Natural gas drilling continued to decline in the fourth quarter, despite an uptick in exploratory drilling, the American Petroleum Institute (API) said in a report on well completions. “In the year-to-date comparison, gas well completions have decreased 26%” to 9,752 wells in 2012 from 13,128 wells in 2011. At the same time, oil well drilling rose, with exploratory and development wells showing a 15% and 16% increase respectively from 4Q2011 numbers. “The oil and natural gas industry expanded oil drilling in 2012, thanks in large part to access on private and state lands,” said API Statistics Director Hazem Arafa. A year-to-date comparison of oil wells drilled yields a 25% increase in total well completions between 2011 and 2012 (26,213 to 32,652).

Ethane and propane spot prices in the second half of 2012 were near or below the bottom of the 2006-2010 range because of an overabundance of supply, the Energy Information Administration said. Propane’s average 2012 spot price was nearly one-third below average 2011 prices; ethane’s price was nearly one-half of the previous year’s average. Average spot prices for normal butane, isobutane, and natural gasoline fell in summer 2012 as oil prices fell, returning to near the top of the five-year range toward the end of the year. Annual average spot prices for normal butane, isobutane, and natural gasoline were down relative to 2011 by 5%, 12% and 7%, respectively.

Oneok Partners LP plans to invest up to $500 million to 2015 to build additional natural gas liquids (NGL) infrastructure in some of its Midcontinent operations, with the bulk of the funds earmarked for the Williston Basin. Included is another plant at the Garden Creek facility and related infrastructure to be built in eastern McKenzie County, ND, which is in the Williston. The Garden Creek III would have 100 MMcf/d of processing capacity. The second Garden Creek plant, also with 100 MMcf/d of capacity, was announced in mid-2012. A 95-mile NGL pipeline would run between Hutchinson, KS, and Medford, OK. The partnership also wants to modify NGL infrastructure at Hutchinson to accommodate lighter, unfractionated NGLs produced in the Williston Basin.

Alaska Republican Sen. Lisa Murkowski applauded a U.S. District Court decision that vacated the U.S. Fish and Wildlife Service (FWS) designation of 187,000-square miles of the North Slope as critical habitat for polar bears. The court found that the FWS failed to show that the North Slope contains the physical and biological features essential to polar bear conservation, and that the agency failed to follow Endangered Species Act procedures to provide Alaska with adequate justification for not incorporating state comments into the final rule. The court vacated the FWS rule and sent it back to the agency for further consideration. The Alaska Oil and Gas Association and the state had challenged the rule in 2011.

ConocoPhillips is selling a package of properties in the Cedar Creek Anticline of North Dakota and Montana to Denbury Resources Inc. for $1.05 billion cash. The sale includes close to 86,000 net acres in southwestern North Dakota and eastern Montana, an area where Denbury already operates. Net production in 2012 averaged 13,000 boe/d through November. Denbury is funding the purchase with $1.3 billion it received from ExxonMobil Corp. in 2012 for some Bakken acreage and an asset exchange (see NGI, Sept. 24, 2012).

Nova Scotia has issued a request for proposals (RFP) to examine challenges on natural gas price volatility and on meeting gas demand now and into the future (www.gov.ns.ca/tenders). The province’s price for natural gas tripled in December, mostly because of offshore supply issues and availability from the Massachusetts market, said Energy Minister Charlie Parker. Nova Scotia’s gas prices dropped slightly in January, but the spike still was noticeable, especially for large users, according to Parker. The offshore issues were from Encana Corp.‘s long-delayed Deep Panuke gas project offshore, whose start-up has been delayed until the middle of the year (see NGI, Nov. 19, 2012).

A six-foot section of a 20-inch diameter Columbia Gas Transmission system that ruptured Dec. 11 in West Virginia had wall thickness measured as low as 0.078 inches, significantly thinner than the nominal wall thickness of 0.281 inches when the pipe was installed in 1967, according to a preliminary report issued by the National Transportation Safety Board (NTSB). A 20-foot ejected section of the pipeline “was fractured in the base metal along the entire longitudinal direction along the bottom of the pipe,” according to NTSB report. “The longitudinal ERW [electric resistance weld] pipe seam was located near the top of the pipe. The outside surface of the pipe was heavily corroded near the midpoint and along the longitudinal fracture. The thinned area was approximately six feet in the longitudinal direction and two feet in the circumferential direction.” The report confirmed comments made by NTSB investigators in the first days of their investigation (see NGI, Dec. 17, 2012).

Alaska Gov. Sean Parnell filed legislation to give the Alaska Industrial Development and Export Authority (AIDEA) the ability to provide up to $275 million in financing for a natural gas liquefaction plant and a liquefied natural gas (LNG) distribution system within the Fairbanks North Star Borough. The bill would authorize AIDEA to provide financing for gas facilities through the Sustainable Energy Transmission and Supply Fund in the form of low-interest loans, guarantees or any other financing mechanisms permitted. In December Parnell proposed a $355 million financial package to jump-start construction of a gas liquefaction plant on the North Slope and a Fairbanks-area gas distribution system (see NGI, Dec. 17, 2012).

The Kansas Supreme Court upheld a $33 million settlement regarding royalty payments in favor of Anadarko Petroleum Corp. for a class action, overturning an appeal by one plaintiff who said the agreement was not fair. In Coulter v. Anadarko Petroleum Corp., the court found that Stan R. Boles, a member of the original settlement class of more than 6,000 leaseholders, had failed to demonstrate that settlement was unfair. The case originated in 1998, when royalty owners entitled to receive a share of the production in the Hugoton gas field filed a lawsuit against Anadarko, claiming it had underpaid royalties. Plaintiffs argued that Anadarko should pay royalties on both hydrocarbons and nonhydrocarbons; Anadarko stated that it had been paying royalties on the total heating value of the gas stream as it left the wellhead.

UGI Corp. and Tenaska affiliate Tenaska Resources LLC plan to jointly develop natural gas resources in the Marcellus Shale in north-central Pennsylvania. A UGI affiliate would construct and operate about 20 miles of gathering pipelines and related midstream facilities for wells that Tenaska intends to drill in Potter County, PA; the first phase of construction is set to be completed by early 2014. The initial investment in the proposed gas gathering system is estimated at up to $25 million, with the total investment in Tenaska’s Potter County acreage estimated to be about $65 million over 10 years. UGI has also invested $25 million for close to a 19% nonoperating working interest Tenaska acreage in Tioga County, PA.

North Dakota lawmakers are considering offering incentives to eliminate natural gas flaring at the wellhead by cutting taxes on gas takeaway infrastructure (HB 1134). The state’s current percentage of associated gas that is flared in oil extraction is around 30%, versus 1% nationally and 3% globally, according to the Energy Information Administration. Operators may may flare gas for a year without paying taxes or royalties, and they may seek hardship status for extending the practice. Operators also may be exempt from the state’s 6.5% extraction tax if they process supplies at the only refiner under another bill (HB 1032).

Atlas Pipeline Partners LP is accelerating work on a $200 million, 200 MMcf/d processing plant in West Texas and separately has signed a contract with SandRidge Energy Inc., the partners’ largest producer customer in the Mississippian Lime. Overall processing capacity in West Texas would increase to 455 MMcf/d from 255 MMcf/d. The Driver Plant is being built in two phases with the first having 100 MMcf/d of capacity and entering service by the end of 1Q2013; the second 100 MMcf/d phase is to come online in 2014.

Authorities in Quebec have been monitoring environmental groups opposed to shale gas development in the province for the last two years on fears that their activities could become radicalized and violent, according to a report by La Presse, a Montreal newspaper. According to the report, documents requested from the Royal Canadian Mounted Police and the Canadian Security Intelligence Service show investigators monitored anti-drilling activists in 2011 and 2012 over growing concerns they could abandon acts of civil disobedience for violence. Although the documents were partially censored, they showed that investigators have been monitoring three websites, including Facebook, for activity in Western Canada. In 2011, the Quebec government said it would conduct a two-year strategic environmental assessment of shale development, but would allow oil and gas companies to drill test wells and perform hydraulic fracturing (see NGI, March 14, 2011).

Canada’s First Nations protested across the country on Jan. 16 — blocking railways, border crossings, and in some places hindered access to oil and natural gas facilities — to protest the federal government’s passage last month of an omnibus budget bill that altered the rules for leasing tribal lands. The protests, collectively called a national day of action by the country’s Idle No More movement, are in response to Ottawa’s passage of House Government Bill C-45, also known as the Jobs and Growth Act of 2012. The bill was introduced in both houses of Canada’s Parliament in October and given royal assent, the final stage before becoming law on Dec. 14. The bill amends three subsections of the Indian Act. One of the changes gives the Minister of Aboriginal Affairs and Northern Development the power to approve lease sales, if a majority of the electors in a tribal band council approves the sale in a referendum. According to reports, the federal cabinet held that power before C-45 was enacted.

Pennsylvania’s new auditor general, Eugene DePasquale, plans to conduct a performance audit of the Department of Environmental Protection‘s (DEP) water testing and waste disposal programs to assess their effectiveness in regulating shale gas development. DePasquale, a former member of the state House of Representatives (D-York), was sworn in on Jan. 15 and that day he sent a letter to DEP Secretary Michael Krancer outlining his plans, which would cover programs from 2009 to 2012. While in the state assembly, DePasquale voted against Act 13, the state’s omnibus Marcellus Shale law (see NGI, Feb. 13, 2012).

Consol Energy Inc. plans to spend most its capital expenditure (capex) budget in 2013 on natural gas production in the Marcellus and Utica shales. The capex budget is to be $1.29-1.5 billion, with between $835 million and $935 million on shale gas development and production. The company is to receive a final annual payment of $328 million from a August 2011 leasehold sale to Marcellus Shale partner Noble Energy Inc. (see NGI, Aug. 29, 2011). Consol also expects to make $127-312 million from additional assets sales.

Gasco Energy Inc. said it would submit a plan of compliance in March to NYSE MKT to address how it intends to right its financial ship and avoid being delisted by the exchange, the Denver-based company said. Gasco was notified by the exchange Jan. 11 that it does not satisfy NYSE listing standards that apply “if a listed company has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the exchange, as to whether such company will be able to continue operations and/or meet its obligations as they mature,” the company said. NYSE required Gasco to submit a plan by Feb. 10 to address how it will regain compliance by June 30. If the plan is not submitted, if NYSE does not accept the submitted plan, or if the company does not make progress consistent with the plan, Gasco would be subject to delisting proceedings.

The New Mexico State Land Office pulled in $2.39 million in proceeds from its January oil and natural gas lease sale, which covered slightly more than 7,200 acres. Those numbers vary with the state’s December and November proceeds last year, which were $5.8 million and $3.85 million, respectively; about 10,000 acres were leased in each sale (see NGI, Dec. 3, 2012). January 2012 proceeds were $6.4 million for 7,715 acres, or more than $4 million ahead of the January 2013 sale. Twenty-seven tracts were sold in the most recent offering; the sales late last year included 29 tracts. Three counties were involved in both lease sales — Lea, Eddy and Chaves counties — with the addition of Sandoval County this month in place of San Juan or Roosevelt.

At the U.S. Conference of Mayors in Washington, DC, Tulsa, OK, Mayor Dewey Bartlett said he planned to a charge for liquefied natural gas exports. “I do believe that there is no need for a lot of further study and evaluation and simply kicking the can down the road,” he said. In a letter to Energy Secretary Steven Chu, the mayor and 16 mayors from Oklahoma, Texas, Louisiana, Arkansas and Kansas said Canada and Australia are developing LNG export capabilities and the time to act was now. Chu was to be one of the featured speakers at mayors’ conference, which represents cities with populations of more than 30,000.

Louisiana’s economic output will grow by $30 billion between 2011 and 2019 as a result of natural gas-induced investment, according Louisiana State University‘s Center for Energy Studies. In its report, “Unconventional Resources and Louisiana’s Manufacturing Development Renaissance, new investment is expected to increase wages by more than $9 billion and create 214,000 job-years over the period.The sectors that will benefit the most are the natural gas-to-liquids industry and the liquified natural gas export industry, which have garnered investments worth $22.5 billion and $19.5 billion respectively. In total, there are $62.3 billion in manufacturing investments planned. The state’s onshore gas production has risen by 34 % annually since 2008, but recently growth in the state’s Haynesville Shale has slowed as producers move away from its dry gas to more profitable liquids-rich plays.

When El Paso Electric Co. goes to the market looking for more power, it considers everything, but increasingly the choice has been natural gas or renewables, COO Hector Puente told NGI. He said what’s happening with generation choices at the company reflects the industry at large. In the Southwest, however, solar is the favored renewable, while wind might be the favorite elsewhere, he said. Biomass-fueled power is also attractive because it can be readily dispatched. The two “main competitors” to gas are biomass and photovoltaic.

Canada’s BNK Petroleum Inc.‘s U.S. subsidiary BNK Petroleum US Inc., has seen “very encouraging results” from a test well in southern Oklahoma’s Tishomingo field, in the Ardmore Basin of the Woodford Shale. The Barnes 6-2H well, located in Johnston County, OK, had achieved a 21-day stabilized pumping production rate of 180 boe/d, with 70% weighted toward oil. The well, which is targeting the Lower Caney and Upper Sycamore formations, is also being tested at select intervals to determine the best locations for drilling laterals at future wells. The company said the Sycamore interval alone tested 140 b/d, with 70% being oil and the remainder being flowback from hydraulic fracturing (fracking). Caney intervals were deemed inconclusive, flowing at clean oil rates of 200 b/d. BNK owns 12,000 net acres in the Tishomingo field and plans to drill wells targeting oily areas of the Woodford Shale in 2013, provided capital is available.

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