The total value of U.S. natural gas and oil and mergers and acquisitions (M&A) in the first three months of this year jumped 69% from a year ago and sends a signal that 2011 will be another strong year for transactions, according to a survey by PwC US. The Oil & Gas M&A analysis is a quarterly report of announced U.S. transactions valued at more than $50 million. PwC uses transaction data provided by John S. Herold Inc. Shale natural gas properties remain a big draw for buyers. According to PwC, eight transactions each valued at more than $50 million related to shale gas properties for a total value of $9.7 billion. Two transactions in the Marcellus Shale together totaled $325 million. Several big sales contributed to a 76% increase in overall average deal value from a year ago. Forty-seven transactions in the latest quarter were valued at more than $50 million each, accounting for a total of $51.5 billion in deal value, versus $30.4 billion in the year-ago period. The average size of a transaction also jumped significantly to $1.1 billion from $620.9 million year/year. Twenty-three individual transactions were valued at more than $250 million. Upstream transactions made up almost three-quarters (73%) of the sales valued at more than $50 million, with a total of 27 transactions fetching $25.3 billion.

Calgary-based Enerplus Corp. is selling a portion of its Marcellus Shale interests in Pennsylvania, Maryland and West Virginia to an undisclosed buyer for US$575 million. The transaction, expected to be completed by the end of June, includes stakes in about 91,000 net acres in southwest and central Pennsylvania, Garrett County in Maryland and northern West Virginia. Current total production averages about 5.4 MMcfe/d. Land to be retained in the Marcellus includes ownership in close to 110,000 net acres that at the end of 2010 were estimated to hold 2.3 Tcfe of natural gas contingent resource and 92 Bcfe of proved plus probable natural gas reserves.

Appalachian Midstream Partners (AMP) will use a $176 million equity commitment from Avista Capital Partners to develop and expand its Bear Print gathering system to serve Marcellus Shale gas production in north central Pennsylvania. AMP recently signed a gathering agreement with Pennsylvania General Energy Co. LLC (PGE) as an anchor customer on the Bear Print system. Bear Print is 56 miles long, provides access to Tennessee Gas Pipeline in northern Pennsylvania and has the ability to provide future access to Columbia Gas, Dominion, National Fuel and Transco at the Leidy Hub storage field.

Pennsylvania Gov. Tom Corbett has signed into law amendments to the state’s 1984 Coal and Gas Resource Coordination Act, which will require natural gas drillers to coordinate their activities with active coal mine operations. SB 265 updates the 27-year-old law with new definitions for gas drilling activity and would require a minimum distance between gas wells, designated well classes and coordinated gas well drilling undertaken through active coal mines. The full text of the legislation is on the General Assembly’s website.

The New York Assembly‘s Environmental Conservation Committee has reported out of committee legislation to suspend until June 1, 2012 issuing new permits to drill that use hydraulic fracturing (hydrofracking) to extract natural gas or oil. The bill, A7400, is sponsored by Environmental Conservation Committee Chair Robert K. Sweeney and would give the state legislature more time to review a draft Supplemental Generic Environmental Impact Statement (SGEIS) on horizontal drilling and hydrofracking, which the New York Department of Environmental Conservation (DEC) is expected to complete by mid-year. The Assembly committee, as well as a standing committee on health, have scheduled a public hearing on Thursday (May 26) in Albany’s Legislative Office Building to review the potential health effects of hydrofracking techniques. In related news a statewide poll found New Yorkers divided on whether hydrofracking should be allowed. The NY1/YNN-Marist Poll, overseen by the Marist Institute for Public Opinion (MIPO), reported that 41% of 941 adults questioned April 25-29 were opposed to hydrofracking, while 38% were in favor and 21% were unsure.

The Federal Energy Regulatory Commission (FERC) has granted a certificate to Pine Prairie Energy Center LLC to expand its Pine Prairie Natural Gas Storage salt cavern facility in Evangeline Parish, LA. The project would increase working capacity of the facility to 80 Bcf from the current 48 Bcf, including two new 12 Bcf caverns and the expansion of permitted capacity for caverns two through five to 12 Bcf from 10 Bcf each (see NGI, Oct. 11, 2010). The FERC order requires Pine Prairie to hold an open season to solicit permanent capacity release offers and grants Pine Prairie’s request for continuing authorization to charge market-based rates.

Cheniere Energy Partners LP unit Sabine Pass Liquefaction LLC has received approval from the U.S. Department of Energy to liquefy and export U.S. natural gas from the Sabine Pass LNG terminal to any country that has or develops import capacity. The order expands upon the authorization Sabine Liquefaction received in September that authorized exports to all current and future Free Trade Agreement countries (see NGI, Sept. 13, 2010). It concludes one of the key regulatory requirements necessary for the Sabine Pass liquefaction expansion project to proceed, Cheniere said. Sabine Liquefaction received long-term, multi-contract authority to export on its own behalf, or as agent for others, up to 803 Bcf/year (about 16 million metric tons/year) of domestically produced natural gas as liquefied natural gas (LNG).

The Federal Energy Regulatory Commission has granted Empire Pipeline Inc. a certificate authorizing it to proceed with a pipeline expansion in Pennsylvania and New York that would enable Marcellus Shale production to be shipped northward on the Empire system. The certificate authorizes Empire to construct, operate and replace about 15 miles of 24-inch diameter pipeline to extend the Empire Connector Pipeline, an interconnection with the facilities of Tennessee Gas Pipeline Co., and modifications to an existing compressor station to permit bidirectional flow on Empire’s system. Empire is a subsidiary of New York-based National Fuel Gas.

The Connecticut House of Representatives has unanimously approved a bill that would ban the use of “flammable gas to clean or blow the gas piping” of electric generating facilities. The bill (HB 5802) also would require companies applying to the Connecticut Siting Council to build electric generating facilities to provide a special inspector to help municipal fire marshals inspect the facilities, and to pay a fee that would be used to train local fire marshals “on the complex issues of electric generating facility construction.” Violators would be fined up to $100,000 and face prison terms of up to two years for each offense. The bill was introduced in the aftermath of an explosion which occurred Feb. 7, 2010 at the 620 MW Kleen Energy combined-cycle baseload plant in Middletown, CT, causing six deaths and multiple injuries (see NGI, Feb. 15, 2010). The accident occurred during the planned cleaning of natural gas piping during the commissioning and startup phase of construction. The bill awaits action by the state Senate. The Connecticut General Assembly is scheduled to adjourn June 8.

American Rivers, which publishes an annual list of the “most endangered rivers” in the country, said the dangers to water resources from natural gas drilling have lifted the Susquehanna River to the top of its 2011 compilation. The Susquehanna and its tributaries flow over the Marcellus Shale region in New York, Pennsylvania and Maryland. Pennsylvania and New York, noted the authors, are working to improve clean water safeguards for gas development but “they fall short of adequately protecting the water supply for millions of Americans.” Because of the lack of safeguards, these states and the Susquehanna River Basin Commission were urged by American Rivers to “announce a complete moratorium on water withdrawals and hydraulic fracturing until there are comprehensive regulations in place for natural gas development or they will put public health and drinking water at risk.” The Hoback River in Wyoming was seventh on the list because gas drilling may be permitted by the U.S. Forest Service in the river’s headwaters.

The Delaware River Basin Commission (DRBC) will hold another public hearing on June 1 over plans by XTO Energy Inc., an ExxonMobil Corp. subsidiary, to withdraw up to 250,000 gal/d of surface water from a creek in New York for natural gas wells. The hearing will take place in Deposit, NY. DRBC commissioners unanimously elected to hold another public hearing over XTO’s proposed water withdrawals after 39 people testified at a public hearing in West Trenton, NJ on May 11. XTO wants to withdraw water from Oquaga Creek for natural gas exploration and production activities in Broome County and neighboring Delaware County, NY, The company plans to withdraw the water from a site in Sanford, NY.

Pennsylvania American Water Co. sampled raw water intakes along the Allegheny, Clarion and Monongahela Rivers, as well as Two Lick Creek in Indiana, PA — all in the Pittsburgh area — but found “no elevated or harmful levels” of radiological contaminants, volatile organic compounds (VOC) or inorganic compounds (IOC). The testing found “no detectable levels” of six radioactive contaminants and 22 VOCs and “levels well within compliance standards” for 32 IOCs. The company, at the request of the Pennsylvania Department of Environmental Protection (DEP), also sampled finished drinking water at three sites in late March for total alkalinity, bromide, chloride, pH, total dissolved solids, uranium, gross alpha radiation, radium-226 and radium-228 and said the results were “within all acceptable water quality standards set by the U.S. Environmental Protection Agency and the DEP.” Pennsylvania American Water, which provides water for more than 200,000 customers in Allegheny, Washington and Fayette counties, launched the tests following a New York Times article claiming that radioactive Marcellus wastewater threatened drinking water (see NGI, March 7).

The New Jersey Board of Public Utilities (BPU) has approved the continuation through next year of an Elizabethtown Gas utility infrastructure upgrade program, which has already replaced nearly 47 miles of cast iron pipe and constructed two major interconnect projects totaling about 24 miles of new pipeline in Sussex, Warren and Hunterdon counties. The program, which was originally approved by the BPU in 2009 (see NGI, April 20, 2009), accelerates capital expenditures for projects designed to enhance the safety, reliability and integrity of the natural gas distribution system while creating jobs in New Jersey, the AGL Resources subsidiary said. The extended program will allow Elizabethtown Gas to continue replacing aging infrastructure and provide reinforcements to the distribution system. The company expects to spend about $40 million to complete infrastructure projects between now and the end of 2012.

The California Energy Commission (CEC) unanimously approved two natural gas-fired electric generation plants that would add more than 800 MW to the state’s generation fleet, which is under pressure along the coast where 20 plants need to meet new once-through-cooling (OTC) rules this decade or shut down. Separately, the CEC gave the green light to the 200 MW Mariposa Energy Project, a gas-fired peaking plant seven miles east of Livermore, CA, in the southeastern part of the East San Francisco Bay Area. It is being developed by Mitsubishi Corp. subsidiary Diamond Generating Corp.

Harvest Natural Resources Inc. (HNR) has completed the sale of its oil and gas assets in the Uinta Basin of Utah to an affiliate of Newfield Exploration Co. for $215 million in cash. The sale has an effective date of March 1. Net proceeds from the sale are estimated to be $205 million after deductions for transaction-related costs, HNR said. The transaction is part of its ongoing process of exploring strategic alternatives, which was announced last September. Newfield entered into the HNR deal and a separate one with an undisclosed seller earlier this year to build its Uinta portfolio. The combined acquisitions add about 70,000 net acres to the company’s unconventional oil and gas holdings in the basin, and consist of largely undeveloped acreage located adjacent to the Monument Butte field, Newfield’s largest oil asset.

Spokane, WA-based Avista Corp.‘s combination utility is seeking rate increases for its natural gas and electric operations to recover costs of bolstering infrastructure to serve 234,000 electric and 147,000 natural gas customers in the state. The general rate increase requests made to the Washington Utilities and Transportation Commission (WUTC) include a $6.2 million (4%) annual hike for gas service and a $38.3 million (8.7%) increase for retail electric customers. A major part of the gas hike seeks to recover Avista Utilities‘ cost of a portion of the gas it stores in the Jackson Prairie storage facility in southwest Washington.

Sparks flew last week between national wind industry interests and the federal Bonneville Power Administration (BPA) over the large Pacific Northwest power market/transporter’s interim decision to temporarily limit nonhydroelectric supplies, such as wind and natural gas-produced power, due to the region’s record-breaking levels of water (see NGI, April 25). BPA Administrator Steve Wright said the interim decision to cope with the upcoming runoff from the largest snowpack in the region in years will protect grid reliability and the salmon, along with avoiding increased costs on average Northwest electric ratepayers.

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