New Processing Plant and Pipeline Coming to Ohio

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.”

Eastern Ohio Natural Gas Processing Plant Begins Operations

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 To Increase Gas Supply

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.

Marcellus Shale Drilling Results in Lower Gas Bills for Pennsylvania Consumers

The Scranton Times-Tribune reports that UGI Penn Natural Gas customers continue to pay one-third less to heat their homes than they paid five years ago.  According to the Marcellus Shale Coalition, this is a nationwide trend.  The lower rates are a direct result of the natural gas production from the Marcellus and Utica shales.

Bluegrass Pipeline to Connect Utica and Marcellus Gas Fields with Gulf Coast

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 Budget Passes With No Increase in Severance Tax, Contains Other Regulatory Changes for Oil and Gas Production

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.

ODNR Implements Guidelines for Unitization Applications

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 Has Big Plans for the Utica

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.

Ohio's Drilling Rig Count On the Rise

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.

Pennant's Gas Facility, Pipeline Under Development

Pennant Midstream, a joint venture between NiSource Midstream Services and Hilcorp Energy Co., will build a processing facility and a new pipeline as part of its $300 million project to serve the Utica and Marcellus shale plays in Ohio and Pennsylvania.  The pipeline will move natural gas to a cryogenic natural gas processing plant, located near Youngstown in Mahoning County, which should be in service by the end of the year.  According to NiSource Midstream Chief Operating Officer, Chad Zamarin, gas will start flowing through the first section of the pipeline within the next few weeks and the project will be finished by the second quarter of 2014.

Ohio Governor Revises Drilling Tax Plan

Ohio governor John Kasich revised his proposed drilling tax after it has been rejected by the Ohio legislature. The new proposal would increase the proposed tax of 4% to 4.5% and direct 25% of the revenue generated by the tax to 33 Appalachian counties. The remainder would go toward funding state income tax decreases. The new proposal is likely to face continued resistence from industry groups.

Utica and Marcellus Dubbed Most Prolific Wet Gas Play in the World

Speakers at a recent conference in Columbus, Ohio expect the Utica and Marcellus shale fields to become the most prolific source of natural-gas liquids in the world.  While there is plenty of oil and gas in the ground, producers are restrained by the current infrastructure in eastern Ohio and western Pennsylvania.  The construction of multiple cracker facilities for processing natural-gas liquids, and pipelines to transport gas and oil, is needed in order for the region to reach its full potential. Industry spokesmen say that there is potential for the play to produce 500,000 barrels per day of natural-gas liquids by 2018.

Reduced Assessments Likely for 500,000 Ohio Property Owners

Residents in the Muskingham Watershed Conservancy District are likely to see reduced property assessments as a result of recent shale leasing and water sales. The Muskingham Watershed Conservancy District stretches across eighteen Ohio counties and roughly 500,000 property owners pay a $12 annual assessment. The District has entered into significant lease agreements and water sales agreements in recent months resulting in signing bonuses of over $77 million. Officials from the district are meeting tomorrow about the possibility of reducing the annual assessment.

Sixth Circuit Rules on Ohio Oil and Gas Law

Yesterday, the Sixth Circuit Court of Appeals ruled on a case of first impression involving Ohio’s four-year statute of limitations on lawsuits arising from miscalculation of royalty payments in oil and gas leases. It had been successfully argued in the U.S. District Court that any miscalculation occurring after an initial miscalculated payment was part of a “continuing violation” and that the limitations period ran from the date of the initial miscalculation. On appeal, the Sixth Circuit reversed the U.S. District Court and ruled that Ohio law dictates that the royalty payment provision in the oil and gas lease at issue be treated as a divisible contractual obligation. Because the contractual obligations were determined to be divisible, each alleged miscalculation triggers a new four-year limitations period. Thus, any alleged miscalculated payment which occurred during the four years prior to the lawsuit could be included in a claim for breach of the oil and gas lease.

"State of the Play" Event to Unveil 2012 Utica Production Numbers

The Ohio Department of Natural Resources will unveil the long-awaited 2012 Utica shale production numbers on May 16, 2013 at 2 p.m. The event is being held in Columbus and will be live-streamed at www2.ohiodnr.gov.

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