November 2014 • Issue 55

The

PIOGA pressThe monthly newsletter of the Pennsylvania Independent Oil & Gas Association

(Continues on page 2)

(Continues on page 34)

®

The result of the November 4 gubernatorial election wasdisappointing, but not surprising. Tom Corbett trailed hischallenger in the polls throughout the race, and in the end

he was the first chief executive to be defeated in the 46 yearssince Pennsylvanians began allowing their governor to run for asecond term. Tom Corbettessentially spent the cam-paign running againsthimself—and lost by an11-point margin.

While it’s too early topredict what will happento the oil and gas industryunder Governor-elect TomWolf, we do know thatone of his major campaignpledges was to impose a5-percent severance tax onshale- gas production tobe used primarily forschools, along with roads and renewable energy technology.

The new governor will be up against a General Assemblywhere Republicans strengthened their majority in both chambers.Early results showed the number of Democrats dropping below90 in the 203-member House of Representatives and the GOPexpanding its 27-23 margin in the Senate by two or three addi-tional seats.

As one veteran Harrisburg-watcher told us, “Wolf’s progres-sive agenda is very ambitious and will be difficult to accomplishin a Republican-controlled, hyper-partisan legislature whichmade it difficult for Governor Corbett to get many of his initia-tives passed. The governor-elect and lieutenant governor-electface formidable budgetary challenges in the next session begin-

Election Day 2014 in Pennsylvanianing in January. The first challenge will be to find a way to closewhat is estimated to be a $2 billion structural budget deficit. Inaddition, the governor will need to find a way to address basiceducation funding, which was often cited by voters as their num-ber-one concern for Pennsylvania.”

At the same time, both chambers could see new leaders cho-sen when the legislature convenes in January.

Speaker of the House Sam Smith from Jefferson County, anindustry supporter, did not seek reelection. Potential replace-ments the top House officer include House Majority LeaderMike Turzai (R-Allegheny), Caucus Secretary Mike Vereb (R-

Producer requirements change forterminated, expired or cancelled leasesBut inconsistent provision requires interpretation

By Holly M. Christie, Associate, Steptoe & Johnson PLLC& Vice Chair, PIOGA Legislative Committee

Kevin J. Moody, PIOGA General Counsel

On October 22, Governor Tom Corbett signed the“Recording of Surrender Documents from Oil andNatural Gas Lease Act,” making House Bill 402

Pennsylvania law effective December 21 as Act No. 152 of 2014.Representative Tina Pickett (R-Bradford/Sullivan/Susquehannacounties), author of the bill, described the legislation as “pro-consumer” as it attempts to establish “a better process for whenan oil or natural gas lease ceases. Right now, the end of a leasecould cause confusion about whether or not the property ownercould engage with other drilling companies and has caused con-

siderable delays in trying to develop theresources under their property.”

While PIOGA does not oppose theconcept of this legislation, PIOGAbelieved the legislation was unneces-sary and raised concerns with how HB402 implemented the concept. Exceptfor providing an extended (but stillinsufficient) the time for a lessee chal-lenge to a lessor’s termination notice,our concerns were not addressed,including the inconsistent provision

Message to the Membership . . . . . . . . . . . . . 4Governor signs oil and gas legislation . . . . . . 7PIOGA tax & accounting seminar . . . . . . . . . . 82015 Wanango date confirmed. . . . . . . . . . . . 9DEP policy comment period extended . . . . . 10Supreme Court operating shorthanded . . . . 10SEO optimization webinar available . . . . . . . 10Online well completion report unveiled . . . . . 13Policy on use of national forest roads. . . . . . 13Responsibility over confined spaces. . . . . . . 14Title due diligence: Part 2 . . . . . . . . . . . . . . . 17

October Spud Report . . . . . . . . . . . . . . . . . . 20Marine LNG applications promoted . . . . . . . 27Discussing project development . . . . . . . . . . 28PIOGA outreach initiatives . . . . . . . . . . . . . . 30Robinson Township challenge denied. . . . . . 32New land programs at Cal U. . . . . . . . . . . . . 33Oil & Gas Trends. . . . . . . . . . . . . . . . . . . . . . 36New PIOGA members . . . . . . . . . . . . . . . . . 38Calendar of Events . . . . . . . . . . . . . . . . . . . . 39PIOGA contacts . . . . . . . . . . . . . . . . . . . . . . 39

Governor-elect Tom Wolf

Page 2 The PIOGA Press

2014 elections: Continued from page 1

Montgomery) and Dave Reed (R-Indiana), chair of the HouseMajority Policy Committee. All oppose a severance tax.

On the Senate side, Majority Leader Dominic Pileggi ofDelaware County—a severance tax supporter—came under firerecently from other Republican senators for not pushing a moreconservative agenda this session. The most likely successor forPileggi is Senator Jake Corman (R-Centre).

PIOGA’s hope is that whatever changes occur in the GeneralAssembly’s leadership, it will translate into greater opposition toimposing a tax on natural gas production.

Agencies, appointments and nominationsOf course, the new governor gets to choose who will lead the

Department of Environmental Protection and other state regula-tory agencies, as well as set the agenda for those agencies.

Wolf’s official platform on energy development included the fol-lowing:

• Ensure responsible drilling to protect Pennsylvania’s envi-ronment. New drilling technologies and water recycling process-es would allow for exploitation of natural gas resources withoutcausing environmental degradation.

• Increase funding for the Department of EnvironmentalProtection so that it is sufficiently staffed and able to provideproper oversight of drillers.

• Bring greater transparency to the fracking process byrequiring drillers to publicly disclose chemicals used in thehydraulic fracturing process, and lifting the current gag order onphysicians.

• Allow local communities more control in zoning.“If done right, continued development of natural gas is a

bridge to a clean energy future and renewables and will allowPennsylvania to have good-paying energy jobs; a safe and secureenvironment; and the ability to make critical investments in edu-cation, health care, and infrastructure through a severance tax onoil and natural gas extraction,” the platform stated. (Note that inthis particular mention of a severance tax, the candidate lumpedtogether all oil and gas production.)

Finally, as mentioned elsewhere in this issue, two vacancieswill have to be filled on the Pennsylvania Supreme Court earlyon in Wolf’s term. The court continues to be a focus for theindustry over issues such as the ongoing litigation related to Act13.

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Page 4 The PIOGA Press

Thoughts about the 2014 elections

On November 4, Pennsylvania voters rejected Governor Tom Corbett’s reelection effort.Corbett faced numerous issues that played out in an election more about defeating him andrejecting his policies than about supporting the Wolf candidacy.

The press and the Democratic Party were successful in painting Corbett as a governor who cuteducation spending, despite the fact that state dollars to education increased every year of hisadministration. The difference in spending was from one‐shot federal stimulus money that wassupposed to be earmarked for “brick and mortar” spending at the conclusion of the Rendelladministration.

The other major issue was Corbett’s rejection of a severance tax on our industry, and aperception that the governor was in our industry’s pocket. Although we in the industryrecognize the fallacy of this perception, the constant repetition of this claim was clearly a dragon Corbett’s campaign.

The election in Pennsylvania was an aberration in a mid‐term election that nationwide saw theDemocratic Party lose control of the U.S. Senate, a Republican governor elected in deep‐blueMaryland and a razor‐thin senatorial win by Virginia’s Mark Warner in a race that was literallyon nobody’s radar screen before Election Day.

Even in Pennsylvania, where Republicans extended their control in both chambers of theGeneral Assembly, the Wolf election is an aberration. The big government, tax‐and‐spendagenda has been rejected with the exception of the liberal governor‐elect.

It remains to be seen how this election will play out for our industry, but it would appear thatrough waters are on the horizon. The rocky relationship between Governor Corbett and theGeneral Assembly may seem far friendlier than the relationship of the General Assembly withthe new governor‐elect.

Lou D’AmicoPresident & Executive Director

port PIOGA and its mission. We continue to be the only organi-zation representing all facets of Pennsylvania’s oil and gas indus-try—shale-gas producers, conventional operators, and the multi-tude of businesses that provide products and services to them.

Not only will we continue to fight vigorously against propos-als to impose a severance tax and the impacts it would have onour industry and the Commonwealth’s economy, but we will

remain engaged against attempts to impose costly and unneces-sary new regulatory requirements. Ongoing and planned amend-ments to DEP’s Chapter 78 regulations could easily provide avehicle for such changes.

Please continue to stand with us to ensure that Pennsylvaniaremains the “Keystone to America’s Energy Future.” ■

Messageto theMembership

February 2014 Page 5November 2014 Page 5

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Page 6 The PIOGA Press

February 2014 Page 7November 2014 Page 7

Two pieces of legislation billed as measures to enhanceclarity for landowners made their way through theGeneral Assembly and were signed into law last month

during the waning ways of the 2014-15 legislative session.House Bills 402 and 2278, sponsored by Rep. Tina Pickett (R-

Bradford/Sullivan/Susquehanna), were approved by the House ofRepresentatives in late June and moved quickly though theSenate as the legislature wrapped up its voting days in October.After receiving no opposing votes in either chamber, the billswere sent on to Governor Tom Corbett, who approved them onOctober 22.

HB 402 provides a formal method for landowners with an oiland gas lease to obtain a release from the lease upon its termina-tion or cancellation (see article on page 1). Pickett indicated theintent was to create a process for addressing situations in whichan expired lease contains no renewal clause and the landownerwants to enter into an agreement with another producer.

“Right now, the end of a lease could cause confusion aboutwhether or not the property owner could engage with otherdrilling companies and has caused considerable delays in tryingto develop the resources under their property,” she explained in astatement announcing passage of her legislation.

The bill requires lessees to deliver a recordable surrender doc-ument to the lessor within 30 days of the termination, expirationor cancellation of a lease. The document, which is to be filedwith the county recorder of deeds, must include a statement indi-cating that the lessee surrenders all of its interests under thelease. The act takes effect 60 days after enactment.

HB 2278 requires operators of unconventional gas wells tofile monthly production reports with the Department ofEnvironmental Protection rather than semi-annually, as mandatedunder Act 15 of 2010. Monthly reporting is to begin March 31,2015, with filings required within 45 days of the end of eachreporting period. Production reporting for conventional wellscontinues to be on an annual basis.

According to Pickett, “Monthly reporting will give lease hold-ers timelier information about the production of their wells, andthat is important so that they can keep accurate track of theirmonthly royalty payments and ensure they are receiving propervalue from their wells. This legislation is all about greater trans-parency for our property owners.”

The U.S. Energy Information Administration has also indicat-ed monthly reporting in Pennsylvania would make its job of dis-seminating and analyzing energy-related statistics easier.

PIOGA’s Legislative Committee took issue with the additionalreporting burden on smaller unconventional operators and thevagueness of some of the requirements related to reporting peri-ods and well status.

One bill that PIOGA had hoped would win approval beforethe session’s end was Senate Bill 1310, establishing thePennsylvania Grade Crude Oil Development and AdvisoryCouncil. The advisory panel created under the bill sponsored bySenator Scott Hutchinson (R-Venango) would be made up of 17members—including two from PIOGA—representing state gov-ernment, industry, economic development and academia.

The council would examine existing DEP technical regula-tions and policies and make recommendations on the impact onconventional producers; explore development of a regulatoryscheme that provides for environmental oversight and enforce-ment specifically applicable to the conventional industry; assistDEP with new departmental policy impacting conventional oper-ators, including economic impact; review and comment on alltechnical regulations related to oil and gas; ensure cooperationand communication among government agencies and the aca-demic and research community; develop a plan to increasePennsylvania Grade crude oil production; and create a jointworking group with DEP to explore an environmentally respon-sible and economically viable water-management option.

SB 1310 earned Senate approval in the waning days of thesession, but advanced no further than a committee assignment inthe House before time ran out.

Also failing to advance was HB 1607, which would havetransferred enforcement authority over the Pennsylvania OneCall System from the Department of Labor and Industry to thePennsylvania Public Utility Commission. PIOGA supported themove to the PUC, but opposed language that would have endedan exemption from mandatory One Call participation for oil andgas gathering lines.

PIOGA had expected the measure to move this fall with anamendment that continued the exemption for conventional opera-tors but required the operators of lines carrying unconventionalgas to participate in One Call.

PIOGA tracked more than 200 pieces of legislation this ses-sion, with 65 of those considered high priority. Any legislationthat was not approved will have to begin the process all overagain when the General Assembly begins a new session early in2015. ■

Governor signs production reporting and lease surrender bills

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PIOGA Tax & AccountingSeminar set for December 2

In order to prosper in our oil and gas industry, we need toclearly know what to do and when to do it. We need to knowwell those in our industry who provide skilled services or

those who use our services. This principle undoubtedly applies totax and accounting issues. We want to learn to keep more of ourhard-earned money and reduce our tax bill. Join us on December2 in Cranberry Township, for a day of learning helpful informa-tion, meeting new oil and gas associates, and reconnecting withold friends.

PIOGA’s Tax Committee, in partnership with Arnett FosterToothman, PLLC, is sponsoring a special oil and gas tax and

accounting seminar from 9 a.m. to4 p.m. on Tuesday, December 2, atthe Regional Learning Alliance andConference Center in CranberryTownship. Registration and break-fast begin at 8 a.m.

Participants will receive a fullreview of all areas of federal andPennsylvania income tax,Pennsylvania production taxes, oiland gas accounting, revenue distri-bution, due diligence audits, jointoperating agreement and other con-tract management, and generalrecordkeeping in the oil and natural

gas industry. Also, you willhear more about thePennsylvania Department ofRevenue’s new focus on theoil and gas industry. The seminar will also be relevant tothose that have operations in Ohio and New York.

Each area to be reviewed will have a brief general dis-cussion of the basics and a review of selected, moreadvanced issues, all with special emphasis on ways yourcompany or your clients can save money and reduce taxdebt. A key part of the day will focus on how to reduceincome and estate tax burdens concerning the sale andtransfer of oil and gas leases.

Informational resources will be provided to each partici-pant that will include easy access to data such as industrydefinitions, accounting disclosures, income tax elections,

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February 2014 Page 9November 2014 Page 9

We can now confirm June 1 as the date of our2015 Summer Picnic and Golf Outing. The popularevent takes place at Wanango Golf Club in Reno,between Oil City and Franklin.

As we announced last month, PIOGA’s other2015 events include:

• Winter Meeting, February 24-25 at Seven Springs Mountain Resort, Champion.We expect to have our program finalized and registration available in late Novemberor early December.

• Pig Roast, Equipment Show and Seminar, July 28-29, Seven Springs.• 18th Annual Divot Diggers Golf Outing, August 26, Tam O’Shanter of

Pennsylvania, Hermitage.• Eastern Oil & Gas Conference and Trade Show, October 27-28, Monroeville

Conventional Center, Monroeville.Mark your calendar now and watch for details as they become available.

production tax filing updates and other useful industry informa-tion. PIOGA’s Tax Committee chair, Don Nestor from ArnettFoster Toothman, will be the lead presenter for this seminar andwill be assisted by Arnett Foster Toothman associates who spe-cialize in tax, accounting, revenue or audit areas of oil and natu-ral gas.

The session will be tailored to accommodate attendees of allexperience levels including accountants, attorneys, bankers, pro-ducers, service companies, and revenue personnel involved in theoil and gas industry, providing opportunity to present ideas, askquestions and network with other professionals who serve thisindustry.

The course will offer six hours of continuing education credits

for accountants and attorneys. The fee for this one-day semi-nar—including all handout materials, breakfast and lunch, andbeverages—is $250 per person for PIOGA members and $350for nonmembers.

To register, please complete the registration form that can befound online at www.pioga.org under PIOGA Events > Oil andGas Tax and Accounting Seminar.

For those requiring overnight accommodations, the Courtyardby Marriott has reserved a block of rooms at a special rate of$139.95 per night plus tax. To reserve your hotel room at thisrate, call 724-776-1900 by November 24 and mention thePIOGA room block. ■

2015 Wanangodate confirmed

Page 10 The PIOGA Press

DEP extends comment period on oil and gas violations policy

The Department of Environmental Protection has extendedthe public comment period until November 18 on its“Standards and Guidelines for Identifying, Tracking and

Resolving Oil and Gas Violations” (DEP ID: 550-3000-001). The policy provides direction to DEP staff in determining

enforcement actions the department will pursue to resolve viola-tions and achieve compliance with applicable laws and regula-tions related to conventional and unconventional oil and gasdevelopment (October PIOGA Press, page 10). The policy alsoprovides advisory information to the industry.

Once finalized, this document will replace the previous policy“Compliance Monitoring of Oil and Gas Wells and RelatedFacilities and Activities” that was issued in 2005. Revisions arenecessary to reflect changes to the organizational structure of thedepartment and update the policies and procedures to reflect cur-rent oil and gas development activities in Pennsylvania, DEPsays.

Speaking to the Pittsburgh Post-Gazette following a recentmeeting of DEP’s Citizens Advisory Council where the policywas discussed, council member and PIOGA director Burt Waitedescribed the proposed policy as “flawed.”

““I think there are provisions in it that allow the department tobe the policeman, the prosecutor and the judge without giving

operators an adequate opportunity to respond,” Waite told thenewspaper. In particular, he highlighted a provision that calls onoperators to automatically provide temporary replacement watersupplies even when the company can rebut the presumption thatits activities damaged the water.

“There’s got to be a way for an operator to take an actionwithout admitting guilt,” Waite said. “That’s not in there. In fact,the opposite is in there.”

Commenting. Written comments should be submitted toJohn Ryder, DEP Bureau of District and Oil and Gas Operations,Rachel Carson State Office Building, 15th Floor, P.O. Box 8765,Harrisburg, PA 17105-8467, or email them to ra-epoilandgas@pa.gov (with the subject line “Comments on Standards andGuidelines for Identifying, Tracking, and Resolving Violations”).

Questions regarding the proposed policy should be directed toRyder at 570-327-3636 or ra-epoilandgas@pa.gov. ■

Pennsylvania Supreme Courtoperating without tiebreaking vote

Governor Corbett allowed the deadline to pass for nomi-nating a Supreme Court candidate to replace JusticeSeamus McCaffery, who resigned October 27 in the

wake of the same email porn-sharing scandal that resulted in theresignation of Department of Environmental Protection SecretaryChris Abruzzo (October PIOGA Press, page 12).

Consequently, the Supreme Court, now with six justices, willoperate without a tiebreaking vote through at least the end of theyear.

According to a press report, the governor had until October 31to make a nomination and provide a statement of financial inter-est for a candidate in order for the Senate to hold a confirmationvote when it returns on November 12 for its last scheduled meet-ing before the two-year legislative session ends on the 30th.

Pennsylvania’s next governor, Tom Wolf, will select a replace-ment for McCaffery. A second vacancy will come when ChiefJustice Ronald Castille steps down at the end of the year due tothe mandatory retirement age. ■

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Look for future webinars that will help your com-pany maximize its marketing/web presence to gainmore sales.

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DEP unveils online wellcompletion report

As part of efforts by the Department of EnvironmentalProtection to improve consistency and increase trans-parency, the agency unveiled an online Well Completion

Report in mid-October. DEP’s Oil and Gas program continues work diligently to sup-

port new information technology projects, including streamliningelectronic review, upgrades to reporting systems and the modern-ization of forms and databases. The new online Well CompletionReport clearly communicates data entry expectations, ensuringmore complete reports from industry.

Use of the online Well Completion Report is voluntary at thistime; however, the expectation is that it will become a completeelectronic submission in the future.

Access to GreenPort is at www.depgreenport.state.pa.us.Those with questions on the use of the online Well CompletionReport should contact the eFACTs Helpdesk at 717-705-3768 orep-efactshelpdeskteam@pa.gov.

Recorded webinars of October 21 training sessions can befounded at www.portal.state.pa.us/portal/server.pt/community/Webinars/21506/Oil_and_Gas/1615487. ■

Use of Allegheny National Forest roads

Managers of northwest Pennsylvania’s AlleghenyNational Forest have provided clarification to oil andgas operators and their staff regarding the use of nor-

mally closed Forest Service roads during hunting season.An October 7 letter from Acting Forest Supervisor Robert

Lueckel explains that when a Forest Service road is gated orposted as closed for the general public, oil and gas operators mayuse them only to access their mineral holdings. Use of theseroads by motor vehicles is not permitted for hunting, gameretrieval or firewood gathering. Forest Service gates that arelocked closed must be re-closed and locked after entering andleaving the closed road.

The letter is available on our website at www.pioga.org/publi-cation_file/anf-road-use-letter.pdf. A list of roads open to huntingand game retrieval can be found on the ANF website,www.fs.usda.gov/allegheny. Look for the Motor Vehicle UseMap under Quick Links. ■

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Safety Committee CornerSafety Committee CornerConfined spaces:Who has the responsibility?By Melissa A. Heike, M.S. 3P Safety, LLC

Irecently participated in conducting an OSHA 5810 course fora dozen or so oil and gas attendees from both operator com-panies as well as service companies. Most of the class atten-

dees held safety and health supervisory duties for their respectivecompanies. One of the many topics we covered during the coursewas recognition of hazards associated with permit-required con-fined spaces.

My first surprise of that day was the number of attendees whowere not familiar with what constituted a confined space accord-ing to OSHA’s definition. The second surprise was that someattendees were under the impression that ISNetworld could givethem an exemption/variance from having to follow confinedspace requirements for work performed on oil and gas sites.

Unfortunately, ISNetworld holds no legal authority over whatis or is not a confined space. Even if the host employer hasgranted an exemption/variance for needing to “upload” a con-fined space program to satisfy their ISNetworld requirements,this does not remove the service company’s responsibility underOSHA to recognize and properly address confined space hazardsif they participate in this type of work. This includes having aproper written program, safe entry procedures, and all of theequipment, training and rescue capabilities that are in compli-ance with 29 CFR 1910.146.

The OSHA definition of a confined space is as follows:

A confined space: Is large enough for an employee to enterfully and perform assigned work; Is not designed for continuousoccupancy by the employee; and Has a limited or restrictedmeans of entry or exit. These spaces may include undergroundvaults, tanks, storage bins, pits and diked areas, vessels, silosand other similar areas. By definition, a permit-required con-fined space has one or more of these characteristics: Contains orhas the potential to contain a hazardous atmosphere; Contains amaterial with the potential to engulf someone who enters thespace; Has an internal configuration that might cause an entrantto be trapped or asphyxiated by inwardly converging walls or bya floor that slopes downward and tapers to a smaller cross sec-tion; and/or Contains any other recognized serious safety orhealth hazards.

A case study that was reviewed as part of the OSHA 5810course illustrated why the well cellar, an often overlooked space,is a permit-required confined space.

Three oil field workers died after breathing carbon monoxide(CO) gas in an oil well cellar. The incident occurred during per-foration, a procedure to create holes in the pipe in the well toallow the well to be used for water disposal. During the proce-dure, water began flowing from a valve in the well cellar. Noplan had been prepared for actions by the workers in the eventthat this occurred. The first worker (decedent #1), a 22 year-oldmale, entered the well cellar to turn off the valve. Upon enteringthe area, he collapsed and fell into the cellar. A second worker(decedent #2), a 24 year-old male entered the cellar to assistdecedent #1 but was also overcome and collapsed. A third work-er (decedent #3), a 26-year-old male, was overcome while kneel-ing near the opening to the cellar and also fell in.

A lack of understanding and appropriate respect for thepotential dangers associated with confined space work still existsin many industries. Host employers and contractors often fail tocomply with one or more provisions of OSHA’s permit-requiredconfined space standard. Hosts often fail to exercise theirauthority over contractors or, even worse, ignore situations wherea contractor demonstrates egregious at-risk behavior.

Many contractors lack an understanding of the complexnature of confined space hazards or demonstrated a consciousindifference toward the safety of their employees. Few possesssufficient experience, technical knowledge or skill necessary tomanage a confined spaces program.

Hosts and contractors must provide for each other’s safety.This duty is overlapping and interlocking because the host andtheir contractors are not only obligated to share specificinformation about confined space issues, but also mustcoordinate entry operations so that they don’t kill each other. Thespecific obligations of hosts and contractors are describedrespectively in 29 CFR 1910.146(c)(8) and (c)(9).

Host employer dutiesCareful reading of 29 CFR 1910.146(c)(8) shows that host

employers have six principal duties.Advise of permit spaces. Hosts must advise contractors of

any permit spaces on the host’s premises that the contractor’semployees may have reason to enter. Hosts need to be adequately

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familiar with what is or is not a (permit -required) confinedspace based on the OSHA definition as well as the 80-plus lettersof interpretation that have been issued by OSHA since theconfined space regulation was published in 1993.

Compel compliance. Hosts must compel compliance byinforming contractors that permit spaces can be entered onlyunder the auspices of a written program that meets therequirements of 29 CFR 1910.146(d). As explained above, thehost and contractor must also agree as to exactly what programwill be followed.

Inform of hazards. The host is arguably the mostknowledgeable party with respect to many aspects of the space.For example, it is reasonable to expect the host to know thingssuch as how the space is used, how often it is used, what it lastcontained, its volume and its dimensions. The host would also belikely to have access to piping and instrumentation drawings,material safety data sheets for substances found in the space andother similar safety-related information. Consequently, hosts areobligated to inform contractors of their previous experience withthe space and of any hazards that make the space a permit space.

Inform of precautions. Hosts must also inform contractors ofany entry precautions that have been implemented such asdraining, flushing and rinsing a space; isolating the space bydisconnecting lines, blanking or providing a double block-and-bleed system; locking out mechanical equipment; flagging orbarricading the work area; de-energizing electrical equipment;providing temporary lighting; purging and ventilating the space;and performing initial atmospheric testing.

Coordinate entry. Hosts must coordinate operations with thecontractor when host and contractor employees will be workingin or near permit spaces.

Conduct debriefing. At the conclusion of the entry, thecontractor must debrief the host regarding the permit programand any hazards confronted in the space during entry operations.

Contractor’s dutiesIn addition to complying with all of the other requirements

governing confined space entry, contractors must:• Obtain any available information regarding permit space

hazards and entry operations from the host;• Inform the host of the provisions of the contractor’s written

permit program if it is agreed that the contractor’s programwill be followed rather than the host’s;

• Coordinate entry operations when the host’s and thecontractor’s employees will be working in or near permitspaces; and

• Report hazards confronted or created during the entry to thehost, either at the debriefing session or when they occur.OSHA’s goal, as explained in the standard’s preamble, is to

provide all employers with the flexibility they need to effectivelymanage their confined space entries. Hosts and contractors,however, must cooperate with each other to identify andimplement a permit program that best suits their specific needs.

Although the final rule provides for this flexibility, hosts haveultimate control over their workplaces and should employspecific administrative procedures to ensure that contractorscomply with the regulations. While there are many things a hostcan do to evaluate its contractor’s performance, three of the moreimportant considerations are program review, verify trainingproficiency and monitor contractor activities. This may mean

going beyond the capabilities of a computer-based contractormonitoring service. Host employers might benefit from actuallyconducting their own audits of their contractors.

Host employers and contractors who work in or aroundconfined spaces have overlapping and interlockingresponsibilities toward each other. Each must communicateinformation concerning confined space entry operations to theother, each must consider and evaluate confined space hazards,and each must take an active role in controlling those hazards.

Failure to strictly abide by the contractor provisions outlinedin the OSHA confined space standard may not only lead toemployees being maimed, injured or killed, but also may resultin a costly litigation for both companies. ■

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Title due diligence: Conducting thetitle examination, reporting titledefects and establishing thebuyer’s pre-closing title objectionsThe following is the second in a series of articles prepared byBabst Calland regarding title due diligence

In last month’s article, we focused on the basics of title duediligence in transactions involving the purchase and sale ofoil and gas assets. In that article we discussed the quality of

title which the buyer is willing to accept and upon which thebuyer and seller have negotiated the transaction. In these transac-tions, it is common for the seller to warrant that title to the assetsis “defensible” as opposed to “marketable”—the former being aless stringent title standard that is not defeated by the possibilityof litigation and only requires the seller to provide title that couldbe successfully “defended” in the event of a post-closing lawsuit.We also discussed the typical purchase and sale agreement (PSA)terms and conditions that establish the standards of the transac-tion, including setting forth deadlines and procedures for analyz-ing title. Focusing on the “defensible title” standard, the title duediligence examination is usually limited in terms of what isexamined and how the information is presented to the buyer.

The focus of this article is on the process of the title due dili-gence examination—from defining the scope of the title exami-nation and conducting the actual examination to relaying the titledefects to the buyer and establishing any pre-closing objections.

I. Defining the scope of the title examination andconducting the examination

In order to confirm that the seller has title to the assets beingconveyed and to identify any issues that rise to the level of adefect as defined in the PSA, the buyer or its counsel must effec-tively organize and conduct a pre-closing title examination. Thetitle examination phase must balance the needs and goals of thebuyer with the size and complexity of the project. Because it canbe difficult to anticipate the size and complexity of any givenproject, it is crucial to limit the scope of the examination to onlythat which is necessary to identify defects and reduce the buyer’srisk. The abbreviated time frame between the signing of the PSAand closing of the deal (usually between 30 and 90 days) alsooperates as a constraint on the scope of the title due diligenceexamination, making it critical for the title examiner to addressthe most valuable assets first.

There are two key components to the title due diligence exam-ination—the “inside examination” and the “outside examina-tion.”1 The “inside examination” involves a review of the seller’sinternal title documents, which may include previously preparedtitle opinions, well reports, and agreements between the sellerand third parties, while the “outside examination” refers to areview of the official title records of the county where the assetsare located. Given the strict time constraints and volume of infor-mation that must be reviewed, the scope of the inside and outsidetitle examination is usually limited in terms of time and content.

A. Limited in time. Depending on what the inside examina-tion reveals, i.e. previously prepared title opinions by the seller’scounsel, the buyer may elect to limit the time period allotted forits outside examination or forego such examination altogether.

For example, if the seller already obtained atitle opinion covering a subject lease orproperty, depending on the quality of theopinion and the buyer’s willingness toaccept the corresponding risk, the buyermay only require a “bringdown,” or supple-mental abstract, to cover the time periodfrom the closing date of the original opinionto the present. If any curative requirementsfrom the original title opinion remain unsat-isfied, such defects will be incorporated intothe title defect report or acquisition titleopinion, if they also constitute a defectunder the terms of the PSA and pose anunacceptable risk to the buyer.

B. Limited in content. Another way thescope of the title due diligence examinationmay be limited is through the content of thematerials actually being examined. Forexample, if the buyer is purchasing olderleases that are held-by-production (HBP),the buyer’s top priority is likelyconfirming ownership of theleasehold estate as purported bythe seller. In this case, the buyermay not be concerned with fee ownership of the underlying oiland gas estate and/or who will be entitled to future royaltypayments under the leases. Therefore, the title examination maybe limited to only those documents affecting title to the oil and

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Page 18 The PIOGA Press

gas estate up to the date of the execution of the lease in order toconfirm the validity of the lease. If the lessor was, in fact, vestedwith the entire oil and gas estate at the time of the lease, theinside and outside examination may then be limited to only thosedocuments affecting leasehold title, i.e. assignments, recordedand unrecorded agreements, declarations of pooling andunitization, etc. from the date of the lease to the present, in orderto confirm the seller’s leasehold interest.

Because the scope of the title due diligence examination isusually limited in order to confirm that the buyer is receiving“defensible title,” it is recommended that buyers later obtain fulltitle opinions prior to operating under the leases or including thelands in a pool or unit.

II. Efficiently and effectively relaying title defects to thebuyer

In light of the time and content limitations inherent in the titledue diligence examination, it is important that the informationcollected during this process is provided to the buyer in the mostefficient and effective manner possible. For this reason, the infor-mation relating to each property should be presented in a conciseformat that focuses on the information that the buyer has deemedto be most important. The format of the report will depend onvarious factors, including the nature of the assets being acquired,the materials provided for review, time constraints of the projectand the terms of the PSA. Typically, these reports will be in theform of title defect reports or notices, which are standardizedforms, or acquisition title opinions, which are similar in formatto drilling title opinions, though very limited in scope. Thereports or opinions may be issued on a leasehold or property

basis, but the type of information contained therein will dependon the focus of the due diligence examination.

Regardless of the form, all title defect reports or acquisitiontitle opinions typically include the following information: (i)property identification, including tax parcel number, acreage andlocation; (ii) oil and gas ownership information (at least throughthe date of the subject lease); (iii) current leasehold information;(iv) the seller’s claimed interest as set forth in the PSA comparedto the seller’s actual interest of record; (v) any issues that rise tothe level of a “title defect” as defined in the PSA, and proposedcurative action; and (vi) the value of the property as set forth inthe PSA compared to the value of the property as confirmed bythe due diligence examination. In preparing a title defect reportor acquisition opinion, it is important to keep in mind that thegoal of the title due diligence process is to confirm the seller’srepresentations and the information that the buyer relied uponwhen making its offer.

The title defects uncovered during the due diligence examina-tion will depend largely on the type and location of the property.A due diligence examination of a newly leased property willlikely uncover more defects than that of a property that is heldby production (HBP) under an older lease, as many of thedefects may have been previously cured for the HBP property.However, older leases that are HBP may present different chal-lenges due to complex leasehold chains of title or litigationregarding the same. Additionally, properties subject to newerleases that were executed in favor of the seller and remain vestedsolely in the seller will likely reveal fewer leasehold defects thanproperties that were frequently transferred among different oper-ators.2 Finally, the location of the assets being sold may also bean indicator of the level of risk that a buyer should anticipate, assome counties have a longer history of oil and gas development,and therefore, operators are likely to encounter more title-relateddefects.

III. The buyer’s pre-closing objectionsOnce the buyer has received the title defect reports or acquisi-

tion title opinions, the buyer must compile a list of objections toprovide to the seller prior to closing. Although an issue may riseto the level of a title defect as agreed upon between the parties,the PSA will likely set forth a deductible, such as $15,000 foreach property, or a threshold, such as 8 percent of the total pur-chase price, before the asserted title defect requires curativeaction on the part of the seller or a reduction in the overall pur-chase price. Therefore, not all title defects uncovered during thetitle examination process must be addressed by the seller.However, it is common practice to deliver reports of all identifieddefects to the seller, regardless of value, as the PSA typicallyincludes a provision that any title defect not presented to the sell-er is deemed waived by the buyer.

In the final article of Babst Calland’s title due diligence series,we will address the seller’s response to the buyer’s pre-closingobjections and how the parties may handle any other closing orpost-closing issues. ■

1 Ira H. “Stormy” Bryant III, Due Diligence For Oil And Gas Properties: A Home

Study Course For Continuing Professional Development 30 (AAPL, 1994).

2 Randy Brown & Allen D. Cummings, Organizing and Executing Effective DueDiligence…Quickly! Oil and Gas Agreements: Sales and Financing, Paper No. 5,

4 (Rocky Mtn. Min. L. Fdn. 2006).

February 2014 Page 19November 2014 Page 19

Page 20 The PIOGA Press

Anadarko E&P Onshore LLC 5 10/2/14 081-21482* Lycoming Cogan House Twp10/3/14 081-21440* Lycoming Cogan House Twp10/9/14 081-21430* Lycoming Cogan House Twp10/8/14 081-21533* Lycoming Cummings Twp10/21/14 081-21532* Lycoming Cummings Twp

Autumn Ridge Energy LLC 2 10/9/14 123-47502 Warren Mead Twp10/14/14 123-47501 Warren Mead Twp

Mark F Batista 3 10/13/14 083-56386 McKean Wetmore Twp10/15/14 083-56385 McKean Wetmore Twp10/20/14 083-56384 McKean Wetmore Twp

Bittinger Drilling / LA Bittinger 1 10/21/14 005-31220 Armstrong Wayne TwpBull Run Energy LLC 3 10/13/14 123-47639 Warren Sugar Grove Twp

10/20/14 123-47634 Warren Sugar Grove Twp10/23/14 123-47635 Warren Sugar Grove Twp

Cabot Oil & Gas Corp 2 10/9/14 115-21826* Susquehanna Brooklyn Twp10/9/14 115-21822* Susquehanna Brooklyn Twp

Cameron Energy Co 2 10/27/14 123-47722 Warren Sheffield Twp10/30/14 123-47724 Warren Sheffield Twp

Campbell Oil & Gas Inc 1 10/24/14 129-28868* Westmoreland Derry TwpCatalyst Energy Inc 10 10/10/14 083-56416 McKean Eldred Twp

10/1/14 083-56338 McKean Kane Boro10/6/14 083-56337 McKean Kane Boro10/29/14 121-45531 Venango Cranberry Twp10/7/14 123-47650 Warren Sheffield Twp10/9/14 123-47647 Warren Sheffield Twp10/14/14 123-47649 Warren Sheffield Twp10/20/14 123-47648 Warren Sheffield Twp10/23/14 123-47646 Warren Sheffield Twp10/30/14 123-47651 Warren Sheffield Twp

Chautauqua Energy Inc 3 10/1/14 123-47597 Warren Sugar Grove Twp10/6/14 123-47598 Warren Sugar Grove Twp10/8/14 123-47593 Warren Sugar Grove Twp

Chesapeake Appalachia LLC 12 10/13/14 015-23135* Bradford Monroe Twp10/3/14 115-21851* Susquehanna Auburn Twp10/3/14 115-21854* Susquehanna Auburn Twp10/3/14 115-21853* Susquehanna Auburn Twp10/3/14 115-21852* Susquehanna Auburn Twp10/7/14 131-20467* Wyoming Meshoppen Twp10/7/14 131-20468* Wyoming Meshoppen Twp10/7/14 131-20465* Wyoming Meshoppen Twp10/27/14 131-20439* Wyoming Washington Twp10/27/14 131-20440* Wyoming Washington Twp10/27/14 131-20438* Wyoming Washington Twp10/27/14 131-20466* Wyoming Washington Twp

Chief Oil & Gas LLC 7 10/13/14 113-20289* Sullivan Elkland Twp10/16/14 113-20304* Sullivan Elkland Twp10/16/14 113-20291* Sullivan Elkland Twp10/17/14 113-20305* Sullivan Elkland Twp10/18/14 113-20306* Sullivan Elkland Twp10/19/14 113-20307* Sullivan Elkland Twp10/20/14 113-20308* Sullivan Elkland Twp

CNX Gas Co LLC 12 10/18/14 059-26667* Greene Morris Twp10/18/14 059-26668* Greene Morris Twp10/3/14 125-27377* Washington East Finley Twp10/3/14 125-27443* Washington East Finley Twp10/3/14 125-27444* Washington East Finley Twp10/3/14 125-27378* Washington East Finley Twp10/3/14 125-27420* Washington East Finley Twp10/3/14 125-27418* Washington East Finley Twp10/3/14 125-27455* Washington East Finley Twp10/3/14 125-27469* Washington East Finley Twp10/3/14 125-27470* Washington East Finley Twp10/4/14 125-27376* Washington East Finley Twp

Curtis Oil Inc 4 10/16/14 083-56365 McKean Lafayette Twp

Spud Report:October

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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10/21/14 083-56366 McKean Lafayette Twp10/24/14 083-56364 McKean Lafayette Twp10/29/14 083-56363 McKean Lafayette Twp

D&S Energy Corp 2 10/27/14 083-56606 McKean Hamilton Twp10/30/14 083-56605 McKean Hamilton Twp

Devonian Resources Inc 3 10/4/14 053-30516 Forest Harmony Twp10/10/14 053-30517 Forest Harmony Twp10/17/14 053-30513 Forest Harmony Twp

Enervest Opr LLC 1 10/1/14 083-56506 McKean Lafayette TwpEQT Production Co 15 10/18/14 059-26607* Greene Morgan Twp

10/18/14 059-26609* Greene Morgan Twp10/19/14 059-26602* Greene Morgan Twp10/26/14 059-26600* Greene Morgan Twp10/26/14 059-26601* Greene Morgan Twp10/26/14 059-26606* Greene Morgan Twp10/15/14 059-26635* Greene Morris Twp10/28/14 059-26678* Greene Washington Twp10/28/14 059-26679* Greene Washington Twp10/28/14 059-26680* Greene Washington Twp10/28/14 059-26681* Greene Washington Twp10/29/14 059-26682* Greene Washington Twp10/29/14 059-26683* Greene Washington Twp10/29/14 059-26684* Greene Washington Twp10/29/14 059-26685* Greene Washington Twp

Hilcorp Energy Co 4 10/1/14 073-20489* Lawrence Mahoning Twp10/1/14 073-20490* Lawrence Mahoning Twp10/22/14 073-20487* Lawrence Mahoning Twp10/28/14 073-20494* Lawrence Mahoning Twp

Howard Drilling Inc 7 10/24/14 047-24854 Elk Jones Twp10/9/14 121-45670 Venango Cranberry Twp10/14/14 121-45672 Venango Cranberry Twp10/15/14 121-45674 Venango Cranberry Twp10/17/14 121-45675 Venango Cranberry Twp10/21/14 121-45673 Venango Cranberry Twp10/24/14 121-45669 Venango Cranberry Twp

Inflection Energy (PA) LLC 6 10/13/14 081-21474* Lycoming Eldred Twp10/13/14 081-21501* Lycoming Eldred Twp10/17/14 081-21461* Lycoming Eldred Twp10/17/14 081-21470* Lycoming Eldred Twp10/18/14 081-21471* Lycoming Eldred Twp10/18/14 081-21472* Lycoming Eldred Twp

Jett Oil LLC 3 10/1/14 123-47586 Warren Pleasant Twp

10/6/14 123-47486 Warren Pleasant Twp10/8/14 123-47485 Warren Pleasant Twp

Kylander Oil Inc 6 10/2/14 123-47626 Warren Glade Twp10/10/14 123-47628 Warren Glade Twp10/16/14 123-47629 Warren Glade Twp10/22/14 123-47627 Warren Glade Twp10/25/14 123-47631 Warren Glade Twp10/30/14 123-47630 Warren Glade Twp

Lendrum Energy LLC 5 10/1/14 053-30679 Forest Harmony Twp10/8/14 053-30678 Forest Harmony Twp10/14/14 053-30677 Forest Harmony Twp10/16/14 053-30676 Forest Harmony Twp10/31/14 121-45726 Venango Pinegrove Twp

Marco Drilling Inc 1 10/1/14 003-22304 Allegheny Harmar TwpMead Oil LLC 2 10/6/14 123-47661 Warren Cherry Grove Twp

10/23/14 123-47662 Warren Cherry Grove TwpMissing Moon Oil Inc 5 10/1/14 123-47606 Warren Mead Twp

10/7/14 123-47605 Warren Mead Twp10/13/14 123-47604 Warren Mead Twp10/16/14 123-47603 Warren Mead Twp10/20/14 123-47602 Warren Mead Twp

MSL Oil & Gas Corp 1 10/3/14 083-56036 McKean Wetmore TwpNoble Energy Inc 5 10/27/14 125-27358* Washington West Finley Twp

10/27/14 125-27326* Washington West Finley Twp10/27/14 125-27359* Washington West Finley Twp10/27/14 125-27360* Washington West Finley Twp10/27/14 125-27361* Washington West Finley Twp

Northwestern Well Svc Inc 3 10/7/14 053-30525 Forest Jenks Twp10/20/14 053-30523 Forest Jenks Twp10/30/14 053-30522 Forest Jenks Twp

Pecora Enterprises 1 10/2/14 083-56585 McKean Lafayette TwpRange Resources Appalachia 35 10/6/14 027-21709* Centre Snow Shoe Twp

10/21/14 081-21301* Lycoming Anthony Twp10/22/14 081-21299* Lycoming Cogan House Twp10/23/14 081-21298* Lycoming Cogan House Twp10/23/14 081-21300* Lycoming Cogan House Twp10/26/14 081-21475* Lycoming Cogan House Twp10/26/14 081-21476* Lycoming Cogan House Twp10/25/14 081-21478* Lycoming Lewis Twp10/25/14 081-21479* Lycoming Lewis Twp10/25/14 081-21480* Lycoming Lewis Twp10/25/14 081-21481* Lycoming Lewis Twp

OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY

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10/28/14 125-27264* Washington Amwell Twp10/28/14 125-27266* Washington Amwell Twp10/28/14 125-27267* Washington Amwell Twp10/28/14 125-27268* Washington Amwell Twp10/6/14 125-27306* Washington Chartiers Twp10/7/14 125-27459* Washington Chartiers Twp10/7/14 125-27308* Washington Chartiers Twp10/8/14 125-27460* Washington Chartiers Twp10/8/14 125-27307* Washington Chartiers Twp10/14/14 125-27351* Washington N Strabane Twp10/14/14 125-27423* Washington N Strabane Twp10/14/14 125-27386* Washington N Strabane Twp10/14/14 125-27367* Washington N Strabane Twp10/14/14 125-27424* Washington N Strabane Twp10/1/14 125-27199* Washington Robinson Twp10/2/14 125-27450* Washington Robinson Twp10/3/14 125-27422* Washington Robinson Twp10/4/14 125-26959* Washington Robinson Twp10/6/14 125-26962* Washington Robinson Twp10/31/14 125-27441* Washington Robinson Twp10/31/14 125-27369* Washington Robinson Twp10/31/14 125-27370* Washington Robinson Twp10/31/14 125-27371* Washington Robinson Twp

10/31/14 125-27372* Washington Robinson TwpRE Gas Dev LLC 1 10/1/14 019-22295* Butler Connoquenessing Rice Drilling B LLC 3 10/13/14 059-26664* Greene Aleppo Twp

10/13/14 059-26662* Greene Aleppo Twp10/13/14 059-26663* Greene Aleppo Twp

Snyder Bros Inc 6 10/6/14 005-31213* Armstrong East Franklin Twp10/7/14 005-31214* Armstrong East Franklin Twp10/8/14 005-31215* Armstrong East Franklin Twp10/2/14 047-24802 Elk Jones Twp10/8/14 047-24801 Elk Jones Twp10/13/14 047-24800 Elk Jones Twp

Southwestern Energy Prod Co 7 10/13/14 115-21787* Susquehanna Jackson Twp10/14/14 115-21562* Susquehanna Jackson Twp10/16/14 115-21836* Susquehanna Jackson Twp10/8/14 115-21829* Susquehanna New Milford Twp10/22/14 115-21550* Susquehanna New Milford Twp10/22/14 115-21717* Susquehanna New Milford Twp10/7/14 115-21788* Susquehanna Oakland Twp

Stateside Energy Group LLC 5 10/7/14 083-56600 McKean Lafayette Twp10/9/14 083-56601 McKean Lafayette Twp10/13/14 083-56602 McKean Lafayette Twp10/15/14 083-56603 McKean Lafayette Twp10/20/14 083-56604 McKean Lafayette Twp

OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY

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By Joyce TurkalyDirector, Natural Gas Market Development

Clean Fuels/Clean Rivers Consortium is an initiative tobuild a natural gas marine corridor that extends from theMorgantown, West Virginia, area through Pennsylvania

and down to the Ohio River to Huntington, West Virginia. Themarine industry is addressing the EPA compliance rules, andLNG offers this segment an alternative fuel with significantreductions in particulate matter and GHG emissions. The ulti-mate goal will be to expand the potential of natural gas as areplacement fuel for diesel that would encompass about 12,000navigable miles of the inland waterway system. Life CycleEngineering has been retained by the Port of PittsburghCommission to conduct a feasibility study on LNG for tug andtow boats.

The LNG Marine Study will research fuel conversions onmarine vessels by addressing retrofitting, fueling locations andfuel storage. Tom Risley from Life Cycle Engineering providedadditional information on the project and its relationship toClean Fuels/Clean Rivers, which is looking at how to implementthe use of natural gas on the rivers. Approximately 3,900 tow andtug boats run year round from Pittsburgh’s waterways to eitherKentucky or Mississippi. A 150-ton tug can burn more than400,000 gallons of fuel a year.

Design of the inland towing vessels is underway by BristolHarbor Group. As a designer, Greg Beers, President, spoke to afew of the design challenges with probably the most challengingbeing fuel storage: an LNG storage tank needs to hold 1.7 gal-

lons per the same diesel gallon equivalent, or DGE, in order toget the same Btu. He noted the limited space in the hull of a ves-sel when placing cylinders in what is essentially a square or rec-tangular configuration, as well as restrictions of cylinder place-ment, which cannot be under any accommodations. Not impossi-ble he said, just challenging.

Robert Petsinger, CEO of Marcellus Marketing Inc. and oneof the key stakeholders in the LNG fueling infrastructure projectalong the Ohio River, educated the audience on LNG’s early role

The RiverQuest served as the venue for the stakeholder kickoffmeeting held October 23 with a follow-up forum held at CCAC,West Campus the following day.

LNG for Marine comes to the Three Rivers

Page 28 The PIOGA Press

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as peak shaving plants as well as his involvement in testing vehi-cle applications from 1960 to the present time. MarcellusMarketing Inc. stated intentions to build a 600,000 gallon/dayLNG plant on the south bank of the Ohio River with hopes tobuild out even more infrastructure to serve the marine vesselsoperating on the Allegheny, Monongahela and Ohio rivers.

Most marine vessels operate on liquid petroleum fuel—eithermarine distillate or marine residual oil. Worldwide there arefewer than 50 vessels in service or on order that operate on natu-ral gas; the majority of these are car and passenger ferries.Virtually all of them operate in Norway or the Baltic or NorthSea. ■

PIOGA members speak to project developmentBy Joyce TurkalyDirector, Natural Gas Market Development

Both Tony Cox of UGI Energy Services, LLC and DavidKailbourne of REVLNG, LLC (pictured at right) spokeon different panels at the Penn State Utilization

Conference October 14-15. Cox highlighted the Penn East pipeline project as part of the

Natural Gas Supply and Infrastructure Panel on day one. This105-mile, 30-inch diameter pipeline project will originate in theMarcellus region of Luzerne County and serve customers inPennsylvania and southern New Jersey. Permitting and regulato-ry approvals will take two years, with an expected constructiondate of 2017. UGI Energy Services, Inc. would build and operatethe pipeline. Affiliates of South Jersey Gas, New Jersey Naturaland Elizabethtown Gas are also investors in this project.

Speaking to the challenges of building infrastructure, Coxnoted, “Many people don’t fully appreciate what it takes for nat-ural gas to show up in their furnace or electricity to power theirgadgets.”

Kailbourne, CEO, REV LNG, followed on day one in a sepa-

rate panel addressing virtual pipelines. Familiarizing the audi-ence with REV, David’s company walks the talk. REV LNG iscurrently the third-largest truck fleet on the eastern seaboard. Hecomments on the Ulysses, Pennsylvania, location as being in themiddle of nowhere, yet the middle of somewhere—pointing outthat the 500-mile radius of distribution positions them as aturnkey provider of LNG.

February 2014 Page 29November 2014 Page 29

There are currently 3.2 million class 8 trucks on the roadtoday. 60 percent of this market represents trucks that have areturn-to-base or depot operation. Along with fueling class 8s,David’s company can supply LNG for high horsepower applica-tions, where the market is currently growing the fastest.

Speaking to the market share, Kailbourne observed,“Pennsylvania is a very large market for LNG.”

Immediately following the Utilization Conference was thePlatt’s Appalachian Oil and Gas Conference held in Pittsburgh.Producers spoke to their drilling programs and production statsand commonly referred to increases in drilling efficiencies show-ing a six-fold improvement in estimated ultimate recovery, orEURs, since 2010. Each speaker addressed acreage in either theMarcellus or Utica plays, showed maps of wet versus dry andfurther broke the Marcellus into either Marcellus North (meaningthe dry gas in eastern Pennsylvania) or Marcellus South (to

include the western side of the state into West Virginia). Those ofus who rely on Energy Information Administration data for pro-duction estimates were quite surprised when producers spokevery candidly about seeing 30 Bcf/day out of this region as soonas 2020, with some estimates as high as 35 Bcf/day by 2025.

PIOGA member and Spectra Energy General Manager ofBusiness Development Bob Riga (shown at left) spoke on theincreased need to build pipeline to markets in the Northeast,South and Gulf Coast. From the Appalachian supply projectsBob highlighted, the NEXUS project is the largest with 1.5Bcf/day of capacity to bring both Marcellus and Utica gas toLDCs, power generators, and industrial users in Ohio, Michigan,Chicago and Ontario; currently the project is 80 percent sub-scribed with an estimated in service day of late 2017. This proj-ect is a 250-mile, 42-inch greenfield pipe that will take gas atKensington, Ohio, just over the Pennsylvania border, to DTEEnergy’s line southwest of Detroit. ■

Page 30 The PIOGA Press

➤ On October 22, a dozen or so small- to medium-sized manu-facturing companies interested in becoming suppliers to the shaleenergy sector were given an in-depth slide presentation of theindustry at the Catalyst Connection offices along TechnologyDrive in Pittsburgh. The one-day workshop titled “Shale GasCollaborative” was jointly presented by Penn State’s MarcellusCenter for Outreach and Research (MCOR) and CatalystConnection as a way to teach manufacturers about how to growtheir existing products and services as they consider the naturalgas industry a potential “new” customer. Matt Henderson, MCORShale Gas Asset Manager, provided the morning content by pre-senting some helpful slides highlighting the oil and gas industryas well trends in the midstream sector. Erica Frischmann,Catalyst Connection Senior Consultant, Business GrowthServices, led the afternoon session in interactive discussions thathelped companies assess opportunities in action planning andcreating a value proposition.

➤ Fort Indiantown Gap is a National Guard training facility locat-ed in Lebanon County that is used year round for various militarypersonnel, law enforcement agents and civilians. It is also hometo the Pennsylvania Department of Military and GovernmentAffairs. On October 29, PIOGA’s Kevin Moody and Joyce Turkalywere hosted by Robert Edwards, Chief of Planning andOperations for a two-hour tour of the 17,000 acre facility (2,600acres of which would be considered urbanized). Fort IndiantownGap has recently completed Phase 4 of a four-part project thatbegan in 2010 to convert the entire facility from propane and fueloil to natural gas. UGI has laid more than 13 miles of pipe to

PIOGA staff partnered again this fall with our printing contractingPrint King to collect food to be donated to North Hills CommunityOutreach. NHCO operates two food pantries in the northern sub-urbs of Pittsburgh. On average, its pantries provide healthy foodto nearly 500 families each month. By the end of our collectionperiod, the PIOGA staff had contributed noticeably more fooditems than last year. We are proud to be able to support this inter-faith organization as its addresses the needs of people in crisis,hardship and poverty.

Where in the World is the PIOGA Outreach Team?

Helping the needy in our neighborhood

November 2014 Page 31

For the second year, PIOGA was the lead sponsor for the Sinnemahone Trail Run, held on October 18. The run begins and ends in thepicturesque town of Emporium, the county seat of Cameron County. It consists of either the 25K or 50K or a two-person relay event forthe 50K race. The race this year benefited West Creek Rails to Trails, with a ribbon-cutting ceremony in the afternoon to commemoratethe opening of the trail. PIOGA continues to support events that encourage people to enjoy the natural resources found in Penn sylvania.MEET-U volunteer Adam Peterson (above right) had a respectable finish in the 25k as third-place overall and second male.

connect about 200 buildings as part of this project. Edwards dis-cussed with us the numerous maintenance and environmentalcosts and benefits of this project, as well as the economic pay-

back of the project being ahead of schedule. FITG is realizing anenergy cost savings of 55 percent.

Page 32 The PIOGA Press

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resources, with the result in this case being that local opponentscould not employ a referendum to bar a project. Ballard Spahrargued before the court on behalf of waste-to-energy facilitydeveloper and client Delta Thermo Energy (DTE).

Last year, opponents of the DTE project petitioned to have anew municipal air ordinance presented to voters for approval byreferendum in the November elections. The proposed ordinanceincluded compliance requirements that conflicted with therequirements and procedures established by the PennsylvaniaDepartment of Environmental Protection (DEP) under thePennsylvania Air Pollution Control Act (APCA), which couldhave derailed the project.

As the entity responsible for preparing the ballots for upcom-ing Allentown elections, the Board of Elections refused to putthe ordinance on the ballot by finding that such action was pre-empted by the APCA. The project opponents filed a mandamusaction in the court of common pleas to compel the board to printthe ordinance on the ballot, and DTE (whose project was anintended target of the proposed ordinance) intervened.

In their complaint, the plaintiffs initially argued that theboard’s action violated the APCA and state election law (argu-ments which the court later rejected). However, in the wake ofthe Robinson decision, the plaintiffs added a constitutional chal-lenge by moving for summary judgment on the basis that theboard had failed to uphold its Article I, Section 27 role as trusteeof the environmental trust when it declined to allow the voter ref-erendum on the ordinance.

Ballard Spahr lawyers argued on behalf of DTE that theboard’s action was not only consistent with Article I, Section 27,but that for the board to have done otherwise would have been

Robinson Township challenge towaste-to-energy facility turned back

Although some have suggested that Robinson Township, etal. v. Commonwealth, a 2013 Pennsylvania SupremeCourt ruling that struck down key provisions of a state

law regulating the oil and gas industry, could impair develop-ment in the Commonwealth, Ballard Spahr lawyers have recentlydemonstrated otherwise. In an opinion issued last month by theLehigh County Court of Common Pleas in Fegley v. LehighCounty Board of Elections, the court agreed that RobinsonTownship may be used as a shield for environmentally soundprojects facing challenges from local interest groups.

The court applied Robinson Township’s plurality holding thatArticle I, Section 27 of the Pennsylvania Constitution requiresthat decisions of the state and local governments be guided bythe government’s role as trustee of the state’s environmental

February 2014 Page 33November 2014 Page 33

unconstitutional. DTE cross-moved for summary judgment onthe basis of Robinson, arguing that the City of Allentown couldnot constitutionally subject such an environmental ordinance to apopular vote, thereby abdicating the government’s role as trusteeof the environmental trust and turning that role over to a subsetof the beneficiaries of that trust.

The court rejected the plaintiffs’ constitutional argument,adopted DTE’s position and entered judgment in DTE’s favor.The court held that “Robinson makes it clear that the reliefPlaintiffs seek would unconstitutionally deprive the PennsylvaniaDepartment of Environmental Protection and the City of the abil-ity to fulfill their duties as a trustee of the environmentalresources of the Commonwealth, as required under Article I § 27of the PA Constitution.” Moreover, the court rejected the plain-tiffs’ assertions regarding the environmental impact of DTE’sproject, noting that such assertions were not corroborated by anyevidence and were contrary to evidence submitted by DTE show-ing the extensive efforts by the DEP, the city, and the courts toaccount for the environmental costs and benefits of the project inlight of the government’s Article I, Section 27 duties.

This decision suggests not only that a developer can defeat anenvironmentally-oriented Robinson challenge, but that Article I,Section 27 can serve as a shield for developers seeking certaintythat permitting from the DEP or other Commonwealth agencieswill not be undercut by local interest groups seeking to derailsuch development. Given the court’s apparent reliance on evi-dence showing the DEP’s extensive consideration of the environ-mental costs and benefits of the project during the permittingprocess, developers seeking to minimize the impact of Robinsonwould do well to work with state agencies or localities up front

to assure that the decision-makers take environmental impactsinto consideration and document their consideration of thoseissues under Article I, Section 27. In the right circumstances, anappropriate record can help the developer defeat communityopposition to a project that is based on unsupported concerns. ■

Cal U offers onlineland-management programs

California University of Pennsylvania has begun offeringtwo online land-management programs that are designedto prepare students for a variety of positions in the indus-

try, such as staff landman, operations landman, in-house energycompany support staff, third-party contractor support staff, prop-erty manager, leasing manager and title abstractor. Classes forthe winter term begin December 15.

The Land Management Certificate is an accelerated programfor students who have at least a high school diploma and areseeking additional education, experience and credentials to enterinto the land management field. The program consists of 30 cred-its and may be completed in five semesters.

The second program is the bachelor of arts in jurisprudence:land management concentration, which is a solution for thosewho want to pursue a bachelor’s degree but are unable to attenda traditional on-campus program. The degree may be completedin four to six semesters, depending on the number of credit hoursearned prior to admission to the program.

For additional information, visit www.calu.edu/golandman-agement, or call 866-595-6348. ■

Page 34 The PIOGA Press

Lease termination: Continued from page 1

addressed below.The act requires an oil and natural gas producer (lessee) to

deliver a “surrender document” to the owner of the oil and gas(lessor) not more than 30 days after the termination, expirationor cancellation of oil and gas lease, which the lessor can thenrecord. This is the “general rule” set forth in Section 3(a) of theact. However, the surrender document is not required “if the les-see and lessor have expressed an interest in writing to each otherof an intention to renew the oil or natural gas lease or to negoti-ate a new oil or natural gas lease.” Section 3(c). If theproducer/lessee fails to deliver timely notice, thelandowner/lessor is empowered by the statute to serve a “Noticeof Termination” on the lessee. Failure of the lessee to respondwith a challenge within 30 days of receipt of this notice permitsthe lessor to record an “Affidavit of Termination, Expiration orCancellation” with the county recorder’s office.

However, there is an inconsistency between the “general rule”and one statement required to be included in the lessor’s “Noticeof Termination”:

If the surrender document is not received by the dateof termination, expiration or cancellation, the lessorhas a right to record an affidavit of termination, expi-ration or cancellation of an oil or natural gas lease inthe office of the recorder of deeds for the county inwhich the land is situated. Section 4(a)(1)(iv).

The statement of this lessor right to record an “Affidavit ofTermination, Expiration or Cancellation” if the surrender docu-ment is not received by the date of the event is inconsistent withthe general rule giving the lessee up to 30 days after the date ofthe event to deliver the surrender document as well as Sections4(a) (when lessor may send notice to lessee), 4(c) (time for les-see to challenge notice), 4(d) (effect of no lessee challenge) and5(b) (duty to record affidavit in compliance with statutoryrequirements). In short, there is no provision of the Act thatgrants lessors the right required by Section 4(a)(1)(iv) to be stat-ed in the lessor “Notice of Termination”. As the overriding pur-pose of all statutory interpretation is to give effect to the intent ofthe General Assembly as expressed in the plain words used in thestatute, 2 Pa.C.S. § 1921(a), PIOGA’s position is that the state-ment of the lessor right to record in Section 4(a)(1)(iv) does notactually grant that right to a lessor. Accordingly, alandowner/lessor has no right to record an “Affidavit ofTermination, Expiration or Cancellation” within the 30 day peri-od Section 3(a) provides for a producer/lessee to deliver the sur-render document.

While the framework of the act is similar to Ohio’s lease for-feiture statute, ORC § 5301.332, there are several salient differ-ences between the provisions. Noticeably, the amount of timeallotted a producer to respond to notice is dramatically cut (Ohioprovides producers 60 days to Pennsylvania’s 30 days).Particularly problematic, Act 152 does not require an explanationof the cause of forfeiture in the “Affidavit of Termination,Expiration or Cancellation” that is to be recorded, or a back ref-erence to either the lease of record or the “Notice ofTermination,” which does require the lessor to state the basis forthe lessor’s belief that the lease has terminated, expired or beencancelled. Providing this information is particularly importantwhen a lessor gives notice regarding a lease that a producerwould wish to defend. This information should also be requiredto be stated in the affidavit recorded by a lessor, in part becausethe lessee’s surrender document requires that information, butalso in case there are problems with the lessor’s “Notice ofTermination.” More importantly, Act 152 lacks crucial detail asto the effect of a recorded “Affidavit of Termination, Expirationor Cancellation.” This critical omission leaves operators andlandowners alike in doubt as to its ultimate bearing on recordtitle.

How it affects you:• Duty to release leases. Producers are now responsible for

closely monitoring expiration of the primary terms of their leasesand drafting, notifying and delivering surrender documents tolessors on any lease that does not continue to be held by produc-tion. Specific language requirements for surrender documents aredetailed within the act.

• Notice of termination. Producers have a narrow opportunityin which to respond to any Notice of Termination received froma lessor, or their heirs, successors or assigns. If producers fail toidentify a lease held by production and properly challenge theNotice, they risk the lessor’s filing an Affidavit of Terminationagainst the lease.

• Assignment. Producers operating with working rightsobtained through Assignment must work closely with the origi-nal lessee and the lessor to assure timely notification to all neces-sary parties.

• Increased litigation risk. Producers could face increasinglitigation risk if a lessor records a preemptive and unwarrantedAffidavit of Termination, or records without observing properNotice requirements.

• Best practices. Producers should create a protocol for eval-uating and timely responding to a Notice of Termination, as wellas draft standard documents compliant with statutory require-ments for lease surrender and challenge of Notice.

• Unanswered questions. It is essential for producers to pre-pare statutorily compliant surrender, challenge and supportingdocuments, as well as a carefully crafted protocol to assure aminimization of lost leases and associated liability as this legisla-tion takes effect. Qualified legal assistance may be necessary, notonly to draft documents that take into consideration the unspeci-fied and uncertain results of this law but also to address novelsituations as they arise in the relationship between lessor, lesseeand assigned parties.

For more information about HB 402 and other legislation, seepage 7. ■

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Natural Gas Futures Closing PricesAs of November 6

Month PriceDecember 4.429January 2015 4.500February 4.422March 4.302April 3.830May 3.795June 3.804July 3.816August 3.829September 3.826October 3.878November 3.949

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 Direct Energy Business, 304-464-1176

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Arthur J. Gallagher & Co.Four Gateway Center, 8th Floor, 444 Liberty Ave., Pittsburgh, PA15222412-929-0380www.ajg.comProfessional Firm

McGill, Power, Bell & Associates, LLP623 State Street, Meadville, PA 16335814-724-5890www.mpb.cpaProfessional Firm

QPS Engineering, LLC1300 Commerce Drive, Coraopolis, PA 15108412-424-8904www.qpsepc.comProfessional Firm

S&T Evergreen Insurance, LLC196 Industrial Park Road, Ebensburg, PA 15931814-243-1988www.st.evergreen.comProfessional Firm

Have industry colleagues or vendors you thinkshould be PIOGA members? Encourage them toclick on “Join PIOGA” at the top of ourhomepage, www.pioga.org. There’s strength innumbers!

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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.Thomas M. Bartos, ABARTA EnergyStanley J. Berdell, BLX, Inc.Rob Boulware, Seneca Resources CorporationCarl Carlson, Range Resources - Appalachia, LLCMike 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, LLCJoy Ruff, Dawood Engineering, Inc.Stephen Rupert, Texas Keystone, Inc.Jake Stilley, Patriot Exploration CorporationBurt 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 Energy

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 (lou@pioga.org), President & Executive DirectorKevin Moody (kevin@pioga.org), Vice President & General Counsel Debbie Oyler (debbie@pioga.org), Director of Member ServicesMatt Benson (matt@pioga.org), Director of Internal Communications

(also newsletter advertising & editorial)Joyce Turkaly (joyce@pioga.org), Director of Natural Gas Market

DevelopmentDan Weaver (dan@pioga.org), Public Outreach DirectorDanielle Boston (danielle@pioga.org), Director of AdministrationChris Lisle (chris@pioga.org), Manager of Finance Tracy Koval (tracy@pioga.org), 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 39November 2014 Page 39

PIOGA EventsPIOGA Winter Meeting

February 24-24, Seven Springs Mountain Resort, ChampionInfo: www.pioga.org/events/category/pioga-events

PIOGA Summer Picnic & Golf OutingJune 1 , Wanango Golf Club, RenoInfo: www.pioga.org/events/category/pioga-events

PIOGA Pig Roast, Equipment Show & SeminarJuly 28-29, Seven Springs Mountain Resort, ChampionInfo: www.pioga.org/events/category/pioga-events

18th Annual Divot Diggers Golf OutingAugust 26, Tam O’Shanter of Pennsylvania, HermitageInfo: www.pioga.org/events/category/pioga-events

Eastern Oil & Gas Conference and Trade ShowOctober 27-28, Monroeville Convention Center, MonroevilleInfo: www.pioga.org/events/category/pioga-events

Industry EventsIOGANY Annual Meeting

November 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 Expo and Techical ConferenceDecember 2-4, IX Center, Cleveland, OHInfo: ooga.org/events

OOGA Winter MeetingMarch 11-13, Hilton Columbus at Easton, OHInfo: ooga.org/events

IOGANY Summer MeetingJuly 8-9, Peek'n Peak Resort & Conference Center,Findley Lake, NYInfo: www.iogany.org/events.php

Calendar of Events

➤ More events: www.pioga.org

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