the pioga press, september 2014
DESCRIPTION
The monthly journal of the Pennsylvania Independent Oil & Gas AssociationTRANSCRIPT
September 2014 • Issue 53
The
PIOGA pressThe monthly newsletter of the Pennsylvania Independent Oil & Gas Association
(Continues on page 5)
(Continues on page 2)
®
The Commonwealth Court was to tidy up the remaininglegal questions related to Act 13 of 2012 in the RobinsonTownship V. Commonwealth case, but now attention is
back to the Pennsylvania Supreme Court as the PennsylvaniaPublic Utility Commission and the municipality plaintiffs haveappealed various parts of the Commonwealth Court’s July 17 rul-ings.
When the Supreme Court last December struck down the por-tions of Act 13 establishing uniform local zoning standards foroil and gas activities, the high court also directed theCommonwealth Court to decide which provisions of the lawwere still valid in light of the parts that were declared unconstitu-tional (January PIOGA Press, page 1).
In its July decisions on the Act 13 remand, theCommonwealth Court ruled that the PUC can no longer reviewlocal ordinances or withhold impact fee monies from municipali-ties whose ordinances are not in compliance (August PIOGAPress, page 1). The court also nullified portions of Act 13 allow-ing challenges of local ordinances to go before the PUC and thenon to the Commonwealth Court, or directly to CommonwealthCourt bypassing the PUC. The court also addressed the continu-ing validity of the traditional Oil and Gas Act preemption oflocal ordinances that was continued unchanged in Act 13, eventhough the court had previously ruled that Section 3302 was notat issue.
In an August 14 notice to the Supreme Court, the PUCappealed the Commonwealth Court’s decisions on Sections3305-3309, related to the commission’s ability to review munici-pal ordinances.
The Commonwealth Court’s July 17 rulings also rejected aphysician’s assertion that confidentiality language regarding thenature of chemicals used in drilling and stimulation amounted toa medical gag order; affirmed that the Department ofEnvironmental Protection is required to notify public water sup-
PUC, municipalities appeal Commonwealth Court Act 13 remand rulingspliers, but not private water well owners, in the event of adrilling-related spill; and upheld the ability of certified publicutilities to use eminent domain to take land for gas storage ortransportation.
On August 22, the municipality plaintiffs filed notice with theSupreme Court that they were challenging the CommonwealthCourt’s decisions on DEP spill notices, eminent domain and theso-called physician gag order.
On August 29, the municipalities challenged the PUC’s stand-ing to appeal the Commonwealth Court’s finding that Sections3306 (civil actions), 3307 (attorney fees and costs) and 3309(applicability) were nonseverable and therefore unenforceablebecause these provisions do not impact the PUC. The munici-palities claim that only the state attorney general, who is chargedwith defending the constitutionality of Act 13—and who also“adequately” represents Industry’s interests according to theCommonwealth Court’s and Supreme Court’s denials of indus-try’s requests to intervene—has standing to appeal theCommonwealth Court’s remand decision with respect to these
FEMA’s anti-hydraulic-fracturingpolicy criticized
PIOGA participated in a roundtable in Towanda last monthorganized by Pennsylvania Congressman Lou Barletta toshed light on a little-known Federal Energy Management
Administration policy that essentially disqualifies property own-ers with oil and gas leases from receiving hazard mitigationmoney.
Under its hazard mitigation assistance program, FEMA paysto acquire properties in flood zones orreduce flood risks by razing or relocat-ing structures. The property title usuallygoes to local governments, which canuse it as open space, allowing flood-plains or wetlands to act as naturalflood buffers.
Without seeking public comment orstakeholder input, FEMA issued a poli-cy on May 5 that bans the use of hazardmitigation assistance (HMA) money forproperties that could eventually host
Search engine optimization webinar. . . . . . . . 6Briefs filed in equitable-extension case . . . . . 8PIOGA partners for membership mailings . . 10Divot Diggers Golf Outing . . . . . . . . . . . . . . . 13PIOGA joins in state leasing lawsuit . . . . . . . 14Events added in October and November . . . 15Statement on anti-energy proposals. . . . . . . 16Exemption No. 38 compliance alert . . . . . . . 19Post-production costs and royalties . . . . . . . 20Items wanted for career center . . . . . . . . . . . 23July Spud Report . . . . . . . . . . . . . . . . . . . . . 24
Changes to powers of attorney. . . . . . . . . . . 29Worker exposure during flowback. . . . . . . . . 30Potential litigation over flaring . . . . . . . . . . . . 34Report from EIA conference . . . . . . . . . . . . . 36High Horsepower Summit special offer . . . . 38Oil & Gas Trends. . . . . . . . . . . . . . . . . . . . . . 40Member profile: IMG Midstream . . . . . . . . . . 42New PIOGA members . . . . . . . . . . . . . . . . . 42Calendar of Events . . . . . . . . . . . . . . . . . . . . 42Contact information. . . . . . . . . . . . . . . . . . . . 43
Page 2 The PIOGA Press
FEMA policy: Continued from page 1
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horizontal drilling and hydraulic fracturing, even if the leasesdon’t allow for development on the surface.
In a document explaining its hazard mitigation policy, theagency claims that hydraulic fracturing and horizontal directionaldrilling (HDD) “is a practice with currently unresolved environ-mental impacts and unknown open space compatibility. Based onavailable scientific information, FEMA is unable to make adetermination of compatibility with open space requirements.Therefore, the acquisition of property with underground oil, gas,or mineral rights permitting extraction by means of hydraulicfracturing/HDD generally is not eligible under HMA grant pro-grams.”
Agency officials have said they are waiting on the results ofan ongoing U.S. Environmental Protection Agency study todetermine if hydraulic fracturing is environmentally safe.
The policy document goes on to state that FEMA generallywill not allow any current or future property owner or grantee tosever or transfer oil and gas rights that include hydraulic fractur-ing/HDD on properties acquired with HMA grant funds.
Additionally, the agency says the HMA program requires aclear title before properties can be acquired. Properties with sev-ered subsurface rights may not be eligible unless the subsurfacerights are long dormant and the identity of the subsurface owneris unknown or not readily ascertainable.
In a June 9 letter, Barletta and Pennsylvania CongressmanBill Schuster asked FEMA to rescind the policy, expressing con-cern that it harms property owners who only want to relinquishsurface rights while maintaining subsurface rights. Schusterchairs the House Transportation and Infrastructure Committee,while Barletta chairs its Subcommittee on EconomicDevelopment, Public Buildings and Emergency Management.Barletta’s subcommittee has primary jurisdiction over FEMA.
“In my part of Pennsylvania, I understand fully how importantit is to mitigate damage from natural disasters like whatHurricane Irene and Tropical Storm Lee inflicted on us in 2011,”Barletta said. “However, this new policy may bring to a halt thesale of properties under the mitigation program. Some home-owners in Wyoming County live in area that severely floods reg-ularly and qualify for buyouts under FEMA’s mitigation pro-gram. However, FEMA said they have to also relinquish theirsubsurface property rights, and that no fracking will ever happenon the land again. These homeowners face the choice of beingflooded again or relinquishing their rights. Additionally, this pol-icy will create ribbons of land under which hydraulic fracturingcannot occur—for no reason.”
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Participating in the August 20 roundtable in Towanda,PIOGA’s Lou D’Amico and Kevin Moody, along with LaurenParker of the Marcellus Shale Coalition, expressed dismay thatFEMA did not seek industry input on the policy—which inessence is a regulation developed without bothering to solicitpublic comment. In response, a FEMA representative committedto a discussion with stakeholders, including industry, but prom-ised nothing more.
The Pennsylvania Emergency Management agency said thereare eight homeowners in Wyoming and Luzerne counties whoseapplications for hazard mitigation assistance due to floodingwere denied because of gas leases. ■
Act 13 remand rulings appealed: Continued from page 1
sections. If the Supreme Court agrees, the PUC’s appeal wouldbe limited to Sections 3305 (commission) and 3308 (ineligibili-ty) of Act 13 because the attorney general did not appeal, eitheralone or with the PUC.
The municipalities’ August 29 filings also included a requestfor expedited consideration because of the uncertainty of theeffect of the appeals on the local impact fee distributions tomunicipalities and their budgets. The PUC and the DEP indicat-ed they did not oppose the request for expedited consideration. ■
Page 6 The PIOGA Press
February 2014 Page 7September 2014 Page 7
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Page 8 The PIOGA Press
PIOGA continues support of case arguing for fair treatment of lessees
When an oil and gas lessor files an unsuccessful lawsuitto invalidate a lease, is the lessee entitled to an equi-table extension of the primary term equal to the length
of time the lawsuit was pending?The commonsense answer to that question is, Of course.
Courts in nearly every producing state have agreed on this essen-tial question of fairness.
In Pennsylvania, the issue has not been resolved. ThePennsylvania Supreme Court, however, is poised to take up thequestion in Harrison v. Cabot Oil & Gas Corporation. PIOGAjoined last month with others in the industry to urge the court toagree that the equitable-extension principle applies in theCommonwealth.
The issue is particularly important at a time when landownershave been filing lawsuits attempting to invalidate their leases.Oftentimes, the property owners are upset that they signed leasesearly in the Marcellus play at terms less lucrative than those whoentered into contracts later, after it became more apparent justhow prodigious the Marcellus would become.
For their part, producers are understandably reluctant to begindevelopment on a property where the lease is under challenge, allthe while losing valuable lease time as a lawsuit makes its waythrough the legal system. Without the benefit of equitable exten-sion, the primary term of a lease can expire without drillingoccurring and the lease itself can become invalidated—an out-come that favors the landowner seeking a better deal than whatthe parties originally agreed to, essentially giving the landownerthe relief sought by the lawsuit even though the landowner lost.
In August 2007, Wayne Harrison and a now-deceased co-owner of a property in Susquehanna County entered into a leasewith Cabot that included a bonus payment of $100 per acre and aone-eighth royalty on any natural gas produced from the proper-ty. Halfway through the five-year primary term of the lease,Harrison filed suit in U.S. District Court, claiming that the leasewas the product of fraudulent inducement because the agreementdid not meet the requirements of Pennsylvania’s MinimumRoyalty Act. The suit was initially dismissed, but the courtallowed it to be amended to include claims that the land agentmade false statements to Harrison.
Because the validity of the lease was under challenge, Cabotdid not begin development of the property. The company filed acounterclaim asking the court to extend the lease by the length oftime that Harrison’s claim was pending. Ruling in August 2012,the court dismissed Harrison’s claim of fraud. However, the courtalso declined to grant Cabot’s counterclaim for an extension ofthe lease.
Appealing the decision to the U.S. Court of Appeals for theThird Circuit, Cabot argued that courts in virtually every oil andgas producing state have held that when a challenge to a lease isdismissed, the production company’s primary term is extendedby the amount of time the lease challenge was pending.Pennsylvania’s Supreme Court had not yet considered the issue,but Cabot contended it would follow the lead of the commonrule adopted elsewhere.
In Harrison, the property owner bypassed Pennsylvania courtsand sued in federal district court. Cabot argued that in denying
February 2014 Page 9September 2014 Page 9
the company’s request for an extension of the lease, the federalcourt mistakenly relied on a 1982 Pennsylvania Superior Courtruling, Derrickheim Company v. Brown. Derrickheim dealt withan issue in the buried chain of title to the property that no onewith standing knew about. In the Harrison case, Cabot contend-ed, the property owner “not only raised an inquiry but he prose-cuted a federal lawsuit seeking a declaration that his lease wasinvalid.”
On April 7, 2014, the Third Circuit “certified” the questionposed in the opening paragraph of this article to the PennsylvaniaSupreme Court for resolution.
Federal courts apply state law, but when the highest statecourt has not determined the state law on a subject, the federalcourts may ask the state supreme courts for help. The ThirdCircuit intends to use the Supreme Court’s determination ofPennsylvania law to decide the case. The Supreme Court on July16 granted the Third Circuit’s petition.
PIOGA—along with the Marcellus Shale Coalition, Chief Oil& Gas and Southwestern Energy Production Company—filed anamici brief with the Supreme Court on August 25, emphasizingthese points:
• Production in the Marcellus Shale is complex and expen-sive, and most leases allow the production company a limitedperiod to establish production in order to avoid having the leaserendered void.
• By filing lawsuits seeking invalidation of their leases,landowners create a practical impediment to a producer’s abilityto develop wells on the property.
• Production companies in Pennsylvania have lost substantiallease time and opportunities due to unsuccessful lease chal-lenges.
• As the courts in many jurisdictions have decided, equityrequires that where a landowner deprives a producer of part ofthe primary term of the lease by initiating an unsuccessful leasechallenge, the court should grant the production company amake-whole remedy.
• The Derrickheim decision does not support rejection of theequable-extension rule and could be read as supporting it.
“The courts that have adopted the rule Cabot urges here haverecognized that, in the world of oil-and-gas leasing, even unsuc-cessful lawsuits can end with remarkably inequitable results,” theindustry amici write. “Thus, while they sometimes describe thelegal bases in modestly different ways, they nonetheless over-whelmingly recognize that the legal principles of contract per-formance and the equitable principles of fair play demand that, ifa lease challenge is unsuccessful, the lessee should be put backin the position it would have been in but for the unsuccessfullawsuit. That exacts no punishment against the landowner—itsimply requires him to give what he promised and nothing more.And, at the end of the day, such a result is precisely what con-tract law aims to do. It allows parties to bargain for certain per-formance and then receive the benefit of that bargain. Any otherresult, including the one in this case, flies in the face of contractlaw and allows a party to a valid contract to escape performanceto the detriment of the other contracting party, a party that dideverything it was required to do.”
There is no indication when the Supreme Court will rule. Itwill then be up to the federal Third Circuit to make a final deter-mination in the case. ■
Page 10 The PIOGA Press
PIOGA partners with MercyIntellectual Disability Servicesfor membership mailings
Did you receive the Board of Directors ballot in themail last month? PIOGA was pleased to partnerwith Mercy Intellectual Disability Services –
Alternative Employment Solutions for this important mem-bership mailing.
Mercy Intellectual Disabilities Services AlternativeEmployment Solutions, part of the Pittsburgh Mercy HealthSystem and sponsored by the Sisters of Mercy, is a nonprofitorganization that employs individuals with disabilities torealize their full potential by providing opportunities for mean-ingful work. Working with Mercy Intellectual Disability Servicesallowed PIOGA to efficiently do a large-scale mailing campaignwhile providing an opportunity for these individuals with disabil-ities to learn marketable job skills and to earn a paycheck.PIOGA is pleased to be able to assist with promoting their inde-pendence, building self-confidence, and helping to grow and sus-tain this workforce population.
“Working with Mercy Intellectual Disability Services wastruly a delight,” said Danielle Boston, PIOGA’s director ofadministration. “With such a small staff here at PIOGA, weappreciated the extra assistance with this mailing campaign andplan to utilize their services in the future.”
If any of our members in the Pittsburgh region and are look-ing for similar services, we would encourage you to considerusing Mercy Intellectual Disabilities Services Alternative
Employment Solutions. They offer a reliable, dedicated anddependable workforce, guided by trained professionals and theyoffer very competitive pricing for job tasks that are repetitive,routine or just time-consuming to your business.
Services include:• First- and third-class bulk mailings • Collating and stapling • Envelope stuffing • Sealing • Labeling • Stamping • Assembly and packaging • Sorting and tagging • Binder assembly • Prep work • Promotional kit assembly • Cleaning and janitorial servicesThis is truly a win-win situation. PIOGA is proud to pro-
vide work opportunities that promote job training and the abilityto earn a paycheck to this vulnerable population. If you are inter-ested in learning more, contact Bruce Carman, employment/pro-duction & training specialist, at 412-344-6466 (office) or 412-915-2486 (mobile) or [email protected]. ■
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Page 14 The PIOGA Press
PIOGA adds its voice opposing lawsuit to halt state-lands leasing
As a Commonwealth Court judge prepares to decide achallenge to the plans of the General Assembly andCorbett administration to generate $95 million this fiscal
year from new non-surface-disturbance leasing of state-ownedlands, PIOGA has formally recommended that the court deny arequest by the Pennsylvania Environmental Defense Foundation(PEDF) [Matt, I hope I didn’t make this mistake in our brief!] tohalt additional leasing and bar the use of Oil & Gas Lease Fundrevenue for general budget purposes.
Governor Corbett issued an executive order in late Mayrescinding a moratorium on new leases for natural gas develop-ment on state-owned lands that had been put in place during thefinal days the term of his predecessor, Ed Rendell. Corbett’sorder allows leasing if the gas can be accessed without additionallong-term surface disturbance on lands administered byDepartment of Conservation and Natural Resources or via hori-zontal drilling from adjacent private lands
The budget for the current fiscal endorses the new leasing andcalls for $95 million to go toward general state expenses (AugustPIOGA Press, page 15). Normally, leasing revenue would stay inthe Oil & Gas Lease Fund, to be spent on conservation, recre-ation and flood control projects at the direction of DCNR. As thefund has swelled from revenue generated by Marcellus Shaleleases in state forests, it has been tapped over the past severalyears by Rendell, Corbett and lawmakers for general stateexpenses, including DCNR’s general budget.
PEDF went to court to block the new leasing, arguing thatDCNR was being directed to lease additional state lands solely
for generating revenue without identifying the tracts to be leasedor evaluating the impacts on surrounding public naturalresources. The foundation also objected to using Oil & GasLease Fund money for non-conservation uses, apparently notviewing DCNR’s general budget as a conservation use.
The foundation had asked Commonwealth Court to issue anexpedited injunction while budget negotiations were going onthis spring, but Judge Kevin Brobson refused to intervene in thelegislative process and ruled that he would wait until the budgetwas finalized before considering the matter.
BriefsAs briefs were being filed ahead of oral arguments in the
case, scheduled to take place in October in Philadelphia, PIOGAsubmitted an amicus brief to the Commonwealth Court urgingthe court to deny the PEDF’s motion for summary judgment toblock new leasing and stop the transfer revenue out of the Oil &Gas Lease Fund. The PIOGA filing makes the points that:
• “Conservation” means reasonable development and use ofpublic natural resources for the benefit of all citizens—notabsolute preservation and no development.
• PEDF’s reliance on the Pennsylvania Supreme Court’s plu-rality (non-majority) opinion regarding the state Constitution’sEnvironmental Rights Amendment (ERA; art. I, § 27) in theRobinson Township case involving Act 13 (January PIOGAPress, page 1) is unwarranted and ineffectual. Further, environ-mental interests must be balanced against other public interestsunder the ERA, and the court should defer to the judgment of the
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governor and the General Assembly in such balancing decisions.• The political branches of state government have constitu-
tional budgeting duties and may use the Oil & Gas Lease Fundto serve multiple public interests.
• PEDF exaggerates and speculates about the environmentaleffects of oil and gas development and production.
In another amicus brief, filed by the House and SenateRepublican caucuses, legislators make many of the same argu-ments about the General Assembly’s authority to transfer moneyfrom the Oil & Gas Lease Fund to the General Fund, PEDF’sheavy but misguided reliance on the Robinson Township pluralityopinion, the balancing of environmental and public interests thatare part of the budget process, and the lack of detrimental envi-ronmental impacts from shale-gas development on state lands.
A brief filed by the Commonwealth describes the history ofleasing state forest land for oil and gas development, beginningin 1947 and reaching a high of 1 million acres under lease in1980. The document describes the careful process the state hasfollowed in determining lands to be offered for lease, the rigor-ous lease provisions and the thorough monitoring of natural gasdevelopment that has occurred. The Commonwealth emphasizesthat it has not violated the provisions of the EnvironmentalRights Amendment and that nothing prevents the GeneralAssembly from using revenue from natural gas leasing forGeneral Fund purposes.
Shortly after the Supreme Court’s Robinson Township deci-sion was issued, PEDF and its supporters solicited additionalfunds for this litigation by touting this lawsuit as becoming “thenew law regarding Art. I Sec. 27.” PIOGA agrees that may beso, but not in the way PEDF believes. PIOGA is hopeful thatthe resolution of this case will reverse the disturbing trend forjudicial intervention into judgments usually reserved to the leg-islative and executive branches of government. ■
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Upcoming PIOGA eventsBelow are two PIOGA events coming up in the next two
months. If you haven’t already received information via email,go to the News/Events section at www.pioga.org for details.
➤ PIOGA PAC Fall Blast Sporting Clays and GolfTournament
Scheduled for October 8 at Seven Springs MountainResort, this fun event will benefit PIOGA’s political actioncommittee and the association’s essential government rela-tions activities in the state capitol.
➤ PIOGA Conventional Producer RoundtableIs your head downhole? Take this Producer Quiz: Just
when you started to get a bit comfortable with selling your pro-duction into the market, did the market trick you? Just whenyou thought you had a handle on determining what your gaswas really worth, did location premiums drop out of the equa-tion? Just when you thought you had delivery options to opti-mize flow figured out, did you have less gas to sell? Do youdread having to take a loss every time you contract to sellyour supply?
At PIOGA, we believe the drop in production rates of con-ventional production is a serious issue. As your industryorganization, we have tailored an agenda specific to conven-tional producers that will seek to educate you on your near-term and longer-term options. If you answered yes to any ofthe questions above, you won’t want to miss this event onNovember 3 at the Ramada Greensburg Hotel andConference Center.
Page 16 The PIOGA Press
PIOGA statement on proposals by legislators and candidates that will impact“unprecedented” energy production in Pennsylvania
PIOGA President and Executive Director Louis D. D’Amico issued the following statement on September 4 regard‐ing continued efforts by state policy makers to thwart energy development in the Commonwealth:
“Political leaders from gubernatorial candidate Tom Wolf and state row officers, as well as some members ofthe General Assembly from both parties, have announced a range of punitive and misguided initiatives on energyproducers in Pennsylvania that have the potential to dismantle the unprecedented growth of natural gas productionin the Commonwealth. From severance tax proposals of between 5 and 10 percent to legislation to retroactivelyimpose a $3 million per well “fee” for every well that has been drilled on state forest land, it appears that someelected officials want to scrap the effective policies and regulations that have allowed Pennsylvania to become thesecond largest natural gas producer in the United States in five short years. The fact is that our industry is investingbillions of dollars of private capital and leading the Commonwealth’s economic resurgence, benefiting manufactur‐ers, local governments and consumers.
“The calls for a severance tax ignore the huge infusion of revenue being paid by natural gas producers and serv‐ice companies to the state’s tax base. Pennsylvania’s natural gas industry is paying more than its fair share of taxes,including an estimated $2 billion in state and local taxes since 2007 and more than $630 million in impact fees injust the past three years, with much of that money being directed to rural communities that have long been neg‐lected by Harrisburg lawmakers. The fact is that if any other sector of our economy was moving into theCommonwealth with that level of investment and accompanying tax payments, policy makers would be throwingincentives and tax holidays at their feet, not looking for new ways to tax them or at a higher rate than every otherbusiness in the Commonwealth. Our industry does not demand incentives such as tax‐increment financing, andrelies solely on private capital to make energy development a reality.
“There are multiple shale plays around this country competing for capital with better tax climates thanPennsylvania, home of nation’s highest corporate net income tax. These misguided proposals will result in fewercompanies coming into Pennsylvania to drill wells, and more companies looking to reduce their level of investmenthere.
“Producers in Pennsylvania are already struggling with complicated and changing state regulations that increasethe cost to operate, and lower commodity prices due to a lack of pipeline infrastructure to get natural gas to mar‐ket. A number of producers have cut back their drilling operations due to these substantial disadvantages, andthese anti‐industry measures would be another strike against our state’s ability to remain competitive.
“The argument often made is that the state needs money and the drilling companies can afford to pay more tohelp the state out of its financial problems, but the public policy question that must be asked is whether it is betterfor Pennsylvania’s long‐term future to generate tax revenues through economic growth (new job creation, newinvestment, sales tax, and the local impact fee) or to make it more difficult for the natural gas industry—the indus‐try that has played a key role in Pennsylvania’s economic turnaround—to grow and mature. We, and the 200,000employees who work in or work with the natural gas industry, believe the choice is clear: Pennsylvania must contin‐ue to expand and become a world leader in energy development.”
Need to market your company’sproducts and services toPennsylvania’s oil and gasindustry? Here’s why you should beadvertising in The PIOGA Press:
■ The printed copy reaches themain contact for each of our nearly900 member companies. More than2,500 member contacts receive noti-fication of the electronic version eachmonth.
■ It’s a great value, with PIOGAmembers entitled to a substantialdiscount for advertising.
■ It’s one of the most-respectedassociation journals in the industry.
Find out more by contacting MattBenson at 814-778-2291 [email protected].
February 2014 Page 17September 2014 Page 17
Pre-Drilling Water Supply Inventory and Sampling
Post-Drilling Complaint Resolution and Investigations
Gas Well Permitting for Conventional and
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Development of High Capacity Groundwater Supply Wells
Soil & Groundwater Contamination Investigations
Assistance with Water Sourcing
Water Management Plan Preparation
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Pre-Drilling Water Supply Inventory and Sampling
Post-Drilling Complaint Resolution and Investigations
Gas Well Permitting for Conventional and
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Development of High Capacity Groundwater Supply Wells
Soil & Groundwater Contamination Investigations
Assistance with Water Sourcing
Water Management Plan Preparation
SPCC/Control & Disposal Plans
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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
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Page 18 The PIOGA Press
Oil and Gas Support Services:Engineering, Survey, and Environmental.
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February 2014 Page 19September 2014 Page 19
As you may be aware, on August 14, Department ofEnvironmental Protection air program managers sent let-ters to individual companies with respect to their submis-
sion of compliance demonstrations in accordance with,“Category No. 38 Exemption Criteria specified in DEP’s AirQuality Permit Exemptions Document.” The letters stated thatthe submissions were either incorrect or incomplete and gave therecipients 30 days from their receipt of the letters within whichto supplement their initial submissions.
PIOGA has learned that on August 26, the Marcellus ShaleCoalition submitted a single request for a 60-day extension of theaforementioned deadline to DEP on behalf of membercompanies. On August 28, DEP advised MSC that it wouldnot be approving the requested extension. DEP stated thatbecause letters were sent to individual companies, “thosecompanies must individually request extensions to dead-lines.” DEP further stated that those companies “must alsojustify the basis for the extension in that request,” and that“the extension request should be sent to the appropriateDEP Regional Air Program Manager regarding CategoryNo. 38 Compliance Demonstrations.”
PIOGA recommends that those companies that havereceived deficiency letters, but are not able to comply withthem within the deadline specified by DEP, should submitwritten extension requests to the agency. Those requestsshould be sent to the appropriate regional air programmanagers, should provide justification for the request for
extension and should specify the additional time that will beneeded to respond.
Note that PIOGA has also reviewed the “instructions” provid-ed with the mass distribution of deficiency letters and will bediscussing a potential response. Part of the justification mayinclude the lack of a specific requirement for a written compli-ance demonstration in Exemption No. 38 and the confusion anduncertainty created by the long delay in providing instructions aswell as the “instructions” themselves.
Should you have any questions, please contact Ron Cusano(412-577-5203) or Roy Rakiewicz (610-933-5246, ext. 127). ■
Compliance alert:Extension requests for responses to Exemption No. 38 notice of deficiency letters to operators
Page 20 The PIOGA Press
Issues with post-productioncosts and royalties underan oil and gas lease
Allocating the costs of post-production processes betweenthe lessor and the lessee is one of the challenges of nego-tiating an oil and gas lease. Once a well has been drilled
and production begins, oil and gas are brought to market for thepurpose of gaining a profit for the lessor and lessee. Under a typ-ical oil and gas lease, the lessee bears the burden for the initialproduction costs to develop the oil and gas. This includes thecost of the well and the operations to bring the oil and gas out ofthe ground. The lessor is entitled to a royalty after productionfrom the subsurface occurs, but there is uncertainty underPennsylvania law as to what extent the lessor is to share in theadditional costs that may be necessary or otherwise incurred bythe lessor in bringing the oil and gas to market. Should the lessorroyalty be calculated based on a market price at the time when itis produced at the well head? Should the lessor share costs andbenefits after the oil or gas is processed which may increase itsvalue at sale?
With the development of horizontal drilling and MarcellusShale production, new technology has progressed to make oil,gas and other hydrocarbons more profitable and available formore purposes. These advancements may include innovativeprocesses, such as separating chemicals from the oil or gas, ormay allow for the transportation of oil and gas to other marketswhere a favorable return can be realized. Post-production
processes will also add additional expensesbefore the sale of the oil and gas or byprod-uct which may result in lower royalty pay-ments. Further, these costs may not havebeen contemplated when an oil and gaslease was drafted. Prior to the recent boomin the Appalachian region, oil and gas leasesdid not contain detailed provisions regard-ing the lessee’s rights to deduct post-pro-duction costs prior to determining landown-er royalties. Therefore, under older formleases there is potential for conflict if theparties later disagree on the sharing of post-production costs.
In recent years, oil and gas royalties haveincreased, and oil and gas producers andlessors are now using royalty provisions as abargaining point. Rather than rely on currentcase law, operators seek to include clauseswhich expressly allow them to deduct costsincurred in post-production, prior to calcu-lating royalty payments. Some of theselease provisions allow a producerto deduct additional costs thatenhance the value of the gas or oilbeyond a marketable state such asliquefaction or separation processes.
Several Pennsylvania cases provide guidance related to opera-tor’s rights to deduct post-production costs prior to calculatingroyalties under oil and gas leases. In 2010, the Supreme Court ofPennsylvania evaluated whether post-production costs interferedwith the Pennsylvania Guaranteed Minimum Royalty Act. Thisstatute, enacted in 1979, invalidates any lease that does not pro-vide the lessor with at least a one-eighth royalty interest. Thestatute is now part of the Oil and Gas Lease Act, at 58 P.S. §33.3, but the substance has remained unchanged. In Kilmer v.Elexco Land Services, 605 Pa. 413 (2010), with more than 70suits pending appellate litigation at the time of litigation, thecourt agreed to hear a case on post-production costs as a matterof first impression. The Kilmer court sought to define the term“royalty” as it is applied in the Pennsylvania GuaranteedMinimum Royalty Act, as the statute does not provide guidanceas to the ability to deduct post-production costs from royaltypayments. The lessee in Kilmer sought to define “royalty” as itwas generally understood in the industry to mean one-eighth ofthe sale price of the gas minus one-eighth of the post-productioncosts of bringing the gas to market. This particular method,called the “net-back method,” seeks to determine the value of thegas by deducting from the sales price the costs of getting the nat-ural gas from the wellhead to the market. The landownersbelieved this particular method violated the PennsylvaniaGuaranteed Minimum Royalty Act, and argued that royaltiesshould be determined solely by the price at the point of sale,regardless of the costs of delivering the product to the market.
The lessors contended that operators could drive up the costof getting the gas to the market in order to reduce the royaltypayments owed to landowners. The Kilmer court dismissed thisconcern, believing that gas producers had a strong incentive toreduce costs despite its effect on royalty payments. Ultimately,the court determined the net-back method was the appropriate
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Page 22 The PIOGA Press
method for calculating royalties in compliance withthe -Pennsylvania Guaranteed Minimum Royalty Act. In reach-ing its decision, the court relied on the industry standard defini-tion of “royalty,” being “the landowner’s share of production,free of expenses of production.” The court stated that “theexpenses of production” are the costs of drilling the well and get-ting the product to the surface, but do not encompass the costs ofgetting the product to the point of sale. Further, in reaching itsdecision the court rejected the “First Marketable ProductDoctrine,” which requires the lessee/gas company to bear all ofthe costs necessary to get the natural gas to the point of sale. Thecourt also determined that disregarding post-production costscould result in inequities among landowner royalties. Gas can besold after different degrees of processing for different prices. Ifone landowner’s gas is sold at a less processed state, the pricewill likely be less than the owner of gas that is sold after it isfully processed. The court stated that using the net-back post-production cost formula results in a more equal price to be dis-tributed among landowners.
More recently, in an attempt to distinguish themselves fromthe Kilmer decision, landowners in Katzin v. Central AppalachiaPetroleum, 39 A.3d 307 (2012), argued that the royalty provisionin their lease was vague and not compliant with the PennsylvaniaGuaranteed Minimum Royalty Act. The lease in questionallowed for deductions for “all taxes, assessments, and adjust-ments on production from the leasehold,” but did not include anexhaustive list of allowable deductions. The plaintiffs contendedthat the after the deduction of certain post-production costs thelease would pay less than a one-eighth royalty. Though thePennsylvania Superior Court acknowledged the landowners’ cre-ativity in their argument, ultimately the court held that the leaseclearly evidenced the intent to comply with the PennsylvaniaGuaranteed Minimum Royalty Act. The court held that simplystating a one-eighth royalty was sufficient to comply with thestatute in this situation. In another recent case, Pollock v. EnergyCorporation of America, 2012 U.S. Dist. LEXIS 186089 (2012),a federal district court denied summary judgment for a plaintiffseeking to invalidate a lease because the operator allocated costsbased on the combined costs of several wells under a leaseinstead of calculating each well separately. The court held thatthe plaintiff failed to show this method of calculating productionwas a clear violation of the lease. Also, the district court, relyingon Kilmer, determined that deductions for certain post-produc-tion marketing costs were not in violation of the PennsylvaniaGuaranteed Minimum Royalty Act.
The above cases show a trend that Pennsylvania courts willlikely allow an operator to deduct post-production costs and givea certain degree of discretion in calculating the appropriate coststo be deducted from royalty payments, unless these are prohibit-ed by the terms in the lease. These costs can include processing,transportation, marketing and other processes, if there is reason-able basis for the deduction. However, what Kilmer does notcover is the deduction of costs that not only make oil or gas mar-ketable, but enhance the value of the resource before the point ofsale. In the time since the Kilmer case, leases typically includemarket enhancement clauses which allow for the deduction ofcosts involved in “enhancing” the value of oil and natural gasproduced. These clauses enable an operator and lessor to share inthe costs involved in additional procedures to obtain a betterprice for the oil and gas products. However, in recent litigation,
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lessors are asserting that the terms of these clauses are unclearand resulted in payments that were inconsistent with the expecta-tions of some lessors.
To date, Pennsylvania courts have not interpreted any specificmarket enhancement clause. Therefore, there is uncertainty as to
limitations on what operators can deduct based on the terms of alease. In order to reduce the risk of claims arising from thesetypes of lease provisions, it is important that any terms in a leasedealing with post-production deductions from royalties are clearand consistent with the intent of the parties. ■
The Lawrence County Career and Technical Center hasbegun a program this school year to train future oil andgas field workers. Starting in 10th grade, the students
receive instruction on all facets of the oil and gas business. Thisis a brand-new program being created from the ground up. Localcompanies including Hilcorp have donated money and materials,but more is needed.
The tools of the oil and gas field are as varied as the compa-nies that work with them. For this program, Jay Parsons, theinstructor and former OFT, needs the following items:
• 2-inch or 1-inch valves with extra seals and O-rings• Pressure tester for valves (up to 1,500 psi)• Sonic tester• Small field separator• Gauges• Well head • Simple rig (a long shot, but it doesn’t hurt to ask!)These items don’t need to be new, as they will be used as a
teaching tool, and since nothing stays clean in the field, thosewould be the perfect teaching tools. Any item your company
Lawrence County Career and Technical Center needs your castoffs!would like to send would be greatly appreciated. While monetarydonations are always appreciated, it is the tools of the field thatare most necessary. For more information, contact Dan Weaver [email protected] or 724-933-7306 ext. 30. ■
Page 24 The PIOGA Press
Airdale Oil & Gas LLC 2 8/7/14 123-47404 Warren Sugar Grove Twp8/14/14 123-47405 Warren Sugar Grove Twp
ARG Resources Inc 4 8/7/14 047-24819 Elk Highland Twp8/14/14 047-24824 Elk Highland Twp8/20/14 047-24829 Elk Highland Twp8/27/14 047-24823 Elk Highland Twp
B&B Resources 3 8/4/14 123-47416 Warren Pleasant Twp8/6/14 123-47415 Warren Pleasant Twp8/11/14 123-47414 Warren Pleasant Twp
BJS LLC 3 8/8/14 123-47587 Warren Warren City8/19/14 123-47588 Warren Warren City8/28/14 123-47589 Warren Warren City
Cabot Oil & Gas Corp 16 8/8/14 115-21746* Susquehanna Gibson Twp8/8/14 115-21747* Susquehanna Gibson Twp8/19/14 115-21735* Susquehanna Gibson Twp8/19/14 115-21738* Susquehanna Gibson Twp8/19/14 115-21022* Susquehanna Gibson Twp8/19/14 115-21024* Susquehanna Gibson Twp8/19/14 115-21737* Susquehanna Gibson Twp8/19/14 115-21736* Susquehanna Gibson Twp8/26/14 115-21677* Susquehanna Lenox Twp8/26/14 115-21678* Susquehanna Lenox Twp8/26/14 115-21679* Susquehanna Lenox Twp8/26/14 115-21680* Susquehanna Lenox Twp8/26/14 115-21681* Susquehanna Lenox Twp8/26/14 115-21682* Susquehanna Lenox Twp8/26/14 115-21683* Susquehanna Lenox Twp8/26/14 115-21684* Susquehanna Lenox Twp
Cameron Energy Co 2 8/18/14 053-30486 Forest Howe Twp8/20/14 053-30485 Forest Howe Twp
Catalyst Energy Inc 10 8/20/14 083-56340 McKean Kane Boro8/27/14 083-56339 McKean Kane Boro
8/5/14 083-56205 McKean Wetmore Twp8/11/14 083-56204 McKean Wetmore Twp8/14/14 083-56203 McKean Wetmore Twp8/5/14 123-47314 Warren Mead Twp8/8/14 123-47313 Warren Mead Twp8/13/14 123-47311 Warren Mead Twp8/18/14 123-47316 Warren Mead Twp8/26/14 123-47312 Warren Mead Twp
Chesapeake Appalachia LLC 7 8/7/14 015-23082* Bradford Tuscarora Twp8/7/14 015-23083* Bradford Tuscarora Twp8/7/14 015-23084* Bradford Tuscarora Twp8/7/14 015-23085* Bradford Tuscarora Twp8/20/14 131-20428* Wyoming Mehoopany Twp8/20/14 131-20427* Wyoming Mehoopany Twp8/20/14 131-20453* Wyoming Mehoopany Twp
Chevron Appalachia LLC 10 8/8/14 059-26347* Greene Dunkard Twp8/10/14 059-26337* Greene Dunkard Twp8/12/14 059-26338* Greene Dunkard Twp8/14/14 059-26339* Greene Dunkard Twp8/16/14 059-26341* Greene Dunkard Twp8/18/14 059-26340* Greene Dunkard Twp8/20/14 059-26342* Greene Dunkard Twp8/22/14 059-26343* Greene Dunkard Twp8/24/14 059-26344* Greene Dunkard Twp8/26/14 059-26345* Greene Dunkard Twp
Chief Oil & Gas LLC 7 8/1/14 081-21487* Lycoming McNett Twp8/2/14 081-21484* Lycoming McNett Twp8/3/14 081-21483* Lycoming McNett Twp8/29/14 113-20316* Sullivan Elkland Twp8/30/14 113-20315* Sullivan Elkland Twp8/31/14 113-20314* Sullivan Elkland Twp8/21/14 115-21760* Susquehanna Lathrop Twp
Spud Report:August
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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D&M Energy LLC 2 8/13/14 053-30689 Forest Jenks Twp8/18/14 053-30690 Forest Jenks Twp
D&S Energy Corp 4 8/5/14 083-56409 McKean Hamilton Twp8/12/14 083-56408 McKean Hamilton Twp8/19/14 083-56407 McKean Hamilton Twp8/22/14 083-56406 McKean Hamilton Twp
Enervest Opr LLC 6 8/6/14 083-56512 McKean Lafayette Twp8/11/14 083-56513 McKean Lafayette Twp8/14/14 083-56507 McKean Lafayette Twp8/20/14 083-56505 McKean Lafayette Twp8/25/14 083-56508 McKean Lafayette Twp8/28/14 083-56514 McKean Lafayette Twp
EQT Production Co 10 8/21/14 059-26194* Greene Morris Twp8/21/14 059-26610* Greene Morris Twp8/21/14 059-26196* Greene Morris Twp8/21/14 059-26613* Greene Morris Twp8/21/14 059-26614* Greene Morris Twp8/21/14 059-26615* Greene Morris Twp8/12/14 059-26603* Greene Washington Twp8/12/14 059-26604* Greene Washington Twp8/22/14 065-27048* Jefferson Washington Twp8/22/14 065-27049* Jefferson Washington Twp
Galati Enterprises Inc 1 8/1/14 123-47567 Warren Conewango TwpHilcorp Energy Co 2 8/26/14 085-24696* Mercer Lackawannck Twp
8/26/14 085-24703* Mercer Lackawannck TwpHolden Oil & Gas 1 8/30/14 123-47618 Warren Watson TwpHoward Drilling Inc 3 8/11/14 047-24856 Elk Jones Twp
8/18/14 047-24857 Elk Jones Twp8/26/14 083-56311 McKean Wetmore Twp
Interstate Gas Mkt Inc 2 8/6/14 019-22122 Butler Center Twp8/20/14 019-22124 Butler Oakland Twp
Kastle Resources Enterprises 2 8/5/14 039-25795 Crawford Beaver Twp8/20/14 039-25797 Crawford Beaver Twp
Lendrum Energy LLC 2 8/1/14 053-30544 Forest Harmony Twp8/6/14 053-30545 Forest Harmony Twp
McGaughey Scott 1 8/11/14 005-31210 Armstrong West Franklin TwpMieka LLC 3 8/6/14 083-56573 McKean Wetmore Twp
8/12/14 083-56575 McKean Wetmore Twp8/15/14 083-56574 McKean Wetmore Twp
MSL Oil & Gas Corp 2 8/25/14 083-56432 McKean Lafayette Twp8/28/14 083-56434 McKean Lafayette Twp
New Horizon Oil LLC 2 8/11/14 123-47481 Warren Farmington Twp8/14/14 123-47482 Warren Farmington Twp
Oz Gas Ltd 1 8/7/14 123-46901 Warren Triumph TwpPecora Enterprises 1 8/25/14 083-56578 McKean Lafayette TwpPennEnergy Resources LLC 4 8/6/14 007-20424* Beaver Marion Twp
8/6/14 007-20425* Beaver Marion Twp8/7/14 007-20426* Beaver Marion Twp8/7/14 007-20427* Beaver Marion Twp
R&N Resources LLC 1 8/26/14 123-47564 Warren Sheffield TwpRB Robertson & Son Gas & Oil 3 8/14/14 005-31105 Armstrong Mahoning Twp
8/5/14 005-31157 Armstrong Redbank Twp8/11/14 005-31158 Armstrong Redbank Twp
Range Resources Appalachia 10 8/4/14 125-27263* Washington Buffalo Twp8/4/14 125-27262* Washington Buffalo Twp8/5/14 125-27382* Washington Buffalo Twp8/5/14 125-27254* Washington Buffalo Twp8/6/14 125-27164* Washington Mt Pleasant Twp8/6/14 125-27165* Washington Mt Pleasant Twp8/6/14 125-27166* Washington Mt Pleasant Twp8/6/14 125-27312* Washington Mt Pleasant Twp8/7/14 125-27140* Washington Mt Pleasant Twp8/7/14 125-27313* Washington Mt Pleasant Twp
RE Gas Dev LLC 7 8/6/14 019-22146* Butler Adams Twp8/16/14 019-22145* Butler Adams Twp
8/1/14 019-22259* Butler Connoquenessing 8/2/14 019-22260* Butler Connoquenessing 8/3/14 019-22261* Butler Connoquenessing8/10/14 019-22278* Butler Lancaster Twp8/10/14 019-22279* Butler Lancaster Twp
Seneca Resources Corp 10 8/13/14 047-24842* Elk Jones Twp8/13/14 047-24838* Elk Jones Twp8/14/14 047-24843* Elk Jones Twp8/14/14 047-24837* Elk Jones Twp8/15/14 047-24841* Elk Jones Twp8/15/14 047-24836* Elk Jones Twp8/16/14 047-24840* Elk Jones Twp8/16/14 047-24834* Elk Jones Twp8/17/14 047-24839* Elk Jones Twp8/17/14 047-24835* Elk Jones Twp
Snyder Bros Inc 2 8/22/14 083-56322 McKean Hamilton Twp8/27/14 083-56321 McKean Hamilton Twp
Southwestern Energy Prod Co 4 8/25/14 015-23117* Bradford Stevens Twp8/27/14 115-21152* Susquehanna New Milford Twp8/27/14 115-21254* Susquehanna New Milford Twp8/4/14 117-21722* Tioga Liberty Twp
SV ABS Interest Wetmore Proj 3 8/14/14 083-56466 McKean Wetmore Twp8/22/14 083-56468 McKean Wetmore Twp8/29/14 083-56469 McKean Wetmore Twp
SWEPI LP 12 8/29/14 117-21724* Tioga Middlebury Twp8/30/14 117-21725* Tioga Middlebury Twp8/4/14 117-21704* Tioga Richmond Twp8/5/14 117-21705* Tioga Richmond Twp8/6/14 117-21706* Tioga Richmond Twp8/12/14 117-21701* Tioga Richmond Twp8/12/14 117-21702* Tioga Richmond Twp8/13/14 117-21703* Tioga Richmond Twp8/14/14 117-21707* Tioga Richmond Twp8/15/14 117-21708* Tioga Richmond Twp8/20/14 117-21709* Tioga Richmond Twp8/25/14 117-21710* Tioga Richmond Twp
Talisman Energy USA Inc 6 8/6/14 015-22927* Bradford Troy Twp8/6/14 015-22929* Bradford Troy Twp8/3/14 115-21718* Susquehanna Choconut Twp8/8/14 115-21722* Susquehanna Choconut Twp8/20/14 115-21723* Susquehanna Choconut Twp8/23/14 115-21719* Susquehanna Choconut Twp
Trimont Energy LLC 7 8/1/14 121-45455 Venango Allegheny Twp8/6/14 121-45478 Venango Allegheny Twp8/12/14 121-45480 Venango Allegheny Twp8/15/14 121-45460 Venango Allegheny Twp8/19/14 121-45452 Venango Allegheny Twp8/25/14 121-45667 Venango Allegheny Twp8/20/14 121-45382 Venango Cranberry Twp
Vantage Energy Appalachia II 1 8/29/14 059-26498* Greene Washington TwpWeldbank Energy Corp 3 8/12/14 123-47538 Warren Mead Twp
8/18/14 123-47537 Warren Mead Twp8/21/14 123-47535 Warren Mead Twp
Whilton Brooks A 1 8/26/14 123-47544 Warren Glade TwpXTO Energy Inc 3 8/4/14 005-31202* Armstrong South Buffalo Twp
8/4/14 005-31209* Armstrong South Buffalo Twp8/5/14 005-31212* Armstrong South Buffalo Twp
OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY OPERATOR WELLS SPUD API # COUNTY MUNICIPALITY
Page 28 The PIOGA Press
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February 2014 Page 29September 2014 Page 29
Amendments to PA lawenhance the ability to relyon powers of attorneyBy David L. Hotchkiss and Janelle L. HackmanSteptoe & Johnson PLLC
The Pennsylvania General Assembly passed House Bill1429 amending Pennsylvania’s law on powers of attorney(20 Pa.C.S. §§ 5601-5612) and the bill was signed into
law by Governor Tom Corbett on July 2 as Act 95 of 2014. Theprovisions of Act 95 are of particular importance to third partieswithin the energy industry who regularly rely on powers of attor-ney (POA) to engage in financial and property transactions. Theprovisions discussed below apply to POAs created before, on orafter July 2, 2014, but do not apply to the acts or omissions ofagents, or third parties presented with instructions by agents, thatoccurred prior to July 2.1
The amendments operate, in part, to override the PennsylvaniaSupreme Court’s decision in Vine v. Com., State Employees’ Ret.Bd., 9 A.3d 1150 (Pa. 2010). In Vine, the plaintiff petitioned forreview from an order denying relief regarding a retirement elec-tion made by her then-husband under a purported POA, obtainedwhile she was mentally and physically incapacitated. The POAwas found to be void. The Supreme Court held that a third partycould not rely on a void POA submitted by an agent where thePOA may be defective or void, even where the third party had noknowledge of invalidity.2
These amendments offer greater protection from civil liabilityfor third parties acting in reliance on POAs. Under amendment toSection 5608(c), a person who in good faith accepts a POA with-out actual knowledge that the signature or mark is not genuinemay, without liability, rely upon the genuineness of thesignature.3 To illustrate this expansion of immunities, in a situa-tion where a company seeks to acquire an oil and gas lease orother written commitment from the agent acting for a principalunder a purported POA, without actual knowledge of any inva-lidity, the company may accept the POA in good faith, withoutrisk of civil liability. This represents a significant, favorablechange from prior policy.
The amendments to Sections 5608(e) and (g), however, createsome concern for an entity dealing with an agent under a POA.In such a case where a person is required to engage in a transac-tion with another, and a POA is tendered to confirm the authorityof the agent to act for the principal, the first person is required toaccept the POA within seven days, unless the first personrequests the provision of certain identified forms of supportingdocumentation within the seven-day period, and these are satis-factorily furnished. Under Section 5608.1(c) a person who refus-es to accept a POA in violation of Section 5608 shall be subjectto “[c]ivil liability for pecuniary harm to the economic interestsof the principal proximately caused by the person’s refusal tocomply with the instructions of the agent designated in the[POA]” and a court order mandating acceptance of the POA.4
In application, a prospective oil and gas lessee would not berequired to accept a purported POA, as the potential lessee is nototherwise required to enter into the lease. However, in circum-stances where there is an existing relationship between the lessorand lessee, the lessee may be required to accept the POA, to
honor an instruction to change the royaltypayee.
The provisions pertinent to the obligationto accept a power presented, and liabilityarising for failure to do so, outlined inSections 5601(f), 5608, 5608.1, and 5608.2,as well as the provisions outlined inSections 5611 and 5612 became effective onJuly 2. All other amendments shall takeeffect on January 1, 2015.5 ■
1 PA LEGIS 2014-95, 2014 Pa. Legis. Serv. Act 2014-95 (H.B. 1429) (PURDON’S). See also Power ofAttorney – PEF Code Amendments, Fiduciary Review,August 2014, at 1, 3-4.2 Vine v. Com., State Employees’ Ret. Bd., 607 Pa. 648,9 A.3d 1150 (2010). 3 PA LEGIS 2014-95, 2014 Pa. Legis. Serv. Act 2014-95 (H.B. 1429) (PURDON’S).4 Id. See also Raymond Pepe, Important ChangesEnacted to Pennsylvania’s Power of Attorney Law, PABankers Association, June 26, 2014,www.pabanker.com/media/1888/powerofattorney.pdf.5 PA LEGIS 2014-95, 2014 Pa. Legis. Serv. Act 2014-95 (H.B. 1429) (PURDON’S). See also Power ofAttorney – PEF Code Amendments, Fiduciary Review,August 2014, at 1, 3-4.
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Page 30 The PIOGA Press
Safety Committee CornerSafety Committee CornerPreliminary field studies onworker exposures to volatilechemicals during oil and gasextraction flowback andproduction testing operationsBy Eric J. Esswein, MSPH, CIH; John Snawder, PhD,DABT; Bradley King, MPH, CIH; Michael Breitenstein, BS;and Marissa Alexander-Scott, DVM, MS, MPH
This blog describes NIOSH evaluations of worker expo-sures to specific chemicals during oil and gas extractionflowback and production testing activities. These activities
occur after well stimulation and are necessary to bring the wellinto production. Included are descriptions of initial exposureassessments, findings, and recommendations to reduce workerexposures to potential hazards. Further details about these assess-ments can be read in a recently published peer-reviewed journalarticle, “Evaluation of Some Potential Chemical Exposure Risksduring Flowback Operations in Unconventional Oil and GasExtraction: Preliminary Results”.1
Flowback operationsFlowback refers to process fluids that return from the well
bore and are collected on the surface after hydraulic fracturing.In addition to the mixture originally injected, returning processfluids can contain a number of naturally occurring materialsoriginating from within the earth, including hydrocarbons suchas benzene. After separation, flowback fluids are typically storedtemporarily in tanks or surface impoundments (lined pits, ponds)and recovered oil is pumped to production tanks, which are fixedsystems at the well pad.
Initial Exposure Assessments during Flowback andProduction Testing Operations
NIOSH exposure assessments included short-term and full-shift personal breathing zone and area air sampling for exposuresto benzene and other hydrocarbons using standard methods andanalyses listed in the NIOSH Manual of Analytical Methods.2
Real-time, direct reading instruments were also used to charac-terize peak and short-term exposures to workers and variousworkplace areas for volatile organic compounds, benzene, carbonmonoxide, hydrogen sulfide, and flammable/explosive atmos-pheres. We conducted biological monitoring by collecting pre-and post-shift urine samples from flowback workers to evaluateexposure to benzene. Benzene metabolites found in a worker’surine indicate some level of exposure during the work shift.Benzene is an exposure concern because the Department ofHealth and Human Services’ National Toxicology Program hasdetermined that it is a known carcinogen (i.e., can causecancer).3 The International Agency for Cancer Research and theEPA have also determined that benzene is carcinogenic tohumans.4, 5
FindingsWorkers gauging tanks can be exposed to higher than recom-
mended levels of benzene. The average full-shift time-weightedaverage (TWA) personal breathing zone benzene exposure (± 1
standard deviation) for workers gauging flowback or productiontanks (n=17) was 0.25 ± 0.16 parts per million (ppm). Fifteen ofthese 17 samples exceeded the NIOSH recommended exposurelimit (REL) of 0.1 ppm (0.32 mg/m3).6 (This REL is a quantita-tive value based primarily on analytical limits of detection.NIOSH recommends that occupational exposures to carcinogensbe limited to the lowest feasible concentration). Because theflowback technicians’ work shifts were 12 hours, a reduction fac-tor of 0.5 was calculated to modify the American Conference ofGovernmental Industrial Hygienists (ACGIH) threshold limitvalue for benzene from 0.5 ppm to 0.25 ppm. Two of 17 samplesmet or exceeded the ACGIH unadjusted value of 0.5 ppm value;six of 17 exceeded the adjusted value of 0.25 ppm.7 Task-basedpersonal breathing zone samples for benzene collected duringtank gauging on flowback tanks exceeded the NIOSH short-termexposure limit (STEL) for benzene (1 ppm as a 15-minuteTWA). At several sites, direct-reading instrumentation measure-ments detected peak benzene concentrations at open hatchesexceeding 200 ppm.
The average full-shift personal breathing zone benzene expo-sures (± 1 standard deviation) for workers not gauging tanks(n=18) was 0.04 ± 0.03 ppm. The difference in mean personalbreathing zone benzene exposures between those who gaugedtanks and those who did not was statistically significant.Seventeen of the 18 samples were below the REL as a full-shiftTWA for those not gauging tanks. None of the 35 full-shift per-sonal breathing zone sampling results exceeded the OccupationalSafety and Health Administration (OSHA) permissible exposurelimit for benzene of 1 ppm for general industry (29 CFR1910.1028) or 10 ppm for the oil and gas drilling, production,and servicing operations sector exempt from the benzene stan-dard (29 CFR 1910.1000 Table Z-2).8 Exposures to other meas-ured hydrocarbons (e.g., toluene, ethyl benzene, and xylenes) didnot exceed any established occupational exposure limits.
For the biological monitoring, we used s-phenyl mercapturicacid, a specific metabolite of benzene that can be measured inurine. We compared the results to the ACGIH BiologicalExposure Index (BEI) for occupational benzene exposure.[iii]
A flowback technician gauging a flowback tank througha hatch on top of the tank.
September 2014 Page 31
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The benzene BEI represents the concentration of metabolitesmost likely to be observed in specimens collected from healthyworkers exposed to the ACGIH TLV of 0.5 ppm. None of thebiological monitoring samples were found to exceed the ACGIHBEI.
Direct reading instruments identified instances of short-termflammable atmosphere measurements as high as 40 percent ofthe lower explosive limit (LEL) adjacent to separators and flow-back tanks; in general, a concentration of 10–20 percent of theLEL is considered a risk for fires and is the typical alarm settingsfor direct reading personal and fixed flammable gas monitors.
Preliminary conclusionsThese findings suggest that benzene exposure can exceed the
NIOSH REL and STEL and present an occupational exposurerisk during certain flowback work activities. Based on these pre-liminary studies, primary point sources of worker exposures tohydrocarbon vapor emissions are opening thief hatches andgauging tanks; additional exposures may occur due to fugitiveemissions from equipment in other areas in the flowback process(e.g., chokes, separators, piping, and valves), particularly whileperforming maintenance on these items. The NIOSH researchfound that airborne concentrations of hydrocarbons, in general,and benzene, specifically, varied considerably during flowbackand can be unpredictable, indicating that a conservative approachto protecting workers from exposure is warranted. Hydrocarbonemissions during flowback operations also showed the potentialto generate flammable and explosive concentrations dependingon time and where measurements were made, and the volume ofhydrocarbon emissions produced.
Recommendations for protecting workersBased on workplace observations at the sites visited, NIOSH
researchers identified a number of general recommendations toreduce the potential for occupational exposure:
1. Develop alternative tank gauging procedures so workersdo not have to routinely open hatches on the tops of the tanksand manually gauge the level of liquid.
2. Develop dedicated sampling ports, other than the thiefhatches, that minimize workers’ exposures to volatile organiccompound emissions while manually tank gauging.
3. Provide worker training to ensure flowback techniciansunderstand the hazards of exposure to benzene and other hydro-carbons and the importance of monitoring atmospheric condi-tions for LEL concentrations.
4. Limit the time spent in proximity to hydrocarbon sources.5. Monitor workers to determine their exposure to benzene
and other contaminants.6. Establish a controlled perimeter (similar to the high pres-
sure zone established during hydraulic fracturing) around flow-back tanks. Limit entry and require that any portable tents orsunshades remain outside and upwind of the controlled area.
7. Provide workers with calibrated portable flammablegas monitors with alarms at appropriate levels. The actions tobe taken if the alarm sounds should be defined before the detec-tor system is put into use.
8. Use appropriate respiratory protection in areas wherepotentially high concentrations of hydrocarbons can occur as aninterim measure until engineering controls are implemented.Note that OSHA regulations (29 CFR 1910.134) require a com-prehensive respiratory protection program be established whenrespirators are used in the workplace.4
9. Use appropriate impermeable gloves to protect againstdermal exposures during work around flowback and productiontanks and when transferring process fluids.
Help wantedNIOSH is looking for additional partners in drilling and well
servicing to work with us to further evaluate worker exposures tothese chemicals and other hazards and to develop controls, asneeded. To investigate whether workers are exposed to toxicchemicals at hazardous concentrations in this rapidly expandingindustry and to address the existing lack of information on occu-pational chemical exposures, NIOSH initiated the NIOSH FieldEffort to Assess Chemical Exposures in Oil and Gas ExtractionWorkers (www.cdc.gov/niosh/docs/2010-130/pdfs/2010-130.pdf).
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NIOSH conducted a comprehensive exposure assessment tocharacterize worker exposure to crystalline silica in this process.The results from this evaluation and recommendations for con-trolling worker exposure to crystalline silica during hydraulicfracturing have been disseminated in trade association journals, aprevious NIOSH science blog, an OSHA-NIOSH Hazard Alert,and a peer-reviewed publication. Furthermore, in a recentNIOSH science blog posting, we addressed reports made knownto NIOSH of recent fatalities of workers who were gauging flow-back or production tanks or involved in transferring flowbackfluids at the well site. Other potential occupational exposures caninclude hydrocarbons, lead, naturally occurring radioactive mate-rial (NORM), and diesel particulate matter, which have not beenfully characterized. If you have questions or wish to participatein any aspects of this effort, please contact us by e-mail at [email protected]. ■
This article was published August 21 on the Centers for DiseaseControl NIOSH Science Blog (blogs.cdc.gov/niosh-science-blog/2014/08/21/flowback-2). Eric Esswein and Bradley King arewith the NIOSH Western States Office in Denver, CO. JohnSnawder, Michael Breitenstein, and Marissa Alexander-Scott arewith the NIOSH Division of Applied Research and Technology(DART) in Cincinnati, OH. The authors would like to acknowl-edge Belinda Johnson (NIOSH DART) for her efforts and contri-butions prior to and during the field studies.
1 Esswein E, Snawder J, King B, Breitenstein M, Alexander-Scott M, Kiefer M[2014]. Evaluation of Some Potential Chemical Exposure Risks during FlowbackOperations in Unconventional Oil and Gas Extraction: Preliminary Results.Journal of Occupational and Environmental Hygiene 11(10):D174–D184.2 NIOSH [2003]. NIOSH manual of analytical methods (NMAM®). 4th ed.
Schlecht P.C., O’Connor P.F., eds. Cincinnati, OH: U.S. Department of Healthand Human Services, Centers for Disease Control and Prevention, NationalInstitute for Occupational Safety and Health, DHHS (NIOSH) Publication94–113 (August 1994); 1st Supplement Publication 96–135, 2nd SupplementPublication 98–119; 3rd Supplement 2003–154. [www.cdc.gov/niosh/docs/2003-154/].3 NTP [2011]. Report on Carcinogens, Twelfth Edition. Research Triangle Park,NC: U.S. Department of Health and Human Services, Public Health Service,National Toxicology Program. 499 pp. [ntp.niehs.nih.gov/ntp/roc/twelfth/roc12.pdf].4 IARC [2012]. Chemical agents and related occupations, volume 100F: A reviewof human carcinogens. Benzene. Lyon, France: International Agency forResearch on Cancer, pp 249–294. [monographs.iarc.fr/ENG/Monographs/vol100F/mono100F-24.pdf].5 EPA [2009]. Integrated Risk Information System (IRIS) on Benzene.Washington, DC: U.S. Environmental Protection Agency, National Center forEnvironmental Assessment, Office of Research and Development. [www.epa.gov/iris/subst/0276.htm]6 NIOSH [2010]. NIOSH pocket guide to chemical hazards. Cincinnati, OH: U.S.Department of Health and Human Services, Centers for Disease Control andPrevention, National Institute for Occupational Safety and Health, DHHS(NIOSH) Publication No. 2010-168c. [www.cdc.gov/niosh/npg/]7 ACGIH [2014]. 2014 TLVs® and BEIs®: threshold limit values for chemicalsubstances and physical agents and biological exposure indices. Cincinnati, OH:American Conference of Governmental Industrial Hygienists.8 CFR. Code of Federal Regulations. Washington, DC: U.S. Government PrintingOffice, Office of the Federal Register.
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Page 34 The PIOGA Press
Potential litigation concerningflaring of wells in PennsylvaniaBy Renee Anderson, with special thanks to Brent Moreheadand Stephen ZaffutoTucker Arensberg Attorneys
The flaring of natural gas and natural gas liquids (NGLs) islikely to draw attention from royalty owners and neigh-boring landowners due to the noise and light it creates.
The attention to flaring can cause unwelcome scrutiny from roy-alty owners wondering why the flaring is taking place instead ofproducing the oil and gas for profit.
Producers choose to flare oil and gas from oil and gas wellsfor a variety of reasons including safety, line pressure, and a lackof infrastructure to separate and transport NGLs to market.However, advancements in technology are allowing for a moreefficient and economical separation of NGLs, and infrastructurefor the transportation of NGLs is quickly being constructed.These advancements beg the question—at what point does a pro-ducer become liable for flaring NGLs instead of employing tech-nology that allows for separation and transportation of NGLs thatwill increase the monetary compensation to royalty owners?
In North Dakota, several class action lawsuits allege that anoil and gas lessee is committing waste by not utilizing technolog-ical advancements to separate and market NGLs. The LA Timesreports that more than $1 billion in gas has been flared in NorthDakota in the past year1. This staggering amount of gas leavesroyalty owners wondering why they haven’t been compensatedfor lost profits. Industry response has been varied. Continental
Resources Ltd. wants to pay state taxes and royalty payments ongas it flared. Conversely, other companies cite compliance withstate laws regulating flaring and refuse to pay royalties on flaredgas2. The threat of similar litigation in Pennsylvania should con-cern producers that regularly flare wells.
In Pennsylvania, royalty owners unhappy with the flaring ofoil and gas have two options of judicial intervention: an injunc-tion to stop the flaring and a civil action based on the commonlaw principal of waste.
Injunctive relief is an equity action that asks the court to stepin and prevent (or continue) a certain activity that results in harmto the plaintiff. Plaintiffs could potentially claim that flaringharms them by excessive noise, fumes and light. They could alsoseek an injunction if the flared oil and gas is not being meteredto preserve their civil actions for waste. The granting of aninjunction is fact-specific and will be granted in cases wherethere is no other adequate legal remedy. It would be uncon-scionable for courts to grant an injunction against flaring occur-ring for the safety of the general public but it is possible that aninjunction could be granted for the metering of the flared gas toensure royalty owners’ proper compensation if a final determina-tion of waste is found.
Under Pennsylvania law, waste is generally defined as an actor omission by someone in legal possession of property in orderto alter or impair its value to the detriment of a person who willcome into possession in the future. There is an implied commonlaw duty to prevent waste in every lease of real property, absentsome express language to the contrary. This duty applies to theoil and gas lessee, which is a tenant in legal possession of the oiland gas produced from the leased property. Royalty owners are
September 2014 Page 35
the owners of the reversionary interest in the oil and gas at thetermination or cancellation of the lease term.
Although there is no relevant Pennsylvania case law involvingoil and gas lessees, Pennsylvania courts have shown a generalreluctance to find that tenants in possession of mineral propertyhave committed waste. An exception was noted in SchuylkillTrust Co. v. Schuylkill Mining Co., 57 A.2d 833 (Pa. 1948),where irreparable damage was done to property by an operatorengaging in unskilled and careless mining operations not inaccord with good mining practice. The court has not since elabo-rated on what kinds of conduct might constitute unskilled orcareless operations in natural resource extraction, or under whatstandard “good mining practice” might be determined.
At what point do advancements in technology tip the scales ofjustice to find the flaring of oil and gas an unskilled or carelessmining practice? Presently in Pennsylvania, “good mining prac-tices” could be evaluated under the prudent operator standard.This standard is objective and requires the lessee to do “whateverordinary knowledge and care would dictate as the proper thing tobe done for the interest of both lessor and lessee under any givencircumstances.” Kleppner v. Lemon, 35 A. 109 (Pa. 1896). Theprudent operator standard, if applied, could give courts morefreedom to consider an operator’s specific practices regarding theuse of technology, profit, safety, etc., in the context of industrystandards, and potentially find liability for waste where an opera-tor is adjudged to have fallen short of that standard.
So could Pennsylvania oil and gas producers face liability forwaste related to the flaring of NGLs? Absent any Pennsylvaniajurisprudence directly on the topic, it remains possible. Althoughcourts are generally reluctant to find that a lessee has committedwaste, a plausible expansion of the exception noted in theSchuylkill case to apply to certain conduct of oil and gas produc-ers could at the very least give rise to expensive and time-con-suming litigation. As noted above, several class action lawsuitshave recently been brought in North Dakota. While these law-suits have been dismissed on procedural grounds, they are cur-rently being appealed in the Eighth Circuit Court of Appeals. Inan effort to avoid the expense of litigation, at least one producerhas requested approval from state regulators to pay state taxesand royalty payments for gas that it has improperly flared inrecent years.
There are several ways that Pennsylvania producers can pro-tect themselves from potential waste claims related to the flaringof NGLs. The simplest and most effective way would be to add aclause to the lease form that would explicitly exclude from royal-ty calculation any compounds that are flared, for any reason, dur-ing the processes associated with oil and gas production andtransportation. Such a clause would become part of the agree-ment between the lessor and lessee, and thus eliminate any risk
of a common law waste claim related to flaring. Another optionthat an oil and gas lessee might consider would be to agree tocompensate the lessor for any oil, gas, or NGLs flared after thetesting phase, once the well has been completed. To avoid addingany additional administrative burden, the amount of such com-pensation could be a flat fee or daily fee for each day in whichflaring occurs. As technological advances allow NGLs to be economically sepa-rated and transported, the scales might tip in favor of royaltyowners bringing successful actions for injunction and wasteunder Pennsylvania law against those operators that fail to utilizepractices widely used in the basin to capture and market NGLs.The purpose of this article was not to predict the possible resultsof any lawsuits that might be brought in Pennsylvania over flar-ing under common law waste principles, but rather to point outthe risk associated with potential litigation and suggest means tolimit or eliminate this possible liability. Though flaring is muchmore prevalent in North Dakota (an estimated 28 percent of nat-ural gas production was flared in May 2014), and the laws andregulations differ in important respects from those inPennsylvania, prudent oil and gas producers in Pennsylvaniawould be wise to take precautions and adjust practices in order tolimit the possibility of future liability. ■
1 Paresh Dave, In North Dakota’s oil bonanza, natural gas goes up in flames, LosAngeles Times (July 16, 2014, 6:29 PM), www.latimes.com/nation/la-na-dakota-gas-flaring-20140717-story.html#page=1.2 Chester Dawson, Dispute Flares Over Burned-Off Natural Gas, Wall StreetJournal (August 3, 2014, 7:24 p.m. ET), online.wsj.com/articles/dispute-flares-over-burned-off-natural-gas-1407108281.
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Congressman Fred Upton began his career in politics dur-ing the Reagan administration and is currently chairmanof the House Energy and Commerce Committee. Without
hesitation, he reminded the audience of our not-so-distant energypast:
“The oil and natural gas that we rely on for 75 percent of ourenergy is beginning to run out. In spite of increased effortdomestic production has been dropping steadily by 6 percent peryear. Imports have doubled in the last five years, our nation’sindependence of economic and political action is becomingincreasingly constrained.” —President Carter, 1977
To familiarize us with the culture of his committee, heclaimed: “In our committee every good idea is welcome.” Hefurther explained the far-reaching jurisdiction of the committeeas well as its bipartisan successes. In the last Congress, 88 billspassed the committee; of those that passed on the House floor,40 were signed into law. In the current Congress, of the 62Energy & Commerce bills that were passed in the House, 15were signed into law and virtually all had broad bipartisan sup-port.
“It’s no secret too that we’ve been disappointed in the Housethat the Senate has failed to follow our lead; in fact…294 billsthat we passed in the House are stalled in the Senate,” he said.“But we are going to keep on reaching out.”
How will we get that job done when it comes to energy?
Congressman Upton outlined five distinct but related energy con-cepts, or pillars. He called our new energy vision “Architectureof Abundance.”
1. Energy transmission and distribution. A call to modern-ize and update our energy distribution infrastructure allowingdemand to keep up with supplies and better connect new sourcesof energy to all American consumers. What is needed to accom-plish this? Targeted changes to federal laws that provide certain-ty, predictability and fairness. Take politics and obstruction outof siting new energy infrastructure; place accountability withpipeline permitting agencies. Examples: Seven times the Housepassed Keystone XL pipeline legislation (H.R. 3) with bipartisansupport; ensure energy projects with our North American neigh-bors are never caught in a “Keystone-style” gridlock (H.R.3301); restore predictability for natural gas pipeline permittingcreating shock clocks and a clear process for project review andapprovals (H.R.1900).
2. Diverse electricity generation. We all need reliable power.Concern over administration’s limiting and undermining criticalbase load generation like coal and nuclear. Continue to press foranswers on how the Environmental Protection Agency and statesplan to implement the climate rules, targeted changes to federallaws so that all sources of electric generation can compete in themarket. Examples: passed new EPA rules that are achievable inthe real world (H.R. 3826) and put Congress back in the driver’sseat on the rule for existing plants (H.R. 2218); more sensiblestate based regulatory system in place for coal ash as well as
From the 2014 EIA Energy ConferenceMichigan Congressman Upton: Insights and remarks on energy issues and energy policy
February 2014 Page 37September 2014 Page 37
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3. Permitting, not just for energy projects, but for manufac-turing. Boosting confidence in long-term investment for multibil-lion-dollar projects including new foreign direct investments inthe U.S. by increasing transparency and requiring timely rulesand guidance for certain air permits; including future action fromgreenhouse gas permitting and ozone (H.R.4795) promoting newmanufacturing act.
4. Energy efficiency; private sector led innovation withouthaving to limit consumer choices. This means prioritizing effi-ciency legislation that saves tax payer dollars with no costs ormandates. It means updating laws like Renewable Fuel Standardsor RFS. H.R. 2126, Energy Efficiency Improvement Act.Building efficiency which builds on the initial Energy Star initia-tive; EE in schools, EE federal buildings; and build to promotehydropower.
5. Energy diplomacy; energy is a global commodity. Thosewho have the energy have the power. Upton stated, “We are see-ing this play out in Russia and we see the chaos in the MiddleEast that affects us at home. We have an opportunity to use our
energy as a diplomatic tool and we can take care of our domesticneeds rather than be held hostage and by the way it adds tens ifnot thousands of jobs.” This last pillar will ensure that our cur-rent laws are not making artificial barriers in the market and willconduct oversights to ensure increased exports do no harm toAmerican consumers. H.R. 6 will speed up the approval of natu-ral gas export applications in the Department of Energy andimprove the process going forward. More than two dozen exportapplications have been pending for more than one to two yearsfor approval. DOE states that we have enough natural gas tomeet our needs here at home and support our allies around theworld.
Congressman Upton’s closing remark welcomed the realprospects of energy independence with news by some estimatesthat the U.S. is now the world’s largest oil producer, surpassingboth Saudi Arabia and Russia. ■
“The great economic news coming from energy-producing states is going to increase awarenessof these issues, and I’m convinced the American people are going to expect us to act,”Representative Upton told the EIA gathering. “If the pundits are right, then Republicans aregoing to have an opportunity, and we’re going to have to prove we can govern. I’m excitedabout the possibilities.”
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Here are just four reasons to attend HHP Summit 2014:1. Endorsed as the HHP industry’s #1 natural gas event.
Connect with 150-plus sponsors and exhibitors from the world’sleading natural gas fueling, equipment and technology providers.Top sponsors include Caterpillar, Pivotal LNG, Chart Industries,Shell, GE, Cummins and ANGA, among many others.
2. Learn about the latest HHP projects with our exclusiveagenda. Given the incredible movement taking place across theHHP market, the summit draws insight from real deploymentsand investments taking shape in the form of new LNG produc-tion plants, natural gas-fueled drill rigs and pressure pumpingengines, LNG tender cars and natural gas-powered locomotives,LNG-fueled marine vessels of all shapes and sizes, and other off-road equipment. Attendees can gain an insider’s perspective byattending educational sessions that focus on drilling engines andconversion kits, LNG, CNG and field gas fuel supply, pressurepumping engine optimization, end user case studies, and a seriesof technical workshops. Beyond the traditional LNG and CNGdemonstrations, the program will highlight real innovations inthe capture and use of flare gas.
3. Experience our massive expo hall floor & equipmentdisplay. Get hands-on access to the latest natural gas engines,equipment, technology, and fueling solutions for HHP opera-tions. HHP Summit’s $50 Expo Hall only pass offers attendeeswho are short on time the opportunity to explore the show flooron Thursday, October 9, from 9 a.m. to 1 p.m.
4. Connect with 2,000-plus stakeholders. Network withhigh-level decision makers spanning the marine, rail, mining,drilling, pressure pumping and power gen sectors. With tremen-dous synergies across these HHP sectors, all heavy-duty equip-ment operators stand to economically benefit by collaborating todrive infrastructure development, technology and engine
September 2014 Page 39
Digging Out Potential SavingsDigging Out Potential SavingsDigging Out Potential Savings
Side by Side Side by Side Side by Side
With YouWith YouWith You
Into the FutureInto the FutureInto the Future
Adrianne Vigueras
Vice President Energy Division
888-313-3226 ext. 1335
WWW.ECBM.COM
Insurance Brokers & Consultants
www.fmctechnologies.com
Frac Flowback
Cased HoleWireline
Fiber OpticLogging
FMC Technologies Completion Services, Inc.2170 Washington Road, Canonsburg, Pennsylvania 15317 Phone: 724.916.4852
Completionswithout Compromise
CNG milestone. Giant Eagle recently reported topping the 1-million gasoline gallon equivalent (GGE) at its compressednatural gas fueling facility in Crafton. The grocery chain usesCNG in its fleet of delivery trucks. This photo is from a June2012 PIOGA tour of the facility.
advancements, and to create current regulations and policies.Sign up today to be a part of the industry’s leading show.
PIOGA members can save $50 on registration using codePIOGA50. Visit hhpsummit.com. ■
Page 40 The PIOGA Press
Natural Gas Futures Closing PricesAs of September 8
Month PriceOctober 2014 3.887November 3.938December 4.019January 2015 4.101February 4.076March 4.013April 3.803May 3.788June 3.811July 3.840August 3.848September 3.837
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,
manrenergy.com
Oil & Gas Trends
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[email protected]: (412) 667-9817
www.newprospect.com
NEW PROSPECT COMPANY
Office: (724) 742-1122Fax: (724) 742-4703
NEW PROSPECT COMPANY120 MARGUERITE DRIVE, SUITE 201 • CRANBERRY TOWNSHIP, PA 16066
DANIEL R. STEFFYNE Business Development ManagerEngineering, Completions and Drilling Consultants
February 2014 Page 41September 2014 Page 41
Physical and Hedging Expertise for the O&G Industry
Art Cipriani Frank Kronz Phill Sabol
www.asset-risk.com Phone: 412-886-1800
Houston Pittsburgh Chicago Denver
Pittsburgh 412.497.6000
hdrinc.com
Bridging the gap between idea + achievement
Page 42 The PIOGA Press
New PIOGA members — welcome!
Belmont Energy1000 South Garfield, Traverse City, MI 49686Royalty Owner
Well Control Technologies, Inc.310 Grant Street, Suite 823, Pittsburgh, PA 15219412-310-1449www.wellcontroltech.comService Provider
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!
Based in Wexford, IMG Midstream develops, owns andoperates small-scale natural gas generation projects inthe northeastern U.S. IMG’s business plan was
designed to create a new niche market for producers to selltheir natural gas.
By using locally produced natural gas to generate electricityfor the region, IMG is working with local producers to reinvestin the community and provide family-sustaining jobs for theregion. Additional benefits to the natural gas industry includelong-term firm market supply opportunities with multiple gasprice options and potential market alternatives for ethane andnatural gas liquids.
All facilities are wholly owned subsidiaries of IMGMidstream and are built using similar size, capacity and equip-ment to allow for economies of scale and operating efficienciesin building and maintenance costs. All IMG sites are located inclose proximity to natural gas production as well as local sub-stations to maximize utilization of existing infrastructure andminimize the need for additional infrastructure to be built.
Development plans for IMG sites include:• Each facility is located on a 4-5 acre site, using approxi-
mately 1 acre for building and equipment.• Building size averages 70 feet wide by 110 feet long and
34 feet high.• Each site can generate 19.9 MW of electricity at full
capacity, enough to provide power to 13,000 homes.• Functional life 20-plus years.• Best available control technology to significantly reduce
air emissions. First locations will use GE’s new Jennbachertechnology (J624 engines).
• Advanced noise mitigation technology.• Low profile design with minimal lighting.
Advantages of distributed generationThe retirement of coal-fired facilities, increased variable
generation (renewables), increased need for reliable reserves,improved grid security and quick response generators all makefacilities like those being built by IMG Midstream a good fitfor the generation mix of the electric grid as compared to larg-er generators.
IMG sites have a low environmental impact since no toxicchemicals are required for operation. There is no high pres-sure/temperature steam or water use and no high pressure gason site. Distributed generation offers high efficiencies througha wider range of electrical output, making the technology areliable and economical good fit for demand response. IMGsites are quick-start capable, meaning they can be at full loadin approximately 5 minutes, making the technology appealingin economical dispatch to meet capacity needs in the real-timeenergy market.
As grid operators make decisions for the reliable and eco-nomical “balancing” of the bulk electric system in our area,facilities like those being built by IMG will enhance their abili-ty to achieve a balanced and cost effective system.
For more information on IMG Midstream, visit www.img-midstream.com.
PIOGA Member Profile
Purchasers of Penn Grade & Utica Crude Oil
77 N. Kendall Ave.Bradford, PA 16701
814-368-1200
www.amref.com
Dan PalmerCrude Relationship Mgr PA / NY
ISO 9001:2008 Certified
Supplying Quality Lubricants Refined UsingPenn Grade Crude Oil
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 43September 2014 Page 43
PIOGA EventsPIOGA PAC Fall Blast Sporting Clays and Golf Tournament
October 8, Seven Springs Mountain Resort, Seven SpringsInfo: www.pioga.org/events/category/pioga-events/
Search Engine Optimization Webinar for PIOGA MembersOctober 22. Info: www.pioga.org/events/category/pioga-events/
PIOGA Conventional Producer RoundtableNovember 3, Ramada Greensburg Hotel & Conference CenterInfo: www.pioga.org/events/category/pioga-events/
Industry EventsIOGAWV Sports Weekend
September 19-20, Lakeview Resort, Morgantown, WVInfo: www.iogawv.com
Shale Insight 2014September 24-25, David Lawrence Conv. Center, PittsburghInfo: www.shaleinsight.com
WV Oil & Gas ExpoOctober 1, Morgantown, WVInfo: www.wvoilandgasexpo.com
High Horsepower SummitOctober 6-9, Morial Convention Center, New Orleans, LAInfo: www.hhpsummit.com (use PIOGA50 for $50 discount)
PUC Gas Safety SeminarOctober 7-8, Ramada Conference & Golf Hotel, State CollegeInfo: 717-787-3416 or [email protected]
Platts 7th Annual Appalachian Oil & GasOctober 16-17, Omni William Penn Hotel, PittsburghInfo: http://www.platts.com/conferencedetail/2014/pc433/index
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
OOGA Winter MeetingMarch 11-13, Hilton Columbus at Easton, OHInfo: ooga.org/events
Calendar of Events
➤M
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115 VIP Drive, Suite 210Wexford, PA 15090-7906
Address Service Requested
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