Dominion made good on a promise to farm out some of its extensive natural gas-rich land in West Virginia and to carry more gas to outside markets under key agreements announced Tuesday.
CEO Tom Farrell had said in September that Dominion was restructuring, forming a master limited partnership to hold some of its gas assets, and farming out about 100,000 acres or more in West Virginia (see Shale Daily, Sept. 13). The operator has been involved in several expansions that would carry more gas away from Appalachia; several already are on the drawing board or have been launched (see Shale Daily, Oct. 30).
In one new venture, Dominion contracted to deliver 500,000 Dth/d of gas produced in West Virginia to various interconnections with pipelines in Ohio, as producers seek new markets for Marcellus Shale output. In addition, the operator farmed out several packages of acreage in the state to natural gas producers.
Consol Energy Inc. and Triana Energy LLC in separate agreements also would farm out the 100,000 acres, which underlie Dominion gas storage fields (see related story).
Nearly 80,000 acres would be developed by Consol in Lewis and Harrison counties, the Fink-Kennedy and Lost Creek storage areas. In addition, Dominion subleased another 9,000 acres to Consol, most in Gilmer and Ritchie counties in its Racket-Newberne storage area. About 13,000 acres in Harrison and Taylor counties, which underlie the Bridgeport Storage area, would be developed by Charleston, WV-based Triana Energy LLC.
Dominion would retain the storage fields but permit directional drilling into the deeper Marcellus formation.
In conjunction with the Consol farmout agreement, Dominion Transmission executed a binding precedent agreement to transport 250,000 Dth/d from the Fink-Kennedy area to two interconnections: with Texas Eastern Transmission (Tetco) pipeline at Mullet, OH; and with Rockies Express Pipeline in Clarington, OH. The 15-year contract begins in November 2016.
The farmout agreements with Consol would result in payments to Dominion of about $200 million over nine years and an overriding royalty interest in the gas produced. No financial details were disclosed about the Triana transaction.
Dominion indicated that various producers also have given commitments for up to 250,000 Dth/d to be transported to interconnections in Lebanon, OH. The agreements would begin in June with contract terms of up to 21 years.