The U.S. Army Corps of Engineers has issued a permit to Tennessee Gas Pipeline Co. LLC (TGP) for its Northeast Upgrade Project after determining that it is in the public interest and would not adversely affect the environment. An environmental impact statement (EIS) for the project is not necessary, in part because the Federal Energy Regulatory Commission (FERC) gave its approval in May 2012 (see NGI, June 4, 2012). The Northeast Upgrade Project calls for expanding TGP’s existing 24-inch diameter 300 Line by building five, 30-inch diameter pipeline loops and modifying four existing compressor stations. The $400 million project would allow an additional 636,000 Dth/d of natural gas to be transported via the 300 Line to markets in the Northeast. An interconnection with the Algonquin Gas Transmission line also is to be built in Mahwah, NJ.
Houston-based Phillips 66 said it plans to develop a 100,000 b/d natural gas liquids (NGL) fractionator in Old Ocean, TX, to provide an alternative for suppliers wary of congestion at facilities located in and around Mont Belvieu, TX. To be located close to the company’s Sweeny Refinery, the fractionator would create more than 25 full-time jobs and hundreds of temporary construction jobs, the company said. If approved internally and all permits are received, construction is to begin in the first half of 2014 with startup expected by the second half of 2015. Phillips 66 currently owns fractionation capacity at the Gulf Coast Fractionators (GCF) and Enterprise fractionators in Mont Belvieu, as well as the Conway fractionator in Kansas. The company operates the GCF facility for the joint venture. NGL feedstock for the Old Ocean fractionator project would be supplied by several nearby pipelines to avoid the Mont Belvieu congestion, and purified products produced by the fractionator would be marketed primarily to petrochemical customers in the region with access to Mont Belvieu. Phillips 66 spokesman Dennis Nuss told NGI that the NGLs would flow from the Eagle Ford Shale, among other unconventional plays.
The Senate Energy and Natural Resources Committee has scheduled three forums on natural gas issues in May. The forums, which would be held in a roundtable format “to encourage discussion and allow flexibility to find areas of agreement,” would include input from members and a variety of stakeholders, according to committee Chairman Ron Wyden (D-OR) and ranking member Lisa Murkowski (R-AK). Topics for the forums are “Infrastructure, Transportation, Research and Innovation” (May 16), “Domestic Supply and Exports” (May 21) and “Shale Development: Best Practices and Environmental Concerns” (May 23).
The Interior Department’s Office of Natural Resources Revenue (ONRR) has fined Chesapeake Energy Corp. $765,000 for “knowing or willful submission of inaccurate information” on its oil and natural gas royalty reports. “It is simply unacceptable for Chesapeake Energy to misreport sales volume information. Chesapeake Energy has been repeatedly warned about its inaccurate report on this oil and gas lease [in Oklahoma] from May 2011 through July 2012,” said ONRR Director Greg Gould. “Chesapeake does not believe that it knowingly or willfully submitted inaccurate royalty reports,” a spokesman told NGI. It intends to request a hearing on the civil penalty. During an audit that began on Oct. 1, 2009 of an American Indian lease, ONRR directed the producer to report additional volumes on its royalty-reporting forms. It failed to comply at the time but eventually made the required corrections through April 2011. However, the auditors said that Chesapeake the next month resumed its practice of filing inaccurate reports. ONRR said it warned the company of the continued violations in an October 2011 order, and again on Sept. 4, 2012, following a separate review.
Natural gas producer GMX Resources Inc. has filed for Chapter 11 bankruptcy, and it wants to finalize an asset purchase agreement with holders of the company’s senior secured notes to acquire all of its operating assets and undeveloped acreage. The Oklahoma City-based operator said once the asset purchase agreement was finalized, the sale would be subject to a public auction where competing, and possibly higher and better offers, could be considered by the U.S. Bankruptcy Court for the Western District of Oklahoma. Two of its subsidiaries, Endeavor Pipeline Inc. and Diamond Blue Drilling Co., are included in the current bankruptcy proceedings, but Endeavor Gathering LLC joint venture that operates in East Texas in which it owns 60% is not.
Gastar Exploration Ltd. paid $85 million to Chesapeake Energy Corp. for proven reserves and undeveloped leasehold interests in Oklahoma’s Kingfisher and Canadian counties, which extend into the Hunton Limestone formation. The acquisition includes drilling rights in 157,000 net acres. Gastar also repurchased for an estimated $9.8 million all of Chesapeake’s holdings, which totaled 6.78 million shares of its common stock, about 9.9% of its total outstanding shares, for $1.44/share. The producers also agreed to settle all current litigation. Chesapeake had filed a lawsuit in U.S. District Court for the Southern District of Texas, alleging that it was owed $130 million from a failed joint venture in Texas (Chesapeake Exploration LLC et al. vs. Gastar Exploration Ltd. et al., No. 4:12-cv-2922) (see NGI, Oct. 8, 2012).
Pittsburgh-based retail energy provider Direct Energy is entering the retail natural gas market in California for commercial and industrial customers to add to its residential mix. The subsidiary of UK-based Centrica plc has been active in California’s retail power market since 2007, when it acquired Strategic Energy. It now eyes more competitive opportunities against Sempra Energy’s Southern California Gas Co. and San Diego Gas and Electric Co., and Pacific Gas and Electric Co. A spokesman told NGI that the company intends to go after the largest customers eventually, and more immediately commercial/industrial firms. Direct’s officials are not saying how many electric or gas customers they have in California, or specifying where their gas supplies are located. The company doesn’t own any reserves.
General Electric has unveiled plans for a $110 million Global Research Center in Oklahoma dedicated to driving innovation and technological advancements in the oil and gas sector, which in turn would allow products to be brought to market faster. The new facility, GE Research’s first devoted to one sector, is expected to initially create 125 high-tech engineering jobs. The launch of the new center, noted GE, “comes as the availability of unconventional resources, such as shale gas, is changing the global energy landscape and has the potential to create jobs, fuel innovation and lead to more energy independence.” The center initially would focus on technologies that enable safe, efficient and reliable production, delivery and use of unconventional oil and gas.” The search for a specific site for the new center is underway and expected to be completed soon.
A Harris Interactive poll found 68% of registered voters in Ohio believe increasing oil and gas severance taxes would slow development. Most respondents also agreed that higher severance taxes in Ohio would harm job creation (69-24%), the state’s economy (76-19%), and consumers of gasoline and home heating fuels (77-17%). Republican Gov. John Kasich has proposed a 1% severance tax on natural gas produced from unconventional wells, but has proposed eliminating the severance tax on gas from conventional wells that produce less than 10 Mcf/d; conventional wells that produce more than 10 Mcf/d would be taxed at 1%, up to a cap of 3 cents/Mcf (see NGI, Feb. 11). The poll surveyed 605 registered voters between March 25 and 31 and has a margin of error of plus/minus 4.0%, at 95% confidence.
Pennsylvania’s deep-shale drilling fees collected last year fell about 3% from 2011 because of low natural gas prices, according to state data. The Pennsylvania Public Utilities Commission (PUC) estimated that it would collect $198 million from the fees for 2012, down from $204 million in 2011. The state collects an impact fee due April 1 instead of a severance tax. Payments, which were due April 1, provide revenue that is divided among various state entities. The average annual price of natural gas used by the PUC to calculate well fees in 2012 was $2.78/Mcf, down from 2011’s $4.08. The PUC cut the horizontal deep-shale well fee for 2012 by almost $5,000 from 2011 fees to $45,000 per well because Act 13 ties the levy to the price of gas. There were 1,357 new deep-shale wells drilled in Pennsylvania last year and almost all of those were horizontals. Before 2012, 4,920 deep-shale wells had been drilled. There also were 288 vertical deep-shale wells drilled, for which operators paid about one-fifth of what horizontal drillers paid as required under the law.
Judge Irene Keeley of the U.S. District Court for the Northern District of West Virginia has ruled that the state’s Supreme Court of Appeals should certify whether existing state law allows a company to drill on land where it doesn’t own the surface rights, but it owns the underlying mineral rights. At issue is whether XTO Energy Co., an Exxon Mobil Corp. subsidiary, may drill horizontal wells on 105 surface acres in Marion County owned by Richard Cain, a farmer from Mannington, WV. XTO also plans to build oil and natural gas pipelines across Cain’s property. Keeley ordered both parties to jointly submit statements and possible alternatives by April 29. Cain filed a lawsuit against XTO and Waco Oil & Gas Inc. in Marion County Circuit Court in July 2011, arguing that the companies didn’t have the right to use his property to drill horizontal wells that would access natural gas from his neighbors’ reserves (see NGI, Aug. 29, 2011). Cain’s motions to have the case remanded back to county court have been denied.
The Ohio Oil and Gas Association reported at its annual winter meeting that the Ohio Department of Natural Resources (ODNR) issued 1,000 drilling permits in 2012, a 45% increase from the 690 permits that were issued in 2011. The report said 625 wells were completed in 2012, a 36% increase from the 460 wells that were completed in 2011 (see NGI, March 18). Of the 1,000 permits issued by the ODNR in 2012, 42% were for 424 wells targeting the Utica Shale. The report also said that in 2012, Chesapeake Exploration LLC was the most active operator in the state in terms of wells drilled (158) and footage drilled (1,609,781 feet). Carroll County also had the most wells drilled (81) and footage drilled (989,218 feet) in 2012. Total footage drilled increased 77%, from about 1.99 million feet in 2011 to about 3.53 million feet in 2012
The Pennsylvania Public Utility Commission (PUC) introduced an interactive website that allows users to examine information related to the collection and distribution of revenue from the state’s unconventional natural gas well impact fee, which was enacted as part of Act 13, the state’s omnibus Marcellus Shale law. The website, which includes graphical data analysis including the top paying producers, well count breakdowns and top collecting counties and local governments, can be accessed on the PUC website by clicking on “Act 13 (Impact Fee)” and then “Interactive Impact Fee Website.” Impact fee producer payments for 2012 were due to the PUC April 1. Information on the amount of money expected for 2012 as well as the amount of money collected to date can be found on the website. Payments for some wells are still being challenged by some producers; disputed wells are not reflected in the current data available.
Penn Virginia Corp. (PVA) is acquiring 40,600 gross acres (19,000 net) targeting the Eagle Ford Shale in Gonzales and Lavaca counties, TX, for $401 million from Magnum Hunter Resources Corp. (MHR), which has set its sights, in part, on the Pearsall Shale. The acreage is adjacent to PVA holdings in both counties and will give the company 83,000 gross (54,000 net) contiguous acres in the Eagle Ford oil window. The deal, which is expected to close mid-May, increases PVA’s drilling inventory to 640 gross (420 net) locations from 295 gross (251 net), the company said. Last summer, PVA sold most of its Appalachian Basin portfolio to focus on the Eagle Ford.
Midstates Petroleum Co. Inc. is buying producing properties, as well as developed and undeveloped acreage, in the Anadarko Basin in Texas and Oklahoma for $620 million in cash from Panther Energy LLC and its partners Red Willow Mid-Continent LLC and Linn Energy Holdings LLC. The deal adds about 36.4 million boe of proved reserves that are 45% oil and 21% natural gas liquids (NGL), of which 34% are proved developed producing, Midstates said. It increases net production by 8,000 boe/d (67% liquids), enhances its drilling inventory with more than 700 “low-risk, repeatable horizontal drilling opportunities” and expands its acreage position with140,000 net acres with multiple objectives (102,000 in Texas and 38,000 in Oklahoma).
The Ben Franklin Shale Gas Innovation & Commercialization Center (SGICC) has named a dozen finalists in its annual Shale Gas Innovation Competition, which will award a total of $75,000 to three winners to be selected in April. The finalists are Atlantis Technologies, Atonarp, Calyx Bioprocess Technologies, Clean Power Resources, KCF Technologies, LaserSense, Lasers for Innovative Solutions, Lewis Environmental, Nittany Laser Technologies, ProChemTech, Pyrochem Catalyst, and REV LNG. ProChemTech was also a finalist in last year’s competition (see NGI, May 28, 2012). The winners are scheduled to be announced by Terry Engelder, a geosciences professor at Pennsylvania State University, at an SGICC reception May 7 in Southpointe, PA.
Pennsylvania Senate Majority Leader Dominic Pileggi (R-Chester) and Sen. Gene Yaw (R-Lycoming) have introduced a pair of bills designed to make natural gas service available to more consumers. SB 738 would require every operating natural gas distribution utility to submit a three-year plan to the Pennsylvania Public Utility Commission (PUC) outlining a strategy to extend and expand gas lines. The first three-year plan would be due to the PUC on Jan. 1, 2014, with additional plans required every two years. SB 738 would also create a system to expedite expansion or extension projects if there are large numbers that want service. Meanwhile, SB 739 would provide $15 million in grants so schools, hospitals and small businesses can be serviced by gas. Both bills have been referred to the Senate Environmental Resources and Energy Committee.
Shell Technology Ventures (STV) plans to make research and development (R&D) investments in private companies over the next six to eight years. In addition to promising technology companies, Shell may invest in technology spin-outs and externally managed venture capital funds. Shell last year spent about $1.3 billion a year on R&D. About 70% of the new proposed funds is to target enhanced hydrocarbon extraction and refining, while the remaining funds would be committed to new energy forms. Areas of particular interest include natural gas production and conversion; geophysical imaging; chemical manufacturing and conversion; novel materials; enhanced oil recovery; and water treatment.
Mexico’s Petroleos Mexicanos‘ (Pemex) exploration and production (E&P) unit has awarded contracts with a total value of more than $350 million to Empeiria Acquisition Corp. and subsidiary Integrated Drilling Equipment Co. Holdings (IDE) to build four 3000HP AC modular platform rigs. The first unit is scheduled to be delivered in 3Q2014 and the additional units by December 2014. Specifications for the rigs were developed through collaboration of the IDE and Pemex teams. Deployments of the drilling packages will be key steps toward Pemex’s development of the Tekel, Ayastil, Xux and Tsimin fields in the Bay of Campeche, according to Houston-based Empeiria.
ExxonMobil Corp. and BHP Billiton are partnering to build the world’s largest floating liquefied natural gas (FLNG) processing and export plant off Australia’s northwest coast. The Scarborough FLNG plant is scheduled to begin producing 6-7 million metric tons per year (mmty) of LNG in 2020-2021. The 0.3-mile-long-vessel is to be moored 137 miles off Australia’s northwestern coast, according to ExxonMobil. Based on the seven LNG projects now under construction in Australia, ExxonMobil and BHP’s plant would increase Australia’s LNG supplies by almost 30%. ExxonMobil provided no cost estimate in its filing. A final investment decision is to be made in 2014-2015.
Bechtel has been awarded the engineering, procurement and construction contract for the Panda Temple II Generating Station, a 758 megawatt natural gas-fueled, combined-cycle power plant to be built in Temple, TX. It is the third power facility to be built by Bechtel and consortium partner Siemens for Panda Power Funds. The consortium is also designing and building the Panda Temple I Generating Station, which is adjacent to Panda Temple II, and the Panda Sherman Power Project in Sherman, TX. All three projects are identical in size.
Canada Minister of International Trade Ed Fast and Alice Wong, a fellow member of Parliament from British Columbia, are leading a trade mission to China and Japan. Fast said Wong would begin the trade mission by leading business delegations in Shanghai and Hangzhou in China, and he would join her for meetings in Tokyo and Yokohama in Japan. Visits to Hong Kong and Beijing are to follow. Canada is looking to export oil and liquefied natural gas (LNG) to Asian markets.
ProPublica, a nonprofit corporation that pursues investigative journalism on matters of public interest, said former Pennsylvania Gov. Ed Rendell should have disclosed his ties to natural gas-related businesses in a pro-industry editorial he wrote March 27 for the New York Daily News. The editorial urged New Yorkers and New York Gov. Andrew Cuomo to embrace high-volume hydraulic fracturing in their state (see NGI, April 1). ProPublica said Rendell has been paid about $30,000 a year by Element Partners, a private equity firm, since he left office in 2011. ProPublica said Rendell is also a senior adviser to Greenhill & Co. Inc., an investment bank. ProPublica said both Element and Greenhill have investments and/or interests in the oil and natural gas industry.
The Washington Post and the New York Times published different opinions on how shale development was creating manufacturing jobs in the United States. On April 2, the Post said European firms — including Royal Dutch Shell plc, BASF SE and Voestalpine AG — were building facilities in the U.S. to take advantage of low natural gas prices. But on April 1, the Times said low natural gas prices weren’t as compelling as cheap labor costs in China and Mexico, and said manufacturing jobs are not being created as fast as industry groups have pred
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