A bill, HB2688, designed to allow oil and gas operators to create oil and gas production units without the express authority of all oil and gas owners within the unit boundary, is currently pending before the West Virginia House Judiciary Committee. The bill would require the owners of 80% of the interests in any given unit boundary to agree to pooling and unitization for horizontal wells before an operator could apply to the West Virginia Conservation Commission for a “horizontal well unit order.” Proponents say that the bill could reduce the administrative burdens against operations in the West Virginia Marcellus Shale region by allowing oil and gas operators to commence operations without locating unknown, un-locatable or abandoning oil and gas owners. Opponents fear that the bill, if passed, would be used to infringe individual landowners’ rights. The bill has already passed the West Virginia House Energy Committee.
As reported by the Charleston Gazette on February 4, 2015, West Virginia Governor Earl Ray Tomblin has signed legislation originally known as Senate Bill 280, which streamlines the transfer process of well work permits to eliminate a requirement that companies must re-apply for well work permits after acquiring assets from existing operations in West Virginia. The approved change was introduced and fast-tracked by both the House of Representatives and Senate in favor of Southwestern Energy Company, which bought $5 billion in assets from Chesapeake Energy Corporation in October of 2014. Please see our original blog post on S. B. 280 for further information.
The West Virginia Division of Air Quality will release a new general air quality permit, the G80-A, which will regulate air quality in regard to natural gas production, compressor and dehydration facilities. On February 5, 2014, the DEP will host a meeting to release the draft of the G80-A and cover the timeline, procedures for the official public notice for the draft permit, and subsequent public meetings.
Currently, General Permits G30-D and G35-A cover air quality relating to natural gas compressor facilities while G70-A covers air quality relating to natural gas facilities which are designed and operated for natural gas production at a well site. The general air quality permits currently in existence will continue, but there will be no future registrations, modifications or administrative updates to the G30-D, G35-A or G70-A permits. After the rollout of the new general permit, registrants wishing to modify an existing registration must register under the General Permit G80-A.
The meeting will take place from 9 a. m. to 4 p. m. at the DEP’s headquarters and will also be live-streamed over the internet.
As reported by Marcellus Drilling News and the Daily Reporter, the WV Department of Commerce, which is tasked with overseeing the state’s leasing program, opened another round of bids on Friday to lease state-owned lands for oil and gas operations. Jay-Bee Production Company submitted a bid ranging from $5,000 to $16,300 per acre to drill underneath 303 acres in theJug Wildlife Management Area in Tyler County, and Antero Resources bid $8,100 per acrefor 283 acres in the Jug Wildlife Area. Noble Energy also submitted a bid to drill beneath Fish Creek and adjacent lands in Marshall County, and the state is currently negotiating with Noble, Statoil USA Onshore Properties Inc. and Gastar Exploration to lease different sections of the Ohio River.
As reported by The State Journal, the West Virginia Senate has passed Senate Bill 280 (“SB 280”) which, if it becomes effective, would allow the Secretary of the West Virginia Department of Environmental Protection to transfer well work permits from one business entity to another, a process that has been previously prohibited by State Code. SB 280 was ultimately pushed in favor of Southwestern Energy, a company that has invested more than $5 billion to purchase wells in West Virginia and Pennsylvania. To become effective legislation, SB 280 must first pass through West Virginia House of Representatives before ultimately needing the approval of West Virginia Governor Earl Ray Tomblin.
The Oil & Gas Financial Journal reported on January 14, 2015 that Jeffrey A. Fisher has been named CEO of newly created American Energy Appalachia Holdings, LLC (“AEA”). AEA was recently created through the combination of American Energy Partners’ (“AEP”) affiliates, American Energy-Utica LLC and American Energy – Marcellus LLC. Fisher was previously COO of AEP and Executive Vice President of Production for Chesapeake Energy Corporation, which AEA’s Chairman of the Board, Aubrey K. McClendon co-founded. Fisher also served in a number of other engineering management positions at Chesapeake, BP and Vastar Resources. In addition to adding Fisher to the management team, AEA also named John K. Reinhart and Jeffrey A. Agosta as the COO and CFO, respectively. Similar to Fisher, Reinhart held several operational leadership positions at Chesapeake Energy in the Anadarko, Marcellus and Utica areas. Agosta previously served as CFO of Oklahoma City based Devon Energy, as well as a manager at D. R. Payne & Associates, a financial consulting firm. The executive team will oversee the management and operation of AEA’s estimated proven reserves of 1.5 trillion cubic feet equivalent of oil and gas (77% of which is gas) and the operation of seven drilling rigs in eastern Ohio and northern West Virginia.
Judge David W. Hummel, Jr. of Marshall County, West Virginia has dismissed the second in a pair of lawsuits aimed to restrict operator Gastar Exploration, Inc.’s ability to hydraulically fracture several wells in Marshall County, West Virginia. According to the Order entered by Judge Hummel in December, on April 22, 2014 Eagle Natrium, LLC, a wholly owned subsidiary of Axiall Corporation, filed suit against Gastar seeking a preliminary injunction to keep Gastar from hydraulically fracturing wells located under Eagle’s lands in Marshall County, West Virginia, due to the threat of irreparable damage to existing salt wells and operations. Judge Hummel denied Eagle’s request for a preliminary injunction and dismissed the Case (Civil Action No. 14-C-179), noting that the issue had already been resolved by a Pennsylvania court, and that a party cannot seek relief for the same problem in multiple courts without some intervening change in circumstance.
American Energy Partners, LP (“AEP”) announced yesterday that its affiliates, American Energy-Utica, LLC (“AEU”) and American Energy – Marcellus, LLC (“AEM”) are combining in an all-stock transaction to form American Energy Appalachian Holdings, LLC (“AEA”). AEP hopes that the “attractive positions [of AEU and AEM] in each of these respective plays and their complementary nature will allow AEA to maximize returns by realizing administrative and operational efficiencies.” The transaction will result in AEA holding a position in over 300,000 net Utica and Marcellus shale acres in eastern Ohio and northern West Virginia. AEP entered the Marcellus shale play in June as part of a larger $4 billion effort to expand its holdings in West Virginia, Ohio and Texas. AEP affiliates also maintain positions in the Woodford Shale in central Oklahoma and the Permian Basin in western Texas.
As reported by The State Journal, Robert A. Fala has been appointed to serve as the director of the West Virginia Division of Natural Resources (“WVDNR”), effective January 1, 2015. Fala was appointed by WV Governor Earl Ray Tomblin and will replace Frank Jezioro, who served as director since 2005 and retired on December 31, 2014. Fala began his career with the Pennsylvania Game Commission and has recently held positions with the West Virginia Department of Environmental Protection, the U.S. Fish and Wildlife Service and the WVDNR Natural Resource Commission. The WVDNR controls bids for the leasing of state game lands, such as the Conaway Run Wildlife Management Area in Tyler County, WV, and administered the recent leasing of West Virginia’s oil and gas interests underlying the Ohio River.
West Virginia University recently announced that it will be establishing the “Marcellus Shale Energy and Environment Laboratory,” at a site in the Morgantown Industrial Park near the WVU campus. The laboratory is being funded as part of a five-year, $11 million agreement with the U.S. Department of Energy and will be operated in conjunction with the DOE’s National Energy Technology Laboratory (that has long had a presence in Morgantown) and Charleston-based natural gas producer Northeast Natural Energy, LLC. Timothy Carr, WVU Professor of Geology, will be the Director of the new lab, which will also benefit from contributions by faculty with Ohio State University’s Subsurface Energy Resource Center. The primary goal of the new lab is to undertake a comprehensive, long-term study of the environmental and other aspects of the extraction of shale gas resources, focusing on the precise measurement of various parameters and developing best operating practices based on their research.
As reported by the Pittsburgh Business Times on October 15, 2014, Wexford-based Marcellus driller Mountaineer Keystone LLC has finalized its acquisition of joint-venture partner PDC Mountaineer LLC for a reported sale price of $500 million. PDC Mountaineer was created in 2009 by PDC Energy and Lime Rock Partners as a joint venture for the purposes of exploring the Marcellus Shale. Mountaineer Keystone LLC currently operates in northern West Virginia and eastern Ohio and drilled its first Utica and Marcellus wells in 2012. As a part of the deal, Mountaineer Keystone acquired 131,000 acres for its West Virginia Marcellus Shale position while also agreeing to sell the joint-venture’s midstream assets, consisting of 24 miles of high pressure gathering lines, to MK Midstream Holdings LLC, a separate joint venture in which Mountaineer Keystone holds a fifty (50%) percent stake.
Southwestern Energy Co. announced that it has signed a deal to acquire 413,000 net acres in West Virginia and Pennsylvania from Chesapeake Energy Corp. for $5.375 billion, reports the Pittsburgh Business Times. This acquisition includes 256 producing and 179 unoperated or nonproducing Marcellus and Utica Shale wells. These assets will complement those Southwestern already has in the Marcellus Shale in northeastern Pennsylvania.
As reported by Columbus Business First and NGI’s Shale Daily, Magnum Hunter Resources Corporation’s first Utica well in West Virginia has reported production of 46.5 million cubic feet of natural gas per day, thereby rendering the Stewart Winland 1300U well in Tyler County the biggest Utica well drilled to date. The well has a true vertical depth of 10,825 feet, and is only the second Utica well that has been drilled in West Virginia. Magnum Hunter’s CEO Gary Evans said, this well “represents the greatest flow rate and one of the highest sustained flowing casing pressures of any Utica well drilled in the entire play of Ohio and West Virginia [and] is one of the highest flow rate gas wells ever reported in any shale play located in the U.S.” The well is positioned in the far southeastern part of the play, and indicates a highly productive area of dry gas Utica in West Virginia. Three additional wells on the Stewart Winland pad have been completed and are expected to be put into production in the coming weeks.
As reported on Bloomberg.com, Spectra Energy Corporation, a Houston-based pipeline operator, and Northeast Utilities, a Connecticut-based utility provider, have partnered in proposing a $3 billion pipeline expansion that will increase natural gas supply to the six New England states. The project, known as “Access Northeast,” will provide fuel for power plants and home heating in an attempt to combat soaring energy prices in the New England region. According to the report, power prices in New England reached a 6-year high last spring due to extreme cold temperatures and a shortfall in pipeline capacity, which restricted gas supply. The proposed Access Northeast project plans to boost the capacity of Spectra’s existing Algonquin and Maritimes pipelines, by as much as 1 billion cubic feet per day and create additional delivery points for local distribution. The project is expected to be in service by November 2018.
According to the report, Access Northeast is not the only pipeline project aimed at connecting the booming Marcellus Shale gas formation with other states: (i) Kinder Morgan Energy Partners LP’s proposed “Northeast Energy Direct” project will also supply natural gas to New England, (ii) Duke Energy Corp., Dominion Resources, Inc., Piedmont Natural Gas Co. and AGL Resources Inc. have partnered to construct a $5 billion pipeline from West Virginia to North Carolina, (iii) NextEra Energy Inc. and EQT have paired up to build a 330-mile pipeline from West Virginia to the southeastern states, and (iv) Spectra is also seeking to expand its Texas Eastern pipeline system in Ohio pursuant to an agreement with American Electric Power Co. and Chesapeake Energy Corp.
The West Virginia Department of Environmental Protection (WVDEP) has released a draft “Interpretative Rule” to implement certain inspection, certification, and spill prevention – response plan provisions of the Aboveground Storage Tank Act (AST Act) enacted earlier this year. The AST Act requires that all qualifying aboveground tanks (generally those with a capacity of 1,320 gallons or more) be inspected and certified as suitable for use by January 1, 2015. Owners of such tanks must also submit a “Spill Prevention Response Plan” to WVDEP by December 3, 2014. Read our Administrative Watch for more information about the rulemaking and the AST Act.