May 1, 2013

West Virginia bats down natural gas proposals

In mid-April, state lawmakers in West Virginia introduced several bills intended to impact the natural gas industry; none of the bills gained enough support to pass the state's legislature.

According to the Tribune Chronicle, Senate President Jeff Kessler, D-Marshall, proposed the West Virginia Future Fund that would have created a fund to hold 25% of the increased revenue the state receives from severance taxes to be appropriated by the legislature at a later time. The article noted that this bill has failed to gain legislative support for 3 consecutive years.

Other bills that failed to reach the committee agenda included provisions requiring seismic monitoring near both production and wastewater wells, and new requirements for landmen who are not members of the American Association of Professional Landmen to have a minimum of 2 years of experience and to complete an ethics course prior to being permitted to sign Marcellus leases in West Virginia.

Utica/Point Pleasant assets divested in Ohio

Oklahoma City, Okla.-based independent Devon Energy Corp. has retained Scotia Waterous (USA) Inc. as exclusive advisor for the sale of the company's Utica shale/Point Pleasant assets in eastern Ohio. This represents a complete sale of Devon's position in the play, including all acreage associated with its previously announced joint venture with China Petrochemical Corp. (Sinopec).

The largely operated assets consist of approximately 244,000 gross acres (195,000 net), with an average working interest of 79.7%, across eastern Ohio in the liquids-prone portion of the play. The acreage is primarily held by existing production, with significant upside development potential in the Guernsey County area. Other upside includes potential future oil/liquids pipeline infrastructure development. Currently, Tennessee Gas, Columbia Gas, and Dominion have major lines through Devon's leasehold.

The Utica/Point Pleasant play is in the early stages of appraisal and development, with recent transactions taking place for assets in Guernsey, Noble, and Tuscarawas counties. Approximately 270 horizontal well permits have been issued in eastern Ohio as of Dec. 2012.

Sampling plans released for radiation study

In April, the Pennsylvania Department of Environmental Protection (DEP) released detailed sampling and quality assurance plans for its ongoing comprehensive radiation study of oil and gas development. The agency will sample and analyze radioactivity levels of flowback waters, treatment solids, drill cuttings, and drilling equipment along with the transportation, storage, and disposal of drilling wastes.

Based on current data, regulations, and industry practices, there is no indication that the public or workers in the oil and gas industry face health risks from exposure to radiation from these materials, the DEP reported. The study is aimed at ensuring that public health and the environment continue to be protected.

On Jan. 24, 2013, Gov. Corbett directed DEP to undertake a comprehensive study examining naturally occurring levels of radioactivity in byproducts associated with oil and gas development. Since then, the agency sought a peer review of its sampling and quality assurance plans and expects to begin sampling this month.

The sampling plan outlines the types of samples DEP will collect, their locations, and the methods for analyzing them. The quality assurance plan provides specifics on how the agency will collect, transport, and analyze the samples.

The DEP will collect and analyze drill cuttings, flowback fluid, and drilling mud for a variety of radioactive particles. Staff will also examine compressor stations, storage tanks, trucks, rigs, and wastewater treatment facilities.

The agency routinely reviews radioactivity data in wastes that the drilling and other industries generate, and according to the DEP, the information obtained to date indicates very low levels of natural radioactivity. The agency also maintains a statewide monitoring network to protect the public from exposure to unsafe levels of radiation.

Cadiz complex to process new Utica production

MarkWest Utica EMG LLC, a joint venture between MarkWest Energy Partners LP and The Energy and Minerals Group (EMG), has signed on to provide gathering, processing, fractionation, and marketing services in the Utica shale in an agreement with PDC Energy Inc.

MarkWest Utica EMG expects to begin gathering and processing PDC's liquids-rich gas production from Guernsey County, Ohio, by the end of the second quarter of 2013. Initial production from PDC's Utica operations will be processed at the Cadiz complex in Harrison County, Ohio. In the second half of 2013, PDC's gas will be transported via MarkWest Utica EMG's high-pressure rich-gas header system to the Seneca complex in Noble County, Ohio, for processing.

Additional capacity announced for Utica gas

MarkWest is expected to complete the installation of 100,000 b/d of C2+ fractionation capacity in Harrison County, Ohio, that will include extensive marketing access by truck, rail, and pipeline. When completed, the company will have the largest processing and fractionation capacity in the Utica shale. The fractionation facility will also be connected by an NGL pipeline to MarkWest's NGL infrastructure in the Marcellus shale and to its Houston, Pennsylvania, complex, the largest fractionation and marketing facility in the northeast.

Producers will have access to the company's system extending throughout a multi-county area in eastern Ohio. MarkWest currently has 60 MMcfd of refrigeration processing capacity available at its Cadiz complex and, during second-quarter 2013, it will begin operation of its 125 MMcfd Cadiz I cryogenic processing facility. The 185 MMcfd of combined processing capacity at the Cadiz complex is expected to provide the needed capacity to support 2013 drilling plans.

MarkWest expects to complete the first 200 MMcfd Seneca facility by October. The company will also complete the second 200 MMcfd Seneca facility by year-end 2013, bringing its total processing capacity in the Utica shale to 585 MMcfd.

University poll finds New Yorkers still oppose drilling

In March, Quinnipiac University released findings that, for the first time, New York State voters opposed drilling by a clear margin of 46% against the activity and 39% in favor of it. Environmental concerns win out over the promise of economic benefits when it comes to drilling for natural gas in the state. The university first asked the question in August 2011, when drilling support peaked at 47% in favor of drilling and 42% opposed to it. Mirroring the politics around the issue, New York voters have been virtually tied on the question. In upstate New York, voters are softer on the issue, with 44% in favor of drilling vs. 42% opposed to the activity. Suburban voters showed an even split at 42% for and against. New York City residents showed the clearest resistance, with 53% against and 32% in favor of drilling.