July 1, 2013

EQT updates Marcellus activity in Pennsylvania

EQT reported in May 2013 its increased estimated ultimate recovery (EUR) rates for its core Marcellus acreage in southwestern Pennsylvania.

The company holds 95,000 acres in southwestern Pennsylvania, primarily in Greene, Washington, and Allegheny counties. According to a company press release, EQT has identified 1,080 well locations throughout the region, with EUR estimated at 9.8 bcfe. At the end of March, the company had 109 wells online with plans to drill an additional 56 wells by year-end.

In early May, the company signed an agreement to purchase 99,000 net acres in the region from Chesapeake Energy and its partners for $113 million, of which $60 million was allocated to the undeveloped acreage. The deal included 67,000 Marcellus acres and 32,000 dry Utica acres. The remaining $53 million was applied toward existing Marcellus wells. The company also reported it anticipates drilling four wells on the new acreage in late 2013, but the acquisition will not have a significant impact on its 2013 capital budget or sales volume guidance, which was increased to 340-350 bcfe.

New gas pipeline set for Northeastern markets

After nearly a year, the Constitution Pipeline Co., a limited liability company owned by subsidiaries of Williams Partners L.P., Cabot Oil & Gas Corp., Piedmont Natural Gas Co., and WGL Holdings Inc., has filed an official application with the Federal Energy Regulatory Commission seeking approval to construct the Constitution Pipeline from Susquehanna County, Penn., to Schoharie County, NY.

The 122-mile pipeline will connect natural gas production in northeastern Pennsylvania with northeastern markets by spring of 2015, Williams said in a press release. The 30-in. diameter pipeline has been designed to transport enough natural gas to serve approximately 3 million homes (up to 650,000 dekatherms/day).

The current route, which extends from Williams Partners' gathering system in Susquehanna County to the Iroqouis Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, reflects changes to more than 50% of the original pipeline alignment. The underground transmission pipeline stretches across five counties, including Broome, Chenango, and Delaware counties, in New York in addition to the two counties mentioned above.

The capital cost of the Constitution Pipeline is estimated to be $683 million. FERC is expected to make its final decision on project authorization in the summer of 2014. If approved, construction is scheduled to begin in the third quarter of 2014, the company said.

Water testing continues in Westmoreland County

Beaver Run Reservoir, located in Washington, Bell, and Salem townships in the northern end of Westmoreland County, Penn., holds approximately 11 billion gal of water, according to the Municipal Authority of Westmoreland County. The authority recently signed a $100,000 agreement with the Indiana University of Pennsylvania (IUP) to continue testing water from the 1,300-acre reservoir, its tributaries and streams, and drainage areas.

According to the Westmoreland Tribune-Review, the 3-year program has tested water from sites near Marcellus drilling. IUP's geography and geoscience departments collect and analyze water samples to determine long-term effects of nearby activity. To date, the water quality has not been affected, the paper reported.

Consol Energy has 37 active wells in the area and expects to have 13 more wells online this year.

Counties benefit from Marcellus impact fee

Lehigh and Northampton counties received more than $545,000 in Marcellus shale impact fees. The Pennsylvania Public Utility Commission (PUC) began distributing checks to counties and municipalities on June 28, 2013. Lehigh County was to receive $296,000, with $250,000 remitted to Northampton County.

Under the state's Act 13, impact fees are imposed on operators drilling in Pennsylvania's Marcellus shale. The rate fluctuates on the basis of natural gas prices and the rate of inflation. The revenue is collected by the PUC, which collected impact fees in the amount of $202.4 million in 2012. Counties and municipalities have the option to address a variety of drilling impacts, including preservation and reclamation of water supplies; road and bridge improvement projects; construction and repair of local water and sewer systems; delivery of social services; and other local programs such as tax reduction, affordable housing, and assistance to county conservation districts.

Ohio reports 2012 Utica production numbers

The Ohio Department of Natural Resources (ODNR) released its highly anticipated production numbers for 2012 just after the inaugural issue of UOGR went to press.

Production from 63 of the 85 wells submitted was commercial, according to the report. Nineteen wells were tested and shut in, and three wells were dry and abandoned. None of the wells were produced for the entire year. Of the 19 wells shut in, 17 wells reported incidental volumes of crude oil and natural gas that were recovered during flowback.

The numbers were not overwhelming but are positive nonetheless. Roughly, 636,000 bbl of oil and 13 MMcf of natural gas were extracted from 87 wells, with some of those producing for less than a week. Only three wells produced for 300 days or more, according to the ODNR's report.

The reported volumes of oil were higher than conventional nonshale oil wells. Overall shale oil production from 80 wells represented 12% of the total oil produced in 2012, and reported volumes likely include condensate.

Gas volumes included both "dry" and "wet" gas. The report cited pipeline capacity as a limitation to production, but with the addition of processing plants to the region, produced "wet" gas volumes are expected to increase. Though early production numbers are restricted, shale gas production from 80 wells represented 16% of the total gas produced in Ohio in 2012. With roughly 50,000 conventional wells online in Ohio, horizontal wells represent about one half of 1% of the total well population.

In light of what many considered to be underwhelming numbers, it is likely that expanded horizontal drilling and new processing infrastructure additions could drastically increase Ohio's Utica production numbers in the coming year.

Delaware Co. lawsuit challenges fracing ban

Legal documents were filed on June 12, 2013, in Delaware County State Supreme Court, challenging the 1-year gas drilling moratorium approved Feb. 14, 2013, by a 3-5 vote in the Town Board of Sidney, NY.

Landowners asked the court to "vacate and annul Local Law No. 1" based on the town's failure to follow prescribed procedures for legal adoption, including the legal requirement of passage by a "supermajority" vote (four of the five members of the town board). The suit also claims the town failed to demonstrate the "dire necessity" and other justifications needed to limit the rights of property owners to use their own land. The moratorium is classified in the suit as unconstitutional under the Commerce Clause of the US Constitution because it impedes interstate commerce in the byproducts of natural gas drilling while continuing to reap the energy benefits of natural gas.

According to a document released by the Binghamton, NY-based firm of Hinman, Howard & Kattell, which is representing the landowners in this case, this is the first instance in which a local gas drilling ban has been challenged under the Town Law 265 "protest petition" procedure. The challenge is brought on behalf of two land owners, Inge Grafe-Kieklak and Concetta Martinucci, who own 170 acres and 35 acres, respectively, in Sidney.

Unlike the recent zoning bans in Dryden and Middlefield, NY, the Sidney case does not hinge on whether a local zoning ban is superseded or preempted by state law (the Oil, Gas, and Solution Mining Law). All of these cases are similar on the grounds of county referral requirements of the General Municipal Law (GML). The towns of Dryden and Middlefield fully complied with GML referral requirements, while Sidney twice referred proposed moratorium laws to the Delaware County Planning Board, and twice received disapproval recommendations. The town proceeded to disregard the supermajority override provisions of the GML, the court filing stated. None of the other legal challenges in this suit were before the courts in the Dryden or Middlefield cases.

Gov. Corbett urges DRBC to set frac rules

In 2010, the Pennsylvania's Delaware River Basin Commission (DRBC) issued a moratorium on natural gas development in its region to allow for a review of current regulations and adopt new rules for drilling and hydraulic fracturing. Gov. Tom Corbett is now urging the commission to stop delaying and pass regulations. The governor cited missed opportunities for residents living in the region, which is located in the heart of the Marcellus shale in the eastern part of the state.

The DRBC previously canceled a meeting to consider adoption of final rules that was set for November 2011. In an open letter to DRBC Executive Director Carol Collier, Corbett stated, "Pennsylvania has significantly enhanced environmental protection standards through passage of Act 13 in February 2012, which represents the first comprehensive update of the state's Oil and Gas Act since 1984." Wayne County, which is prospective for Marcellus development, has been withheld from benefits seen in other parts of the state as a result of the DRBC moratorium. Commissioner Brian Smith said on the Dave Madeira Show, "They became more interested in shutting down the process as opposed to actually just working with the gas industry to create an industry in the Delaware River Basin that could have been productive."