom Stewart. That is up from 19 in 2012 and now surpasses the 23 drilling rigs in West Virginia. According to Stewart, it will take many more rigs than 32 to fully develop the Utica Shale play in Ohio, but he is very optimistic that the number will increase. Much of the recent activity has been focused on the liquids-rich parts of the Utica Shale play.
On Friday, June 7th, twelve energy-producing states, including Ohio and West Virginia, signed a letter to the EPA defending the industry practice of hydraulic fracturing. The letter was in response to recent threats to sue the EPA for not assuming regulatory responsibility of the energy industry made by several northeastern states. The letter warned the EPA not to utilize “sue and settle” tactics in an attempt to regulate hydraulic fracturing and emphasized that the Clean Air Act places the regulatory responsibility for the oil and gas industry on the states rather than the federal government.