Tuesday, November 6, 2012

Well To Be Fracked Within Mile of Nuclear Plant

By CASEY JUNKINS - Staff Writer , The Intelligencer / Wheeling News-Register


SHIPPINGPORT, Pa. - Despite concerns associated with nearby seismic activity, officials do not foresee any problems with Chesapeake Energy's plans to frack within 1 mile of the Beaver Valley Nuclear Power Station.
"We would not have granted the permit if we did not think it was safe. Considering the depth at which they are drilling, there should not be any problem," said John Poister, spokesman for the Pennsylvania Department of Environmental Protection. "They will be working at a depth at least 1 mile underground, so this should not create a problem."
The nuclear plant - operated by FirstEnergy Corp. - is located in Pennsylvania along the Ohio River, roughly 10 miles east of East Liverpool and Chester along the Ohio River. According to company information, nuclear power has been generated at the site since 1957.

Article Photos

Photo by Casey Junkins
As Chesapeake Energy continues drilling and fracking gas wells in Ohio County, the company is preparing to break ground within a mile of the Beaver Valley Nuclear Power Plant in Shippingport, Pa.
Chesapeake works across West Virginia, Ohio and Pennsylvania. Company employees, or subcontractors working on Chesapeake's behalf, drill and frack wells all the time.
Stacey Brodak, senior director of corporate development for Chesapeake, directed all questions to DEP and FirstEnergy officials, noting Pennsylvania regulators "have a rigorous regulatory review process for all permitting."
"While we do not expect any impact from an oil and gas production well near the Beaver Valley station, our robustly designed and constructed facilities are built to withstand a wide variety of issues with considerable margin, including potential seismic events, which is the concern often cited with hydraulic fracturing," said FirstEnergy spokeswoman Jennifer Young.
Pennsylvania is home to the worst accident in the history of U.S. commercial nuclear power. On March 28, 1979, a partial meltdown at the Three Mile Island plant - caused by a sequence of equipment malfunctions, design-related problems and worker errors - released small amounts of radioactive gases and radioactive iodine.
Although fracking - which pumps millions of gallons of water, sand and chemicals into the earth at high pressure to break shale rock - has not been proven to cause earthquakes, there are some potential links. After a swarm of small earthquakes hit north-central Arkansas near a formation called the Fayetteville Shale last year, the state issued a temporary moratorium last year on new injection wells. The state found that three wells were operating near an unknown fault and were likely contributing to earthquakes. State officials shut those wells and banned future ones near the fault.
In April 2010, a 3.4 magnitude earthquake hit Braxton County, W.Va. In a span of several months, the area was hit by five more such quakes. The quakes were small - about a 2.7 magnitude - but large enough to catch the attention of state officials. Some speculated these quakes might be related to nearby fracking, but West Virginia University geology professor Tim Carr said he believed they occurred naturally.
According to the U.S. Nuclear Regulatory Commission, an earthquake would cause nuclear power plant structures on or in the ground to move. The nature of the movement depends on how the earthquake releases energy and location. The intensity of an earthquake can be characterized by both the frequency of the shaking and by the acceleration of the ground at the plant.
Furthermore, Ohio Department of Natural Resources officials said that the injection of gas-drilling wastewater into a brine disposal well near Youngstown almost certainly induced a dozen small earthquakes last year.

Tuesday, October 30, 2012

Hydraulic Fracturing has a long way to go -

By Robert Campbell

NEW YORK Oct 26 (Reuters) - For all the hoopla surrounding the shale revolution in oil and gas markets, it is worth bearing in mind that the technology is still in its infancy.

It is hard not to be overwhelmed by the speed of the transformation hydraulic fracturing, or fracking, is bringing to global oil and gas markets.

In the United States, fracking has spawned talk of re-industrialization, buoyed by cheap natural gas that will give North America a competitive edge over the rest of the world.

And shale oil production may lift U.S. crude output so quickly that the country becomes once again the world's largest producer of liquids within a decade.

Yet current techniques are in their infancy according to industry experts. There is considerable room for improvement, both in the application of force to reservoirs as well as in the location of "sweet spots" where fracking yields the best results.

Today hydraulic fracturing relies heavily on brute force and operators still count on a great deal of luck when completing wells, although the best operators are gaining an edge through research and development.

However, the scale of the opportunity from improvement is staggering.

Analysts at Bernstein Research argued this week, based on data from services firm Schlumberger, that a remarkable 80 percent of production from average shale wells comes from only a fifth of the fracking stages, and a staggering 50 percent of all fracking stages contribute no output whatsoever.

That suggests a huge amount of money spent blasting water and sand into the ground is being wasted. And that in turn points to a major focus of research in the oil services industry: improving completions to cut costs.

Lower costs may well open up additional shale basins for exploitation where the economic case today is simply not compelling.



PRIMITIVE WELLS

Already, modest reductions in costs and drilling time have allowed some operators in shale areas to substantially boost productivity.

Continental Resources, one of the top firms in North Dakota's Bakken Shale, trumpeted the role of technology and refined techniques in helping it achieve its 2014 production goal this year.

Higher production gives the firm more cash flow, which, in the custom of North American independent oil firms, it is plowing right back into exploration and development.

This is a major reason why shale-related output in North America has continued to outstrip projections. Lower costs lead to higher cash flows, which in turn lead to even more drilling than initially planned.

None of this is to say there are not significant challenges nor that some firms are hopelessly optimistic in their forecasts. But the current scope for technological improvement appears to remain considerable.

The prospect for technological advances in shale oil and gas extraction is one of the major reasons why some opponents of peak oil theories, like Nansen Saleri, a former Saudi Aramco executive who now heads upstream technology consultancy Quantum Reservoir Impact, are optimistic about the prospect for liquid fuels production.

"In a few years the techniques used today for fracking will be viewed as primitive," Saleri said in an interview this summer.

Finding the technologies that help streamline completion costs for hydraulically fractured wells as well as improving monitoring techniques to ensure wells and frack stages are better placed are the focus on intense research already.

Longer term, companies are already examining more radical improves, such as replacing pumped water with magnetic resonance techniques or other energy sources, in the fracking process.

Moreover as the technology matures and becomes less costly, it is likely to prove more portable than at present.

While North America seems uniquely suited to shale oil exploration at present due to deep capital markets and an oil and gas industry made up mostly of smaller, independent firms, lower cost technology may eventually erode this advantage.

That is the interesting question for global oil markets. If shale oil drilling techniques can be exported, will the balance of power shift? Or will the fact that major oil basins remain largely off-limits to private companies blunt the impact.

Tuesday, October 23, 2012

Dear Neighbors:

William Drelles sent me this link to a very interesting article about Portage County fracking activity. It appears that ODNR is still the "expert" on public safety and doesn't see anything of concern to have so many drilling wells located so close to injection wells. I will keep my fingers and toes crossed for the people in the neighborhood of this new industrial park.

Take Care,

Gail Larson
Trumbull Township
FYI, did you see the article about fracking in Portage County...very worrisome. Many Blessings, Bill

Tuesday, October 2, 2012

This is a must read for Ohioans if you are thinking about leasing

Ranjana Bhandari and her husband knew the natural gas beneath their ranch-style home in Arlington, Texas, could be worth a lot - especially when they got offer after offer from Chesapeake Energy Corp.

Chesapeake wanted to drill there, and the offers could have netted the couple thousands of dollars in a bonus and royalties. But Bhandari says they ultimately declined the deals because they oppose fracking in residential areas. Fracking, slang for hydraulic fracturing, is a controversial method used to extract gas and oil.

Their repeated refusals didn't stop Chesapeake, the second-largest natural gas producer in the United States. This June, after petitioning a Texas state agency for an exception to a 93-year-old statute, the company effectively secured the ability to drain the gas from beneath the Bhandari property anyway - without having to pay the couple a penny.

In fact, since January 2005, the Texas agency has rejected just five of Chesapeake's 1,628 requests for such exceptions, a Reuters review of agency data shows. Chesapeake has sought the most exceptions during that time - almost twice the number sought by a subsidiary of giant rival Exxon Mobil, Reuters found.

Chesapeake says it only seeks exceptions to the Texas statute - called Rule 37 - as a last-ditch effort, and often because it cannot locate the land owner. The law, company spokesman Michael Kehs said, "protects the rights of the majority of mineral owners."

Not so, say many local residents.  "The principle of it is insane," said Calvin Tillman, a former mayor of Dish, Texas, a small town north of Fort Worth where drilling has been heavy. "Not only can they take your property, but they don't have to pay you for it."

Chesapeake's use of the Texas law is among the latest examples of how the company executes what it calls a "land grab" - an aggressive leasing strategy intended to lock up prospective drilling sites and lock out competitors.

Chesapeake has become the principal player in the largest land boom in America since the 1850s California Gold Rush, amassing drilling rights on more land than almost any U.S. energy company. After years of leasing tracts from New York to Wyoming, the company now controls the right to drill for oil and gas on about 15 million acres - roughly the size of West Virginia.

More than its rivals, Chesapeake has made land-leasing central to its business model. An analysis by investment research firm Morningstar Inc. shows that the company has spent $31.2 billion to acquire drilling rights on unproven U.S. land in the last 15 years. Exxon - a company whose revenue was 35 times larger than Chesapeake's last year - spent $27 billion during the same period.
Chesapeake's rationale is clearly spelled out in company filings with the U.S. Securities and Exchange Commission.

"We believed that the winner of these land grabs would enjoy competitive advantages for decades to come as other companies would be locked out of the best new unconventional resource plays in the U.S.," the company wrote in its 2012 filing.
It has been less forthcoming about the tactics used in implementing that strategy, however.
Reuters reviewed hundreds of internal Chesapeake emails and thousands of pages of documents, including in-house data that show how Chesapeake evaluates its land acquisitions.

Reporters also examined dozens of lawsuits by land owners in seven states, and interviewed contractors proffering deals for the company.
What emerged were approaches to leasing property that land brokers, land owners and lawyers say push ethical and legal limits. Chesapeake has unilaterally altered or backed out of leases. And in Texas and at least three other states, it has exploited little-known laws to force owners to hand over drilling rights and sometimes forfeit profits.

Some of the company's own contractors have considered the tactics dubious.
"In my entire career, I have never been put in the position that (Chesapeake) has recently handed us," contractor David McGuire wrote to Chesapeake CEO Aubrey McClendon on August 10, 2010. He had just been ordered by the company to reject hundreds of signed leases in Michigan - through means that McGuire said were "beyond anything I could ever have imagined."

He told McClendon that he regretted ever being part of Chesapeake's land grab. "I simply wish our deal would never have taken place," he wrote in the email.
Some of the methods that Chesapeake has used aren't unique to the company. Nor is the outcome necessarily one-sided. Many land owners have gotten rich on deals with Chesapeake.
"Chesapeake has been successful in our leasing because we strive to fairly compensate the more than one million Chesapeake mineral owners," said spokesman Kehs. "Chesapeake has paid nearly $12 billion in lease bonus payments and nearly $10 billion in royalty payments since 2005."

CRITICAL JUNCTURE
How Chesapeake went about its land grab has become increasingly important in the past year, as the company weathers a governance crisis and liquidity crunch.

In April, Reuters reported that McClendon, 53, had arranged more than $1.5 billion in financing by pledging his share of the company's wells as collateral for personal loans. Most of the borrowing came from a firm that also is an investor in Chesapeake, a potential conflict of interest. The report prompted Chesapeake's board of directors to strip McClendon of his chairmanship and hire an independent chairman. Disgruntled shareholders replaced four of its nine directors.

In June, Reuters documented Chesapeake's efforts to team with Canadian rival Encana Corp. to avoid driving up land prices in Michigan. The U.S. Justice Department is investigating whether the companies violated antitrust laws.

Now, as Chesapeake fights to regain its footing, it is looking to execute the last stage in its land strategy: filling out its vast holdings, and then developing or selling them. Where Chesapeake doesn't intend to drill, it intends to sell, according to company presentations.
Much hinges on this next chapter. This year, the company aims to sell $14 billion worth of assets to close a cash-flow deficit.

The real estate strategy has been honed by McClendon, who started his career as a land man, the term for brokers who acquire mineral rights for energy companies.
On April 28, 2010 - amid one of the biggest land grabs in Michigan history - McClendon received a flattering email that harkened to his beginnings. It came from contractor McGuire, manager at O.I.L. Niagaran, a local firm that Chesapeake hired to help handle its leasing efforts in northern Michigan.
"To the most successful Landman in the world," McGuire's email began.
McClendon adored the compliment. "That is the nicest title anyone has ever given me," he replied. "I really appreciate that, thanks David!"

McGuire had been hired to serve as Chesapeake's principal outside land man in Michigan, where the company sought acreage in the Collingwood shale formation, then one of the most promising new oil and gas plays in the United States.

After Chesapeake identifies acreage that might hold significant gas or oil, it deploys armies of land men - some Chesapeake employees, others contractors such as McGuire and his employees. They knock on the doors of land owners to solicit leases. Few regulations govern what they can say or what language can be included in leases.

Chesapeake has, until recently, employed more than 4,000 land men. Often, they are ordered not to disclose that Chesapeake is their client, according to internal emails and interviews with land owners and land men.
"It is critical that we do everything in our power to keep our client's name secret!!!!" wrote Joe McFerron in a November 10, 2010 email to his staff. McFerron was a contractor with RedSky Land, an Oklahoma brokerage hired by Chesapeake in North Dakota and Michigan. McFerron did not respond to requests for comment.

Broker McGuire pursued his task energetically and in secret: Within three months, O.I.L. Niagaran and other subcontractors for Chesapeake had leased about 450,000 acres in Michigan. Chesapeake spent some $400 million there through McGuire and other brokers.
But internal Chesapeake emails show that by August - a few months after he had called McClendon the world's best land man - McGuire was troubled by the experience.

At the direction of McClendon and other Chesapeake executives, McGuire was ordered to reject or put on hold hundreds of leases after a Chesapeake test well performed poorly and a major Chesapeake competitor stopped new leasing.
A backlash ensued, and McGuire's company bore the brunt. O.I.L. Niagaran became a defendant in about 150 breach-of-contract lawsuits filed since late 2010 in Michigan state courts.
McGuire referred questions to an attorney, who declined to comment.

FAUX DEALS?
Extricating itself from land leases has sometimes proved as important to Chesapeake as obtaining them.
In lawsuits in Texas, Pennsylvania and North Dakota, land owners allege Chesapeake has treated signed leases as mere placeholders for deals that it may later choose not to honor.
Two state court judges in Michigan ruled early this year that Chesapeake had the right to reject leases at any time before title to the minerals was finalized.
But in the last three months, judges in Louisiana and Texas have awarded nearly $120 million to two land owners - Peak Energy and Preston Exploration - after finding Chesapeake breached contracts by walking away from signed deals. Scores of similar cases in Michigan and Texas have been settled this year.
In late 2008, as the financial crisis sent natural gas prices tumbling, Chesapeake began to reevaluate deals it had cut.

One group of land owners caught in these retreats was the Witt family. They own a 33-acre tract above the Haynesville formation of rich gas fields in Harrison County, Texas.
In August 2008, the Witts were approached by land men working for Chesapeake. The offer: to lease mineral rights for the Witts' land for $14,000 per acre, according to an amended complaint filed in May 2012. Instead of checks, Chesapeake issued bank drafts, which can be cashed after an owner's property title is reviewed - typically 30 to 90 days after a lease is signed.
When the Witts went to cash the Chesapeake bank draft, they were told by bank officials that the payment would not be honored. A hand-written note on one of the Witts' bank drafts rescinded by Chesapeake reads, "Cancelled for renegotiating price (per) acre," according to an exhibit submitted in the family's lawsuit.

The Witts alleged that McClendon told Chesapeake employees "to reduce the already agreed upon bonuses down to no more than $5,000 per acre" and to "take lawsuits" if necessary.
The family claimed they were "cold-drafted," a term used to describe an "unethical practice in the leasing industry" in which the land owner is provided a bank draft "in consideration for a valid, enforceable lease," even though the company's intent is "not to honor the payment obligation."

The practice allegedly enables Chesapeake to lock up property, block rivals, prevent owners from shopping for better offers, and then later decide if it wants to keep the acreage.
"It is unethical by anyone's standards in the energy industry if the intention was not to pay the draft at the time it was issued," said Richard Bate, an oil and gas attorney in Denver. "It is the essence of the land grab because it boxes out the competition without the intention to pay."
In response to the suit, Chesapeake said it "was simply under no contractual obligation to pay lease bonuses" to the Witts, according to court records. The company said the leases were "not signed by Chesapeake," though copies show they were taken in the name of a Chesapeake subsidiary, Chesapeake Exploration.

Terry Rhoads, an attorney for the Witt family, said their lawsuit was settled on August 17. Terms were not disclosed.

NO REFUSING
Some land owners oppose fracking, and New York, Vermont and Maryland have all refused to grant fracking licenses. The technique's effects on groundwater are still under review by the U.S. Environmental Protection Agency.
But Chesapeake and other energy companies, which view fracking as safe, are now using state statutes to access the minerals under unleased land even if owners object to the drilling technique.
If property owners refuse deals, Chesapeake and its land men have made clear their plans to take the oil and gas from beneath the land by using little-known laws in Texas, Ohio and other states. The terminology varies from state to state - a Rule 37 exception in Texas, mandatory pooling or unitization in Ohio. But the result is often the same: getting state regulators to enable the company to drill, sometimes against the owner's will.

The economic argument for granting access to unleased land is logical. Difficulty in stitching together large plots leaves holes in drilling units that can make development less profitable. Large, contiguous plots enable drillers to pump more oil and gas. Allowing companies to access remaining land means that property owners who want to sell their mineral rights aren't shortchanged by a few holdouts.
"Under Ohio law, it's not legal for one or a few land owners to keep the vast majority of land owners from exercising their rights to develop their minerals and get the benefits," said Heidi Hetzel Evans, a spokeswoman with the state's Department of Natural Resources, which rules on such requests.
Chesapeake has based some of its petitions on just such a premise: that it is protecting the rights of people who want to drill, rather than succumbing to the will of holdout land owners.

That marks a turnabout in Texas. When the state passed the Rule 37 statute in 1919, it was meant to prevent excessive drilling of oil wells and to protect the mineral rights of small land owners, say legal experts. The rule prohibits companies from drilling too close to unleased properties.
Today, Rule 37 exceptions "seem to be a new creative use of the statute in a way that was not intended when it was designed," said Matthew Festa, an associate professor of law at South Texas College of Law. "It's possible that this amounts to the transfer of private property from one private entity to another private entity."

Since January 1, 2005, three of the largest oil and gas drillers in Texas have applied for 3,595 exceptions to Rule 37, according to a Reuters review of Texas Railroad Commission data. Chesapeake has been the most active. It has applied for 1,628 exceptions, compared with 1,073 for rival EOG Resources and 894 for XTO Energy, a unit of Exxon Mobil.
Chesapeake and its rivals almost always win. Energy companies only have to notify land owners that they intend to apply for a Rule 37 exception. If the owner doesn't protest, commission guidelines require the petition be granted.

Texas Railroad Commission spokeswoman Ramona Nye said the agency believes there is no evidence that fracking is unsafe. And evaluating the fairness of Rule 37 exceptions is not part of the commission's mandate, she said.

"We are charged by the legislature to make sure hydrocarbons don't stay underground and go to waste," she said. "It becomes a balancing act. Do we allow two or three landowners to prevent a majority from developing those minerals?"

Energy companies and their executives are the dominant contributors to the election campaigns of railroad commission members and candidates, according to a Reuters review of Texas Ethics Commission data. For example, Chesapeake was among the largest donors last year to the campaign of the commission's chairman, Barry Smitherman, who is seeking reelection this year. The company contributed $25,000.

"WHATEVER WE WANT"
In Texas, Arlington resident Bhandari is resigned to losing future income from the gas beneath the couple's land. "We decided not to sign because we didn't think it was safe," Bhandari said. But "the railroad commission doesn't seem to care about whose property is taken."
They aren't the only owners facing a similar scenario.
Ohio's Utica shale formation is a cornerstone of Chesapeake's plan to drill for more oil, which is fetching a premium at a time of rock-bottom gas prices. The company has already leased more than 1 million acres of land in the state. It wants more.

One result: Dozens of Ohio land owners interviewed by Reuters say Chesapeake land men are raising the prospect that their land will be "force pooled" - a term for using state law to mandate that unleased property be included in drilling units.

That contention is supported by a tape recording of land man Nate Laps, who worked for Chesapeake in Ohio through subcontractor Kenyon Energy. The recording was made by David Kennedy, a land owner in Stark County, Ohio. Kennedy later signed a lease with Chesapeake, receiving a bonus of $9,900 for his 11-acre property. He said he feels that Laps gave him a "fair shake."
The recording indicates that not all land owners are as fortunate.

In a portion of the recorded conversation, Kennedy asked Chesapeake land man Laps: "Mandatory pooling - what is that?"

Laps responded: "We don't like to talk about this because we won't want to come across as it's our way or no way … But since you mentioned it - if properties don't want to sign, if we have 90 percent secured of the well that we need, we have the power to put these people in the lease without their permission."
Kennedy: "Do you still have to pay 'em?"

Laps: "All you do is pay them the royalties. …. We can do whatever we want."
Laps did not respond to emails and phone calls seeking comment. But state records in Ohio show Chesapeake is doing precisely what Laps said, and with the blessing of regulators.
Unlike Rule 37 in Texas, Ohio statutes allow that land owners could receive royalties. Hetzel Evans said the DNR receives "a few dozen or more" forced-pooling applications per year. The DNR has approved most of them, she said, but only when a driller shows "there's no other option."
Asked about the comments by Laps to land owner Kennedy, she said: "It does concern us if we're being portrayed as allowing an operator to just come in and do what they will. A comment like that makes it sound like we don't have a framework in place."

State Rep. Mark Okey, a Democrat who represents nearby communities, has unsuccessfully sponsored legislation to govern the conduct of land men. He said his constituents have singled out Chesapeake's brokers as the most forceful. Their land men have even sought to lease his property, he said.
"They believe in intimidation tactics. They threaten you. They will yell at you….It's all about getting you to sign," Okey said. "You don't sign? We'll go around you. You don't sign? You'll not get anything out of your mineral rights. You don't sign? Then you're going to pay the price because we're going to take those minerals from you."

Chesapeake declined to comment.
David and Catherine Conrad live just outside the town of Hartville, Ohio, near Akron. They said they refused to sign a lease with Chesapeake last year because they, too, oppose fracking. But a Chesapeake well will soon snake beneath the Conrad home.
Chesapeake requested last November that the couple's land - and the land of 48 other property owners - be included in an area where Chesapeake plans to drill six wells. Chesapeake's application was reported by the Columbus Dispatch.

On July 10, officials with the DNR approved Chesapeake's request. "I don't think the state should be able to take a land owner's rights to generate a profit for a private company," Conrad said.
In its petition, Chesapeake told regulators its proposed drilling unit could produce 4.5 million barrels of oil and 3.5 billion cubic feet of natural gas - if the plots of the 49 land owners who didn't lease their property to Chesapeake were included.

If not, Chesapeake said, the unit would be 75 percent less productive and would miss out on an additional $71 million in revenue, according to its application. That math carried the day.

US boom in natural-gas drilling rattles Russia and Europe

Associated Press
PITTSBURGH

The Kremlin is watching, European nations are rebelling, and some suspect Moscow is secretly bankrolling a campaign to derail the West’s strategic plans.

It’s not some Cold War movie; it’s about the U.S. boom in natural gas drilling, and the political implications are enormous.

Like falling dominoes, the drilling process called hydraulic fracturing, or fracking, is shaking up world energy markets from Washington to Moscow to Beijing. Some predict what was once unthinkable: that the U.S. won’t need to import natural gas in the near future, and that Russia could be the big loser.
“This is where everything is being turned on its head,” said Fiona Hill, an expert on Russia at the Brookings Institution, a think tank in Washington. “Their days of dominating the European gas markets are gone.”

Wednesday, September 26, 2012

New Horizontal Drilling Permit Issued

The Ohio Department of Natural Resources has issued a new horizontal drilling permit to CNX Gas Co. LLC, a subsidiary of Consol Energy Corp., for a new gas well in Mahoning County.
According to ODNR records, ODNR issued the permit Sept. 17 for CNX to drill on the Cadle property in Jackson Township.

This is the second well CNX has permitted for the Cadle property. Another well on the site is now being drilled, state records show.

CNX has also drilled a third well at the Hendricks Farm in Ellsworth Township in Mahoning County.

Fourteen horizontal wells have been permitted in Mahoning County since last year. All except the three CNX wells are permitted for Chesapeake Exploration LLC, the most active energy company exploring for oil and gas in the Utica shale region of eastern Ohio.

No permits were issued to Chesapeake last week.

ODNR also awarded permits to Gulfport Energy for two horizontal wells in Harrison County, and three permits to Mountaineer Keystone LLC for drilling rights on land in Portage County. Another energy company, Hall Drilling LLC, was issued a permit to drill in Monroe County.

Tuesday, September 25, 2012

Conservancy district approves sale of water to drillers

Is it in our best long term interest to sell our most valuable resource, the life blood of our communities in a year of low rain fall to help pay for road damage by the oil and gas industry?
Robin

The Muskingum Watershed Conservancy District intends to sell water from two reservoirs in eastern Ohio to natural gas drillers, despite an earlier plan to suspend sales until a water availability study was completed.

The district said it will sell water from Clendening Lake in Harrison County and Piedmont Lake, mostly in Belmont County, during the fall drawdown, when lakes are lowered for the winter.

The U.S. Army Corps of Engineers, which manages the dams, typically lowers the lakes by several feet in the fall to allow them to refill over the winter with rain and melted snow.

The district’s governing board approved the sales from the two lakes at a meeting Friday and the district announced the plan Monday.

The district said water requests from drillers near Clendening and Piedmont “have increased sharply” in recent weeks.

Any water sales from the two lakes would reduce the wear and tear on local roads —and thus save taxpayers money — by cutting the number of tankers hauling water to new natural gas wells to be hydraulically fractured, or fracked, the district said in announcing the proposed sales.

Earlier this month, the Ohio Township Association’s board of directors had endorsed water sales to drillers from the winter drawdowns.

The volume of water and the price would still have to be negotiated, officials said.

Drillers have told the district they intend to begin drilling soon and will need water. Each well that is fracked typically takes 5 million to 10 million gallons of water.

“At drawdown, billions of gallons of water are released from the lakes, making this the optimum time to supply excess from the lakes to the oil and gas industry without any negative impacts on recreational activities of these two lakes, including boating,” said Sean Logan, the district’s chief of conservation.

An estimated 6 billion gallons of water from the two reservoirs would have been released this fall under normal operations, the district said.

“We do not need a study to verify that excess water is being released from the lakes during the drawdown period, which occurs each fall and winter,” Logan said.

Earlier in the year, the district, based in New Philadelphia, had approved the sale of up to 11 million gallons of water from Clendening Lake to Gulfport Energy Co. In June, however, the district said it was suspending sales to oil and gas companies pending a water availability study by the U.S. Geological Survey at three reservoirs: Atwood, Clendening and Leesville. Results from those studies are expected in December.

A vocal grass-roots group led the push to stop the water sales to drillers.

The district also has approved a new water availability study at Seneca Lake.

The district has three long-term contracts for water sales: with Cadiz for water from Tappan Lake, with Cambridge for backup drinking water from Seneca Lake and with Carroll County for water from Atwood Lake for Atwood Lake Resort.

The district and the U.S. Army Corps of Engineers oversee 16 reservoirs and dams in eastern Ohio to control flooding.

Drillers in Ohio face tighter regulations, relaxed taxes

Ohio has some fairly strict regulations, but very low taxes, when it comes to how it's handling the growing shale gas industry in comparison to other states, a recent report finds.
But all states are not the same in terms of their geology, the need to protect local populations and the way they approach and justify their tax environments, say the report's author and a representative of the Ohio Oil and Gas Association. “Conditions are different in different states,” said Nathan Richardson, a lawyer and resident scholar at the Washington, D.C.-based nonprofit Resources for the Future, and one of the authors of the July report. “Let's say you are looking at how deep a well casing has to go to protect groundwater — what you might be looking at could just reflect how deep the groundwater is in different states.”

Mr. Richardson and his colleagues set out to compare taxes and regulations across the states, with an emphasis on those that are participating in the nation's so-called shale gas boom. They released their initial findings in July, updating them at the end of that month to include the provisions of Ohio's latest legislation on oil and gas drilling, Senate Bill 315, which took effect Aug. 1.

Geological variations aside, the report shows that Ohio has caught up with many other major gas-producing states, at least in terms of its regulations. For example, Ohio joined many other producing states by requiring that groundwater be tested for methane and other contaminants, the report finds.

In some areas, Ohio appears to have adopted even more stringent regulations than some other states. For instance, while nearly all states require that drillers encase their well bores in steel and cement near the surface and down through freshwater aquifers, Ohio also requires that drillers use casings on their well bores for 1,000 feet at the bottom of the well. That's twice as much as the 500 feet of casing required in Pennsylvania, Louisiana or California, the report finds.

Also, in the area of disclosure, Ohio is one of only five states that require drillers to disclose both the volume and the concentrations of chemicals they use in their fracking fluid — the mixture of water, sand and chemicals that drillers pump at high pressure into a well to fracture the shale and release its natural gas, oil and other valuable resources.

“If you think disclosure is a good idea, then Ohio is ahead of most other states,” Mr. Richardson said.

Ohio also has among the lowest number of wells per state inspector. Each Ohio inspector is responsible for overseeing between 31 and 140 wells. In some other producing states, such as Texas and Oklahoma, one inspector monitor more than 1,000 wells, the report stated.

That's not just because Ohio has yet to really begin drilling its new shale gas wells in earnest, either, Mr. Richardson said. The study counts all of Ohio's wells, even conventional wells that have been drilled in Ohio for about the last 100 years. Including those in the mix, Ohio already has nearly 35,000 wells to monitor, the report found.

By DAN SHINGLER
4:30 am, September 25, 2012

The question is; what have we done about zoning regulations.  Our current law required driller to hide well heads, storage tanks and related equipment to a distance of 500' from public roads.  Current laws also allow wells and starage tanks to be 200' and 150' respectively, from any dwelling.  THIS IS NOT SUFFICIENT!  Equipment should be 100' from a dwelling and we need to place people in positions that will fight for those changes.  IS ODNR REALLY ON OUR SIDE?

Debris left over from vertical drilling over the last 50 years is now littering our landscape and our farmers fields with machinery and storage tanks that still hold hazardous fluids left by irresponsible driller.  Abandoned wells should be PLUGGED!

Robin L Brower
Trumbull Township

Board of Zoning Appeals



 

Friday, September 21, 2012

Ohio not ready for ‘fracking’?

A new report by an environmental-advocacy group warns that Ohio is unprepared to shoulder the costs of a coming shale-drilling boom and should take steps to make sure oil and gas companies, not taxpayers, pay to protect the state.
Other studies have warned about the pollution and health risks of shale drilling and “fracking,” but Environment Ohio’s “Cost of Fracking” report defines them in terms of dollars and cents.

The report highlights a $265 million estimate to repair Pennsylvania roads damaged by drillers’ trucks and $300,000 that one oil company paid to replace and filter contaminated well water for 14 homes around Dimock, Pa.

The road-repair figure came from the Pennsylvania Department of Transportation. “Look at what’s happening in other states,” said Julian Boggs, a policy advocate for Environment Ohio. “We want to get out in front of this thing.”

State and drilling-industry officials said steps have been taken to make sure Ohioans are protected.

“Everyone recognizes that we need to make sure we have adequate regulations in place,” said Tom Stewart, vice president of the Ohio Oil and Gas Association.

Drilling Ohio’s Utica shale is expected to mirror activity in Pennsylvania, where thousands of wells have been drilled into Marcellus shale.

The Ohio Department of Natural Resources has so far approved permits for 375 Utica wells in eastern Ohio, 134 of which have been drilled. Officials estimate 2,250 wells could be completed by the end of 2015.

The fracking process injects millions of gallons of water, sand and chemicals underground to shatter the shale and free trapped oil and gas. Industry officials insist fracking is safe.

Boggs said lawmakers should strengthen state laws to require that oil and gas companies have enough money to pay for environmental cleanups and other drilling-related costs.

Natural Resources officials declined to comment on the report but said in a statement that state drilling regulations “reflect the latest science and best practices.”

Stewart said a state law enacted in May already contains several measures intended to increase protections and drilling oversight.

One measure demands that oil and gas companies obtain at least $5 million in liability insurance before they can get a shale-drilling permit. Companies must have at least $1 million to drill conventional wells.

Stewart said drillers also routinely sign agreements with county and township officials in which they promise to upgrade and repair roads as needed.




By Spencer Hunt
The Columbus Dispatch Friday September 21, 2012 6:48 AM

Pipelines - Are they coming our way?

Spectra Energy Corp., DTE Energy and Embridge Inc. announced Sept. 4 they want to build a 250-mile pipeline that extends from northeastern Ohio to Michigan at a cost of $1.9 billion.
Workers operating earthmoving equipment were busy Sept. 13 clearing land atop a large hill near the intersection of state Route 644 and Hagan Road in Hanover Township. In May, the 117-acre site sold for $1.8 million to Utica East Midstream Ohio LLC, according to courthouse records.

“People don’t know how big this is,” said a passerby who lives in Hanoverton, a mile north of the site. “I’ve been watching them for about a month, and they’re moving fast.”
 
MarkWest has secured a major customer with Oklahoma City-based Gulfport Energy Corp., which has also been active drilling wells in the western portion of Harrison County,. A pipeline leading west of the MarkWest project is directed toward gathering lines under construction related to Gulfport’s well sites, he says.
“That pipeline is of great urgency,” Millicent says.
Last month, Gulfport announced the initial results of some of its wells in southeastern Ohio, the most productive of which is the Wagner 1-28H well in the northwestern corner of the county.
The Wagner well recorded a peak rate of 4,650 barrels of oil equivalent per day, outperforming by far Chesapeake Energy Corp.’s Buell well, also in Harrison County. By comparison, Buell registered a peak rate of 3,010 barrels of oil equivalent per day.
“Gulfport had to put a small-scale processor at that [Wagner] well,” Millicent says, and underscores the need to finish the MarkWest complex. “They wanted to get it into production as quickly as possible. The other wells are just waiting for the pipeline to get there.”
There are four major oil and gas companies active in Harrison County, the most prolific leaseholder being Chesapeake. Gulfport owns a sizeable lease position in the western and southern portions of the county, Hess Energy, under a joint venture with Pittsburgh-based Consol Energy, has acreage mostly in the eastern part of Harrison, while Chevron is drilling its first well in the west.
“They’re all still trying to figure it out,” Millicent remarks, “but there seems to be a notion that Harrison County is blessed to be right in the fairway of the wet gas play.”
The county, home to just 15,000 people and two working stoplights, was at one time a bustling coal-mining region. Just outside Cadiz, the largest strip mine in Ohio, owned by Oxford Resource Partners, sits on land just north of the MarkWest project.
 
 Youngstown Business Journal

Thursday, September 13, 2012

Activists Protest Fracking, Regional Chamber Responds




YOUNGSTOWN, Ohio – Activists concerned about the impact and consequences of oil and gas operations in the Mahoning Valley say their rights as citizens have been stripped from them, and demand that local communities be given the power to regulate an industry that they say has grown all too powerful.

"It's about health, safety and welfare," said Doug Shields, a former president of Pittsburgh City Council who successfully led the charge to ban drilling within that city's limits in 2010. "In Pennsylvania, like Ohio, you have no zoning authority anymore and when an operation wants to come into a residential area, they do."

Shields spoke to a crowd of about 30 Wednesday afternoon at the First Unitarian Universalist Church, where the group was shown an 18-minute film, The Sky is Pink, by Josh Fox, who also produced Gasland, a scathing examination of the use of hydraulic fracturing in the oil and gas industry.

The group then marched to the steps of Stambaugh Auditorium and then to City Hall.
The event coincided with similar protests in several states across the country as part of "Freedom From Toxic Frack Waste: National Rally Day," organized by Frackfree America National Coalition and the Network for Oil & Gas Accountability & Protection.

Shields said the oil and gas industry is the only industry exempt from local zoning laws, which grants it an unfair advantage over other businesses. "How can that be?" he questioned.
He added that communities find it difficult to plan ahead as long as the oil and gas industry dangles incentives and bonus payments before landowners and local governments, which see a windfall of money in return for leasing their land.

Moreover, Shields said local governments have ignored the potential health risks and hazards that the industry poses.

"No one's looked at the health, welfare and safety issues, or the diversion of assets," that a community would require such as firefighter training to support a single industry, he said.
Shields said he was able to convince Pittsburgh City Council to ban drilling simply because he was able to present a solid case based on factual evidence.

"We brought science, law and industry before the council and at the end of the day, the council's assessment was that this is not safe," he said.

Oil and gas companies use a process called hydraulic fracturing and horizontal drilling to crack open tightly packed shale rock that holds trapped natural gas. Hydraulic fracturing, or "fracking," calls for injecting water, sand and chemicals under high pressure to break apart the shale and unleash the gas. The wastewater is contaminated, and is often stored in injection wells across the state of Ohio.
An injection well in Youngstown was tied to a series of earthquakes in the Mahoning Valley last year.
Shields emphasized his concerns that these chemicals -- some of them known carcinogens -- used in the fracking process can migrate through cement casings in the well shaft and poison water supplies.
"What happens to my water in my well, for other uses such as recreation? What happens to my health?" Shields said. "There are no answers for this."  "This is something that has a profound lasting effect to everything in our community. Why would we not want to do our due diligence?" he asked.
Liberty Towsnhip Trustee Jodi Stoyak said that she's tried to pass a measure, to no avail, that would call for the township to investigate how it could attain more control over the oil and gas industry and drilling activity there.

"They tabled it," she said. "They didn't want to have anything to do with it." Stoyak also attempted to put a similar measure before the Ohio Township Association, but that, too was squelched when the local township association refused to endorse it.
"I don't know that they're all educated on this," she said. "My immediate concern is that we have no local control."

Ohio Rep. Robert Hagan, D-60 Youngstown, said in a statement that the national protest demonstrates a high-level of concern related to hydraulic fracturing and the threat it poses to the environment. "Today, in Youngstown and all across the country, people concerned about the dangers of fracking and injection wells are coming together to stand up to the big-money oil and gas industry," he said.

Hagan has supported a moratorium on new injection wells throughout the state, and contends that the oil and gas industry hasn't come clean on disclosing what chemicals are used to "frack" wells.
"This call-to-action day is an opportunity for the public to put pressure on and demand answers from these companies that have so far shown blatant disregard for anything other than their bottom line," Hagan said.

Tom Humphries, president and CEO of the Youngstown/Warren Regional Chamber, said in a statement that new Ohio regulations afford citizens adequate protection, and that opposition to the oil and gas industry is "misguided."  "Looking at the facts shows that over the last two years, the Utica shale development has helped attract more than $1 billion in investments and about 1,500 new jobs in just the shale supply chains in the Mahoning Valley," Humphries said.

This development has proceeded without a single environmental incident related to hydraulic fracturing, a process that has been used in the drilling industry since the 1940s, Humphries continued. In the case of the brine injection wells, the state has shut down those wells suspected of causing problems and has strengthened regulations to protect the public, he added.
"I think protesting this responsible activity is misguided and does a disservice to the many people in our Valley who have obtained jobs or hope to obtain jobs related to shale development," Humphries said.

"I understand people have concerns," added Terry Fleming, executive director of the Ohio Petroleum Institute. "But, in Ohio we're operating under the strictest regulations in the country."
Fleming said that while he was in town last week for the second-annual Youngstown Ohio Utica and Natural Gas conference and expo, he noticed a substantially different atmosphere in the community compared to five or six years ago.

"I saw a totally different Mahoning Valley," he said. "You could just feel the excitement."
Many of those opposed to hydraulic fracturing and drilling are passing on information that isn't factual, and use fear as a means to get their message across, Fleming stated. Despite vocal protests, he believes the overwhelming majority of residents in the Mahoning Valley are largely in favor of what the oil and gas industry is doing.

"As in any industry, there are risks," he noted. But new companies and jobs moving into the Valley also provide a sense of stability and optimism that the region hasn't experienced in decades.
"The good far, far outweighs the risks involved," Fleming said. "If you give people the straight facts and let them decide for themselves, the majority will be quite comfortable [with] what we're doing in Ohio."


Copyright 2012 The Business Journal, Youngstown, Ohio.

Wednesday, September 12, 2012

New Well Permits Issued

COLUMBUS, Ohio – The Ohio Department of Natural Resources has issued six new horizontal drilling permits to Chesapeake Exploration LLC that would allow the development of wells in Columbiana and Carroll counties.

Chesapeake was awarded a permit Sept. 4 to drill in Salem and Center townships in Columbiana County, ODNR reported. The well in Salem is permitted for the Weaver farm while the well in Center Township is for the Mrugala property.

The Oklahoma-based energy company has drilled 20 new wells in the county since last year and at least one well, the Sanor well in Knox Township, is producing, according to ODNR's field activity report.

Four other horizontal permits were issued to Chesapeake for new wells in Carroll County, the most active region in the Utica shale.

Chesapeake now holds permits for more than 120 horizontal wells in Carroll County.

And, Hilcorp Energy Corp. is looking to drill a deeper well in Lawrence County in western Pennsylvania, according to the Pennsylvania Department of Environmental Protection.

Houston-based Hilcorp was awarded a permit Aug. 23 to drill deeper into shale formations under the Whiting farm, according to state DEP records. The company had secured a horizontal permit to drill on the land earlier this year.

Monday, September 10, 2012

Communities seek ways to override state control of oil and gas drilling boom

Patti Gorcheff is worried about the potential dangers of oil and gas drilling near schools in her community near Youngstown.

Julia Fuhrman Davis, who lives in the same area south of town, considers the drilling — known as hydraulic fracturing or fracking — to be a threat, and she’s angry that there is little citizens can do.

Their concerns are twofold: The rich discoveries of oil and gas in eastern Ohio have brought a surge in drilling, but eight years ago, the Ohio legislature and former Gov. Bob Taft stripped local governments of control.

The Ohio Department of Natural Resources is now in charge.

The two activists are involved in grass-roots campaigns to give communities more weapons to fight the spread of horizontal boring in the Utica shale formation, and injection wells, which are used for disposal of the polluted water that comes from oil and gas exploration.

They are pushing what’s called limited home rule in Ohio townships and a community bill of rights in cities and villages, both aimed at increased protection for air, water, health, property values and public safety.

Limited home rule already is an option for townships. The community bill of rights could be adopted in cities and villages as resolutions or charter amendments. Such provisions say state laws allowing drilling violate the civil rights of local residents and threaten their health and safety. Supporters say the new efforts give local communities power over state laws.

However, state officials believe otherwise. Under Ohio law, drilling cannot be banned or blocked by local communities.

“We have the sole authority under Ohio law for regulating aspects of the oil and gas industry in Ohio,” said agency spokeswoman Heidi Hetzel-Evans. “That, we feel, is clear.”

‘It’s David versus Goliath’

“We can’t ban fracking, and we know that,” said Fuhrman Davis. “But with limited home rule, we can adopt local rules on hours of operation, noise limits, truck traffic and routes, local nuisance rules, fences and sign rules for drillers, waste shipments. … We can use those rules to fight back a little bit, to give us more control. It’s David versus Goliath. But it’s a way to fight drilling.”

She said it’s not a fracking problem; it’s a democracy problem.

“Citizens are losing rights and this is just another example. … Home rule would help us regain that voice,” she said.

Anti-fracking efforts are growing in Ohio, Pennsylvania and New York as interest in shale drilling grows.

Locally, limited home rule will appear on the Nov. 6 ballot in Portage County’s Randolph Township.

After the township rejected a proposed community bill of rights, a group led by Sandra and Newt Engle decided to place the issue of home rule on the ballot. They needed 209 signatures and collected 271.

Will home rule provide the air-and-water protection they seek?

“I hope so. But I really don’t know,” Newt Engle said. “No one does. That truly is the great unknown.”

If approved by voters, extended home rule would begin Jan. 1. And there would be challenges. Regulations must apply to all, not just drillers.

And there is a financial cost to taking on home rule, according to township trustee Roger Klodt.

Establishing a police department and hiring a part-time law director could cost as much as $500,000, and that would require a tax levy of as much as 5 mills, Klodt said.

Gorcheff and Fuhrman Davis have hit a legal snag in their efforts to get expanded home rule in their community, Beaver Township, on the Nov. 6 ballot.

The two women circulated petitions and got 369 signatures, more than the 296 required. However, on July 27, their petitions were rejected by the township, which said the wrong forms were used.

Akron attorney Warner Mendenhall has taken their case to the Ohio Supreme Court, asking that trustees be ordered to place the issue before voters.

The high court has not yet ruled, leaving the home-rule issue in Beaver Township in legal limbo.

Limited home rule is in place in 48 urban Ohio townships, including Springfield in Summit County and Lake, Jackson, Plain and Perry in Stark County.

Drilling in Medina County has led to serious discussions about limited home rule there, but nothing is likely to appear on the ballot this year, said spokeswoman Sandra Bilek of the Concerned Citizens of Medina County.

She also is involved in a new grass-roots campaign to convince Gov. John Kasich and legislative leaders to return control of drilling to municipalities. Nonbinding resolutions seeking that change are being submitted to local governments and petitions will be circulated, she said.

Bill of rights

Others are trying a different approach: pioneering community bills of rights that acknowledge the rights of the citizens over the government.

Some communities are targeting gas wells, some injection wells, and some target both.

Cincinnati City Council has voted to ban injection wells. The village of Yellow Springs near Dayton is adopting a resolution against gas and injection wells.

Mansfield will vote on Nov. 6 to amend its charter to block injection wells. Athens, in southeastern Ohio, prohibits drilling in protected areas around drinking-water wells.

On Tuesday, the Broadview Heights City Council approved a city charter amendment prohibiting future drilling as part of a community bill of rights. If approved by voters Nov. 6, the initiative would also state that city residents have a right to clean air, clean water, clean soil and a sustainable energy future.

Behind the initiative was Mothers Against Drilling in our Neighborhoods, which collected 1,519 valid signatures on petitions, meeting requirements in the city charter and Ohio law. There are more than 90 active wells in the Cleveland suburb.

Water agencies in Montgomery and Hamilton counties — Dayton and Cincinnati, respectively — are fighting injection wells for fear they will threaten drinking water.

An additional 29 Ohio municipalities have called for drilling bans and moratoriums. They include North Canton, Munroe Falls, Canton, Garrettsville, Hartville, Meyers Lake and Canal Fulton and the following townships: Hinckley, Medina, Montville, Plain, York and Randolph, according to Food and Water Watch, a national environmental group concerned about fracking.

Nonprofit leads effort

Behind many of the local efforts, including the one in Broadview Heights, is the Community Environmental Legal Defense Fund, a nonprofit based in Mercersburg, Pa.

Its pro-democracy campaign was first used in Ohio years ago in an unsuccessful effort to wrest control of factory farms from the Ohio Department of Agriculture and give communities more leverage.

To date, more than 100 communities, mostly in Pennsylvania, have pushed for increased local control with laws drafted by the defense fund, said group spokesman Ben Price.

He worked with Pittsburgh in late 2010 on banning fracking within the city. More recently, he made a presentation to Youngstown City Council in support of a community bill of rights.

“It’s not a movement yet,” he said in a telephone interview. “What’s happening is small, but it’s growing. … We’re attempting to assist communities to establish the greatest degree of local control and self-government possible.”

When laws don’t serve the people, you change the laws, he said.

The bills of rights recognize that local residents “have certain rights and that to protect those rights they have the democratic authority to prohibit activities that would violate these rights,” he said. “Our basic premise is that those rights are yours, and for the state to remove local control is a violation of those rights.”

Industry opposition

The industry is strongly against the citizen efforts.

“The activist organizations furthering these efforts are taking cues from out-of-state organizations that oppose the responsible development of fossil fuels at every turn,” said Dan Alfaro of the pro-drilling, industry-backed group Energy in Depth-Ohio.

“More often than not, these organizations ignore the fact that the region has a long history of development — development that utilized the six-decade-old practice of the hydraulic fracturing process they have focused efforts on. More and more Ohioans are witnessing the positive benefits we are already seeing in this early stage in the exploration of the Utica shale and have educated themselves on the time-tested practices and processes involved in oil and natural gas extraction.”

Critics of the citizen movement point out that landowners who want to drill may have their rights taken away.

Until 2004, Ohio municipalities had the right to control where — and whether — oil and gas wells could be drilled in their communities through zoning and outright bans.

But with passage of House Bill 278, the Division of Oil and Gas Resources Management in the Department of Natural Resources became the sole authority over oil and gas wells.

To date, there have been no legal challenges to local attempts to control the drilling.

Ohio Attorney General Mike DeWine’s office can’t comment on such scenarios, said spokesman Dan Tierney. His office would be responsible for advising and defending Natural Resources and therefore is in a position of attorney-client privilege.

Even the citizen groups are uncertain whether more home rule will stop or slow drilling.

“If hundreds of local communities adopted home rule, it would be wonderful and amazing and might make a difference,” said anti-fracking activist Teresa Mills of Columbus. But she said she fears that it would take years to win such widespread support and that drilling by then will be firmly entrenched in eastern Ohio.

She said there appears to be little interest in the legislature to rethink the local-control issue.

Julia Furhman Davis talks about the efforts of she and friend Patti Gorcheff having home rule established in Beaver Township.
(Karen Schiely /Akron Beacon Journal)

“Fracking is waking people up that we don’t have home rule or control over what is happening locally. It is an issue of trying to protect democracy or fixing the lack of democracy,” she said.

Yellow Springs will be the first Ohio community to ban fracking and injection wells through rights-based legislation, although it’s not in the target zone for oil and gas.

The proposal, pushed by a grass-roots group, Gas and Oil Drilling Awareness and Education, was introduced on Aug. 6 and is expected to get a final vote on Sept. 17.

The proposed ordinance would ban oil and gas extraction or injection wells in Yellow Springs on the premise that they violate the civil rights and threaten the health and safety of residents.

“It’s something we believe in and we’re convinced that this is the right way to go,” said Vickie Hennessy, a spokeswoman for the grass-roots group. “This one stood out and we feel that it might really work. This is the only clear way to go.”

However, Village Solicitor John Chambers told local media that the ordinance may not be enforceable and could face a court challenge.

The Community Environmental Legal Defense Fund says Yellow Springs will join 12 communities in Pennsylvania and New York in approving the rights-based legislation, but there have been no attempts at enforcement, so there have been no court challenges.

Hennessy acknowledged that oil and gas exploration in Yellow Springs isn’t likely, but the underground geology could open the community to injection wells.

Voters in Mansfield will be asked to approve a city charter amendment that would block two proposed injection wells in Richland County.

The change, drafted by Law Director John Spon, would add a community bill of rights to the charter and prohibit the injection of fracking waste on the grounds that the policy is necessary to secure and protect citizens’ rights.

The charter change also recognizes that corporate rights are subordinate to the rights of the people of Mansfield, as well as recognizing the rights of residents, natural communities and ecosystems to clean air and water.

A Texas-based company, Preferred Fluids Management, has state approval to drill two 5,000-foot-deep wells in Mans-field. The company intends to take briny wastes from Pennsylvania via rail.

In Mahoning County, Gorcheff and Fuhrman Davis are not giving up.

“Quitting is not an option,” Gorcheff said. “We’ve worked too hard. This is just such a monster to fight. We’re digging in.”

Said Fuhrman Davis: “We live here. We should decide what happens here.”

Thursday, September 6, 2012

Broadview Heights residents will have a chance in November to say whether they want more oil and gas wells in their city.

Tish O'Dell, stands near a well, left, and storage tanks, right, common sights in Broadview Heights. Tish helped collect more than 1,700 signatures to place an anti-drilling charter amendment on the November ballot.


Broadview Heights residents will have a chance in November to say whether they want more oil and gas wells in their city.

But even if they oppose new drilling, it's not clear whether they can actually prevent it from happening.

Council members voted unanimously Tuesday night to place an amendment on the ballot that would prohibit new wells in the southern Cuyahoga County bedroom community. The city currently has about 90 wells scattered throughout 13 square miles, most of them sunk in the last five years.

"Based on going door to door, I think people here think it's enough," said Tish O'Dell, who helped organize the drive to collect signatures in support of an anti-drilling ballot initiative.

"This is a victory for the rights of the local community over state pre-emptive law, which strips citizens of local self-governing rights," she said.

O'Dell, co-founder of the grassroots Mothers Against Drilling in Our Neighborhoods, said using a charter amendment instead of a city ordinance to outlaw new oil and gas operations is aimed at trumping a 2004 state law that gave the Ohio Department of Natural Resources authority for all decisions about drilling.

"We are seeing more of these local resolutions," ODNR spokeswoman Heidi Hetzel-Evans said. "We do have sole authority for regulating all aspects of the oil and gas industry in Ohio and we will continue to uphold the law."

Broadview Heights Law Director Vince Ruffa advised council members to oppose putting the amendment before voters.

"As much as I would love to say we can control it, we can't," he said. Ruffa predicted the amendment will be unenforceable if adopted "And if we try to enforce it, I would assume that we will get sued by the people who want to drill."

Councilman George Stelmaschuk said the measure might send a message even if it doesn't withstand legal scrutiny.

"I hope at least it will provide some kind of deterrent," he said. "Maybe some of these oil companies will see that we don't want these wells, and maybe residents . . .won't sign leases."

Supporters of a ban collected over 1,700 signatures in July and August backing a ballot vote.
Dubbed a "Community Bill of Rights," the measure says that Broadview Heights residents have the right to clean air, clean water, clean soil and a sustainable energy future. It also prohibits new drilling or using new methods such as horizontal fracking to extract gas and oil from existing wells.

Other communities in Ohio, including Mansfield, also are trying to block drilling operations by arguing that the home-rule provision of the Ohio Constitution supercedes the authority of the ODNR.
O'Dell said her group worked closely with the Community Environmental Legal Defense Fund, out of Pennsylvania, to craft the bill-of-rights charter change.

"Our motive is strictly based on, we care about the community and the people in the community," she said.

Tuesday, September 4, 2012

Ohio already has nearly 35,000 wells to monitor, the report found.

Taxing issues
In the area of taxes, however, the report seems to indicate that drillers are getting a very good deal in Ohio, which currently taxes the production of gas at 2.5 cents per thousand cubic feet (mcf) of gas produced, or about 1% of the gas' market value. That's much less than the 18.45 cents per mcf, or 7.5%, that Texas charges with its severance tax, or the 17.2 cents per mcf (7%) that Oklahoma charges, the report found. The study used a price point of $2.46 per mcf in order to convert absolute taxes to percentages.

Drillers, who are fighting Ohio Gov. John Kasich's ongoing efforts to increase severance taxes in Ohio, have argued that a tax increase would have a chilling effect on drilling in the state, pushing companies to move their rigs to other states.

However, the report shows that some states with the highest severance taxes also have the highest number of wells drilled.

Texas has among the highest overall tax rates on oil and gas production but leads the nation with more than 95,000 total gas wells and twice the shale gas production of any other state. But Texas is a very large state in terms of its land area. But even relatively small West Virginia, with a tax rate of 12.3 cents per mcf, or about 5% of the total proceeds from the sale of its gas, has more than 52,000 gas wells, all of them old-style conventional wells, data in the report show.

Oklahoma, similar in size to Ohio and with taxes about seven times higher, still has 44,000 gas wells and is the third-largest producing state in terms of shale gas, the report finds.

Data like that might be helpful to state legislators as they try to decide whether to back their governor's tax request. But both Mr. Richardson and Tom Stewart, executive vice president of the Ohio Oil and Gas Association, warned that comparing how states tax gas drilling isn't always as simple as just comparing rates.

“There may be a lower tax on initial production in some states (such as Texas),” Mr. Richardson said. “The problem with that is, on shale gas wells, that's a substantial part of your tax revenues.”

He said that's because shale gas wells tend to produce more gas per day initially, right after they are drilled and production has begun, than they do months or even days and weeks afterward.
Scratching the surface
Mr. Stewart said he's looked at several other states that, on the surface, have higher taxes than Ohio — and found that there are mitigating circumstances in many of those states that result in taxes that are effectively lower, especially for horizontal drilling of shale gas wells that produce gas only after they are fracked, like the wells in Ohio. Texas, for example, charges its base tax rate on drillers accessing conventional deposits of oil and gas, but discounts the rate significantly for high-cost shale gas, he said.

Other states have similar mitigating circumstances, Mr. Stewart said. For example, Michigan has a tax rate of 5%, which is about five times higher than Ohio.

“But, what we don't often read is that a producer paying that 5% in Michigan gets to offset that against his normal state business taxes. ... So it's a fair deal,” Mr. Stewart said.

Other states should not be used as examples, because their tax strategies aren't working, he said.

“Arkansas put in a severance tax in 2008, gave a small abatement period of a couple of years — and ever since then, the drilling rate has dropped by as much as 50%,” Mr. Stewart said.

“And West Virginia? I'm not sure why anyone in Ohio public policy would want to mimic the state of West Virginia,” he said, noting that drillers are ignoring parts of West Virginia, while drilling in nearby Pennsylvania is going strong.

Pennsylvania charges drillers an impact fee to compensate local governments for wear and tear on their infrastructure but has no severance tax, he said. “That really hasn't worked out for the great state of West Virginia,” Mr. Stewart said.

Mr. Stewart said he's fine with Ohio's regulations. Indeed, he contends, they are the result of about a century of drilling in Ohio and represent challenges that were met along the way with new laws that often were supported by the oil and gas industry.

But higher taxes are something the industry remains dead set against, he said. A tax of just a few percentage points on a drillers' gross receipts could end up being a tax on as much as half of their profits, because margins are tight, Mr. Stewart said.

“And anyone who believes that taking half of the net profits won't have an impact on the drilling rate is nuts,” he said.

By DAN SHINGLE
Partial Article CCB
4:30 am, September 4, 2012

Companies new, old jockey for position in Ohio's rapidly developing Utica play

 
For the past few months, there's been much speculation on what would become of the 337,000 acres that Chesapeake Energy put up for sale as part of an effort to pay off a mountain of debt that the company ran up to — among other things — buy the mineral rights on those lands. But while that's the single biggest bundle of mineral rights likely to change hands in Ohio's Utica shale gas play, it's not the only one. Companies and investors alike still are jockeying for positions to profit from the Utica's apparently vast deposits of natural gas, crude oil and liquids used in the petrochemical industry — and some observers say we've yet to see all of the energy companies that will eventually emerge to drill in Ohio. “We are seeing new names pop up, smaller companies with names we've never heard of,” said Mark Dolezal, president of the Eastern Geauga Landowners, a group of about 300 landowners in Geauga County that has put together 17,000 acres for which it hopes to sell mineral rights.

Indeed, new players not only are entering the Ohio Utica, but are being formed to do so. Texas-based Beland Energy Utica LLC, for one, was created in May by Beusa Energy principals, who have had success drilling for shale gas in the Haynesville shale play, which includes parts of Arkansas, Louisiana and East Texas, said Gregory Brown, the general counsel for both Beland and Beusa. They hope to repeat their success in the Utica, he said.

“The Utica is an interesting area and an interesting play and people go where opportunities are,” Mr. Brown said. “And lots of people see potential in the Utica.”

Mr. Brown declined to say how much capital Beusa, a privately held company, has to spend on Utica leases or for drilling here, but said the company would like to initially acquire the mineral rights to 15,000 to 20,000 acres here. If those acres prove profitable, it likely will try to buy more, he said.

That's not going to be a cheap ticket in at this point. Mineral rights in the Utica have skyrocketed in price in the last two years, and currently fetch between $2,000 and $5,000 per acre.

Even at the low end of that price range, the mineral rights alone on 15,000 acres would cost $30 million — which does not include the roughly $6 million to $10 million that Utica drillers say they currently are spending to drill each new well.

A 15,000-acre parcel could support about 23 well pads, at 640 acres per pad, with each pad containing as many as six wells, drillers say.


By DAN SHINGLER
4:30 am, September 4, 2012

Tuesday, August 28, 2012

Uphill battle agains brine injection in Niles/Weathersfield

August 24, 2012

By DAN POMPILI -

NILES - Niles city and Weathersfield Township could face an uphill battle in their opposition to the proposed drilling of brine injection wells in the city and township.

Niles City Council passed a resolution Wednesday banning injection well activity within city limits, a follow-up to Weathersfield's earlier action. Mayor Ralph Infante also sent a letter Thursday to the Ohio Department of Natural Resources Division of Oil and Gas Resources Management opposing the well permits applied for by American Water Management Services Co.
"The uncertainty of waste water and potential problems it may cause are worrisome to our communities," the letter reads.

The letter states that one of the wells would be along Route 169 next to Niles Commerce Park in northern Weathersfield Township and would be located within five blocks of the city's downtown area. Infante also is concerned that the brine will have to be transported through the city to get it to the injection well site.

Injection wells are used to store liquid byproducts from the extraction of natural gas from underground shale deposits.

According to a legal notice published in the Tribune Chronicle, the wells in question will be drilled at depths of anywhere from 4,450 feet to 9,100 feet and one will accept on average 2,200 barrels of salt water waste per day, while the other would take an average of 1,000 barrels daily.

Weathersfield trustee Steve Gerberry said Wednesday night that Niles' opposition to the wells would have "more teeth," but conceded that ODNR's denial of the well permit applications would be a first.
Heidi Hetzel-Evans, spokeswoman for ODNR's Division of Oil and Gas, said there is no difference between a city and township opposing a well. She said the permits haven't come up for consideration yet, but ODNR will deny an application if the opposing community can provide convincing evidence that health, safety or an environmental resource would be directly threatened by a well.
No permits have been approved since the state placed a moratorium new injection wells following a 4.0-magnitude earthquake in Youngstown on New Year's Eve.

Since then, changes have begun to be implemented to both the review and testing process.
The review period was extended from 45 to 60 days up to 45 to 90 days. Also, the state is now permitted to request pressure testing, geological investigations, seismic testing, and radiological testing on newly drilled wells, as well at submittal of a plan for monitoring seismic activity.
"Even after drilling the well, if we are not assured of the progress with health and safety testing, we can still shut down the well," Hetzel-Evans said. "This is a highly scrutinized and monitored program."

She added that the new laws also increased the time that public notices must run in newspapers, from one day to five consecutive days at a minimum, and that communities now have two weeks to voice their opposition and request a hearing.
Based on the state's criteria, and Gerberry said he's unsure if the city and his township can meet that burden.

"We can oppose it all we want, it's going to be very difficult to listen to or grant our opposition on those terms," he said.

The ODNR'S Joint Committee on Agency Rule Review will vote next month on whether to make the emergency rules permanent

Compressed natural gas market on the rise

Shares of Chesapeake Energy have rebounded sharply since the news in mid-May that CEO Aubrey McClendon had been mixing business with personal investments.

But even with a more than 50% jump from the lows of three months ago, the stock may still have some more room to run. Why? Just look at the pump the next time you refill your car. The price of gasoline has suddenly crept higher. And with prices getting close to $4 a gallon, conversations about gas alternatives are again making the rounds.

This should help Chesapeake (CHK, Fortune 500), which has a growing presence in compressed natural gas, a type of fuel that is expected to be used more by consumers. Chesapeake formed a relationship with General Electric (GE, Fortune 500) in March to work on more natural gas solutions in the transportation industry.

The Department of Energy is increasingly giving larger amounts of funding to organizations in major cities that support lowering emissions—something compress natural gas can deliver.

And since this type of gas costs roughly half the price for regular gas at the pump -- prospects for this fuel source seem bright. Currently, Honda (HMC) is the only major automaker that manufactures light-duty vehicles running on compressed natural gas in the US. But it may soon have more competition.

Mick Cornett, mayor of Oklahoma City, has publicly endorsed the use of compress natural gas lately. So Chesapeake, which is based in Oklahoma City, may be in the enviable position of having home-team advantage in the state as new planning and permitting go into effect.

Gaining local contracts and proving compressed natural gas is a real business will only validate it as a fuel source that this country clearly needs to offset dependence on foreign oil while also reducing emissions. This may be why 22 states are joining forces to solicit American carmakers to build compressed natural gas-powered vehicles for state fleets.

Cleveland Crains

Thursday, August 23, 2012

Hilcorp Gets First Drilling Permit for Columbiana



YOUNGSTOWN, Ohio – The Ohio Department of Natural Resources has issued a new horizontal drilling permit to Houston-based Hilcorp Energy Co. to begin oil and gas exploration in Columbiana County.

Hilcorp, a privately owned oil and gas exploration company, was issued a permit Aug. 13 to drill on the Hanover-Mountz property in Hanover Township, records show. It is the 49th well permitted in Columbiana County since 2011, and is the first such well for Hilcorp in the county.
Hilcorp recently signed an $836,000 drilling lease with the city of Campbell; the company has approached the city of Struthers and the Lowellville school board about leasing mineral rights for the lands both entities own.

According to ODNR records, two Columbiana wells – the Sanor well in Knox Township and the Ayrview Acres well in West Township – are in production. No results have been resulted.
Chesapeake Exploration LLC, the most active energy company drilling in the Utica shale, last week was issued two permits to drill horizontal wells in Carroll County, ODNR records show.
Since 2011, Chesapeake has been issued 121 permits to drill in Carroll County, which has emerged as the focal point of Utica shale development.

No permits were issued last week for Mahoning and Trumbull counties, nor were any issued for Mercer and Lawrence counties in western Pennsylvania.

Copyright 2012 The Business Journal, Youngstown, Ohio.

Tuesday, August 21, 2012

Storage Field area and your Mineral Rights - A must read



YOUNGSTOWN, Ohio -- Natural gas storage fields beneath tens of thousands of acres in Ohio have become the flash point of the latest legal battle over drilling rights across the state.

At issue is whether landowners within these fields own the deep drilling rights to their land, an especially sensitive issue since major energy companies are stepping up oil and gas exploration in the Utica shale and paying generous bonuses and royalties to residents.

"It's going on all over the state," says Dale Arnold, director of energy policy for the Ohio Farm Bureau. "This issue comes up in every storage field in Ohio."

Natural gas storage fields came into prominence shortly after World War II, Arnold says. These fields are areas of the Clinton sandstone strata between 3,000 and 6,000 feet below the earth where energy companies once drilled, some as far back as the 1930s. Once a particular region of the sandstone was drilled dry, these companies converted the acreage into storage areas connected to major pipeline networks that pump natural gas to and from the underground fields.

Ohio is home to 16 such storage fields.


The premise is for natural gas companies to keep a reserve for the winter months where it can be tapped when demand increases. "There's an injection season and a withdrawal season," Arnold says.
Natural gas is purchased and transported into the storage fields between April 1 and Oct. 31 each year, Arnold explains. That reserve is then drawn down between November and March, demand being highest during the colder months. "They're designed to address at least three to four cold snaps or adverse winter climate," he says.
The main legal question before courts in northeastern Ohio is whether those who own land within a designated storage field also own the mineral rights, Arnold says.
During the 1940s and ‘50s, energy companies negotiated many leases with landowners that specifically awarded these companies the rights to storage, Arnold says. However, drilling companies exploring the Clinton formation would often cut into the storage field and extract gas from the reserve.
After that, the language in these leases was changed to include not only storage rights, but also mineral and production rights of any potential drilling on or even near the land, Arnold notes. "They wanted to protect the storage field," he says. "Depending on how your lease is worded, it could mean any new gas coming out underneath the field," such as gas drilled from the Utica shale.
Fast forward to today. It's these leases that are complicating matters for thousands of landowners as an entirely new phase of development and billions of dollars of investment from the oil and gas industry take root in eastern Ohio.
Today, two of these storage fields – the Brinker Storage Field in Columbiana County owned by Columbia Gas, and the North Canton Storage Field owned by Dominion – are the subject of a legal fight over these leases.
Landowners outside these storage fields have signed lucrative land deals with energy giants such as Chesapeake Energy Corp. – some of them commanding bonuses of $5,800 an acre and 20% royalties. But many of those within the field are being held to these decades-old leases that at most award them $200 a year for their rights to any gas produced and a 12.5% royalty on any oil found. Moreover, Columbia Gas interprets the leases to mean that royalties could be collected only if the well sits on that property.
"Some of these leases are worse than others, but they're all bad," says Jill McNicol of Leetonia, who lives in the Brinker field. "There is no protection for your property, and they can use your water without compensation. There's nothing good about these leases."
The Brinker Storage Field is one of the smaller fields in Ohio, encompassing 25,000 to 30,000 acres, she says. Her repeated attempts to obtain a map of the field were denied by both Columbia and the Ohio Department of Natural Resources, she relates. They cited “proprietary issues” as the reason for their denials.
McNicol and her husband, Patrick, along with five other parties, have sued Columbia Gas Transmission LLC in the Columbiana Court of Common Pleas, arguing that the company breached the terms of these leases years ago and that these leases should be rescinded or reformed.
"We have 65 acres," she says. "They say they want to live by the terms of the lease, but they haven't. I know of a lot who haven't received a penny."
Since the lawsuit was filed May 30, NiSource Gas Transmission and Storage, parent of Columbia Gas, announced a partnership with Houston-based Hillcorp Energy Corp. that calls for the construction of a $300 million processing and pipeline network in eastern Ohio.
McNicol says others toward the center of the storage area were afforded the opportunity to modify their leases during the 1980s and 1990s, but those who lived on the outer edges – such as McNicol – were not. "Those people were able to sign leases, and they're valid," she says.
However, McNicol points out, landowners with the modified leases aren't likely to have wells drilled on their properties because much of the surrounding land is leased under the older agreements. These older agreements, she says, contain language that prohibits their land from becoming part of a larger drilling unit – in some cases spanning between 300 and 600 acres.
McNicol and others are also voicing their support for a bill sponsored by state Rep. Mark Okey, D-Carrollton, that would provide minimum royalty payments of 15% to landowners.
Meantime, other landowners have filed a class action suit in Stark County that involves drilling rights in the North Canton Storage field, owned by Dominion Gas. The North Canton field extends from the east side of Wayne County into Stark County and involves as much as 60,000 acres.
"There are thousands and thousands of landowners who are affected, including the [Akron-Canton] airport," says attorney Robert Tscholl, who is representing landowners.
Tscholl says that Stark County holds the potential of becoming the heart of the Utica's oil play, and the North Canton field could be a major contributor. "This could drive the economy in Ohio for who knows how long," he suggests.
Jim Mathews, another attorney representing landowners in the dispute, says that Dominion never intended to drill in the field and used the land only for storage. "All Dominion ever wished to hold was the Clinton level for storage interests,” he says. “They had no obligation to explore.”
The lawyers argue that the deep rights and storage rights are severable, and that maintaining the storage rights does not bind them to production rights. And, they contend. since Dominion has not adhered to the terms of these leases, they should be considered expired.
Mathews also notes that similar cases arose in Pennsylvania as oil and gas exploration in the Marcellus shale accelerated. “We’ve found some cases that support our position,” where a court sided with landowners. The court ruled that the company had consideration for storage rights, but not drilling and production rights.
Alan Wenger, an attorney with Harrington, Hoppe and Mitchell in Youngstown, says that he's been dealing with landowners in the Brinker field since energy companies first began canvassing Ohio more than two years ago. Wenger has not filed a lawsuit on behalf of his clients.
"There was a lack of contemplating anything that's happening right now," Wenger says. Thus far, he knows of no drilling activity in the Brinker field, although some leases have been signed. He foresees a settlement on some level with these landowners in the near future as the appetite for drilling increases.
"I think that with or without the lawsuits, there will be some resolution," Wenger says. "We've argued many times with Columbia, and I believe the companies will come around to some sort of accommodation."