Marathon Oil Corp. has completed the spinoff of its refinery arm and is now an independent upstream operator. After relaunching three-year-old plans early this year, the board of directors in May voted to spin off the refinery operations into newly formed Marathon Petroleum Corp. (MPC), which is headquartered in Findlay, OH (see NGI, Jan. 17; Feb. 9, 2009). Marathon Oil, as a global exploration and production company, will continue to be led by CEO Clarence Cazalot. The upstream business remains headquartered in Houston under a new logo and will operate and report through three segments: Exploration & Production, Oil Sands Mining, and Integrated Gas.

The Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) released a draft supplemental environmental impact statement (SEIS) for proposed oil and gas Lease Sale 216/222 in the Central Planning Area of the Gulf of Mexico. These are the last remaining sales scheduled for the Central Gulf Planning Area in the current five-year (2007-2012) Outer Continental Shelf leasing program, the agency said. The sales were delayed as a result of the deadly explosion aboard the Deepwater Horizon rig over a year ago (see NGI, April 26, 2010). The draft SEIS updates the findings in several previously published environmental reviews of the Gulf of Mexico and incorporates the latest available information following the Deepwater Horizon rig explosion and subsequent oil spill. The draft SEIS is available at www.gomr.boemre.gov. A notice announcing the draft SEIS was published in the Federal Register on July 1, at which time BOEM began accepting comments at https://boemre.gov/PublicComment.htm. It said comments will be used to prepare the final SEIS for the lease sale. BOEM said it also plans to have public hearings in New Orleans on Aug. 2, Houston on Aug. 9 and Mobile, AL, on Aug. 11 to receive comments on the draft SEIS.

Energy Transfer Equity LP (ETE) has warned potential merger partner Southern Union Co. that opening up separate discussions with Williams following a counterbid would be a “willful and intentional breach” of their merger agreement. In a filing with the Securities and Exchange Commission (SEC), ETE admonished Southern Union after it agreed to negotiate with Williams, which proposed to acquire the company for $39/share, or a total of $8.7 billion including debt, trumping ETE’s offer of $33/share (see NGI, June 27; June 20). In response, Southern Union said it “has exercised great care, and will continue to exercise great care, to comply fully” with the terms of its agreement with ETE.

SM Energy Co. and a unit of Japan’s Mitsui & Co. Ltd. have struck a carry agreement in the Eagle Ford Shale that is worth $680 million to the Denver-based producer and is part of its sell-down in the South Texas play. The deal gives Mitsui a 12.5% working interest in SM Energy’s nonoperated Eagle Ford position. SM Energy will be carried on 90% of its drilling and completion costs (excluding those for midstream gathering assets) in the acreage until $680 million has been expended. Closing is expected during the third quarter.

The Interior Department said it will raise the maximum civil penalty rate for violations of laws governing activities on the federal Outer Continental Shelf (OCS). The maximum civil penalty rate for violations of the Outer Continental Shelf Lands Act (OCSLA) will increase to $40,000 per day from the current $35,000 a day, while financial responsibility violations of the Oil Pollution Act (OPA) will rise to $30,000 per day from $25,000 a day, according to Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM). The agency said the penalty rates adjustments were designed to keep up with inflation, as required by OCSLA and OPA. It further noted that the Obama administration has called on Congress to pass legislation that would raise the maximum civil penalty rates beyond the rate of inflation.

Denbury Resources Inc. has agreed to pay Cimarex Energy Co. $191 million for the 57.5% working interest it does not already own in the 9,700-acre Riley Ridge Federal Unit in southwestern Wyoming and a 33% working interest in an additional 28,000 acres of mineral leases adjoining the unit. The deal, which is expected to close in late July with an effective date of April 1, 2011, would make Denbury the operator of both projects. Plano, TX-based Denbury estimates that Riley Ridge contains proved reserves of 250 Bcf of natural gas, with another 250-300 Bcf of probable reserves in the additional acreage.

South Korea’s state-run Korea Gas Corp. (KOGAS), the world’s largest liquefied natural gas buyer, is joining the Cordova Embayment natural gas project in British Columbia. In May three of Japan’s largest utilities joined a Mitsubishi Corp.-led consortium to partner with Calgary’s Penn West Exploration‘s shale gas project in northeastern British Columbia (see NGI, May 16). Now KOGAS will join the group after Mitsubishi agreed to sell 5% of its 30% stake in the project, which has been estimated to hold up to 8 Tcf of gas reserves. Penn West continues to hold a half-stake in the project.

Eagle Ford Gathering LLC, a joint venture (JV) of Kinder Morgan Energy Partners LP and Copano Energy LLC, has executed two long-term agreements to provide transportation, processing and fractionation services to two operators in the Eagle Ford Shale, expanding its already significant contracted production in the South Texas play. The JV said it has contracted with Petrohawk Energy Corp. for up to 50,000 MMBtu/d of Eagle Ford Shale natural gas production from leases in LaSalle and McMullen counties in Texas, and with Rosetta Resources Inc. for up to 50,000 MMBtu/d from leases in Webb and Dimmit counties in Texas. Each agreement has an approximate term of 10 years. With the agreements, the JV has contracted for a total of 550,000 MMBtu/d of Eagle Ford gas production, according to Duane Kokinda, president of Kinder Morgan’s intrastate pipeline group.

Wyoming Gov. Matt Mead sees the potential for turning his state’s fossil fuels into gasoline as something that could add economic value to the state’s rich natural resources, according to Mead’s chief spokesperson. NGI asked for the governor’s response to the recent report that a legislative committee wants the state to help underwrite a study of the potential for turning natural gas and coal into gasoline. “Generally, the governor is interested in any project that adds economic value to the energy resources of the state,” said Renny MacKay, the governor’s communications director. Given the technical feasibility and the needed financing from the private sector, the potential is great for a state like Wyoming, the governor has indicated. “The benefits and costs of a project are always specific to the location, the technology, the economics and the general impact,” MacKay said.

Enterprise Products Partners LP cited robust growth in Eagle Ford Shale liquids-rich gas production in South Texas as the rationale behind its plans to add a sixth natural gas liquids (NGL) fractionator at the Mont Belvieu, TX, complex, which would increase capacity there by 75,000 b/d. Enterprise said it has obtained approvals that will allow it to begin construction of the facility, which is projected to begin service in early 2013. At that time Enterprise would have the capability to fractionate more than 450,000 b/d of NGLs at Mont Belvieu.

Despite production rates that would have been considered impressive under different circumstances, Penn Virginia Corp. (PVA) expressed disappointment in results from its first three horizontal wells on its Marcellus Shale leasehold in Pennsylvania. The Risser #A-1H, Risser #A-2H and Dunn #A-1H wells, all in the central portion of PVA’s 35,000-acre position in Potter and Tioga counties, had peak 24-hour production rates of approximately 3.1 MMcf/d, 2.8 MMcf/d and 4.0 MMcf/d respectively, the company said. During the second half of the year, PVA plans to focus on testing, initially with vertical wells, the eastern portion of its Marcellus acreage. The results from the eastern wells might have been more warmly received by the company if natural gas prices were higher, said a PVA spokesman. PVA has been seeking a joint venture partner or other alternatives in the Marcellus. LLC’s interstate system.

The Pennsylvania General Assembly recently passed a law requiring state drillers to post GPS coordinates for each well in order to aid emergency responders. Senate Bill 995 also requires operators to file an emergency response plan with state and county officials. State Sen. Lisa Baker, a Republican from northeastern Pennsylvania, said the bill came about after public safety officials told her about “worrisome holes in the safety net.” Baker introduced the bill immediately after a blowout at a Chesapeake Energy Corp. well in Bradford County (see NGI, May 2).

Local businesses in two of the most active counties in the Marcellus Shale are reporting increased sales, but also some difficulties holding onto employees, according to a recent study from Pennsylvania State University. The survey found that 28% of business owners in Bradford and Washington counties in Pennsylvania — the epicenters of production in the state — said sales had increased because of natural gas drilling, while only 3% reported decreasing sales. Meanwhile, 9% of businesses said natural gas development made it more difficult to find qualified employees. Although Bradford is less than a third of the size of Washington in terms of population, it’s much more active in terms of development and the findings suggest that Marcellus development could have a greater impact on smaller economies, the researchers said.

California’s 2007-2009 drought, one of the severest in its history, carried a heavy impact on the state’s energy markets both from an economic and environmental perspective, according to a report released by the Pacific Institute. Natural gas played a central role, the Oakland, CA-based nonprofit said. Electricity users paid a direct cost estimated at $1.7 billion during the three-year-period due to substantially decreased hydroelectric supplies and corresponding higher costs for alternatives, mostly gas-fired generation. Indirectly, an estimated 10% increase in carbon emissions (13 million tons) was experienced in the state, stated “Impacts of the California Drought from 2007 to 2009.”

The El Nino-Southern Oscillation and the Arctic Oscillation affected regional climates and contributed to many of the world’s significant weather events in 2010, including global temperatures that were among the warmest on record, according to the National Oceanic and Atmospheric Administration (NOAA). Three major independent data sets showed 2010 as one of the two warmest years since official record keeping began in the late 19th century, according to NOAA’s State of the Climate in 2010, which was issued in coordination with the American Meteorological Society. Surface temperatures were approximately 0.5 degree Celsius above the 1961-1990 average, depending on which methodologies were considered, according to NOAA.

Extensive rain and flooding have hampered MDU Resources Group Inc.‘s operations and delayed growth activity in key producing states in the Rocky Mountain region, including the Bakken oil play, to such an extent that the company is lowering its 2011 natural gas and oil production forecasts. The impact of the severe weather, combined with sustained low gas prices, prompted MDU to forecast an 8-12% decrease for natural gas production for 2011, down from its previously released guidance of a 4-8% decrease compared with 2010. The Bismarck, ND-based company also forecast a 1-5% increase in oil production, down from the previously released guidance of a 5-10% increase compared with 2010.

In an effort to capitalize on emerging feedstock opportunities and growing North American demand, NOVA Chemicals Corp. is planning to build new polyethylene lines and expand ethylene production at two facilities. Calgary-based NOVA, which is a subsidiary of Abu Dhabi-based International Petroleum Investment Co. (IPIC), said it has begun feasibility and engineering work for the construction of two polyethylene lines at its sites in Alberta and Ontario and will complete studies for a further debottlenecking of a low-density polyethylene line at its Mooretown, ON, facility. The engineering and feasibility studies are expected to be completed by mid-2012, and start-up of the debottlenecking project and polymer expansions is targeted for 2014-2017. To support the polyethylene expansions, NOVA said it will grow ethylene supply through the increased utilization of its Joffre cracker near Red Deer, AB, and expand its Corunna cracker, about 180 miles southwest of Toronto.

Chief Oil & Gas LLC has paid Pennsylvania $180,000 in fines for two violations discovered last year at a Marcellus Shale gas well in Somerset County. The company was fined for a hydraulic oil spill and for failing to maintain a drill pit at a well site in Jefferson Township. Inspectors with the Department of Environmental Protection (DEP) had visited the well site on June 10, 2010. The DEP said Chief has since remediated the site, removing contaminated soil and maintaining the drill pad. Chief currently holds a Marcellus Shale acreage position of 125,000 net acres, which includes Pennsylvania, New York and West Virginia.

Howard Energy Partners (HEP) has acquired Texas Pipeline LLC and Bottom Line Services LLC for $76 million. Crosstex Energy LP and Quanta Services Inc. each provided $35 million in initial funding in exchange for about a 35% share of San Antonio-based HEP. Texas Pipeline operates 250 miles of gathering lines in the Eagle Ford and Pearsall shale plays. Bottom Line has built more than 500 miles of pipeline and installed more than 50 midstream facilities in the Eagle Ford.

Construction of the Niobrara Energy Park in Weld County, CO, is not expected to begin until mid-2012. Loveland, CO-based Harrison Resource Corp. is developing the site. The energy park hopes to lure oil and gas companies drilling in the Niobrara Shale with its proximity to Poudre Valley REA power transmission lines; adjoining Colorado Interstate Gas and Xcel Energy natural gas pipelines; and an adjacent Suncor Energy crude oil pipeline.

Samson Oil & Gas Ltd. has agreed to acquire up to 90,000 net acres of oil and gas leasehold from Fort Peck Energy for an undisclosed price. The acreage is located in Roosevelt County, MT, on the Fort Peck Indian Reservation in the Williston Basin. Samson, which is based in Tulsa, will acquire the acreage in three blocks, the first of which carries a two-well obligation. A target spud date of Sept. 1 has been set for the first well. The company will also hold at least a 66.66% working interest in the acquired acreage.

Calgary-based Aqua-Pure Ventures said its subsidiary, Fountain Quail Water Management LLC, will expand its operations into the Eagle Ford through a subcontracting agreement with NAC Services LLC, an affiliate of Noise Attenuation Construction Services. The terms of the agreement were not disclosed. Fountain Quail will send two of its Nomad units to NAC’s new water purification facility in Kenedy, TX, to recycle well wastewater. The facility will recycle 5,000 b/d of flowback and produced water.

The answer to some of the environmental concerns about hydraulic fracturing (fracking) in Pennsylvania is a homegrown synthetic proppant, according to Nittany Extraction Technologies. Using various sources of mineral and waste-glass found in Pennsylvania and buoyed by more than $167,000 in funding from Ben Franklin Technology Partners of Central and Northern Pennsylvania (BFTP), Nittany expects to be producing its PennProp proppant in commercial quantities by the end of the year. PennProp is made from low-cost, widely available industrial and domestic waste materials, and is expected to allow millions of tons of minerals to be diverted from landfills, according to BFTP. Nittany has entered into an exclusive license with Pennsylvania State University and has already manufactured its first multi-ton test batch in a high-temperature processing facility.

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