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Expo/Industry events for the next few months

Utica Upstream 
April 5, 2017
Walsh University
Canton, OH  

Ohio Valley Oil & Gas Regional Expo
April 25-26, 2017
Belmont County Carnes Center
St. Clairsville, OH 

Appalachian Storage Hub Conference
June 15, 2017
Hilton Garden Inn
Southpointe, PA

Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, Bakken and Niobrara Shale Plays 

IHS Bullish on Manufacturing in PA. 

Wolf seems to support the industry with his statements about this study, but his DEP is slowing permitting approval and permits for pipelines.  He doesn’t understand if the E&P Companies curtail drilling or worse leave PA, there is no manufacturing future for PA

Governor Tom Wolf and the Team Pennsylvania Foundation today released the report from a comprehensive study conducted by IHS Markit. The study, Prospects to Enhance Pennsylvania’s Opportunities in Petrochemical Manufacturing, forecasts $2.7 to 3.7 billion in investments in natural gas liquid (NGL) assets as well as the opportunity to attract additional cracker plants, and petrochemical and plastics manufacturing.

“Pennsylvania has a once-in-a-generation opportunity to develop and implement a strategy that will cultivate a manufacturing renaissance and transform our economy across the Commonwealth,” said Governor Wolf. “The foundation for building a diverse and robust petrochemical and plastics industry was initiated with the decision by Shell Chemicals to invest in Pennsylvania – and we must ensure that we make the most of this chance to create good paying jobs for Pennsylvanians.”

According to the study, natural gas from the Marcellus and Utica Shale reserves accounted for a quarter of all natural gas produced in the U.S. in 2015, and is expected to account for more than 40 percent by 2030. Additionally, 40 percent of the natural gas produced is rich in natural gas liquids, or NGLs, more than 70 percent of which is ethane and propane. Ethane and propane are two important and high-value NGLs used in basic petrochemical production and plastics manufacturing.

Pennsylvania has a significant base of existing plastics manufacturers as potential customers which IHS noted will benefit from significant reductions in feedstock costs because of their close proximity to these resources.

“The prospect that the Marcellus and Utica Shale plays can support up to four additional ethane crackers beyond Shell Pennsylvania Chemicals is an exciting opportunity for the Commonwealth, as is the IHS forecast that a coordinated strategy has the potential to leverage up to $3.7 billion in investment into NGL assets alone for gas processing facilities, NGL pipelines and storage facilities,” said DCED Secretary Dennis Davin. “The study is a roadmap that will help us jump start our strategy to attract that investment.”

Davin noted the following key priorities: proactively engaging stakeholders to bring the right decision-makers and resources to the table; attracting additional infrastructure investments and petrochemical and plastics manufacturers, as well as retaining and growing Pennsylvania’s existing industry; developing pad-ready sites throughout the state to encourage investment opportunities; streamlining the development timeline and addressing potential critical infrastructure bottlenecks; and training a workforce with the right skill sets to fill future jobs created by the industry.

“The Team Pennsylvania Foundation and our board sponsored the IHS Markit study in partnership with DCED to help Pennsylvania maximize the in-state economic benefits of our natural gas resources by generating new, high-paying manufacturing jobs; attracting investment; growing the supply chain and output in the plastics sector; and generating state and local revenue,” said Ryan C. Unger, CEO of the Team Pennsylvania Foundation. “We look forward to participating in the strategic planning process as part of a cross-agency and multi-stakeholder effort to ensure that our natural resources are utilized to create jobs right here in Pennsylvania.”

In addition to Pennsylvania’s abundant supply of low-cost natural gas and NGL resources, the study also cited that Pennsylvania’s other competitive advantages – including location and close proximity to customers, existing plastics manufacturing base, robust transportation infrastructure and experience with Shell – position Pennsylvania to successfully advance this economic opportunity.

IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions.

BLM Lifts Fracking Rules.  The U.S. Bureau of Land Management has completed its environmental assessment of Slawson Exploration’s proposed oil and gas exploration project near North Dakota’s Lake Sakakawea, on the Fort Berthold Indian Reservation.

BLM also approved a permit for the Wichita, Kan.-based producer to drill the first eight of 11 wells from a single well pad in a March 10 record of decision reviewed by Kallanish Energy.

The well pad will be 800 feet from Lake Sakakawea, with production facilities less than a mile away. BLM said while the facilities will be on private land, it was required to issue a drilling permit because the federally managed leases will be reached with horizontal drilling.

The Bakken-Three Forks formation area has about 446 federal, tribal, and allotted leases already in existence under Lake Sakakawea, BLM said.

Slawson was awarded its leases in late 2008 and early 2009. It submitted its drilling permit application in 2011, which BLM said triggered engagement with the public and the three affiliated tribes: the Mandan, Hidatsa, and Arikara Nations.

Drilling in the Wayne National Forest in OH.  Oil and gas companies bid about $5.2 million Thursday for leases to explore and potentially drill in 1,180 acres of land in the Wayne National Forest located in southeastern OH.

Combined with the initial auction of national forest land in Southeast Ohio last December, oil and gas companies have laid claim to more than 1,840 acres at a cost of nearly $6.9 million, according to the U.S. Bureau of Land Management's web site.

Up to 40,000 acres of national forest land could eventually become available for oil and gas drilling, the majority of which is expected to be accomplished via hydraulic fracturing, more commonly known as fracking. The next auction is tentatively scheduled for June 22.

The Wayne National Forest is a patchwork of land divided into three main sections located across 12 Ohio counties near the cities of Athens, Marietta and Ironton.

All of the acreage leased to date is in Monroe County, near Marietta, which is believed to contain the richest concentration of fossil fuels in the state.

"We knew this sale was going to be at least $2 million, but it more than doubled our conservative projections, and that's great news for taxpayers and private mineral owners in Monroe County," said Jackie Stewart, a representative from the industry-financed newsletter, Energy In Depth Ohio.

Stewart noted that the federal government does not own the majority of mineral rights in the forest; 59 percent are privately owned, she said.

"Up until recently, those private mineral owners were being held hostage of seeing their minerals developed," she said.

The controversial auction of leases to drill in the national forest has sparked outrage in the rural, low-income area of the Appalachian foothills, however. More than 100,000 people signed a petition to block the auction. Another 52 people wrote letters of protest to the Bureau of Land Management expressing fears that fracking operations would pollute the park's groundwater and natural habitat.

"It is unconscionable that the BLM and U.S. Forest Service are considering leasing away 40,000 acres, that is a sixth of our already small and abused forest," wrote Melissa Wales of Athens. "My friends and family love to camp, cook out, hunt, hike and ATV in the forest."

"There is plenty of private land being used for fracking and injection wells - Enough," wrote Barb and John Kidd of the Ohio River township of Reno.

Finally, Keystone XL.  The U.S. State Department today will approve the Presidential permit required to proceed with construction of the Keystone XL oil pipeline, previously blocked by former President Obama, two government sources told Reuters.

The move would mark the beginning of a process industry watchers say could be lengthy and complicated by approvals needed by state regulators, plus legal challenges.

President Trump supports Keystone and days after he took office in January ordered its construction. The massive project originally was proposed by TransCanada nine years ago.

White House spokesman Sean Spicer said the administration would provide an update on Keystone today, but did not offer details, Kallanish Energy understands.

One U.S. government source familiar with the process told Reuters Thursday the State Department was working to get the approval done before Monday, the end of the 60-day timeline under Trump's January executive order for the construction of Keystone and the Dakota Access pipelines.

The State Department's undersecretary for political affairs, Tom Shannon, is expected to approve the cross-border permit for Keystone since Secretary of State Rex Tillerson, former ExxonMobil CEO, recused himself from the situation.

The multi-billion-dollar Keystone line would flow more than 800,000 barrels-per-day (BPD) of heavy crude from western Canada's oil sands, beginning at Hardisty, Alberta, to Steele City, Neb. From there the crude will be transported on existing lines to U.S. refineries and ports along the Gulf of Mexico.

Obama had rejected the pipeline saying it would do nothing to reduce fuel prices for U.S. motorists and would contribute emissions linked to global warming.

TransCanada resubmitted its permit application after Trump's executive order. Spokesman Terry Cunha told Reuters the company was working closely with the State Department.

"Monday is the deadline, so that's what we're working towards," Cunha said.

Environmental group Greenpeace said it would fight the project. "We will resist these projects with our allies across the country and across borders, and we will continue to build the future the world wants to see," Diana Best, a Greenpeace climate campaign specialist, said.

Phillips 66 Holds Open Season in the Permian.  Phillips 66 is kicking off an open season on March 24 for a new crude oil pipeline system in the Permian Basin in West Texas, Kallanish Energy reports.

The Reeves-Odessa Origination (Rodeo) Project will include origination stations in Reeves, Loving and Winkler counties in the Permian’s Delaware Basin, plus in Odessa in West Texas.

Destination options will include Wink, Texas; the Phillips 66 Partners’ Odessa station; a new terminal to be built near Odessa as part of the Rodeo Project; and Midland, Texas.

The pipeline will have an initial throughput capacity of 130,000 barrels per day (BPD) with an ultimate capacity of about 450,000 BPD, depending on commitments from shippers, Houston-based Phillips 66 said.

Service on the new pipeline system is scheduled to begin in the second half of 2018.

OH 4th Qtr. Production.  Ohio shale oil production continued its slide in the fourth quarter, while natural gas numbers increased, as energy companies focus their efforts on parts of the state that are rich with gas.

The new figures, issued on Monday by the Ohio Department of Natural Resources, show oil production of 3.6 million barrels for the fourth quarter of 2016, down from 6.4 million barrels in the prior-year quarter.

Natural gas production came to 345 billion cubic feet, up from 302 billion.

For 2016 as a whole, oil production totaled 17.9 million barrels, down from 23 million in the prior year, and gas production came to 1.4 trillion cubic feet, up from 956 billion. This includes oil and gas extracted from the Utica and Marcellus shale formations in Ohio.

The numbers help to show why 2016 was disappointing for oil and gas companies. The market price of oil was so low that many producers pulled back on their activity in Ohio and in other places. Natural gas prices also were low, but producers have said they could remain viable by producing large amounts of gas in a relatively small number of wells.

Gulfport Energy, based on Oklahoma City, was the top gas producer in Ohio.

"Since our entrance into Appalachia five years ago, we have developed and improved the Utica to be one of the most productive gas plays in North America," said Stuart A. Maier, a Gulfport vice president, in a February conference call.

Chesapeake Energy, also of Oklahoma City, is the top oil producer.

Bad News for Constitution Pipeline.  A federal judge in New York has ruled against the Constitution Pipeline in its efforts to avoid getting pipeline permits from New York state, Kallanish Energy reports.

Judge Norman Mordue said the Constitution Pipeline Co. failed to show injury from the permits on water crossings, excavations and other activities, because the state has not yet decided whether to issue them.

The New York Department of Environmental Conservation has not yet refused to issue the permits, but has simply not yet acted on them, the judge said in a 15-page ruling issued last week.

As a result, the pipeline has not been injured and state permits are still required, the judge said.

The pipeline company had argued that it had federal approval to build the $683 million, 124-mile pipeline from Pennsylvania into New York and that it did not need state approval as a public utility project that pre-empted local regulations.

The pipeline company, a joint venture by the Williams Companies and Cabot Oil & Gas, has a separate appeal pending after New York denied a water-quality permit for the pipeline last April.

The pipeline is scheduled to begin service in second quarter 2018.

Enervest Selling in Appalachia.  EnerVest is selling 360,621 net acres, including 1,100 wells in the Appalachian Basin, Kallanish Energy learns.

The acreage lies in West Virginia, Virginia and Kentucky. The sale includes 850 company-owned wells and 250 non-operated wells run by partners.

The land was acquired by EnerVest Operating, a subsidiary of EnerVest. The acreage includes 219,989 developed acres and 147,631 undeveloped acres.

The assets produce roughly 17.40 million cubic feet of natural gas per day (MMcf/d), plus 4 barrels per day (BPD) of crude oil. That produces a monthly income, based on the last eight months, of $171,946.

The 2017 projected income from the assets is $5.4 million, based on a natural gas price of $3.50 per thousand cubic feet.

The sale is being handled by EnergyNet. The deadline for sealed bids was March 22.

Marathon Buys in the Permian.  Marathon Oil has acquired about 21,000 net surface acres in the Permian Basin for $700 million, Kallanish Energy reports.

The 21,000 acres are in the Permian’s northern Delaware Basin in New Mexico.

The sellers included Black Mountain Oil & Gas.

The deal is expected to close in second quarter 2017.

“While we expect to pursue additional trades and grassroots leasing, this bolt-on achieves the scale necessary for efficient long-term development in this basin,” said president and CEO Lee Tillman in a statement.

With the purchase, Marathon Oil now has about 91,000 net Permian acres in West Texas and New Mexico, including 71,500 net acres in the northern Delaware Basin.

There are 10 target benches or rock formations and up to six of them might be drilled in the stacked play, the company said.

At present, Marathon has one rig is working in the Permian Basin. Two additional rigs are planned by mid-year 2017, the company said.

Federal Judge Kills Frivolous “anti” lawsuit.  A federal judge has ruled the Federal Energy Regulatory Commission is not biased in pipeline cases, dismissing a lawsuit filed by a Pennsylvania-based environmental group, Kallanish Energy finds.

The ruling came from U.S. District Court for the District of Columbia Judge Tanya Chutkan. That argument “does not pass muster,” Chutkan said in her ruling. “FERC stands to gain no direct benefit from the approval of a particular pipeline project,” the judge said.

She ruled in a suit filed by the Delaware Riverkeeper Network and its director, Maya van Rossum.

The suit charged the federal agency is unable to make objective decisions on pipeline projects because its funding, set by Congress, is recovered by fees imposed on the industries it regulates.

The suit charged that FERC favored industry in disputed pipeline cases. It focused at least partially on the PennEast pipeline project in Pennsylvania.

Chutkan basically dismissed the structural argument of bias and did not rule on the arguments of actual bias raised by the eco-group.

FERC remains an agency with no oversight and that’s troubling, van Rossum told NPR’s StateImpact Pennsylvania.

“There is no watch dog willing to bring this out-of-control agency in check,” she said. “That’s the most disappointing piece. Every branch of government, the executive, the legislative and now the judiciary is not willing to stand up to FERC in order to protect the environment.”

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Rig Count 

  • Baker Hughes Rig Count the week of March 24, 2017
  • PA     
    • Marcellus 33 up 1
  • Ohio 
    • Utica 21 unchanged
  • WV 
    • Marcellus 11 up 1
  • TX
    • Eagle Ford 72 up 2
  • TX & NM
    • Permian Basin – 315 up 7
  • ND
    • Williston – 43 up 1
  • CO
    • Niobrara – 25 unchanged
  • TOTAL U.S. Land Rig Count 787 up 22

PA Permits March 16, to March 23, 2017

      County            Township                E&P Companies

1.    Bradford             Leroy                    Chief
2.    Elk                    Ridgway                Hunt Marcellus
3.    Greene              Washington            Vantage
4.    Lycoming           Hepburn                Inflection Energy
5.    Lycoming           Hepburn                Inflection Energy
6.    Lycoming           Hepburn                Inflection Energy
7.    Tioga                 Morris                    Shell
8.    Washington        Chartiers                Range
9.    Washington        West                     Finley

OH Permits for week March 18, 2017

       County            Township                E&P Companies

1.    Belmont               Mead                    Rice
2.    Belmont               Mead                    Rice
3.    Belmont               Mead                    Rice
4.    Belmont               Mead                    Rice
5.    Belmont               Colerain                Ascent
6.    Monroe                Malaga                Antero
7.    Monroe                Malaga                Antero

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement