the pioga press - june 2014
DESCRIPTION
The monthly journal of the Pennsylvania Independent Oil & Gas Association.TRANSCRIPT
June 2014 • Issue 50
The
PIOGA pressThe monthly newsletter of the Pennsylvania Independent Oil & Gas Association
(Continues on page 38)
(Continues on page 2)
®
Governor Tom Corbett on May 23 issued an executiveorder that modifies his predecessor’s moratorium onadditional gas leasing in state parks and forests. Under
Corbett’s order, new leasing can occur if there will be no addi-tional long-term disturbance on state park and forest lands.
The order supports the governor’s budget proposal to gener-ate $75 million to help meet critical priorities. The executiveorder will only allow gas to be extracted horizontally throughwells located on adjacent private lands or previously leased areasof a state forest.
“With this executive order, I am directing that the common-
Corbett executive order could allow more leasingwealth maintain a moratorium on any additional gas leasing ofDCNR lands that involves long-term surface disturbance, such asplacing well pads, roads or pipelines in the newly leased areas,”Corbett said. “This balanced approach will ensure that the spe-cial characteristics and habitats of DCNR lands are conservedand protected, and will also provide for historic investments inconservation programs, our schools and quality health care, with-out raising taxes on Pennsylvanians.”
The governor noted that specific areas and acreage will beanalyzed by reviewing interest from oil and gas operators who
Chairing the Legislative Committee is Ben Wallace ofPenneco Oil Company, with Holly Christie of Steptoe andJohnson service as vice chair.
PIOGA and its Harrisburg lobbyingfirm, Gmerek Government Relations,are currently tracking in excess of 175pieces of legislation that have beenintroduced during the two-year legisla-tive session that ends November 30. Ofthose bills, 53 have been identified ashigher-priority items. Among PIOGA’stop issues:
• HB 1576, endangered speciesreform. The bill would require that theGame Commission and the Fish and
Coming up: PIOGA Pig Roast . . . . . . . . . . . . 4Dealing with difficult municipalities . . . . . . . . . 7Payouts of 2013 impact fees. . . . . . . . . . . . . 11Correction: well permit fee amount . . . . . . . . 11PIOGA conference and show in review . . . . 12Online fatality surveillance map . . . . . . . . . . 142014 Appalachian shale overview . . . . . . . . 16May Spud Report . . . . . . . . . . . . . . . . . . . . . 22Tenaska generating station tour . . . . . . . . . . 27What does “production” mean in PA? . . . . . . 28EIA seeks comment on survey expansion . . 33
PUC chair steps down from energy group . . 33Shale Gas Innovation Contest winners. . . . . 33Penn College rig simulator dedicated . . . . . . 34PIOGA Member News . . . . . . . . . . . . . . . . . 35Member Profile: New Pig Energy . . . . . . . . . 36Pennsylvanians weigh in on drilling . . . . . . . 39Oil & Gas Trends. . . . . . . . . . . . . . . . . . . . . . 40Calendar of Events . . . . . . . . . . . . . . . . . . . . 42New PIOGA members . . . . . . . . . . . . . . . . . 42PIOGA contacts . . . . . . . . . . . . . . . . . . . . . . 43
PIOGA Legislative Committee holds first meeting
PIOGA’s new Legislative Committee discusses the plethora ofbills pending in Harrisburg.
With the rapid rise of shale development in Pennsylvaniahas come a corresponding crush of state legislationaimed at the oil and gas industry. Analyzing, prioritiz-
ing and lobbying on these proposals has become a daunting taskfor PIOGA’s leadership.
“Back before the shale rush, it was a busy year when we wereworking on two or three bills in the legislature,” President &Executive Director Lou D’Amico commented during the inaugu-ral meeting of PIOGA’s newly formed Legislative Committee onJune 3. “Now we see that many new oil and gas related billsintroduced every week.”
The committee was created to assist D’Amico in reviewinglegislation to determine how it will affect the industry—includ-ing differentiating between the impact on conventional andunconventional operations, if applicable—recommendingPIOGA’s position on bills and setting the priority level for vari-ous pieces of legislation. From time to time, committee membersmay be asked to visit Harrisburg to lobby on behalf of PIOGAand the industry.
Page 2 The PIOGA Press
Legislative Committee: Continued from page 1
Boat Commission use the formal regulatory review process whendetermining species to be listed. There is currently no third-partyoversight over the process. Although strong opposition from thecommissions and sportsmen’s groups may keep the bill fromadvancing, there are indications that regulatory agencies mayagreeable to some changes that will ease identification and per-mitting problems.
• HB 1607 and SB 1084, One Call amendments. The legis-lation would transfer authority over the PA One Call programfrom the Department of Labor & Industry to the Public UtilityCommission, which PIOGA favors. However, the bills alsowould end the One Call exemption for gathering lines. PIOGAremains hopeful that the legislation will be amended to continueto exempt gathering lines used in conventional oil and gas opera-tions.
• SB 1378, separate regulations for conventional opera-tions. Although the bill was introduced only recently, there isconsiderate support in the legislature in the wake of Departmentof Environmental Protection proposed Chapter 78 amendments.The aim of the bill is to require DEP to develop separate sets ofregulations for conventional and unconventional operations.Passage of this bill will be a top priority for PIOGA.
• HB 1684, amending the Guaranteed Minimum RoyaltyAct. The bill, which has passed the House of Representatives,specifies that deductions of post-production costs cannot reduceroyalty payments below the 12.5-percent minimum. Passagewould have a chilling effect on shale development inPennsylvania and would have a major impact on gas pricesnationwide.
• Severance tax. Governor Corbett remains steadfastlyopposed to a severance tax, but the state is facing a huge budgetdeficit and a production tax on unconventional gas is an often-repeated talking point as lawmakers rush to meet the June 30deadline for putting a fiscal year 2014-15 budget into place.
PIOGA’s Legislative Committee plans to meet in person on amonthly basis when the General Assembly is in session and willalso deal with legislative matters on an as-needed basis. If youare interested in participating, contact Tracy Koval [email protected] to be placed on the committee roster.
Did you know?You can view the legislation PIOGA is tracking and get the
status of any bill by going to the Members area atwww.pioga.org and scrolling down to the Legislative section(email [email protected] if you need the password). ■
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Page 4 The PIOGA Press
It’s PIOGA Pig Roast time!Golfing, clay shoot, fireworks, conference,equipment show and more
The fourth edition of PIOGA’s popular summertime eventis coming up on July 22-23 at beautiful Seven SpringsMountain Resort, and it will be better than ever.
If you are a golfer or a shooting enthusiast, things get under-way the morning of the 22nd with an 8 a.m. golf outing on thescenic Seven Springs course or the 10 a.m. clay shoot on one ofthe finest sporting clays facilities you’ll find anywhere.
The Pig Roast and Equipment Show kick off at 1 p.m. Thereare approximately 30 equipment spaces available, so contactDebbie Oyler (724-933-7306 ext. 22 or [email protected]) toreserve your spot today.
The day features plenty of entertainment and fun, includingthe Mobile Energy Education Training Unit (MEET-U), mechan-ical bull riding, handwriting analyst, caricature artist, chainsawwood carver, AJA Cigar Company rep, Texas hold ‘em tourna-ment (two one-hour tournaments at 3 and 4 p.m.), alpine slidediscounts, artisans, DJ-supplied music all day, free beer and theusual excellent fireworks display by Little Big Shots.
Conference agenda“A Peek into the Future” is the theme of this year’s confer-
ence, which runs Wednesday from 9 a.m. to 3:30 p.m., withlunch included. Among the topics and presenters are:
• PA Conventional Formations with Horizontal Drilling
February 2014 Page 5June 2014 Page 5
Potential—Dan Billman, Billman Geologic Consultants, Inc.• Horizontal Drilling with Air/Air Foam—Jeff White, Atlas
Copco• Water Disposal Options for PA Producers—Paul Hart, Fluid
Recovery Services, LLC• Hydraulic Fracturing of Horizontally Drilled Conventional
Formations—Ollie Poppenberg Jr., Universal Well Services, Inc.• LNG for High Horsepower—David Kailborne, REV LNG,
and Julianne Heins, Seneca Resources Corp.• Alternative Fuel Vehicles & Infrastructure—Robert Beatty,
O’Ring CNG Fuel Systems, L.P.; Lutitia Clipper, PeoplesNatural Gas Co.; Ron Schram, ProGas, Inc.; and Tim Hooker,FYDA Energy Solutions
Making plansSeparate registrations are available for the Pig Roast (lunch,
dinner and entertainment), conference, golf and sporting clays.Go to the PIOGA Events section at www.pioga.org to downloadthe full event brochure and access online registration.Sponsorship opportunities also are available as well.
Sleeping rooms are available for Monday and Tuesday, July21-22, at a PIOGA rate of $142 per person for single occupancyor $80 per person for double occupancy. Dial 800-452-2223 andask for the PIOGA block of rooms when making your reserva-tions. June 20 is the cutoff date for room reservations under theblock rates.
For directions and information about Seven Springs, visitwww.7springs.com.
See you there! ■
NWTF EnergizingConservation fundraiser
PIOGA is partnering with the National Wild TurkeyFoundation, Associated Petroleum Industries of Pennsylvania,America’s Natural Gas Alliance and the Marcellus ShaleCoalition to host the Energizing Conservation fundraisingevent on Monday evening, July 21, at Seven Springs.
Join us for a fun-filled evening of awesome food, gun raf-fles, silent auction and speakers from various organizations—all in the name of advancing conservation in theCommonwealth. Details and a registration form are availableas part of the PIOGA Pig Roast, Equipment Show &Conference brochure that can be downloaded from the eventpage of PIOGA’s website.
February 2014 Page 7June 2014 Page 7
Dealing with difficultmunicipalities—it isn’tall about preemption
There has been a great deal of discussion, commentary anddebate regarding the scope of municipal authority to regu-late oil and gas operations in the wake of the Supreme
Court’s Robinson Township1 decision. As we see it, the RobinsonTownship decision effectively returns the scope of municipalauthority to where it was prior to the adoption of Act 13 of 2012.
While the Robinson Township decision struck Sections 3303(preempting certain local ordinances) and 3304 (requiring uni-form local zoning ordinances) of Act 13 as unconstitutional,Section 3302 remains in place and limits municipal regulation ofoil and gas operations.2 Section 3302 readopts, and enlargessomewhat, what is often referred to as the “traditional” preemp-tion afforded by Section 602 of the former Oil & Gas Act.3
Under Section 3302, and as a general matter, municipalities mayadopt ordinances pursuant to the Municipalities Planning Code(MPC) and the Flood Plain Management Act that address“where” oil and gas operations may occur, but not “how,” i.e.,the technical standards and features of oil and gas operations.4
But even when attempting to regulate the “where” of oil andgas operations pursuant to ordinances adopted under the MPC,municipalities do not have limitless power. To the contrary, whenpurporting to act under the MPC, municipalities have only thosepowers expressly delegated to them by the MPC. While munici-palities may enact “zoning,” “subdivision” and “land develop-ment” ordinances under the MPC, the grant of regulatory author-ity is limited to the land-use issues expressly delineated in theMPC’s operative provisions.5
Moreover, because land-use ordinances are a limitation on aproperty owner’s constitutionally protected property rights, theycan be upheld only if they are reasonably necessary to protectthe health, safety and general welfare of the people. A land-useordinance adopted pursuant to the MPC can be declared invalid,facially or as-applied, for a host of reasons other than preemptionincluding that it is unreasonable, arbitrary or not substantiallyrelated to the police power interest that the ordinance purports toserve. And, in the right factual setting, a developer may have aremedy for actions by local officials under the Civil Rights Act,42 U.S.C. § 1983, which prohibits deprivation of constitutionalrights under color of state law.
Given the foregoing construct, there are a number of ques-
tions that an operator should be asking todetermine whether a land-use ordinancemight be unreasonable and not substantiallyrelated to a police power purpose or other-wise invalid, including:
Is the ordinance exclusionary, either onits face or in operation when applied?Zoning ordinances that exclude uses fallinto one of two categories: de jure or defacto. In a de jure exclusion case, the chal-lenger alleges that an ordinance on its facetotally excludes a use. It will be a rareoccurrence to encounter a zoning ordinancethat, on its face, totally excludes oil and gasdevelopment from all zoning districts withina municipality, such that there will be abasis for asserting a de jure exclusion claimwith respect to the ordinance. In a de factoexclusion case, the challenger alleges thatan ordinance appears to permit a use some-where within the municipality, but undersuch conditions that the use cannot, in fact,be accomplished. A de facto exclusion-ary challenge to a zoning ordinancewould require a showing that, despiteallowing for oil and gas developmentwithin the municipality, the use cannotin fact be accomplished. Typically, in order to make such ashowing, a challenger will need to present testimony and expertanalysis.6
Does the ordinance result in disparate treatment of similarlandowners without a reasonable basis for such disparate treat-ment? An ordinance will be deemed to be arbitrary (and there-fore, invalid) where it is shown that it results in disparate treat-ment of similar landowners without a reasonable basis for suchdisparate treatment. For example, in Geiger v. Zoning HearingBoard of Township of North Whitehall, the Supreme Court struckdown a township’s ordinance because it drew an arbitrary andunreasonably discriminatory distinction between types ofdwellings.7 It can be difficult to establish that a municipal land-use ordinance is so restrictive that it presents an unreasonableand arbitrary classification between comparable land uses.Analysis of a municipality’s articulated bases, if any, for treatingcomparable uses differently is, therefore, critical to any potentialdisparate treatment challenge. If a municipality cannot articulatea rational basis for such disparate treatment, then a court shouldconclude that the distinction is unconstitutional, arbitrary and
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David R.Overstreet
Authors:
Page 8 The PIOGA Press
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capricious use of the township’s police power. Does the ordinance, as a whole, allow for reasonable devel-
opment of minerals, which includes oil and gas operations, asrequired by Section 603(i) of the MPC? Section 603(i) of theMPC mandates that zoning ordinances provide for “reasonabledevelopment of minerals.”8 For purposes of the MPC, “minerals”include “crude oil and natural gas.”9 In analyzing whether amunicipal ordinance provides for reasonable development ofminerals, including oil and gas, consideration must also be givento whether the ordinance does, in fact, allow the minerals to bedeveloped. What constitutes “reasonable” development of miner-als is a matter of interpretation. Limited precedent provides someguidance, but no definitive or bright-line test regarding what con-stitutes “reasonable” development of minerals for purposes ofSection 603(i) of the MPC. That limited precedent suggests thatan ordinance can be declared invalid if, after balancing the com-peting interests to be served by municipal zoning ordinances, theordinance, as a whole, fails to provide for reasonable mineraldevelopment within a municipality.10
Does the ordinance result in a de facto taking? Both theFifth Amendment to the U.S. Constitution and Article 1, Section10 of the Pennsylvania Constitution expressly provide that pri-vate property may not be taken under the powers of eminentdomain for public use without payment of just compensation. Ade facto taking occurs when an entity clothed with the power ofeminent domain (e.g., a municipality) substantially deprives anowner of the beneficial use and enjoyment of his property. Asexplained by the Pennsylvania Supreme Court in MachipongoLand & Coal Co. v. Department of Environmental Protection,11
de facto taking claims are limited to situations where: (1) a
landowner is totally deprived of any economically beneficial orproductive use of his property; and (2) a regulation places limita-tions on land that fall short of eliminating all economically bene-ficial use, but nonetheless, based on a complex set of factors,“goes too far,” such that a taking of private property for publicuse should be recognized. These circumstances are rare andrequire a case-specific inquiry into the particular facts presented.
Does the ordinance violate rights secured by the UnitedStates Constitution? In the right factual setting, a developer mayhave a remedy for actions by local officials under the federalCivil Rights Act, 42 U.S.C. § 1983, which prohibits deprivationof constitutional rights under color of state law. Section 1983claims are typically grounded in violations of procedural dueprocess, substantive due process, and equal protection rightsfound in the Fourteenth Amendment to the Constitution. Section1983 claims may also be asserted under the “DormantCommerce Clause” and may be brought in the case of a regulato-ry taking. There are a host of collateral issues, both legal andpractical, that must be considered and analyzed when contem-plating the filing of a Section 1983 complaint challenging munic-ipal action and officials. Among them are standing, ripeness,immunity and time limitations on actions, as well as potentialapplication of federal abstention doctrines. Nuanced applicationof these collateral issues will occur depending on the nature ofthe particular claims. While many communities are embracing natural gas develop-ment and the myriad benefits it brings, there are those communi-ties that resist change and oppose all such development. Some ofthose communities will be emboldened by the RobinsonTownship decision to adopt, or maintain, restrictive ordinances.In such cases, efforts to compromise may fail, leaving operatorswith no choice but to challenge ordinances and their applicationto oil and gas operations. When it is necessary to bring such achallenge, operators should consider all avenues of protest, bothprocedurally and substantively, and should not limit themselvesto arguing that local laws and regulations are preempted by statelaw. Rather, in each case, operators should arm themselves withthe full range of arguments in order to ensure the best chance ofultimate success. ■
1 Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013).2 See Robinson Township, 83 A.3d at 1000; 58 Pa.C.S. § 3302.3 See 58 P.S. § 601.602 (repealed).4 See 58 Pa.C.S. § 3302. 5 See 53 P.S. §§ 10501, 10601; see also Hoffman Mining Co. v. Zoning HearingBd., 32 A.3d 587, 593 (Pa. 2011).6 See, e.g., Twp. of Exeter v. Zoning Hearing Bd. of Exeter Twp., 962 A.2d 653,662 (Pa. 2009) (expert testimony established that 25-square-foot billboard restric-tion in ordinance was too small to contain and convey an advertising message tothe motoring public, thereby effectively banning billboards anywhere in the town-ship).7 507 A.2d 361 (Pa. 1986).8 53 P.S. § 10603(i). 9 Id. at § 10107.10 See, e.g., Larock v. Board of Supervisors, 866 A.2d 1208 (Pa. Cmwlth. 2005).11 799 A.2d 751 (Pa. 2002).
Page 10 The PIOGA Press
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February 2014 Page 11June 2014 Page 11
The Pennsylvania Public Utility Commission announced inearly June that it would be distributing more than $225million in Act 13 impact fee payments from unconven-
tional producers for 2013. The amount is an increase of 11 per-cent from the $202 million collected in 2012, due to the largeruniverse of wells subject to the fee and an increase in the impactfee, which is keyed to the average price of natural gas.
Of the $225.75 million collected from producers, approxi-mately $123 million will be distributed to county and municipalgovernments in over 40 counties that host shale gas activity.Under Act 13, county and municipal governments can use theirshares of the money on various expenses related to natural gasdevelopment, including:
• Construction, repair and maintenance of roads, bridges andother public infrastructure;
* Water, stormwater and sewer system construction andrepair;
• Emergency response preparedness, training, equipment,responder recruitment;
• Preservation and reclamation of surface and subsurfacewater supplies;
• Records management, geographic information systems andinformation technology;
• Projects which increase the availability of affordable hous-ing to low-income residents;
• Delivery of social services, including domestic relations,drug and alcohol treatment, job training and counseling;
• Offsetting increased judicial system costs, including train-ing;
• Assistance to county conservation districts for inspection,oversight and enforcement of natural gas development; and
• County or municipal planning.Another $82 million from the impact fee payments will be
distributed through the Marcellus Shale Legacy Fund to countiesfor parks, recreation, greenway trail and bridge improvements, aswell as competitive grants awarded to local governments andnon-profit organizationsfor environmentalimprovement projects.
Additionally, stateand county agencieswith responsibility andoversight of natural gasdevelopment will receive$17 million in fundingfor this round of impactfee revenues, includingthe Department ofEnvironmentalProtection, PennsylvaniaEmergency ManagementAgency, the PUC, theOffice of the State FireCommissioner, and thePennsylvania Fish andBoat Commission.
More informationabout Act 13 impact fee
Correction: Well permit fee
In our reporting of the hike in drilling permit fees forunconventional wells by the Department of EnvironmentalProtection in last month’s issue, we mistakenly stated that
the permit fee for conventional wells is $100.Since 2009, the drilling and alteration permit fee for con-
ventional wells has been a sliding scale based on the length ofthe well bore, starting at $250 for wells 2,000 feet or less indepth. The detailed fee schedule is shown in the permitinstructions available on DEP’s website.
Permit fees are increasing in June by an average of $1,800for unconventional horizontal wells and $1,300 for unconven-tional vertical wells, but the fee schedule for conventionalwells remains unchanged. We apologize for any confusioncaused among conventional operators and extra work answer-ing questions on the part of DEP.
Payouts of 2013 impact fee funds announcedallocations is available on the Public Utility Commission’s web-site at www.puc.state.pa and clicking on “Act 13 (Impact Fee)”under the Natural Gas Heading. ■
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Page 12 The PIOGA Press
A look backat PIOGA’s 2014Eastern Oil & GasConference andTrade Show
A look backat PIOGA’s 2014Eastern Oil & GasConference andTrade Show
Filling in for Governor Corbett at thelast minute, Lieutenant Governor JamesCawley told conference participants thatwhen it comes to natural gas develop-ment, “We are getting it right, here inPennsylvania.” The state is serving as amodel for how to protect the environmentwhile at the same time creating jobs.
Visiting with exhibitors at Heinz Field.
From left, Jean Mosites of Babst Calland, DEP Deputy Secretary Scott Perry andPIOGA Chairman Gary Slagel of Steptoe & Johnson talk with conference partici-pants after the panel discussion on DEP’s proposed Chapter 78 revisions.
February 2014 Page 13June 2014 Page 13
Gas-electric coordinationroundtable recap
As witnessed at the PIOGA Eastern Oil &Gas Conference gas-electric roundtablesession, natural gas will undoubtedly see
increased use in the electric generation seg-ment.
Our panelists helped educate conferenceattendees about the hierarchy of the electricindustry, starting with NERC, or the NorthAmerican Electric Reliability Corporation. NERCis the electric reliability organization for NorthAmerica, subject to oversight by the FederalEnergy Regulatory Commission (FERC) andgovernmental authorities in Canada. NERC’sjurisdiction includes users, owners and opera-tors of the bulk power system, which servesmore than 334 million people.
Communication, scheduling and coordination, and infrastruc-ture and service issues are three categories on which all ourpanel representatives provided insight. Richard Kruze of SpectraEnergy stated that Williams and Spectra have more innovativeways to approach gas and electric coordination than otherpipelines that do not have the flexibility or technological innova-tions. Regarding the communication issue, on November 15FERC provided needed guidance in Order No. 787 regardingelectric rules and gas rules which permitted communication ofoperational information between natural gas pipelines and elec-tric transmission operators to share non-public operational infor-mation with each other for the purpose of promoting reliableservice or operational planning on either the public utility’s orpipeline’s system.
Frank Koza, PJM executive director infrastructure planning,spoke to NERC’s standards, which ensure the reliability of thebulk power system by developing quality reliability standards in atimely manner that are effective, clear, consistent and technicallysound. Koza added that the communication notice of proposedrulemaking (NOPR) was a critical first step in order for bothindustries that will help ensure that electric transmission opera-tors maintain grid reliability and that interstate natural gaspipelines meet the contractual and operational obligations.
Ann Scott with Tenaska expects that changes will come fromboth the gas and electric industries. She stated that the naturalgas industry will conform to changes in the electric schedulingrules will be required to ensure that certain changes to the gasnomination schedule are fully effective. Scott also added that hercompany does not wish to see generators mandated to take firmcapacity, a move she believes may create an uneven playingfield.
Greg Muse of PennEnergy Resources provided the producerperspective. Physical operations will remain a prevalent part ofthe gas industry. The start of the gas day requires physical oper-ations such as redirecting flow from one pipeline to another.Producers must flow all production on a ratable basis to ensureoperations are not adversely impacted.
Ken Magyar of Superior Appalachian Pipeline spoke to infra-structure constraints and the need to get gas to market. Theelectric dispatch model discourages generators from holding firmcapacity; however, it is the pipelines that require a long-termcommitment in order to support growing demand. The real con-cern is who should be incentivized and in what way?
Stay tuned for updates from the PIOGA Gas-ElectricSubcommittee, where the discussion continues: What are thereal issues regarding producer, pipeline, ISO and generator coor-dination in order to ensure safe and reliable grid operation?
Panelists included (from left) Greg Muse of PennEnergy Resources; Richard Kruse,Spectra Energy; Kenneth Magyar, Superior Appalachian Pipeline; Ann Scott,Tenaska Resources; and Frank Koza, PJM Interconnection.
Left: Tunch Ilkin entertains Welcome Reception participants withstories of his days as a Pittsburgh Steeler. Above: PIOGA’s hard-working staff and volunteers get attendees checked in.
Page 14 The PIOGA Press
Safety Committee CornerSafety Committee CornerWVU develops online fatalitysurveillance map for theoil and gas industry By Tiffany Rice, MS CSPWest Virginia University–Safety & Health Extension
The oil and gas industry continues togrow in the Marcellus and Uticashale regions, creating jobs, increas-
ing the service industry and bolstering theoverall economy within the AppalachianBasin. However, with the increase ofworkers, number of wells and productioncome the potential for an increase ofworkplace injuries and fatalities.
The number of fatal injuries in the oiland gas extraction industry rose to 138 in2012 from 112 in 2011. The industry’sfatality rate is seven times greater than therate for all U.S. industries.
West Virginia University—Safety &Health Extension has developed an onlinefatality surveillance tool using mappingand information analysis software toregionally display fatality information. Thefatality data is for the years 2004 to present, which coincideswith the oil and gas boom in the Appalachian Basin.
The fatality data consists of the following information: death,date, employer, city, state, incident description, SIC code, sourceand a link to the OSHA accident investigation, if available. Theinformation is provided to the public, organizations and individu-als to enhance safety awareness and prevent risk for similar
occurrences in the workplace. The fatality information can beused to determine sources, cause of the fatality, and ultimately beused for making safety and health recommendations.
The map currently displays 46 fatalities, which includes onlythose reported to OSHA. The fatalities are categorized using theNAICS codes 211, 213111, and 213112. Fatality statistics arecollected using OSHA’s weekly fatality reports, inspections andthe Bureau of Labor Statistics.
The mapping tool is at www.oilandgasfatalities.com. ■
Page 16 The PIOGA Press
Babst Calland report focuseson the Appalachian shaleindustry in transitionChallenges evolving for producers andmidstream operators
The law firm of Babst Calland has releasedits fourth annual energy industry overview,The 2014 Babst Calland Report—
Appalachian Shale Industry in Transition:Evolving Challenges for Producers andMidstream Operators. This annual review of nat-ural gas and energy development activity acknowledges the sig-nificant growth of the Appalachian shale industry and offersinsights on the issues and legal implications resulting from suchgrowth.
This year’s Report explores major challenges for the industrythat range from political, regulatory and local government influ-ences to property rights, land use issues and workforce safety. Asthe industry transitions from its startup years to an era of produc-tion efficiencies and a promising outlook of manufacturing ren-aissance that is ahead, Babst Calland attorneys provide commentin this Report on related Marcellus and Utica shale issues anddevelopments relevant to Pennsylvania, Ohio and West Virginia.
The 32-page Report reflects the perspectives of BabstCalland’s multi-disciplinary team of energy attorneys. It containssix sections, each covering a specific subject matter consideredto be a key challenge for Appalachian Shale producers and mid-stream operators. This year, Kathyrn Z. Klaber, shale industryadvisor to Babst Calland and former CEO of the Marcellus ShaleCoalition, offers a “Foreword” perspective and also contributedto the content of this Report.
The Report incorporates commentary for each of the keyissues, including specific implications for shale operators, ineach of the primary Appalachian shale states such as:
• Governments and politics are playing a major role in
shale energy. State elections will shape how the industry oper-ates. In Ohio and Pennsylvania, the tax debate is still very muchalive. In West Virginia, a gas severance tax has been in effect and
has remained unchanged despite attempts to raise it.The industry faces in creased budgetary and operationalchallenges from legislative sessions in all three states.Politically-driven dev elopments continue to impact theprospects for new and existing underground injectionwells, ranging from new seismic testing requirementsto public objections to pending permit applications.
• Regulatory issues remain fluid for theAppalachian shale gas industry. There is no shortageof regulation for the burgeoning shale gas industry,particularly given the degree of transparency, publicscrutiny and political influence for and against the
extractive industries. A large number of regulatory issues remainrequiring constant attention to developments and details across aspectrum of subjects including: reporting, permitting, well siteconstruction, impacts to species, and unique standards for waterand air quality.
• Local government regulation of the industry is expand-ing. The line between state and local control is still being testedin the state of Ohio, while the implications of post-RobinsonTownship (Act 13) local regulation in Pennsylvania will not beevident until later in 2014.
• Property rights and land use present more challengesthan ever before. Myriad unresolved property rights, royaltydisputes and land-related issues are pending in the courts. Pro -ducers in Ohio, West Virginia and Pennsylvania are facing a con-tinually evolving environment concerning property rights andland use.
• Safety and labor remain priorities. The industry’s work-force and supply chain partners are keys to productivity gainsand maintaining the all-important license to operate. As the oiland gas industry must protect its workers 24/7, it must remainvigilant on safety compliance and labor matters.
• Next step in the transition: we are at the threshold of amanufacturing renaissance. The Appalachian Basin is playinga leading role in the United States’ production of record amountsof oil, gas and natural gas liquids. New business opportunitiesare rapidly developing, and the Appalachian Basin has the poten-tial to evolve from our vastly successful resource extractionactivities to reclaim its historic reputation as a manufacturingjuggernaut.
An excerpt of the Report follows. To request a copy, [email protected]. ■
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February 2014 Page 17June 2014 Page 17
Property rights and land use present more challenges than ever beforeThe following is an excerpt from Babst Calland’s newly
released “Appalachian Shale Industry in Transition.”
Amyriad of unresolved property rights, royalty disputesand land-related issues are pending in the courts, top ofmind for legislatures, and fodder for media coverage.
Babst Calland attorneys are engaged in these core issues for ourclients’ near-term decision-making and long-term strategies.
Producers in Ohio, West Virginia and Pennsylvania are facinga continuously evolving environment concerning property rightsand land use. For example, operators have gained additionalrights under various areas, including unitization, but now areencountering increased limitations to surface uses and proposedchanges in the calculation of lease royalty payments.
Opportunities are increasing for pooling/unitizationIn Pennsylvania and West Virginia, states where pooling/uniti-
zation is limited, there have been advancements in authorizingthe joint development of leases without express landowner con-sent. In Ohio, mandatory pooling/unitization is authorized bystatute, and there has been an increase in the use of the law withthe rise in drilling activity.
In Pennsylvania, there has been recent activity regardingjointly developing oil and gas leases without express landownerauthority. In July 2013, Pennsylvania Governor Corbett amendedand expanded the Guaranteed Minimum Royalty Act of 1979, bysigning into law Senate Bill 259, the Oil and Gas Lease Act (58P.S. § 33 et seq.), which became effective on September 7, 2013.Included in the provisions of the Oil and Gas Lease Act is an
allowance for an operator to develop multiple contiguous leasesjointly by horizontal drilling, unless specifically prohibited bythe terms of a lease. As a result, an operator may include in aunit the lands covered by a lease that lacks a unitization clause ifthere is no expressed restriction. The Oil and Gas Lease Act doesnot authorize mandatory or forced pooling/unitization, andPennsylvania currently does not authorize mandatory or forcedpooling/unitization of property in formations above the Onon -daga horizon.
The provisions of the Oil and Gas Lease Act permitting pool-ing/unitization, absent a clause in a lease prohibiting the same,are being challenged in litigation. A recent case was decided by atrial court that validated, in part, the Oil and Gas Lease Act, butmuch more is to come on this front. For operators attempting todrill below the top of the Onondaga horizon in Pennsylvania, useof the pooling/unitization provisions under the Oil and GasConservation Law of 1961 could be a valuable tool. However,the pooling/unitization provisions under the Oil and GasConservation Law are the subject of litigation as well. The reso-lution of the current pending litigation challenges referencedabove regarding the Oil and Gas Conservation Act and the Oiland Gas Lease Act will provide guidance to operators inPennsylvania with regard to pooling/unitization provisions underthese statutes.
In West Virginia, legislation has been proposed to allowforced pooling at shallower depths than currently authorized (HB4558, SB 578). Under the current West Virginia statutes, forcedpooling/unitization is not authorized for wells that are drilled and
Page 18 The PIOGA Press
completed in a formation above the top of the Onondaga forma-tion (with the exceptions that a coal operator can force pooling/unitization and that coalbed methane wells can be force pooled).The pending legislation seeks to increase options for oil and gasproducers to develop acreage in those formations above the topof the Onondaga formation, which would include the MarcellusShale. This proposed legislation has been pending for some time,however, and it is not clear whether it will be enacted.
In Ohio, the increase in drilling activity in the Utica Shale hasalso led to an increased usage of the forced pooling/unitizationprovisions contained in Section 1509.28 of the Ohio RevisedCode, the statute authorizing forced pooling/unitization. Thisstatute lays out the framework and requirements for obtaining amandatory pooling order. During 2013, there was a significantincrease in applications for pooling orders, and 2014 appears tobe continuing that trend.
There is heightened landowner interest in reclaimingmineral interests
Proposed changes to the Pennsylvania Dormant Oil and GasAct would allow landowners to reclaim mineral interests thathave been abandoned, while the outcome of ongoing litigationinvolving the 1989 version of the Ohio Dormant Mineral Act willaffect oil and gas ownership of lands throughout the state.
In Ohio, 2013 saw litigation activity centered on the 1989Dormant Mineral Act. The 1989 act was amended in 2006 to addnotice requirements and procedures for how a severed mineralinterest could be deemed abandoned and vest in the surfaceowner. Ohio trial courts reached conflicting decisions on thequestion of whether automatic vesting without notice can occur
under the 1989 act or if the current law with its notice and proce-dural requirements should be applied. The court decisions re -gard ing the efficacy of the 1989 act have been split, and be causethe vast majority of decisions are from trial courts, they cannotbe heavily relied upon. The 7th Appellate District, in the case ofWalker v. Shondrick-Nau, however, has upheld the automaticvesting concept under 1989 act and declined to apply the 2006version of the Dormant Mineral Act to current lawsuits concern-ing ownership of the oil and gas minerals. Future decisions fromhigher courts will allow oil and gas operators to more definitive-ly determine ownership of oil and gas interests by settling addi-tional legal questions arising in Dormant Mineral Act litigation.
The 2006 version of the Dormant Mineral Act has also under-gone recent procedural changes, which now require landownersto record a notice stating that the minerals have been abandonedby using specific statutory language. Prior to January 30, 2014,landowners were required to ask the county recorder to mark thedeed containing the oil and gas severance with the same lan-guage. This was problematic because it imposed a burden on thecounty recorder’s office to correctly identify the interest beingforfeited. This amendment will allow oil and gas operators tomore easily verify that the abandonment process had been prop-erly completed.
HB 97, proposed in the Pennsylvania House of Represen -tatives in 2013, would alter the Pennsylvania Dormant Oil andGas Act significantly, by establishing a procedure by which sur-face owners could acquire the oil and gas interests underlyingtheir lands if such interests were not used by the oil and gasowners for a certain period of time. If this bill, or one similar insubstance is signed into law, it will make it easier for oil and gas
February 2014 Page 19June 2014 Page 19
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operators to lease lands covered by old, unused oil and gas sever-ances. Rather than locating the parties who hold severed oil andgas interests, an operator would wait until the surface ownerscomplete the process of reclaiming the oil and gas interests andexecute a lease with the surface owner upon completion.
Lessors test validity of leasesIn an effort to secure higher royalties, lessors have made more
sophisticated arguments to test the validity of their current leases.While continuing to rely on established contract and propertylaws, the courts are also beginning to form tests to determine thevalidity of a lease.
Lessors continue to argue that their leases have expiredbecause the lessee has failed to satisfy the requirements set forth
in the habendum clause. The courts have begun to establish teststo analyze these fact-specific claims. For example, in Roe v.Chief Exploration & Development LLC, a Pennsylvania federaldistrict court created a test to determine when a lease is held bythe lessee’s operations. The Court looked to whether the produc-er undertook activities in good faith and proceeded with due dili-gence towards drilling a well, and held that taking steps such asobtaining permits, surveys and unitizing leases can satisfy thistest. This type of test recognizes the “behind the scenes” activi-ties that a lessee will undertake. Courts may continue to developsimilar tests in the future.
Lessors also continue to try to invalidate their leases becauseof a minor breach by the lessee. In the past year, the courts havebeen reluctant to break the leases unless the breach is substantial.
The courts have increasingly recognized that an oil and gaslease reflects a conveyance of property rights within ahighly technical and well-developed industry. Careful andconsistent drafting of the lease provisions will reduce anyrisk that a lease will be terminated by a minor breach.
Challenges to surface and subsurface land usescontinue
Land use restrictions, such as conservation easements,and subsurface trespass actions, continue to be a challengefor energy producers.
Conservation easements are permitted in Ohio, WestVirginia and Pennsylvania, and can place rules that runwith the land to future landowners as to the types of activi-ties permitted on a property. The particular use restrictionsvary depending on the objectives of the conservation ease-
February 2014 Page 21June 2014 Page 21
ment. In the case of Stockport Mountain Corporation LLC v.Norcross Wildlife Foundation, Inc., a Pennsylvania federal dis-trict court considered whether a conservation easement that pro-scribed all commercial and industrial uses prohibited drillingoperations on the property. The court concluded that the lan-guage of the easement prohibited surface natural gas drilling onthe property. However, this ruling did not consider whether sucha conservation easement would prohibit the subsurface produc-tion of gas that occurs from a well drilled on an adjacent proper-ty. The existence of a conservation easement and its potentialramifications should be considered when identifying propertiesto develop.
Subsurface trespass is an issue that could be the subject offuture litigation. In 2013, a federal district court in West Virginiain the case of Stone v. Chesapeake Appalachia LLC denied sum-mary judgment to the defendants by finding that “hydraulic frac-turing under the land of a neighboring property without thatparty’s consent” is not protected by the rule of capture, but ratherconstitutes an actionable trespass. However, the case settledbefore reaching an appellate court and the trial court order wasvacated upon joint motion by the parties. Therefore, the opinionhas limited precedential value. Potential subsurface trespasscaused by hydraulic fracturing remains an unresolved issue inOhio, West Virginia and Pennsylvania. A Texas court declined tofind a trespass due to subsurface hydraulic fracturing when goodfaith was shown by the operator; however, few other jurisdictions
have adequately evaluated this issue.
Landowner concerns regarding the calculation of royaltiesare on the rise
Pennsylvania’s Guaranteed Minimum Royalty Act sets theminimum threshold for oil and gas royalties at one-eighth, butdoes not clearly define how royalties should be calculated. Manylandowners continue to question the process by which their roy-alties are being calculated, leading to several civil actions beingfiled against operators based on this ambiguity and other con-cerns.
In early 2014, Pennsylvania HB 1684 was approved by theHouse Environmental Resources and Energy Committee to besent to the House floor. The bill seeks a change in the currentlaw by prohibiting the reduction of post-production costs fromroyalties if the reductions would result in a payment of less thana one-eighth royalty. The bill has been criticized in that it poten-tially violates the state and federal constitutions by changing theterms of leases already in existence and would cause unnecessarylitigation. Careful monitoring of the debate over royalty calcula-tions is advisable as the current law regarding post-productioncosts may change if HB 1684 is passed. ■© Copyright 2014 Babst Calland Clements and Zomnir, P.C. All rights reserved
Lies Distort.Facts Matter.
Page 22 The PIOGA Press
Aiello Bros Oil & Gas Inc 3 5/7/14 083-56306 McKean Hamilton Twp5/13/14 083-56305 McKean Hamilton Twp5/20/14 083-56304 McKean Hamilton Twp
Anadarko E&P Onshore LLC 4 5/5/14 081-21363* Lycoming Pine Twp5/7/14 081-21364* Lycoming Pine Twp5/8/14 081-21367* Lycoming Pine Twp5/10/14 081-21368* Lycoming Pine Twp
ARG Resources Inc 7 5/2/14 047-24811 Elk Highland Twp5/6/14 047-24808 Elk Highland Twp5/9/14 047-24809 Elk Highland Twp5/14/14 047-24812 Elk Highland Twp5/19/14 047-24813 Elk Highland Twp5/22/14 047-24814 Elk Highland Twp5/28/14 047-24821 Elk Highland Twp
Branch John D 2 5/2/14 123-47503 Warren Warren City5/16/14 123-47508 Warren Warren City
Cameron Energy Co 2 5/27/14 123-47528 Warren Sheffield Twp5/30/14 123-47526 Warren Sheffield Twp
Catalyst Energy Inc 5 5/7/14 083-56163 McKean Lafayette Twp5/12/14 083-56162 McKean Lafayette Twp5/15/14 083-56164 McKean Lafayette Twp5/30/14 083-56151 McKean Lafayette Twp5/30/14 121-45535 Venango Cranberry Twp
Chesapeake Appalachia LLC 12 5/7/14 015-22237* Bradford Franklin Twp5/7/14 015-23035* Bradford Franklin Twp5/16/14 131-20449* Wyoming Meshoppen Twp5/24/14 131-20432* Wyoming Meshoppen Twp5/24/14 131-20433* Wyoming Meshoppen Twp5/14/14 131-20389* Wyoming North Branch Twp5/14/14 131-20390* Wyoming North Branch Twp5/14/14 131-20391* Wyoming North Branch Twp5/14/14 131-20392* Wyoming North Branch Twp5/30/14 131-20421* Wyoming Washington Twp
5/30/14 131-20411* Wyoming Washington Twp5/30/14 131-20435* Wyoming Washington Twp
Chief Oil & Gas LLC 10 5/4/14 115-21359* Susquehanna Auburn Twp5/4/14 115-21360* Susquehanna Auburn Twp5/7/14 115-21426* Susquehanna Auburn Twp5/7/14 115-21427* Susquehanna Auburn Twp5/19/14 115-21795* Susquehanna Auburn Twp5/20/14 115-21796* Susquehanna Auburn Twp5/1/14 115-21524* Susquehanna Lenox Twp5/1/14 115-21525* Susquehanna Lenox Twp5/1/14 115-21523* Susquehanna Lenox Twp5/6/14 115-21526* Susquehanna Lenox Twp
CNX Gas Co LLC 5 5/10/14 059-26509* Greene Morris Twp5/10/14 059-26508* Greene Morris Twp5/10/14 059-26510* Greene Morris Twp5/15/14 059-26361* Greene Richhill Twp5/15/14 059-26362* Greene Richhill Twp
Dannic Energy Corp 3 5/28/14 121-45271 Venango Sugarcreek Boro5/29/14 121-45270 Venango Sugarcreek Boro5/30/14 121-45269 Venango Sugarcreek Boro
Devonian Resources Inc 3 5/6/14 053-30418 Forest Harmony Twp5/15/14 053-30602 Forest Harmony Twp5/29/14 053-30487 Forest Harmony Twp
EQT Production Co 12 5/14/14 059-26497* Greene Morgan Twp5/16/14 059-26391* Greene Morris Twp5/16/14 059-26392* Greene Morris Twp5/16/14 059-26393* Greene Morris Twp5/16/14 059-26390* Greene Morris Twp5/16/14 059-26394* Greene Morris Twp5/16/14 059-26395* Greene Morris Twp5/16/14 059-26396* Greene Morris Twp5/16/14 059-26397* Greene Morris Twp5/16/14 059-26398* Greene Morris Twp
Spud Report:May
The data show below comes from the Department ofEnvironmental Protection. A variety of interactive reports are
OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY
available at www.portal.state.pa.us/portal/server.pt/community/oil_and_gas_reports/20297.
The table is sorted by operator and lists the total wells report-ed as drilled last month. Spud is the date drilling began at a wellsite. The API number is the drilling permit number issued to thewell operator. An asterisk (*) after the API number indicates anunconventional well.
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5/16/14 059-26399* Greene Morris Twp5/9/14 059-26506* Greene Washington Twp
Gas & Oil Mgmt Assoc Inc 1 5/1/14 123-47530 Warren Mead TwpHilcorp Energy Co 3 5/10/14 073-20433* Lawrence Pulaski Twp
5/10/14 073-20434* Lawrence Pulaski Twp5/31/14 073-20427* Lawrence Pulaski Twp
Howard Drilling Inc 1 5/28/14 083-56315 McKean Wetmore TwpInflection Energy LLC 1 5/30/14 081-21240* Lycoming Uppr Fairfield TwpKastle Resources Enterprises 2 5/28/14 039-25786 Crawford Cussewago Twp
5/14/14 039-25788 Crawford Spring TwpLendrum Energy LLC 4 5/1/14 053-30410 Forest Harmony Twp
5/7/14 053-30446 Forest Harmony Twp5/21/14 053-30445 Forest Harmony Twp5/28/14 053-30451 Forest Harmony Twp
Mead Oil LLC 4 5/2/14 123-47278 Warren Sheffield Twp5/6/14 123-47279 Warren Sheffield Twp5/10/14 123-47280 Warren Sheffield Twp5/19/14 123-47281 Warren Sheffield Twp
Noble Energy Inc 6 5/23/14 059-26487* Greene Richhill Twp5/23/14 059-26488* Greene Richhill Twp5/23/14 059-26489* Greene Richhill Twp5/23/14 059-26490* Greene Richhill Twp5/23/14 059-26491* Greene Richhill Twp5/23/14 059-26492* Greene Richhill Twp
NTS Energy LLC 4 5/2/14 121-45610 Venango Cranberry Twp5/8/14 121-45613 Venango Cranberry Twp5/14/14 121-45616 Venango Cranberry Twp5/27/14 121-45609 Venango Cranberry Twp
R&N Resources LLC 1 5/20/14 123-47565 Warren Conewango TwpRange Resources Appalachia 24 5/21/14 035-21298* Clinton Gallagher Twp
5/22/14 035-21297* Clinton Gallagher Twp5/14/14 081-21357* Lycoming Lewis Twp5/14/14 081-21449* Lycoming Lewis Twp5/17/14 081-21447* Lycoming Lewis Twp5/17/14 081-21448* Lycoming Lewis Twp5/18/14 081-21446* Lycoming Lewis Twp5/8/14 125-27129* Washington Cross Creek Twp5/8/14 125-27131* Washington Cross Creek Twp5/9/14 125-27365* Washington Cross Creek Twp5/9/14 125-27130* Washington Cross Creek Twp5/14/14 125-27374* Washington Cross Creek Twp5/14/14 125-27373* Washington Cross Creek Twp5/27/14 125-27191* Washington Cross Creek Twp5/27/14 125-27178* Washington Cross Creek Twp5/27/14 125-27176* Washington Cross Creek Twp5/27/14 125-27179* Washington Cross Creek Twp5/27/14 125-27177* Washington Cross Creek Twp
5/16/14 125-27234* Washington Donegal Twp5/6/14 125-27291* Washington Jefferson Twp5/7/14 125-27341* Washington Jefferson Twp5/8/14 125-27290* Washington Jefferson Twp5/8/14 125-27215* Washington Jefferson Twp5/9/14 125-27342* Washington Jefferson Twp
RE Gas Dev LLC 1 5/31/14 019-22211* Butler Lancaster TwpRice Drilling B LLC 2 5/12/14 059-26424* Greene Gray Twp
5/12/14 059-26425* Greene Gray TwpSeneca Resources Corp 2 5/1/14 047-24791* Elk Jones Twp
5/1/14 047-24796* Elk Jones TwpSLT Production LLC 4 5/6/14 123-47445 Warren Sheffield Twp
5/12/14 123-47451 Warren Sheffield Twp5/16/14 123-47444 Warren Sheffield Twp5/22/14 123-47447 Warren Sheffield Twp
Snyder Bros Inc 1 5/15/14 005-31146* Armstrong West Franklin TwpSouthwestern Energy Prod Co 3 5/13/14 015-23011* Bradford Herrick Twp
5/5/14 115-21607* Susquehanna Great Bend Twp5/21/14 115-21657* Susquehanna Great Bend Twp
Stateside Energy Group LLC 2 5/1/14 083-56457 McKean Lafayette Twp5/6/14 083-56454 McKean Lafayette Twp
SVS Abs Interest Wetmore Proj 3 5/5/14 083-56391 McKean Wetmore Twp5/12/14 083-56390 McKean Wetmore Twp5/16/14 083-56392 McKean Wetmore Twp
SWEPI LP 3 5/2/14 117-21685* Tioga Sullivan Twp5/2/14 117-21686* Tioga Sullivan Twp5/3/14 117-21687* Tioga Sullivan Twp
Talisman Energy USA Inc 2 5/27/14 015-23040* Bradford Columbia Twp5/29/14 115-21658* Susquehanna Apolacon Twp
Trimont Energy LLC 6 5/19/14 053-30422 Forest Harmony Twp5/22/14 053-30423 Forest Harmony Twp5/28/14 053-30435 Forest Harmony Twp5/5/14 121-45575 Venango Cranberry Twp5/8/14 121-45574 Venango Cranberry Twp5/15/14 123-47473 Warren Southwest Twp
Universal Resources Holdings 2 5/19/14 123-47542 Warren Sugar Grove Twp5/20/14 123-47541 Warren Sugar Grove Twp
Vantage Energy Appalachia II 4 5/20/14 059-26552* Greene Center Twp5/15/14 059-26419* Greene Perry Twp5/24/14 059-26445* Greene Washington Twp5/24/14 059-26446* Greene Washington Twp
XTO Energy Inc 5 5/14/14 019-22226* Butler Connquenessng Twp5/14/14 019-22227* Butler Connquenessng Twp5/14/14 019-22228* Butler Connquenessng Twp5/14/14 019-22229* Butler Connquenessng Twp5/14/14 019-22230* Butler Connquenessng Twp
OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY
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February 2014 Page 27June 2014 Page 27
Tenaska generating station tourBy Joyce TurkalyDirector, Natural Gas Market Development
The Gas-Electric Subcommittee of PIOGA’s Pipeline andGas Market Development Committee arranged a tour forPIOGA members of Tenaska’s Virginia Generating
Station, which has been recognized by Power magazine as one ofthe tip six natural gas-fueled plants worldwide. Members walkedthe 39-acre facility to see the configuration of the gas and steamturbines, generators, cooling towers, oil storage, high-voltagetransmission system, and natural gas pipeline inlet.
In total, a 559-acre site with approximately 490 treed acresused as a sound buffer for the surrounding community wassecured in Fluvanna County, near Scottsville, Virginia, in 2002,and construction started shortly thereafter, taking about 18months from start to finish. The combined-cycle plant is config-ured with General Electric equipment consisting of three naturalgas turbines (175 MW each) and one steam turbine (450 MW)that represent almost half the overall 2002 cost of $500 million.
We were also welcomed to a slideshow overview of the proj-ect as well as what Tenaska is contributing today to the localcommunity by way of taxes and community support via manysocial responsibility programs.
“The hardest thing about the power plant is getting the per-mits. Once you have the permits, it’s pretty simple to build apower plant,” said Dr. Robert Mayfield, general manager.
Tenaska’s business model is toengage big players. CurrentlyTenaska is in the middle of a 20-yearcontract with Shell to provide thenatural gas and with Dominion totake the power, which is generatedinto the PJM grid. Mayfield told thegroup that the relationship has beennothing but positive for all parties.The Tenaska Virginia plant runs yearround with the exception of sixweeks; three apiece in April andNovember for maintenance.
This trip illustrated that naturalgas is a reliable fuel source for elec-tric generation. “Natural gas is defi-nitely the future,” Mayfield told us.
We were amazed when we weretold by plant operations that thestartup time equals only a push of a button, compared to simple-cycle at 15 minutes and coal start at roughly four hours. Giventhe operational need to supply energy back to the grid on a 24/7basis, the combined cycle configuration and a higher thermalefficiency demonstrates reliable performance.
A special thank-you to Ann Scott, who provided a slide pres-entation during dinner that educated our members on dispatchingthe electricity.
If you would like to learn more about Tenaska or the Gas-Electric Coordination group, contact Committee Co-Chair RonMcGlade at [email protected] or me at [email protected]. ■
Did you know? A heat recovery steam generator isan energy recovery heat exchanger that recovers heatfrom a hot gas stream. It produces steam that can beused in a process (cogeneration) or used to drivea steam turbine (combined cycle).
Page 28 The PIOGA Press
In Pennsylvania, does‘production’ really mean‘production in payingquantities?’
Oil and gas leases typically contain a “habendum clause”which governs the term of the lease. Most habendumclauses provide for a primary and a secondary term. The
primary term is a fixed period of time within which the lesseemay hold the leasehold without being required to develop it. Toprevent the lease from expiring at the end of the primary term,the lessee must act to propel the lease into its secondary term.One way a lease can be extended into its secondary term is if oilor gas, or both, is produced “in paying quantities.” Under such alease, the secondary term will continue until oil and gas are nolonger produced in paying quantities.
In Pennsylvania, the meaning of “in paying quantities” wasannounced in T.W. Phillips Gas & Oil Co. v. Jedlicka.1 InJedlicka, the Supreme Court established a two-part test to deter-mine if a well is producing “in paying quantities.” First, objec-tively, a well produces in paying quantities if it consistently paysa profit, however small, over operating expenses. Second, if awell has only marginally or sporadically produced, the determi-nation of whether the well has produced “in paying quantities”relies subjectively on the operator’s good faith judgment in con-tinuing to operate the well. Jedlicka clarifies the amount of pro-duction that will propel and, subsequently, sustain a lease’s sec-
ondary term in a habendum clause requiringproduction “in paying quantities.”
Some oil and gas leases, however, do notinclude the phrase “in paying quantities”and provide that the secondary term is trig-gered and sustained as long as oil or gas is“produced” from the leasehold. Is theJedlicka test applicable to leases that do notrequire production “in paying quantities?”The answer depends on whetherPennsylvania courts would imply “in payingquantities” into the meaning of “production”or whether the courts would strictly con-strue the oil and gas leases according to
their express terms. If Pennsylvania courts implied “in payingquantities” into the meaning of “production,” then the Jedlickastandard for production in paying quantities would govern thelease. If not, the lease would likely not fall within the purview ofJedlicka and any production, whether in paying quantities or not,would suffice to continue the lease.
In habendum clauses requiring only “production” to enter intoand sustain a lease’s secondary term, many states have expresslyheld that “in paying quantities” should be implied into the clauseeven though the lease does not expressly include the phrase. InGarcia v. King,2 the Supreme Court of Texas held that the term“produced” in a habendum clause meant “produced in payingquantities.” The court reasoned that without profitable produc-tion, the lease’s purpose could not be accomplished and anyextension of the lease into its secondary term would be improper.The majority of other states follow versions of the Garcia rule.3
Alison L. Bush,Esq.
Barnes DulacWatkins
Author:
February 2014 Page 29June 2014 Page 29
Pre-Drilling Water Supply Inventory and Sampling
Post-Drilling Complaint Resolution and Investigations
Gas Well Permitting for Conventional and
Unconventional Plays
Development of High Capacity Groundwater Supply Wells
Soil & Groundwater Contamination Investigations
Assistance with Water Sourcing
Water Management Plan Preparation
SPCC/Control & Disposal Plans
Pre-Drilling Water Supply Inventory and Sampling
Post-Drilling Complaint Resolution and Investigations
Gas Well Permitting for Conventional and
Unconventional Plays
Development of High Capacity Groundwater Supply Wells
Soil & Groundwater Contamination Investigations
Assistance with Water Sourcing
Water Management Plan Preparation
SPCC/Control & Disposal Plans
Disposal Well Permitting
Erosion & Sedimentation Control Planning
Fresh Water Determination Studies
Soil and Groundwater Remediation
Stray Gas Migration Investigations
Hydrogeologic Studies
Expert Witness Testimony
Wetland Delineation and Aquatic Surveys
Disposal Well Permitting
Erosion & Sedimentation Control Planning
Fresh Water Determination Studies
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More locally, in South Penn Oil Co. v. Snodgrass,4 the WestVirginia Supreme Court of Appeals held that the terms “pro-duced,” “produced in paying quantities” and “found in payingquantities,” as used in oil and gas leases, are synonymous.Additionally, in Tisdale v. Walla,5 the Ohio Court of Appealsheld that “produced” means “produced in paying quantities” andrejected the contention that production of gas for domestic use,without more, operates to extend a lease into its secondary term.
General Pennsylvania legal principles relating to oil and gasleases suggest Pennsylvania courts would not imply “in payingquantities” into the meaning of “production.” The PennsylvaniaSupreme Court has consistently held that an oil and gas lease is acontract and should be construed according to principles of con-tract law.6 According to Pennsylvania law, oil and gas leasesmust be interpreted in accordance with the express language ofthe agreement, rather than the silent intentions of the parties.7
Based on these overarching contract principles, it seems likelythat Pennsylvania courts would not hold that “production” means“production in paying quantities” because the parties did notexpressly include it in the lease.
However, in certain instances, Pennsylvania courts have notfollowed the general principle that oil and gas leases should beconstrued according to their express terms. A recent example ofsuch a deviation is the Superior Court’s decision in Hite v.Falcon Partners.8 In Hite, the lease’s habendum clause provided,in pertinent part, for a one year primary term and a secondaryterm for as long “as Lessee shall continue to pay Lessors twodollars ($2.00) per acre as delayed rentals...” The lessors soughtto terminate the lease on the grounds that lessee failed to developthe property during the primary term. The lessee argued that
since it had paid the lessors two dollars per acre annually, it hadcomplied with the express terms of the lease and could maintainproduction rights indefinitely by continuing to pay lessors twodollars per acre. The Superior Court rejected the lessee’s argu-ment and held that the lease expired because an indefinite delayrental would be “at odds with the presumed intention of the par-ties in executing the leases in the first place.” The holding in Hitesuggests that although Pennsylvania law requires oil and gasleases to be construed according to their express terms, excep-tions will be made in situations where the court believes theexpress lease terms are perhaps unfair to the lessor, against pub-lic policy or contrary to traditional property rights conveyed by alease.
Would the omission of “in paying quantities” in the haben-dum clause constitute a situation in which Pennsylvania courtswould deviate from the principle that oil and leases should beconstrued according to their express terms? Although thePennsylvania Supreme Court has not decided the issue,Pennsylvania cases suggest the answer is no. First, a 1978 Courtof Common Pleas case, Mealy v. Clark,9 dealt with a habendumclause stating the lease’s primary term would be for six monthsand so long thereafter as “oil or gas is produced from the landand royalties and rentals paid by lessee therefor.” The lessorsought a forfeiture of the lease on the grounds that lessee hadabandoned or surrendered the lease, but the court ultimatelyruled against the lessor. Among other considerations, the court inMealy reasoned that, although the meager production from thelease was not in paying quantities, the terms of the lease did notrequire it and concluded the lessee did not equitably surrenderthe lease. Second, in a more recent Superior Court case,
June 2014 Page 31
Caldwell v. Kriebel Resources Co., 10 the court upheld the trialcourt’s dismissal of the lessors’ complaint holding the lessee hadno implied duty to develop all strata. Additionally, the SuperiorCourt agreed with the trial court that leases in Pennsylvania donot include an implied duty to produce in paying quantitiesbased on all strata. It agreed with the trial court’s conclusion thatthe Jedlicka test did not apply because:
the parties in [the Jedlicka] case had placed the term“paying quantities” into the lease, thereby makingthe issue the interpretation of an explicit contractualterm—not an implied duty. Here, the lease onlyrequired that oil or gas is produced from the proper-ty. Thus, Jedlicka has no bearing on the case at hand.
Nevertheless, where the only production from the leasehold isfor domestic use, one Pennsylvania case suggests “production”does in fact mean “production in paying quantities.” Under theholding of Babb v. Clemensen,11 not all “production” will propela “production” only lease into or sustain its secondary term. InBabb, the three habendum clauses at issue each provided, in per-tinent part, for a primary term of 10 years and for so long there-after “as oil or gas is produced from the premises…”, “as oil orgas...be produced therefrom,” and “as oil or gas is producedtherefrom hereunder,” respectively. Although the lessors wereusing gas produced from the premises for domestic use, theyargued that the lease had expired due to the lack of commercialproduction. The Superior Court, citing the Ohio Court of Appealsin Tisdale, agreed and held that “everyday use of the gas...did notconstitute production as contemplated by the leases so as toextend the duration thereof.” In its reasoning, the Superior Court
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agreed with the reasoning in Tisdale, that “production” meant“production in paying quantities.”
ConclusionWhether Pennsylvania courts would imply “in paying quanti-
ties” into an oil and gas lease is still very unclear. For leases withproduction other than for domestic use, both Mealy and Caldwellindicate that “production” does not mean “production in payingquantities” unless the parties specifically include it in the expressterms of the lease. Adding the Mealy and Caldwell holdings tothe general principles of oil and gas lease interpretation, theweight of Pennsylvania authority suggests that, in Pennsylvania,courts would likely not imply “in paying quantities” into ahabendum clause which omits it. Babb is the only outlier, but isdistinguishable in that Babb dealt with a lease under which onlydomestic production occurred. Therefore, for leases with produc-tion other than for domestic use, it is likely that the Jedlicka “in
paying quantities” test does not govern the amount of productionrequired to enter into and sustain the secondary term of “produc-tion” only leases. However, it is also possible that Pennsylvaniacourts may agree with the Hite court’s position, disregard theexpress terms of the lease and find that allowing “production”not in paying quantities to sustain an oil and gas lease is contraryto a lessor’s presumed intention in entering into a lease. In such acase, the Jedlicka test would govern the amount of productionrequired to sustain the secondary term of a “production” onlylease, even though “in paying quantities” was not expresslyincluded in the lease’s habendum clause. ■
Ms. Bush is an associate with the law firm Barnes DulacWatkins, a boutique firm located in Pittsburgh that specializes inoil and gas law. The views expressed in this article do not neces-sarily reflect those of Barnes Dulac Watkins or its clients.
1 615 Pa. 199, 42 A.3d 261 (2012).2 139 Tex. 578, 164 S.W.2d 509 (1942).3 See 2 Summers Oil and Gas §14:8 (3d ed.).4 71 W.Va. 438, 76 S.E. 961 (1912).5 No. 94-A-0008, 1994 WL 738744 (Ohio Ct. App. Dec. 23, 1994) (unpublishedopinion).6 Jedlicka, 615 Pa. at 208; See Jacobs v. CNG Transmission Corp., 565 Pa. 228,242, 772 A.2d 445 (2001). 7 Jedlicka, 615 Pa. at 208; See Jacobs, 565 Pa. at 242.8 13 A.3d 942 (Pa. Super. 2011). 9 9 Pa. D. & C.3d 566 (Pa. Com. Pl. 1978).10 72 A.3d 611 (Pa. Super. 2013).11 687 A.2d 1120 (Pa. Super. 1996).
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EIA seeks public comment on proposedexpansion of production survey
As a result of the rapid growth and shifting location ofU.S. natural gas and crude oil production, the U.S.Energy Information Administration (EIA) is proposing
expanding the geographic coverage of its monthly natural gasproduction survey and adding collection of state-level data oncrude oil and lease condensate production.
EIA is soliciting comments on the proposed changes in aFederal Register notice published on May 6(www.gpo.gov/fdsys/pkg/FR-2014-05-06/pdf/2014-10352.pdf).
The current survey, the EIA-914 Monthly Natural GasProduction Report, collects natural gas production data from asample of 240 operators in five states and the Gulf of Mexicothat represent, as of December 2013, 66 percent of total U.S.gross gas production, down from 82 percent in 2007 when thesurvey began. Natural gas production has increased dramaticallyin some of the states outside the current EIA-914 survey—forexample, Pennsylvania and Colorado, both of which now out-produce two of the original EIA-914 areas, New Mexico and theGulf of Mexico. The proposed collection of state-level data froman additional 14 states would raise the sample coverage for natu-ral gas production to 92 percent.
EIA also proposes to collect crude oil and lease condensateproduction data for the same 19 states and the Gulf of Mexico.EIA currently publishes state-level crude oil production databased on information reported to state oil and gas agencies.Where state data are not immediately available, EIA estimatesthe production. Long lags in state-level reporting have made itdifficult to estimate oil production. Collecting data directly fromwell operators should provide timelier, consistent, routine andaccurate production data, the agency says.
In addition, with the rapid rise in production from tight for-mations, identifying shifts in the qualities of crude oil and leasecondensate production has become increasingly important.Collecting information on the API gravity of crude oil and leasecondensate, and possibly the sulfur content, will provide a clear-er picture of those shifts.
Comments on the proposal are due to EIA by July 7. ■
PUC chair steps down fromenergy advocacy group
Amid growing tension surrounding the PennsylvaniaPublic Utility Commission’s role in a high-profilepipeline project, StateImpact Pennsylvania reports that
PUC Chairman Rob Powelson has stepped down from an energyadvocacy and economic development group. He said he did so to“avoid even the appearance of bias.”
Powelson resigned from the Greater Philadelphia EnergyAction Team in a letter dated May 14. It came two weeks afterStateImpact published a story about concerns that Powelson’spresence in the group could pose a conflict of interest in a casebefore the PUC. The Energy Action Team is a group of businessleaders, politicians and academics convened by the GreaterPhiladelphia Chamber of Commerce to strategize about how to
expand the energy industry in Southeastern Pennsylvania.The five-member utility commission has a key say in whether
a plan by Sunoco Logistics to move natural gas liquids through apipeline from western Pennsylvania to Marcus Hook—a projectknown as Mariner East—can move forward. Powelson has previ-ously endorsed the project’s impact on the region’s economicdevelopment.
In the letter, Powelson, a former president of the ChesterCounty Chamber of Commerce, did not specifically mention theMariner East project. However, he expressed concern about thepotential for overlap between the goals of the team and his roleas a regulator.
Sunoco is seeking approval from the PUC to be exempt fromlocal zoning along the pipeline’s route in order to build the nec-essary infrastructure to move propane and ethane to MarcusHook. ■
Four winners announced at $100,000Shale Gas Innovation Contest finals event
Four companies each walked away with a winner’s checkfor $25,000 on May 15 at the Third Annual Shale GasInnovation Contest in Southpointe. They included:
• KCF Technologies, Inc. for the SmartDiagnostics® wirelesssystem that enables low-cost predictive maintenance for rotatingoil and gas equipment.
• NG Innovations, Inc. for its “C-FIT” unit that identifies thedensity and amount of fluid being transported and identifies theloading/unloading points, tracking and date/time stamping truckmovement via satellite.
• OPTIMUM Pumping Technology for high-performancemanifolds for reciprocating natural gas compressors that elimi-nates pulsation control bottles and their vibration-related failures,and significantly improving compressor reliability and operatingefficiency.
• TM Industrial Supply for filtration technology to effectivelyseparate for removal the natural gas liquids and other contami-nates from natural gas through the use of their Gas FlowMembrane Technology.
Bill Hall, director of the Shale Gas Innovation &Commercialization Center commented, “We were very pleasedwith the quality of this year’s applications. Reducing from over80 entries to the 13 finalists was an arduous task. The judges dida fantastic job analyzing all of the applications. The four winnersare all impressive examples of innovation on display. These com-panies identified a challenge the shale energy industry faces anddeveloped impressive solutions ready to be implemented.”
To view a list of all 13 finalists with technology descriptions,visit www.sgicc.org/shale-gas-innovation-contest.html.
Sponsors for this year’s contest were Ben FranklinTechnology Partners , ANGA, Aquatech, Baker Hughes, CabotOil & Gas Corporation, CONSOL Energy, Chesapeake Energy,Chevron, EQT, First National Bank, GE Oil & Gas, Little PineResources, the Marcellus Shale Coalition, PPG Industries,Praxair, Range Resources, Seneca Resources and Williams. ■
Page 34 The PIOGA Press
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Pennsylvania College of Technology held a ceremony lastmonth at its Energy Technology Education Center (ETEC)outside Williamsport to dedicate a drilling rig simulator
that supports hands-on learning for the college’s natural gastraining offerings.
The simulator was purchased with U.S. Department of Labor,Employment and Training Administration, Trade AdjustmentAssistance Community College and Career Training funds. Inaddition, New Pig, of Tipton, donated a protective geosyntheticmembrane that was installed beneath the rig simulator.
The simulator provides students in ShaleNET’s noncredit,short-term roustabout and floor hand courses with hands-ontraining opportunities. Plans include making the simulator avail-able to train new short-service employees for private drillingcompanies. Also under consideration is training of other popula-tions, such as veterans.
Students working on the rig simulator learn about safety andrig fundamentals (including proper use of a slip, tongs, pipespinner, bails, elevator, and connecting and disconnecting drillpipe), as well as teamwork skills.
Invited guests observed a training exercise on the drilling rigsimulator and had the opportunity to tour the rest of the ETEC. Acollaboration with the Lycoming County Department of PublicSafety, the ETEC facilitates hands-on training for workers in thenatural gas industry, as well as emergency-response personnel.
In addition to the rig simulator, the site features live fire“props,” a wellhead, separator, meter house, flammable-liquidssimulator, tank battery, hydraulic fracturing-site display, pressur-
ized production-site setup, sandseparator, pig launcher andreceiver, and miscellaneous staticprops.
Through industry donations ofequipment and accessories, theETEC plans to employ additionalinstructional props to train com-pletion technicians on the funda-mentals of assembling, disassem-bling and maintaining hydraulicfracturing equipment.
Also being developed at theETEC is a gas-distribution area toshow students the proper proce-dures for connecting and discon-necting piping to move naturalgas, how to operate meter runs,how to measure gas flow, andhow to track gas flow usingSCADA (supervisory control and data acquisition). ■
Penn College dedicates rig simulator used in natural gas training
A student crew demon-strates the new drilling rigsimulator.
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ShaleNET receives energy leadershipaward; PIOGA, members recognized
On May 8 the Pittsburgh Business Times held its 2014Energy Gala to recognize companies, individuals andgroups that are making a difference in the energy sector.
ShaleNET was selected as the winner in the WorkforceDevelopment category. The program founding partners—PennCollege of Technology, Westmoreland Community College,Allegheny Conference on Community Development and
PIOGA—accepted the award at the gala. ShaleNET was launched in 2010 with a $4.964M Community
Based Job Training grant awarded to Westmoreland CountyCommunity College by the U.S. Department of LaborEmployment and Training Administration. The original intent ofShaleNET was to respond quickly to natural gas industry needsby creating an effective and efficient entry level training programfeaturing five high-demand upstream occupations includingroustabout, welder’s helper, CDL, floor hand and productiontechnician. By the close of the first ShaleNET grant on June 30,2013 more than 14,000 people had been served by 20 recognizedtraining providers in four states. The program has trained over5,000 participants, with more than 3,400 finding employment.
PIOGA members recognized at the awards gala includedRange Resources, Best Brand Awareness Campaign; ConsolEnergy, Deal of the Year (lease at the Pittsburgh InternationalAirport); and XTO Energy, Midstream.
Selbe joins Babst Calland’s Pittsburgh office
Anthony W. Selbe recently joined law firm Babst Calland asan associate in the firm’s Title and Energy & Natural Resourcesgroups. Selbe concentrates his energy law practice in oil, gas andmineral development, counseling clients on a wide range of oil,gas and mineral matters including title opinions andexaminations. He has worked primarily with clients in shale gasdevelopment. Selbe previously worked for Chambers Law Firm,PLLC, a Houston-based firm where he performed title andmineral examinations as well as completed due diligenceprojects. He began his career as in-house counsel for an
Founding members of the ShaleNET team show off theiraward.
PIOGA Member News
Page 36 The PIOGA Press
New Pig EnergyNew Pig Energy (NPE) is a wholly owned subsidiary of
New Pig Corporation (NPC), the world leader in liquid controland containment products for the past 28 years, serving morethan 200,000 sites in over 70 countries. Due to the success ofits patent-pending liners—the only containment liners engi-neered for use with foot, vehicle and track hoe traffic—NPEwas formed into a separate company in January 2013. NPE’sproducts provide robust, competent secondary containmentduring drilling and hydraulic fracturing to help keep workerssafe and protect the environment for incident-free operations.
There have been numerous studies regarding hydraulic frac-turing and groundwater contamination. Surface spills, however,are one area where industry, regulators and environmentaliststend to agree on the risk. Sources of oil, fracturing fluid andflowback spills at the well site include the drilling rig, mudtanks, diesel tanks, frac tanks, pumps, sand kings, generatorsets, light stands, contractor vehicles and blowouts at the well-head. NPE’s liners and berms are specifically designed toimprove containment durability for environmental protectionand to improve traction for worker safety.
Beyond the award-winning containment products, NPE alsoprovides regulation education, layout consulting, installationtraining and onsite maintenance support at no additionalcharge to customers. To date, NPE has trained over 60 compa-nies and 400 individuals on liner installation, maintenance,reuse and removal.
Headquartered in Tyrone, NPE currently has warehouselocations in Pennsylvania, Ohio and Wyoming to convenientlysupport the Marcellus, Utica, and Niobrara shale plays andcurrently employs 23 full-time employees.
NPE works with operators, industry organizations, and fed-eral and state regulators to understand the unique secondary
containment needs for drilling mud, fuel, chemicals and flow-back water at the well sites. One option is to use pit linersunder the drilling rig and completion equipment as a way tostop spills from reaching the ground. Pit liners, however, werenever intended or designed to be used on the surface. As such,pit liners are slippery to walk on, easily punctured, easily torn,crack-prone in cold weather and subject to wrinkling due tothermal expansion. By manufacturing a composite liner, NPEcan engineer each layer to address these specific issues. Thelayered design also provides a more thermally stable liner thatdoes not grow and shrink with temperature changes, resultingin a flat work surface. A diagram of the nine-layer compositeliner is below:
The PIG® Well Pad Liner is available in 100- and 130-milthicknesses, multiple widths (6, 12 and 18 feet), and two col-ors. The light gray color reduces radiant heat temperatures by10-15 degrees when heat stress is a concern. The compositedesign is up to four times more tear resistant and seven timesmore puncture resistant compared to the pit liners.
Contact: Bob Beck, marketing coordinator, [email protected]. Phone: 855-PIG-LINE (744-5463). Web:www.newpigenergy.com. Awards: Environmental Protection,New Product of the Year, 2011, 2012, 2013.
PIOGA Member Profile
Oklahoma City-based independent natural gas producer in theland and title departments. Selbe received his J.D. from the WestVirginia University College of Law in 2010. He is admitted topractice in West Virginia as well as the U.S. District Court forthe Southern District of West Virginia.
Curry Supply wins Governor’s ImPAct Award
At a ceremony held in Hershey, Governor Tom Corbettrecognized Curry Supply with the 2014 Governor’s ImPActAward for consistently creating and retaining jobs over the pasttwo years. Mark Ritchey, Curry Supply principal partner,accepted the award.
The awards, begun in 2013, recognized 50 companies fromthroughout the state in five categories. Nearly 250 nominationswere received.
“We are extremely proud to receive this award,” said JasonRitchey, Curry Supply president. “Our dedicated and hard-working employees are a key ingredient to our growth over thepast 80 years. We have hired, and retained, 193 employees in thepast two years alone. To be recognized in this way is a hugehonor.”
GZA GeoEnvironmental acquires Laurel Oil & Gas
Engineering consulting firm GZA GeoEnvironmental,Inc.announces the acquisition of Laurel Oil & Gas Corp.Headquartered in Clarksburg, West Virginia, Laurel has beenproviding completion supervision and engineering servicesthroughout the Appalachian Basin for over 20 years. Laurel’sclient list includes local oil and gas operators, many largeindependent operators as well as the major oil companies.
Laurel was founded by Mark Schumacher. The companydirectly and through the use of independent consultants andcontractors provides “company man” services to its clients,offering expertise in all phases of oil and gas well drilling andcompletions including cementing, hydraulic stimulation,wireline, snubbing, and well completions. Additionally, Laurelprovides storage field management and downhole geology andeconomic evaluation including the appraisal of oil and gasproperties.
The Laurel operations will report to David L. Palmerton, Jr.,an existing principal in GZA, who serves as the head of all oiland gas services within the GZA organization. ■
Page 38 The PIOGA Press
can access the gas through horizontal drilling without additionaldisturbance on the surface of lands administered by theDepartment of Conservation and Natural Resources (DCNR).
“Future royalties from these leases will be dedicated toexpanding our system by acquiring lands with high conservationvalue and ecological importance, purchasing privately-held sub-surface rights for existing DCNR lands and improving stateparks and forests,” Corbett said.
Of the 2.2 million acres in the state forest system, approxi-mately 1.5 million are underlain by the Marcellus Shale. Oil andgas leases issued by the Commonwealth total approximately385,400 acres, including three shale-specific leases totaling138,866 acres. Shortly before leaving office in 2010, formerGovernor Ed Rendell issued an executive order barring any addi-tional leasing on state lands.
Since 2008, the state has earned $413 million in bonus bidsfor the shale leases and $285 million from the more than 425wells currently producing.
The executive order, which rescinds and replaces Rendell’sorder, is effective immediately. The order and an accompanyingfact sheet are available on DCNR’s website atwww.dcnr.state.pa.us/forestry/naturalgas/policyandguidelines.
Legal challengeThe Pennsylvania Environmental Defense Foundation (PEDF)
went to court to seek an expedited injunction blocking imple-mentation of the executive order and in particular the transfer ofmoney from the Oil & Gas Lease Fund to the general fund.
Lease revenue goes into the Oil and Gas Lease Fund, createdto provide money for conservation, recreation and flood control
projects. However, beginning in 2009, state lawmakers havetapped the fund for non-conservation purposes. Corbett’s pro-posed budget for the coming fiscal year would take $227 millionfrom the fund for other purposes, including $117 million forDCNR’s day-to-day operations.
The PEDF, whose mission is stated as “Litigating for OurEnvironment,” went to Commonwealth Court to block attemptsto force DCNR to lease additional state lands for the purpose ofgenerating $75 million for the general fund and use $117 millionfrom the Oil & Gas Lease Fund for departmental operatingexpenses in the coming budget year.
In its petition, the foundation argued that DCNR was directedto lease additional state forest land to generate $75 million forthe general fund without identifying the tracts to be leased orevaluating the impacts on the surrounding public naturalresources. Similarly, the PEDF said the directive to use the $117from the Oil & Gas Lease Fund for DCNR operating expenseswas made with no evaluation of the “direct and cumulativeimpacts” to the state forest and parks lands subject to oil and gasextraction and “without soliciting any public input on the peo-ple’s rights to these public natural resources, the proposedimpacts to them or to the use of the Oil & Gas Lease Fund.”
The court was asked to act before the fiscal year 2014-15budget is completed, which must occur by June 30 each year.
During a two-day hearing on May 28 and June 2, the PEDFdid its best to argue that Rendell, Corbett and legislators have putshort-term budget considerations ahead of their duties underArticle 1, Section 27 of the Pennsylvania Constitution—theEnvironmental Rights Amendment that the Supreme Court usedin striking down key portions of Act 13 in December.
In testimony, former DCNR John Quigley asserted that inleasing under Rendell, “The state forest was being treated as a
Executive order: Continued from page 1
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cash cow. That was extraordinarily dangerous and presented anexistential threat to the resource.” He indicated that he was“apoplectic and heartbroken” in 2009 when the legislatureamended the state fiscal code to give the General Assembly con-trol over how money from the Oil & Gas Lease Fund was spend.“The governor and the General Assembly were coming veryclose to slaughtering the cash cow,” Quigley testified.
Another former DCNR secretary, Michael DiBerardinis, testi-fied that forcing the agency to lease more land by dictating a rev-enue goal in the state budget is “a knife in the heart” of the department’s core mission. “If you get people reaching in from the outside telling us, ‘Lease this now,’ that destroys what I thought was the mission of the agency—to manage in a sustain-able way.”
A variety of other witnesses for the PEDF painted a negativepicture of gas development on state lands.
The Commonwealth’s own witness, DCNR Deputy Secretaryfor Parks and Forests Dan Devlin, provided what one mediareport described as “lukewarm” support for Corbett’s leasingplan. During discussions with the Governor’s Budget Office lastfall, Devlin said he advised against additional leasing. He toldthe court, however, that he is comfortable with the plan—“Aslong as there is no surface disturbance, and we have control ofthe lease.”
Judge Kevin Brobson gave no indication when he might ruleon the request for a preliminary injunction. ■
Poll: Pennsylvanians favor drilling,but not in parks
Pennsylvanians support drilling for natural gas by a near-ly 2-to-1 margin, but a majority is opposed when itoccurs under state parks and forests, according to a
Quinnipiac University poll released June 6.The survey found 58 percent of voters support Marcellus
Shale drilling and 33 percent oppose it, the Associated Pressreports. Democrats are against drilling by a margin of 48 per-cent to 41 percent.
“Pennsylvanians are generally willing on drilling, but itdepends on where, drawing the line at state parks and forestland,” said Tim Malloy with the Quinnipiac poll.
Thirty-nine percent of voters said they were less likely tovote for incumbent Republican Governor Tom Corbett thisyear because of an executive order last month that expandedthe amount of drilling connected to state parks and forests.Pennsylvanians overall were against the policy, 57 percent to36 percent. Thirteen percent said it made them more likely tosupport Corbett and nearly half said it would not affect themone way or the other.
The poll indicated 65 percent of women, 48 percent ofmen, 71 percent of Democrats and 38 percent of Republicanswere opposed to the new park drilling policy. Fifty-eight per-cent of Republicans favored it.
The survey of 1,308 registered voters was conducted May29-June 2. The margin of error was plus or minus 2.7 percent.
Page 40 The PIOGA Press
Natural Gas Futures Closing PricesAs of June 9
Month PriceJuly 2014 4.617August 4.610September 4.631October 4.601November 4.660December 4.733January 2015 4.792February 4.735March 4.630April 4.154May 4.118June 4.133
SourcesAmerican Refining Group: www.amref.com/Crude-Prices-New.aspxErgon Oil Purchasing: www.ergon.com/prices.phpGas futures: http://quotes.ino.com/exchanges/?r=NYMEX_NGBaker Hughes rig count: http://gis.bakerhughesdirect.com/ReportsNYMEX strip chart courtesy of Mid American Natural Resources,
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Art Cipriani Frank Kronz Phill Sabol
www.asset-risk.com Phone: 412-886-1800
Houston Pittsburgh Chicago Denver
Page 42 The PIOGA Press
PIOGA EventsPIOGA Summer Picnic
June 16, Wanango Golf Club, RenoInfo: www.pioga.org/events/category/pioga-events
PIOGA Pig Roast, Equipment Show and ConferenceJuly 22-23, Seven Springs Mountain Resort, ChampionInfo: www.pioga.org/events/category/pioga-events
17th Annual Divot Diggers Golf OutingAugust 15, Tam O'Shanter Golf Club, HermitageInfo: www.ipaa.org/meetings-events/upcoming-meetings
Industry EventsIPAA Midyear Meeting
June 18-20, The Broadmoor, Colorado Springs, COInfo: www.ipaa.org/meetings-events/upcoming-meetings
IOGAWV Annual Oil & Gas Equipment ShowJuly 9-11, Buckhannon, WVInfo: events.iogawv.com
IOGANY Summer MeetingJuly 16-17, Peek'n Peak Resort,Findley Lake, NYInfo: www.iogany.org
IOGAWV Summer MeetingAugust 3-5, The Greenbrier, White Sulphur Springs, WVInfo: events.iogawv.com
Calendar of Events
New PIOGA members — welcome!
OOGA Summer MeetingAugust 4-5, Zanesville Country Club, Zanesville, OHInfo: ooga.org/events
Shale Insight 2014September 24-25, David Lawrence Conv. Center, PittsburghInfo: www.shaleinsight.com
WV Oil & Gas ExpoOctober 1, Morgantown, WVInfo: www.wvoilandgasexpo.com
IOGANY Annual MeetingNovember 11-12, Hyatt Regency, Buffalo, NYInfo: www.iogany.org
IPAA Annual MeetingNovember 12-14, The Breakers, Palm Springs, FLInfo: www.ipaa.org/meetings-events/upcoming-meetings
OOGA Oilfield ExpoDecember 2-4, IX Center, Cleveland, OHInfo: ooga.org/events
Bertison-George, LLCP.O. Box 153, Monroeville, PA 15146412-258-5262www.bertison-george.comProfessional Firm
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Serving the Oil & Gas Industry for over 90 years.
MRC CORPORATE OFFICE
Austintown, OH 330-799-1100 Bradford, PA 814-368-8145 Buckhannon, WV 304-472-3565 Carrollton, OH 330-627-0259 Columbus, OH 614-475-4033 Corbin, KY 606-523-9640 Horseheads, NY 607-739-8575 Hurricane, WV 304-562-5724 Indiana, PA 724-349-6823 Williamsport, PA 570-748-5276 Norton, VA 276-679-6452 Wooster, OH 330-264-0077
f rom explorat ion to marketReliable Resources...SM
CEC is a reliable resource in the expanding energy industry, delivering integrated engineering, ecological and environmental
Midstream markets.
Civil & Environmental Consultants, Inc.www.cecinc.com | 800-365-2324
E x p e r i e n c eWell sites and impoundments, dams Gathering and transmission pipeline projects Compression, fractionation and other infrastructure facilities
WINNERNortheast
2013
Northeast Oil & Gas AwardsEngineering Company of the Year
PIOGA Board of DirectorsGary Slagel (Chairman), Steptoe & Johnson PLLC (representing
CONSOL Energy)Sam Fragale (Vice Chairman), Chief Oil & Gas, LLCFrank J. Ross (2nd Vice Chairman), T&F Exploration, LPJames Kriebel (Treasurer), Kriebel CompaniesCraig Mayer (Secretary), Pennsylvania General Energy Co., LLCTerrence S. Jacobs (Past President), Penneco Oil Company, Inc.Mary Anna Babich, Dawood EngineeringThomas M. Bartos, ABARTA Oil & Gas Company, Inc.Stanley J. Berdell, BLX, Inc.Rob Boulware, Seneca Resources CorporationMike Cochran, Energy Corporation of AmericaDon A. Connor, Open Flow EnergyTed Cranmer, TBC ConsultingJack Crook, Atlas Resource Partners, LPRobert Esch, American Refining Group, Inc.Michael Hillebrand, Huntley & Huntley, Inc.Jim Hoover, Phoenix Energy Productions, Inc. Ron McGlade, Tenaska Resources, LLCJim McKinney, EnerVest Operating, LLCSteve Millis, Vineyard Oil & Gas CompanyGregory Muse, PennEnergy Resources, LLCStephen Rupert, Texas Keystone, Inc.Jake Stilley, Patriot Exploration CorporationGary M. Violi, Appalachian Well Services Inc.Burt A. Waite, Moody and Associates, Inc.Roger B. Willis, Universal Well Services, Inc.Thomas Yarnick, XTO Energy
Committee ChairsEnvironmental Committee
Paul Hart, Fluid Recovery Services, LLCKen Fleeman, ABARTA Oil and Gas Company, Inc.
Legislative CommitteeBen Wallace, Penneco Oil CompanyHolly Christie, Steptoe and Johnson, PLLC
Pipeline & Gas Market Development CommitteeBob Eckle, Appalachian Producer Services, LLCRon McGlade, Tenaska Resources, LLC
Health & Safety CommitteePat Carfagna, CONSOL Energy
Meetings CommitteeLou D’Amico, PIOGA
Tax CommitteeDonald B. Nestor, Arnett Foster Toothman, PLLC
Communications CommitteeTerry Jacobs, Penneco Oil Company, Inc.
Membership CommitteeVacant
StaffLou D'Amico ([email protected]), President & Executive DirectorKevin Moody ([email protected]), Vice President & General Counsel Debbie Oyler ([email protected]), Director of Member ServicesMatt Benson ([email protected]), Director of Internal Communications
(also newsletter advertising & editorial)Joyce Turkaly ([email protected]), Director of Natural Gas Market
DevelopmentDan Weaver ([email protected]), Public Outreach DirectorDanielle Boston ([email protected]), Director of AdministrationChris Lisle ([email protected]), Manager of Finance Tracy Koval ([email protected]), Administrative Assistant
Pennsylvania Independent Oil & Gas Association115 VIP Drive, Suite 210 • Wexford, PA 15090-7906724-933-7306 • fax 724-933-7310 • www.pioga.org
Northern Tier Office (Matt Benson)Mail: P.O. Box L, Mount Jewett, PA 16740-0554
Physical address: 167 Wolf Farm Road, Kane, PA 16735Phone/fax 814-778-2291
© 2014, Pennsylvania Independent Oil & Gas Association
February 2014 Page 43June 2014 Page 43
Ross Cochran468 West Valley Road, Wayne, PA 19087 Royalty Owner
Ecotest Energy Services LLC142 South Johnson Road, Houston, PA 15342800-747-3061www.ecotest.usService Provider
Henderson Brothers, Inc.920 Fort Duquesne Boulevard, Pittsburgh, PA 15222412-261-1842www.hendersonbrothers.comProfessional Firm
Hunter Truck Sales519 Pittsburgh Road, Butler, PA 16002724-586-7744www.huntertrucksales.comService Provider
Larkspur Land Group LLC60 Terence Drive, Suite 302, Pittsburgh, PA 15236412-714-8011www.larkspurlandgroup.comService Provider
Lawrence D. Brudy & Associates2500 Brooktree Road, Suite 301, Wexford, PA 15090724-935-1400www.ldbassoc.comProfessional Firm
Reliance Well Services, LLC1250 Tower Lane, Erie, PA 16505814-454-1644www.reliancewellservices.comService Provider
REVLNG, LLC1005 Empson Road, Ulysses, PA 16948585-797-8441www.revlng.comService Provider
Sandbags, LLC5920 South Rainbow Boulevard, Suite 11, Las Vegas, NV 89118702-469-3078www.sandbags.comService Provider
Travis Peak Resources, LLC9020 N. Capital of Texas Highway, Bldg 1, Suite 170, Austin, TX78759512-814-0345www.travispkr.comProducer
Tri-State Containment, Inc.5403 Clairton Boulevard, Pittsburgh, PA 15236412-708-3111Service Provider
Turris Systems3167 Canterbury Drive, Allison Park, PA 15101412-552-3502www.turrissystems.comService Provider
115 VIP Drive, Suite 210Wexford, PA 15090-7906
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