Tuesday, July 31, 2012

Penn. Marcellus News Update: 7/31/12

Low gas prices drive drillers to Ohio
After several years of nonstop drilling, too much gas and too few buyers have put the brakes on Pennsylvania's Marcellus Shale boom. Amid the lowest natural gas prices in a decade, energy companies say much of Pennsylvania's gas, while plentiful and clean-burning, is too cheap to make a profit.
Instead, they're looking west.
A Post-Gazette analysis of state Department of Environmental Protection data shows drillers are picking up stakes in northeast Pennsylvania, long the center of shale development, and moving in greater numbers to Western Pennsylvania and Ohio. Over the last year, the number of drill rigs boring wells in Pennsylvania dropped from 115 to 78, while drills in Ohio increased from 12 to 20.
Their target? "Wet" natural gas, which is expensive to process but comes laced with lucrative by-products and is abundant in the Utica Shale running through Western Pennsylvania and Ohio. This resource is shifting the balance of power to the west, bringing new life to old coal towns -- and new fears among shale veterans that this boom will inevitably lead to another bust.
BG Group, a British natural gas producer, said last week that it has reduced to one the number of drilling rigs in the Marcellus Shale.
In May 2010, BG (OTC: QX) acquired a 50 percent interest in 654,000 net acres in West Virginia and Pennsylvania held by Exco Resources Inc. (NYSE: XCO) and established a Pittsburgh-based joint venture with Exco.
BG said it took a $1.3 billion post-tax charge in the second quarter in connection with its shale gas business in the U.S. It said it would cut drilling activity to the one Marcellus Shale rig and five in Haynesville Shale, a decision due to the low natural-gas prices.
On Friday shale gas driller Encana Corporation, the largest natural gas company of Canada announced it had written down more than $1.7 billion in shale gas assets on its books, the majority from its U.S. shale gas operations as it posted its ominous 2nd quarter operating results. Encana Chief Executive Officer Randy Eresman went on record saying to expect his company to have to take additional shale gas asset write downs in the near future. Such asset impairment write downs directly affect the industry’s operating credit lines as reduced value assets on their books results in financial lenders lending the companies less cash going forward.
Encana Corporation is also the focus of a U.S. Department of Justice price collusion investigation regarding the allegation it has conspired with Chesapeake Energy to fix prices for shale gas land lease agreements with state of Michigan landowners. The investigation is ongoing.
Kampf defended the legislature’s controversial passage of Act 13—a law regulating the extraction of natural gas in the state—by first pointing out that it's almost certainly better than what it replaced: namely, nothing.  Kampf reminded the audience that the first hydraulic fracking well was drilled in the state ten years back, but Act 13, the first meaningful regulation of the industry in Pennsylvania, was passed just six months ago. He called the law an “excellent start towards handling the shale” albeit one that was “well overdue.”
In defense of the law’s content—which critics charge benefits energy companies at the expense of the commonwealth’s taxpayers and gas-rich municipalities—he argued that it mandates drillers pay a steep impact fee and establishes water management, well permitting, and bonding requirements, and a host of other “pretty comprehensive” regulations.
By comparison, while there may be as much as 1.7 billion cubic feet in the formation beneath Montgomery, Berks and Bucks counties, the current estimate for the amount of natural gas trapped in the Marcellus Shale formation is closer to 84 trillion. As National Public Radio’s   State Impact web site reported   , “if you com­bine the undis­cov­ered esti­mates from all five basins listed in this report, the Mar­cel­lus is 20 times larger than all of them combined.” In other words, State Impact reported, what’s trapped beneath our feet would not supply enough natural gas to supply U.S. needs for one month.  As a result, given the current low-price of natural gas, most experts consider it unlikely that Southeast Pennsylvania will be facing a gas drilling boom any time soon.  Nevertheless, the estimates contained in that report were enough to serve as the rationale for a ban on drilling in Montgomery and Bucks counties that was slipped into this year’s budget at the eleventh hour.   The bill - introduced by Bucks County state Sen. Chuck McIlhinney, R-10th Dist. -says the state “may not issue well permits to engage in oil and gas operations within the geographic boundaries of the South Newark Basin as defined in the (USGS) report.”
That ban, in place until the potential of the reserves have been “adequately evaluated by the Commonwealth,” was intended to exempt those counties from the restrictions of   Act 13   .
That law, signed by Gov. Tom Corbett on Feb. 14, removes local zoning and regulatory control of drilling operations from local municipalities and puts it in the hands of the Pennsylvania Department of Environmental Protection.
“My colleagues in Harrisburg never intended for the Marcellus Shale law to affect our region, and now that a newly discovered formation exists, they agree that a moratorium on drilling is appropriate to give us the same time to study and debate the issue for our local area,” McIlhinneysaid in a  statement on his web site.
State officials are seeking a speedy review by the Pennsylvania Supreme Court of their appeal to a decision last week overturning statewide zoning for shale gas drilling.
That request, outlined in a legal brief filed on Monday, asks the Supreme Court to hear the case during its October session in Pittsburgh.
Attorney representing the Pennsylvania Public Utility Commission and the Pennsylvania Department of Environmental Protection are appealing the decision from a panel of Commonwealth Court judges, who ruled that Pennsylvania can't require municipalities to allow drilling in areas where their local zoning rules would prohibit it.

Sunday, July 29, 2012

Weekend Marcellus News Update for PA

Please click on a headline to read the complete story.

Pennsylvania officials to appeal ruling on shale drilling law
The fight over who should control zoning rules for Marcellus Shale drilling moved to the Pennsylvania Supreme Court on Friday, when state officials announced they were appealing a court decision that thwarted attempts to create statewide zoning.
The anticipated announcement came one day after a panel of Commonwealth Court judges ruled that Pennsylvania can't require municipalities to allow drilling in areas where their local zoning rules would prohibit it.
"We very much expected that ... whoever lost would appeal to the state Supreme Court," said David Ball, a councilman from Peters, one of several municipalities that sued to challenge the creation of statewide zoning. "We felt we had a good case. We still believe that much, and the act is unconstitutional."
State Rep. Camille “Bud” George, D-74 of Clearfield County, applauds the Commonwealth Court’s ruling that struck down provisions in Pennsylvania’s Act 13 Marcellus shale gas law that obstructed local zoning protections.
“I feared that Pennsylvanians seeking responsible Marcellus safeguards would run out of words — such as unfair, inadequate and slanted — to describe Act 13,” said George, Democratic chair of the House Environmental Resources and Energy Committee. “However, the court gave us one more – unconstitutional.”
One local lawmaker called Thursday’s state Commonwealth Court ruling to strike down portions of Act 13—the state’s newly enacted legislation regulating Marcellus Shale drilling—a  “major victory” for residents and local government bodies....
But other local officials said they were “disappointed” in the ruling because it leaves many questions on how the industry will respond, as well as many others.
“Are we back to square one? Does this throw the cracker plant out the window? I hope not,” state Sen. Tim Solobay said. “I don’t know how the industry will respond to this.”
And he said that while Act 13 was not perfect in its final form, it was a “blessing to many communities” that didn’t have zoning regulations or the cash to implement them.
And he criticized municipal officials who said they made the challenge because they had the responsibility to protect its residents.
Published Penn State geology maps show it can take on average twice the distance to drill into the Marcellus shale gas formation in Pennsylvania than it does in neighboring New York State or Ohio where shale formations are much closer to the surface. As drilling depths play a key role in the industry regarding total extraction costs, such geology may be playing a significant but unrecognized factor driving the recent downturn in shale gas drilling in the Pennsylvania Marcellus.
Much shorter drilling depths in Ohio and New York State
In Ohio, it can take less than 2,000 feet to reach the Marcellus and Utica shale formations. In New York State, reaching the Marcellus shale begins at a depth of less than 2000 feet. But due to the way the Marcellus shale formation dramatically dips down into the earth under Pennsylvania, drillers must often go 5,000 to 6,000 feet or more down into the earth before they reach varying parts of the formation considered productive. Depths of 7,000 to 9,000 feet are not unknown. Adding to difficult extractions costs, Pennsylvania’s Marcellus region produces less profitable dry shale gas. To reach the Utica shale formation holding wet oil infused gas which is more valuable to the industry, the drilling depths again favor Ohio and New York State at an average depth of 3,000 feet while in Pennsylvania it can take 10,000 feet or more to reach the Utica as it lies below the Marcellus shale.
Marcellus Shale natural gas is helping to create family-sustaining jobs in Blair County and across Pennsylvania, Lt. Governor Jim Cawley said today during a tour of New Pig Corporation in Tipton.
"Whether it is at one of the drill sites in the southern end of the county or right here at New Pig, Marcellus Shale is creating good, family-sustaining jobs. Governor Tom Corbett and I want to see more of this happen across the state," said Cawley.
Cawley cited recent Department of Labor and Industry statistics showing that 29,000 people are working in the drilling industry in the state with average annual earnings of $81,000. There are about 238,000 people working in related industries.

Read more here: http://www.sacbee.com/2012/07/26/4663521/lt-governor-cawley-says-marcellus.html#storylink=cpy
"We're taking the time to present the facts in a reasoned and well-thought out manner," said Dennis Holbrook, an East Aurora resident who is the executive vice president of Norse Energy and - as a 40-year veteran of the gas industry - favors using hydraulic fracturing in the state.
"There's been so much misinformation out there," Holbrook said. "I think it's critically important for people to understand what a tremendous opportunity this really is."
But many of the roughly three dozen or so in attendance seemed unmoved by either Holbrook's explanation or those offered by the two other panelists, Scott Cline of Petroleum Engineering and John Holko, owner of Lenape Resources.
Those opposed to hydraulic fracturing chuckled and offered several catcalls during the 34-minute film that features Pennsylvania mother and landowner Shelly Depue, on a her personal pursuit for "the truth" about the hydro-fracking process after she and her family watched Josh Fox's 2010 documentary "Gasland."
Twenty-one high school students from Pennsylvania and New York recently participated in a different kind of summer camp experience. Rather than go on hikes, paddle canoes and tell ghost stories around a campfire, the teenagers learned about career paths in the shale gas industry while attending the inaugural Marcellus Camp 2012 at Mansfield University of Pennsylvania.
"This camp was designed to teach high school students about the development of shale gas resources in our region and the career and educational opportunities available after high school," said Lindsey Sikorski, interim director of The Marcellus Institute at the university, which is located in Tioga County, Pa.
The shale industry remains phenomenally controversial. Not a week goes by without a study proving or disproving whether hydraulic fracking of the sedimentary rock poses dangers to area residents — and then is immediately contested by the opposing side.
Without acknowledging or accepting which side is correct (we believe both sides have strong cases), we wanted to present the economic effects the booming Marcellus shale resource industry has had on Pennsylvania's economy.
Lead author Charles "Chip" Groat, of the University of Texas, told reporters when the research on hydraulic fracturing was presented at a major science conference in Canada in February that the university had turned down all industry funds for the study. However, an investigation by the Public Accountability Initiative (PAI) found that Groat himself has been on the board of the Houston-based Plains Exploration and Production Company for several years. Groat was paid more than $400,000 in cash and stock by the company in 2011, and holds a near $1.6 million stake in the company's stock, it said. Kevin Connor, the director of the nonprofit PAI, told AFP the report was presented as if it were an independent study on fracking, when it actually represented a "conflict of interest" that should have been disclosed. A University of Texas spokeswoman told AFP that an investigation has been launched and an independent panel was being convened to review the study, with its findings expected in a few weeks.

Read more at: http://phys.org/news/2012-07-author-fracking-gas-industry-ties.html#jCp
Lead author Charles "Chip" Groat, of the University of Texas, told reporters when the research on hydraulic fracturing was presented at a major science conference in Canada in February that the university had turned down all industry funds for the study. However, an investigation by the Public Accountability Initiative (PAI) found that Groat himself has been on the board of the Houston-based Plains Exploration and Production Company for several years. Groat was paid more than $400,000 in cash and stock by the company in 2011, and holds a near $1.6 million stake in the company's stock, it said. Kevin Connor, the director of the nonprofit PAI, told AFP the report was presented as if it were an independent study on fracking, when it actually represented a "conflict of interest" that should have been disclosed. A University of Texas spokeswoman told AFP that an investigation has been launched and an independent panel was being convened to review the study, with its findings expected in a few weeks.

Read more at: http://phys.org/news/2012-07-author-fracking-gas-industry-ties.html#j

Wednesday, July 25, 2012

Penn. Marcellus News Update: 7/25/12

Insurance Companies Slow To Cover Drilling Risks
As gas drilling expands across Pennsylvania and into neighboring states, the insurance industry is trading memos expressing trepidation and uncertainty over how to assess the risk involved in covering the controversial development.
One company has written an exclusion that forces clients working with oil and gas companies to obtain additional coverage. An industry group drafted a memo encouraging brokers to brush up on potential liabilities, even including knowledge of the rare earthquakes said to be a byproduct of some industry practices.
The changes represent another form of growing pains for the far-reaching drilling industry and the ancillary businesses it involves.
Pennsylvania’s Department of Environmental Protection (DEP) is starting a long-term air quality study to collect accurate data, monitor, and analyze potential health risks associated with “wet” Marcellus Shale gas.
Wet Marcellus Shale gas has condensate and more liquid compounds than dry gas and is more prevalent on the western edges of the shale formation. Other studies that the DEP conducted in the northwestern, northcentral and southwestern part of the commonwealth showed no contaminants that would have presented any air-related health issues.
This study will be conducted at four sites in Washington County. Deputy Press Secretary for the DEP Kevin Sunday said at the sites ambient airborne pollution will be measured upwind and downwind of wet shale gas compressor and processor sites.
On June 28, former Pennsylvania Gov. Tom Ridge was awarded a lifetime achievement award by the Pennsylvania Environmental Council for his contributions toward the state’s environmental preservation. It was a decision met with disappointment by many environmental groups.  No one questions the former governor’s previous work in establishing the commendable Growing Greener program, a successful venture that has preserved and cleaned up Pennsylvania land since 1999. It is Ridge’s more recent $900,000 “strategic adviser” contract with the Marcellus Shale Coalition that created the controversy.
In his award acceptance speech, Ridge said, “Some groups fear the development of the shale gas fields, or at least find a thrill in causing others to fear it.” Does this statement intend to imply that environmental groups and concerned Pennsylvania citizens are speaking out to terrorize the minds of fellow citizens just for kicks?
The real motivation of these groups and individuals is to provide awareness and education of the actual impacts of shale gas extraction. No one is looking for a thrill; what they are looking for is a voice in the Marcellus Shale dialogue that to date remains largely unheard.
 The article’s main tar­get for faulty sci­en­tific report­ing is a recent short film by Gasland direc­tor Josh Fox who makes the claim that breast can­cer rates among women in a heav­ily drilled area in Texas have spiked. He sites news accounts. But researchers tell the AP none of their work has made the link. Iron­i­cally, the film, enti­tled “The Sky is Pink,” heav­ily addresses, and attempts to thwart, this ten­dency of “moti­vated rea­son­ing,” although it doesn’t call it that.

Monday, July 23, 2012

Penn. Marcellus News Update: 7/23/12

Frackers Fund University Research That Proves Their Case
The 2009 report predicted drillers would shun Pennsylvania if new taxes were imposed, and lawmakers cited it the following year when they rejected a 5 percent tax proposed by then- Governor Ed Rendell.
“As an advocacy tool, it worked,” Michael Wood, research director with the non-profit Pennsylvania Budget and Policy Center in Harrisburg, Pennsylvania, said in an interview. “If people wanted to find a reason to vote against having the industry taxed in that way, that gave them reason to do it.”
What the study didn’t do was note that it was sponsored by gas drillers and led by an economist, now at the University of Wyoming, with a history of producing industry-friendly research on economic and energy issues. The researcher, Tim Considine, said his analysis was sound and not biased by industry funding.
Critics of fracking often raise alarms about groundwater pollution, air pollution, and cancer risks, and there are still many uncertainties. But some of the claims have little — or nothing— to back them.
For example, reports that breast cancer rates rose in a region with heavy gas drilling are false, researchers told The Associated Press.
Fears that natural radioactivity in drilling waste could contaminate drinking water aren't being confirmed by monitoring, either.
And concerns about air pollution from the industry often don't acknowledge that natural gas is a far cleaner burning fuel than coal.
"The debate is becoming very emotional. And basically not using science" on either side, said Avner Vengosh, a Duke University professor studying groundwater contamination who has been praised and criticized by both sides.
Chamber of Commerce officials have begun a new effort to lobby officials in Pennsylvania and other states not to increase energy firms' costs for drilling and piping natural gas from underground Marcellus Shale.
Chamber officials from Washington and Harrisburg say they will spend millions of dollars on the new "advocacy and education" campaign, as they called it.
It's aimed at persuading Pennsylvania, Ohio, West Virginia and other states with underground shale gas deposits not to hurt the fast-growing natural gas industry by enacting costly new taxes or environmental regulations.
Mark Price sends us to Donald Gilliland on the PA Chamber’s practice of overstating the gas industry’s broader economic benefits:
In case you missed it Patriot-News columnist Donald Gilliland eviscerates the Pennsylvania Chamber of Business and Industry for using suspect job numbers in a Marcellus gas public relations campaign. To loyal readers this is old hat but for our new regular readers let me take a moment to remind you about the two kinds of job numbers available on Marcellus gas extraction.  First there are counts of actual jobs based on government data sets (see page 3 (pdf)) .
These counts capture pretty well (still with some overstatement) the direct jobs created by gas wells but they miss some of the indirect jobs, new staff at the local hotel or fast food restaurant for example.  To get at indirect jobs you have to make an educated guess about how much economic activity Marcellus gas extraction might be generating using models of the economy.  The more generous your guesses the greater the job creation your model attributes to Marcellus gas extraction. No surprise the Chamber’s scrumtrilescent public relations campaign relied on one of the most generous estimates available.
The worst U.S. drought in a half century is putting pressure on natural-gas drillers to conserve the millions of gallons of water used in hydraulic fracturing to free trapped gas and oil from underground rock.
From Texas to Colorado to Pennsylvania, farmers, activists and opponents of the technique, also known as fracking, are using the shortage of rain to push the industry to recycle water and reduce usage -- efforts that could prove costly to the industry.

Sunday, July 22, 2012

Weekend Penn. Marcellus News Update: 7/20-22

Shale still yields jobs, panel says

Despite the drop in natural gas prices that has slowed drilling in Pennsylvania, plenty of jobs remain available related to the gas production in the state’s vast Marcellus shale reserves, panels of government and business representatives said Thursday.
“There are so many jobs beyond the drilling. There are mechanics jobs and sales jobs and a lot of infrastructure jobs for those in farming. They (gas producers) need the support services. I think we (agriculture) are a forgotten industry,” said Rick Ebert, a Derry Township dairy farmer who is vice president of the Pennsylvania Farm Bureau, a statewide trade organization.
Full page ads in your local newspaper are not enough.
Prime time television commercials are not enough.
More than $23 million in campaign contributions and lobbying expenses are not enough.
What Pennsylvania really needs — according to the U.S. Chamber of Commerce — is a public relations campaign to explain the opportunities of the Marcellus Shale to the good folks of the Keystone State.
There’s “a lack of understanding among people,” said Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry. “No one has any concept, even in Pennsylvania,” of the opportunities associated with gas.
It’s necessary — according to Julia Hearthway, Gov. Corbett’s Secretary of Labor & Industry — “to get out the facts.”
So, on Thursday morning, in the Capitol rotunda, the U.S. Chamber launched its “Shale Works For US” campaign, erroneously overstating the employment benefits of natural gas in Pennsylvania by more than 132,000 jobs per year.
The first ever Marcellus Summer Camp was held at Mansfield University July 8-10.
Twenty one students in grades 10-12 from Tioga, Bradford, Clarion and Indiana Counties in Pennsylvania were joined by students from New York State for an introduction to the natural gas industry and possible career paths.
Throughout the event, campers were introduced to many of the 150 occupations within the industry and the educational opportunities available in our area. They gained real world knowledge of a well site and had the opportunity to interact with faculty members from various educational institutions as well as industry professionals.
The camp included water quality and mudlogging learning sessions taught by Jen Demchak and Chris Kopf, both assistant professors in MU’s Geography & Geology Department, as well as field trips to a Chesapeake Energy well site, the Pennsylvania College of Technology campuses, and the Marcellus Shale Education & Training Center’s Energy Technology Education Center. Campers also received safety orientation training through SeaTrax, Inc.
Last week, the Marcellus Shale Coalition (MSC) released a supply chain Recommended Practice focused on further bolstering small- and medium-sized businesses across the region, which play an increasingly critical role in the safe development of clean-burning, job-creating American natural gas. With the national jobless claims once again on the rise, as CNBC reports today, these efforts could not be more timely for small businesses looking to grow and hire more local workers.
State Rep. Camille “Bud” George, D-74 of Clearfield County, today unveiled House Bill 2556, which would require pre-drilling water quality surveys upon request by landowners residing within 5,500 feet of a proposed Marcellus shale gas well.
“This legislation is needed to protect our water supplies and would be a win-win for everyone,” said George, Democratic chair of the House Environmental Resources & Energy Committee.
“House Bill 2556 allows for landowners whose water has been polluted by gas drilling to be compensated, and it protects gas companies from frivolous lawsuits for conditions for which a gas company is not at fault.”

Thursday, July 19, 2012

Penn. Marcellus News Update 7/19/12

Sorry, I lied, more accurately lied to myself. I have not been able to get the commentary and analysis posts done as quickly as I promised, but I will. I underestimated the workload I have.
I haven't had daily news updates this week, but that is due in part to the small volume of stories directly related to Marcellus Shale development in Pennsylvania.

As always, click the headline for the original story in full.

Fracking's Footprint on Pennsylvania Forests
The latest issue of CSA News explores the potential impact of fracking on Pennsylvania’s forests as well as how the most troubling effects might be avoided or mitigated. Researchers have found, for example, that the heaviest gas development is occurring in the Susquehanna River basin—the source of more than half the water flowing into the embattled Chesapeake Bay. And nearly 25% of shale gas wells have gone into Pennsylvania’s last remaining tracts of unbroken, “core” forest, which is among the last intact forest in the entire Northeast, as well.
Do we really have 100 years of natural gas (NG) supply? Why did Chris Nelder claim that we have only 11 years or less NG supply left? The Potential Gas Committee, the EIA and the USGS gave different estimates of US NG resources. People may interpret the numbers wrong. They may not understand the differences between resource, reserve, and economical reserve.
The PGC claimed we have 2192 TCF of discovered and undiscovered potential NG resources. Marketed NG production was 22 BCF in 2010. So 2192 TCF divided by 22 BCF/year is about 100 years of supply.
I will show that it is naive to jump to a conclusion based on that.
The Difference Between Resource and Reserve
In the oil & gas industry, resource means the amount of gas or oil that remains underground, and reserve means what could be produced from the resource.
Only a portion of the resources could be recovered technically.
Only a portion of the technically recoverable resources could be produced economically.
Only a portion of the economically producible resources could be produced into supply. That is called reserve.
LAST WEEK, DUKE University released a study on water quality in the Marcellus Shale region. Many Pennsylvanians concerned about the state's new industry of gas drilling will be interested in the findings of this study. Here's a sampling of headlines from the media coverage:
Marcellus Shale study claims gas drilling did not contaminate drinking-water wells;
New research shows no Marcellus Shale pollution;
Pennsylvania fracking can put water at risk, Duke study finds;
Yet another study confirms fracking can pollute groundwater;
New study: Fluids from Marcellus Shale likely seeping into Pa. drinking water;
Findings are mixed in fracking-water study.
The sources of these headlines and stories include the Wall Street Journal, the Pittsburgh Post Gazette, BusinessWeek, ProPublica and others. Here's the headline from the Duke University site: Natural underground pathways may be conduits for Marcellus brines.
Researchers took hundreds of samples from groundwater aquifers in six counties overlying the shale formation in northeastern Pennsylvania and found elevated brine. The study says it is unlikely that the elevated salinity is connected to hydraulic fracturing, or "fracking" — the explosive process by which gas is extracted from rock. But they are concerned that the presence of the brine suggests "natural pathways" leading up to aquifers from far below the surface, and that these pathways might allow gases from shale-gas wells to put drinking-water supplies at risk.
We're concerned, too — not just about the findings, but about the difficulty in finding our way through conflicting, often-politicized accounts of matters of scientific interest.
Natural gas drillers in Pennsylvania have had to stop withdrawing water from certain streams due to a severe drought, a water regulator said on Monday.
The Susquehanna River Basin Commission (SRBC) said it has suspended permits to siphon water from the river's streams in the highest number of areas than at any time since it began issuing permits to gas producers in June 2008 allowing them to draw river water for operations.
The SRBC, which manages the river as a water source, said the suspensions affected around 30 companies, not all of them gas companies, that rely on some 64 water withdrawal areas in 13 Pennsylvania counties and one New York county.
Penn Virginia Corp. PVA +2.99% agreed to sell all of its Appalachian assets, excluding the Marcellus Shale, to an undisclosed buyer for $100 million in cash to help fund its 2012 capital expenditure plan.
Shares were recently up 1.2% at $6.89. The independent oil and gas company said the deal will substantially reduce its debt, improve its liquidity and fund further investment in its Eagle Ford Shale play. The stock has soared 50% in the past three months through Monday's close.
The assets to be sold include vertical and horizontal coalbed methane and conventional properties, as well as royalty interests. Penn Virginia expects to complete the sale by mid-August.

Sunday, July 15, 2012

Weekend Penn. Marcellus News Update 7/15/12

Special treatment: How did two counties rate a ban on gas drilling?
The Corbett administration and legislative leadership rejected the calls for exceptionalism, and the Post-Gazette generally agreed, welcoming this relatively new industry and its jobs to Pennsylvania so long as it received effective state regulation and contributed adequately to state coffers (one area where Act 13, the new drilling law, failed).
The state's we're-all-in-it-together approach was shattered two weeks ago when, in the General Assembly's flurry of activity to pass a $27.65 billion budget, seven paragraphs were slipped into the fiscal code giving Bucks and Montgomery counties a moratorium on Marcellus Shale drilling*.
Though it has largely been brushed off by the industry because the Marcellus lies thousands of feet below the aquifer level, a new study by geologists from Duke University and California State Polytechnic University at Pomona suggests that water originating far below aquifers has entered Northeastern Pennsylvania drinking water sources in the past, and that geologic pathways for contamination exist.
The study, published in the most recent issue of the Proceedings of the National Academy of Sciences, examined water samples taken from more than 150 wells in six Northeastern Pennsylvania counties and found brine and other elements likely originating in layers of earth much deeper than the aquifer level. However, it also found no link with the proximity of natural gas wells.
The study has already become a political football. Some natural gas opponents champion it as evidence that drilling additives are polluting aquifers. Supporters, among them industry group Energy In Depth, question the validity and relevance of its findings. 
The Tour De Frack bike trek from Butler to Washington, D.C. is about protesting what riders call "the fracking free-for-all" that has begun in Western Pennsylvania.
"This is about the people from the community," said Shayna Metz, 26, of Industry, Beaver County, who noted the tour's slogan is Human Power-Human Stories. "We have community power because there are a ton of people behind us. And we're carrying stories with us because (some) are too sick to ride with us."
The 400-mile ride kicked off with a two-hour rally in Diamond Park in the City of Butler on Saturday morning. The group of four riders biked 22-miles to Blackberry Meadows Farm on Ridge Road in Fawn, where they pitched tents to spend the night.
Consol Energy said Friday that a Marcellus Shale well it drilled in Westmoreland County, Pennsylvania, achieved a peak 24-hour production rate of 17,900 Mcf, the highest of any well in the company's history.

The Pittsburgh-based company also said it drilled 17 Marcellus wells in the second quarter and placed 18 online.  
According to MarcellusMoney.org (which is a is a collaborative effort of Common Cause PA and the Conversation Voters of PA, environmentalist groups) report, the natural-gas industry has forked over $23 million to influence Pennsylvania state officials—including $8 million to state officials and candidates since 2000 and $15.7 million in lobbying between 2007 and 2012—to get them on board with drilling in the Marcellus Shale.
The biggest winner of cash money in Pennsylvania? Gov. Corbett. He’s received over $1.8 million in funds; while Senate President Joseph Scarnati, a Republican who represents parts of Jefferson, McKean, Elk and other counties, got $359,145.72 and House Majority Leader Rep. Mike Turzai, of Western Pennsylvania, took in $98,600.
*editor's note: the geologic formation of interest in Bucks and Montgomery Counties is the Newark Basin, not the Marcellus Shale.

Thursday, July 12, 2012

Penn. Marcellus News Update 7/12/12

Study: Marcellus shale brine naturally migrates to surface
A new study published by Duke University found that natural pathways in the Marcellus shale formation likely allows material to migrate into shallow drinking water aquifers.
The good news, a release from the university points out, is that the pathways are natural and not caused by the process of hydraulic fracturing. The bad news is that those pathways may allow toxic chemicals used in the fracking process to migrate into groundwater supplies via natural pathways.
The study challenges the industry assumption that layers of bedrock over the Marcellus formation contains material underneath. If fluid can migrate up to the surface, or just to groundwater sources, fears of water contamination from the fracturing process could be realized.
While no direct link between salinity and the amount of gas exploration in a region was found by the study, researchers did find "elevated levels of salinity with similar geochemistry to deep Marcellus brine in drinking water samples from three groundwater aquifers."
A new study being done by the Department of Energy may provide some of the first solid answers to a controversial question: Can gas drilling fluids migrate and pose a threat to drinking water?
A drilling company in southwestern Pennsylvania is giving researchers access to a commercial drilling site, said Richard Hammack, a spokesman for the National Energy Technology Laboratory in Pittsburgh.
The firm let scientists conduct baseline tests, allowed tracing elements to be added to hydraulic fracturing fluids and agreed to allow follow-up monitoring. That should let scientists see whether the drilling fluids move upwards or sideways from the Marcellus Shale, which is 8,100 feet deep at that spot.
‘‘It’s like the perfect laboratory,’’ Hammack said.
Hammack said he believes this is the first time such research has been done on a commercial gas well.
In late February, Aqua America and Penn Virginia Resource Partners became the owners of the 12 acres Riverdale sits on. The partnership will use the parcel in a $50 million plan to build a water-pumping station and 36-mile pipeline with the capacity to carry millions of gallons of water daily from the Susquehanna to natural gas wells.
This small park of 32 trailers, home to an oft-ignored and marginalized population, has become yet another flash point in the national debate over the impact of natural gas drilling and the industry’s methods.
Some say it is the first example of outright evictions because of Marcellus Shale operations in the drilling hotbed of Pennsylvania, New York and West Virginia.

The Riverdale trailer park provided affordable homes to a cluster of working-poor families and the elderly of Jersey Shore, a borough of 4,300 people between Lock Haven and Williamsport.
Most residents owned their mobile homes and paid $200 a month to lease the land.
They learned of the project that would eviscerate their community when a story ran in the local newspaper in February.
The majority had neither the desire nor the means to leave. No one bothered to ask them, they said.
The Lycoming County Planning Commission approved site plans to build a pump station on the Riverdale land on Feb. 16.
The park land owners, Richard and Joanne Leonard, sold it to the partnership for $550,000 on Feb. 23, according to Lycoming County assessment records. The land was last valued by the county assessment office at $439,890.
The trailer-park’s manager recently waved off a reporter asking for comment.
Shortly after the land sale, residents received eviction notices.
Natural gas prices have declined steadily over the last few years because of the discovery of huge new domestic sources, including the Marcellus Shale.
Consumers could save even more if the state Public Utility Commission would force gas utilities to account for the vast amounts of gas that they lose between the well and the consumer.
According to a February report by the PUC, Pennsylvania consumers pay up to $131 million a year for gas that never reaches their furnaces, stoves or industrial process because it escapes from delivery systems. Utilities reported losing amounts from zero to 11.9 percent of their volume, second nationally to California. Pennsylvania's market is the ninth largest nationwide.
Higher demand from growing East Coast markets coupled with favorable economics even at currently low prices point to a continued boom in natural gas production from the Marcellus shale play according to a new report from Fitch Ratings. The firm cites a consensus estimate for production to rise from its current level of 4 billion cubic feet/day to more than 10 billion cubic feet/day over the next five years.
The ratings ings agency has looked at 10 pipeline and midstream companies with an eye to both transportation and processing facilities. These MLPs include Enterprise Products Partners LP (NYSE: EPD), EQT Corp. (NYSE: EQT), MarkWest Energy Partners L.P. (NYSE: MWE), National Fuel Gas Co. (NYSE: NFG), NiSource Inc. (NYSE: NI), Rockies Express Pipeline LLC (a joint venture of Kinder Morgan Energy Partners L.P. (NYSE: KMP), ConocoPhillips (NYSE: COP) and Sempra Energy (NYSE: SRE)), Spectra Energy Corp. (NYSE: SE), Sunoco Logistics Partners L.P. (NYSE: SXL), Tennessee Gas Pipeline Co. (owned by Kinder Morgan), and Williams Partners L.P. (NYSE: WPZ).

Wednesday, July 11, 2012

WTF is the Newark Basin?

One story that was all over the news during my break was the moratorium on drilling in Bucks and Montgomery Counties.  In addition to the political controversy there was some confusion over what would be drilled in those areas.  The assumption of some, particularly on blogs and twitter, was that any production drilling under those counties would require hydraulic fracturing and the rocks involved are the Marcellus Shale. The former is speculative (production may or may not require fracking), but the latter is wholly inaccurate. 
Rather than the Marcellus Shale, bedrock formations of interest under those two counties are within a geologic structure known as the South Newark Basin. The geologic question then is what is the Newark Basin?

First off, basins within the crustal bedrock are not the same as topographic ones found on the surface. At one time they were indeed low-lying surface areas, but over time they filled with eroded and/or volcanic material. So they may or may not correspond to a topographic basin today and should not be confused with watersheds in the present. The loose materials in the ancient basins (mud, silt, sand, gravel, ash, organic remains etc.) were buried, compacted and cemented to form sedimentary rocks that became part of crust.  If there were enough organic remains mixed in and subjected to the right combination of temperature petroleum, natural gas or coal may have formed.  Thus geologic basins such as the South Newark are can be prime areas for fossil fuel exploration. 
Location of the South Newark Basin from USGS report.

The Newark Basin is one of several that formed along what is now the East Coast when the Atlantic Ocean opened.  Around 220 million years ago (ma. or mega annum in geology) what is now North America was part of a much larger super continent that began to pull apart or rift. 
Formation of the Newark Basin (from USGS).

Such rifting develops when a tectonic plate is subjected to tension. Blocks of crust will slide up and down along parallel faults to allow the crust to spread and accommodate the tension.  This process forms a rift valley (a basin). In addition to earthquakes, volcanism occurs and lava will be erupted into areas of the rift basins. The East African Rift provides an excellent modern analog that shows all stages of the process.  When such rifting occurs there is not a single tear, but multiple ones branching from each other.  Along the East Coast a chain of these connected rifts eventually continued to open and formed a new plate boundary and eventually the Atlantic. The other ones were abandoned and became inactive and over time the rift valleys filled in with eroded sediments. Some have once again become topographic low points and make up parts of the valleys for rivers such as the Hudson and Connecticut.  If you're interested in more details, the Wikipedia page on the Newark Basin is fairly good and a Newark Basin site at Rutgers provides a wealth of information, although some parts may be difficult for non-geologists. 

The basin has been looked at before, but the current speculation and political brouhaha is driven by a new assessment from the USGS:
Using a geology-based assessment method, the U.S. Geological Survey (USGS) estimated
a mean undiscovered natural gas resource of 3,860 billion cubic feet and a mean undiscovered natural gas liquids resource of 135 million barrels in continuousaccumulations within five of the East Coast Mesozoic basins.
The estimated amounts in the Newark Basin are much less, 876 bil­lion cubic feet of gas, than those put forth for the Marcellus Shale (141 tril­lion cubic feet in some estimates). Even before this report there was renewed speculation in the past decade. Geologist Art Pyron,  published a review of the gas potential of the Newark Basin back in 2007 based on data from two sites drilled in the 1980s. His conclusion:
The results of drilling the two wells in the Newark basin of Pennsylvania provided an initial insight into subsurface conditions.
It allows a broad correlation of seismic data with subsurface conditions. It also exposed the fact that the subsurface characteristics of this basin are more complex than the “cookie cutter” geology that has been imposed upon it since the mid-1800s.
Reservoir analysis suggests that there is a thick, organically rich, siltstone-shale-mudstone complex in basin center that is apparently equal to other great fractured shale reservoirs.
With a thickness ranging from 2,500 ft to over 4,000 ft, the Lockatong member could host many significant local reservoirs that could produce economic amounts of relatively dry natural gas. In addition, there is a possibility that sandstones with porosity might lie in proximity to the organic shale, and could, under the proper conditions, be significantly large natural gas reservoirs. (emphasis added)
The last sentence suggests that the gas would be held in the type of reservoirs tapped by conventional drilling and not fracking. I added the emphasis to stress that the estimates are just that.  So right now uncertainty remains whether there is exploitable amounts of natural gas in this basin and what technique would be needed to recover it.

Monday, July 9, 2012

Penn. Marcellus News Update 7/9/12

I'm back from my break in New England, where it was much more comfortable than it was down here. I'll start off with a news update on Marcellus developments for today.

As always, click on the headline for the original complete article.

Protesters lead to temporary shutdown of Pa. rig
Protesters demonstrating against hydraulic fracturing at a state forest led to a new gas drilling rig temporarily being shut down Sunday.
EQT Corp. spokeswoman Natalie Cox said the company shut down the rig in Moshannon State Forest in central Pennsylvania at midday. The rig was just being commissioned, and protesters said it had gone up in the last week.
Cox said the Pittsburgh-based company's primary concern was the well-being of its employees and contractors.
"The safety of everyone involved is our primary concern, including employees, contractors, police officers and the protesters themselves," Cox said. "Therefore, operations will not resume until we are assured it is safe to do so."
Gloria Forouzan of Marcellus Protest said 150 demonstrators had blocked an access road for trucks headed to the EQT rig.
State police are at the site monitoring the situation. No arrests have been made.
on Young, 60, has been a longtime critic of fracking, which has proliferated in the Barnett Shale formation that runs underneath the Fort Worth area. He also is the founder of a group called Fort Worth Citizens Against Neighborhood Drilling Operations.
His concern is shared by others in both rural and urban parts of Texas, Pennsylvania and Ohio, where drilling for natural gas beneath homes, parks, churches, schools and even cemeteries has become commonplace. The fracking process, in which sand, water and chemicals are injected deep underground at high pressure to extract natural gas from rock formations, has been criticized by environmentalists and others who worry about its effects on groundwater and residents' health.
Cemetery owners lease their mineral rights to oil and gas companies to allow fracking, earning money that many have used to refurbish and maintain their grounds, fencing, sanctuaries and roads. Cemetery managers and oil and gas company executives said fracking, because it occurred at roughly 7,000 feet to 8,000 feet below ground, did not damage graves. And because of advances in horizontal drilling, they said, the wells and other equipment can be located more than a mile away to avoid disrupting the serene atmosphere of the cemetery.
As natural gas prices drop this year, the Marcellus Shale region in Pennsylvania slows substantially. The number of rigs operating in the state is down 29 percent from its peak a year prior, according to Baker Hughes Inc., a tracker of the industry.
The slowdown is no surprise seeing as many exploration companies have been planning on shifting drilling equipment to areas where the oil and natural gas is more profitable. The warm winter, further depressing demand and prices, had an influence as well.
In the northern area of the state, where the most intensive drilling activity has taken place over the last few years, is particularly slowing down.
A new study enters the debate over the safety of hydraulic fracturing: researchers report that naturally occurring paths in the rock bed in northeastern Pennsylvania allowed some contaminants to migrate into shallow drinking aquifers. They found no direct connection between the contamination and shale-gas drilling operations in the region, however.
“The good news is there is no direct link between this finding with saline water and shell gas extraction,” said Avner Vengosh, a geochemist at Duke University and a co-author of the report, published on Monday in the Proceedings of the National Academy of Sciences. “The bad news is that we think there are natural pathways that exist between the Marcellus formation and the shallow groundwater.”
A vote on proposed rules for natural gas drilling in the Delaware River watershed is likely still more than four months away.
Carol R. Collier, the executive director of the Delaware River Basin Commission, said this week that she "would be surprised" if a vote on the regulations happens before November, a message she shared with leaders of a Wayne County landowners group during a private, informal meeting early last week.
The interstate commission that regulates water quality and quantity in the watershed appeared ready to adopt a basin-specific set of drilling rules in November 2011, but the vote was canceled after the commissioners — governors of Pennsylvania, New York, New Jersey and Delaware and a federal representative from the Army Corps of Engineers — could not reach an agreement on the proposal.
In an assessment of "undiscovered" oil and gas resources, a U.S. Geological Survey report released in June estimated that 876 billion cubic feet of natural gas may be contained in a geologic formation called the South Newark Basin. Formed about 227 million years ago, the South Newark lies under portions of Bucks and Montgomery Counties as well as part of New Jersey. The Marcellus Shale formation holds 160 times more gas, according to the latest estimates from the U.S. Department of Energy.
The amount in the South Newark Basin is too little to be worth pursuing for now, said Dan Weaver, spokesman for the Pennsylvania Independent Oil and Gas Association, an industry group. "Do we foresee within the industry any major movement in that direction? No," he said.
But, Weaver added, "that's not to say you're not going to get a small company saying, 'Hey, why don't we drill a test well?' "
The uneven approach is bad not only for the environment but also for industry, because under the current system, mistakes by a few bad apples could lead to overregulation or even outright bans on drilling.
A better approach is one already reflected in many environmental laws: cooperative federalism. The federal government sets baseline standards, which states can exceed but not fall below. Ideally, these would be general “performance standards” rather than detailed specifications, giving the states flexibility to meet them.