A lawsuit filed by Amaranth Advisors LLC claiming JPMorgan Chase & Co. executives helped to cause the natural gas hedge fund to collapse may not proceed, New York Supreme Court Judge O. Peter Sherwood has ruled. The hedge fund imploded in a $6.4 billion debacle in 2006 on bad bets on natural gas futures and derivatives deals. Amaranth sued the bank a year later for its alleged role in the fund’s demise, claiming that JPMorgan officials interfered in a deal with Citadel by disparaging Amaranth’s financial condition (see NGI, Nov. 19, 2007). In a 32-page ruling Sherwood said Citadel had “conducted its own research in connection with the proposed transaction with the fund and evidence of the tenuousness of the fund’s financial condition was readily available” (Amaranth LLC v. JPMorgan Chase & Co., No. 603756/2007, New York Supreme Court, New York County).

El Paso Corp. has filed Securities and Exchange Commission forms for the planned spinoff of its exploration and production (E&P) business (see NGI, May 30). EP Energy Corp. would be listed on the NASDAQ stock exchange under the ticker symbol “EPE.” Once completed El Paso would be composed of the company’s Pipeline Group, Midstream Group and hold general and limited partner interests in El Paso Pipeline Partners LP. Brent Smolik, who has run the exploration arm since late 2006, is to be EP’s president and CEO (see NGI, Oct. 23, 2006). El Paso CEO Doug Foshee would remain chairman of El Paso and become nonexecutive chairman of EP Energy. J. Michael Talbert would serve as lead director of El Paso’s board, which also is to include Juan Carlos Braniff, Anthony W. Hall Jr., Thomas R. Hix, Ferrell P. McClean, Timothy J. Probert, Robert F. Vagt and John L. Whitmire. EP’s board would be composed of Smolik, McClean, Vagt, David W. Crane, Robert W. Goldman and Steven J. Shapiro.

Sawgrass Storage LLC has filed an application at the Federal Energy Regulatory Commission to convert a depleted natural gas reservoir into an underground storage facility just west of Perryville in Lincoln and Union parishes in northeast Louisiana.The facility would have a working capacity of about 30 Bcf and would be capable of delivering and receiving gas at the rate of about 300 MMcf/d. Sawgrass, a new entrant in the storage field, also proposes to build a 13.9-mile, 30-inch diameter high-pressure pipeline extending northeast from the storage facility to an interconnection with the interstate system of Midcontinent Express Pipeline (MEP), about nine miles southeast of Farmerville, LA. Sawgrass said it expects to begin providing services to shippers in the MEP production regions by March 2013, if the project is approved by FERC [CP11-523]. The company held an open open season in late 2010 (see NGI, Oct. 18, 2010). Sawgrass is a venture of Mill Creek Gas Storage LLC, a subsidiary of Samson Investment Co., a privately held energy exploration and production firm; and Cypress Creek Gas Storage LLC, a subsidiary of Nicor Inc. of Naperville, IL.

New York’s registered voters favor the economic benefits of drilling in the Marcellus Shale more than they fear environmental problems, according to a poll by Quinnipiac University. All voters — Republicans, Democrats and Independents — also favor taxing gas producers. From Aug. 3 through Aug. 8, the Quinnipiac pollsters surveyed 1,640 registered voters in New York about a variety of issues. Voters overall were in favor of gas drilling by a 47-42% margin. Support for gas drilling was strong in the upstate area, where 51% were in favor of drilling while 39% opposed, as well as in the suburbs, by a margin of 52-37%. However, voters in New York City, where no gas drilling is taking place, were almost equally opposed by a margin of 50-38%. The poll found that the state’s Republicans strongly supported gas drilling by a margin of 67-20%, while Democrats were opposed by a 52-37% margin. Independent voters were divided 47-45%.

AGL Resources Inc. unit Pivotal LNG said it is buying a 60,000 gal/d natural gas liquefaction facility in Trussville, AL, in support of its plans to market liquefied natural gas (LNG) to the wholesale vehicle fuels market. Pivotal LNG has embarked on a venture selling LNG in the wholesale market to buyers that then deliver it to end-users such as trucking fleet operators. The company is buying the facility from the Utilities Board of the City of Trussville. Heavy-duty trucking, remote power generation, marine engines and railroad locomotives are just a few examples of where LNG can serve as a less-expensive and environmentally friendly alternative fuel to diesel, AGL said.

Chesapeake Exploration LLC told about 20,000 Barnett Shale royalty owners that it will begin deducting expenses associated with post-production of gas, such as gathering, compression and transportation, from their monthly payments. The move is intended to align the company’s practices with those of Total E&P USA Inc., a unit of France’s Total SA. In January 2010 Total E&P acquired a 25% stake in Chesapeake’s upstream Barnett assets in a $2.25 billion joint venture agreement. If the change had not been made, royalty payments would have had to be handled with two separate checks, according to the company. The change does not affect all royalty owners, only those that do not have agreements in place with the producer that would preclude such an expense deduction. Based on current costs and gas prices, the change is expected to cut payments to affected royalty owners by about 25%.

Morgan Stanley Private Equity has taken a majority stake in newly formed Sterling Investment Holdings LLC, the firm and Sterling Energy Co. said. The move is intended to support growth of Sterling Energy’s midstream business in Colorado and North Dakota. Sterling Energy provides gas gathering and processing infrastructure and related services for oil and gas producers through its two gathering systems: the Yenter System, serving Denver-Julesburg (DJ) and Niobrara production in northeast Colorado; and the Ambrose System, serving Williston and Bakken/Three Forks production in Divide County, ND.

Inergy LP plans to spin off a minority interest in a master limited partnership (MLP) as Inergy Midstream LP, which initially would own and operate the northeastern midstream natural gas storage and transportation business. Assets expected to be included in the MLP are the Stagecoach natural gas storage facility and its lateral pipelines, the Steuben and Thomas Corners natural gas storage facilities, the Seneca Lake natural gas storage facility and its associated East and West pipelines, the Finger Lakes natural gas liquids storage facility and the proposed Marc I natural gas pipeline. The MLP would have 41 Bcf of natural gas storage capacity and 825 MMcf/d of natural gas transportation capacity once the proposed Marc I pipeline and the North-South expansion projects are completed.

National Fuel Gas Co. will continue to go it alone in the Marcellus Shale, the company said during a recent quarterly earnings call. The Williamsville, NY-based company began looking for partners after it sold its Gulf of Mexico assets, but CEO David Smith said several “good and serious offers” weren’t quite good enough (see NGI, May 16). “And while discussions do continue with a few potential partners, as we’ve said in the past, unless a joint venture enhances shareholder value, unless it produces significant advantages above and beyond our existing robust plans for growth, which as I said is a pretty high bar, we will simply move forward on our own,” Smith said. “At this point that’s the likely outcome.”

Norse Energy Corp. ASA has reallocated resources to focus on Marcellus and Utica shale development in anticipation of new rules allowing the use of hydraulic fracturing in New York. Norse said it would suspend drilling in the Herkimer sandstone in central New York drilling to “preserve cash for potentially more profitable Marcellus and Utica Shale planning, permitting and development.” Norse, a Norwegian company, has a land position of 180,000 net acres in New York.

Operators drilled more than 1,000 wells into the Pennsylvania Marcellus and Utica Shales through the end of July, a milestone not reached until mid-September in 2010 and not at all in 2009. The Pennsylvania Department of Environmental Protection (DEP) issued 286 Marcellus permits and operators reported drilling 207 wells into the formation in July. Through the first seven months of the year, the DEP issued 1,915 permits — up from 1,721 in 2010 and 999 in 2009 — and operators reported drilling 1,015 wells — up from 822 in 2010 and 263 in 2009. Bradford, Tioga, Susquehanna and Lycoming Counties in northeastern Pennsylvania combined for 1,042 permits and 619 wells. Washington, Greene, Westmoreland and Armstrong Counties in southwestern Pennsylvania combined for 329 permits and 190 wells. Through the end of July the Ohio Department of Natural Resources issued 10 permits for horizontal wells into the Marcellus and 40 permits for horizontal wells into the Utica.

The mayor of Pittsburgh shot down a measure that would have allowed voters to decide whether to ban natural gas extraction in the city, but the city council is still trying to get the referendum on the ballot. By letting the measure expire without a signature or a veto — a maneuver known as a pocket veto — Mayor Luke Ravenstahl made it harder for the council to override his decision by voting on it a second time. Ravenstahl said he blocked the measure because it sent a bad message to industry and because it was legally questionable. Councilman Doug Shields, a sponsor of the measure, said council got conditional approval from the Allegheny County Bureau of Elections to include the referendum on the November ballot, pending a review by the County Law Department, a move he described as standard practice.

Carrizo Oil & Gas Inc. is starting to see results from its decision to focus on liquids-rich shales, the company said during a recent earnings call. The Houston-based company produced 122,788 Mcfe/d in the quarter, up 20% year over year and 5% quarter over quarter, because of increased drilling in the Barnett, Eagle Ford and Niobrara. Carrizo earned $7.7 million (25 cents/share) in net income on $54.1 million in revenues during the quarter. The company realized natural gas prices of $3.83/Mcfe in the second quarter, compared to $4.40/Mcfe in the second quarter of 2010, expects production to increase each month this year to around 5,000 net b/d of oil by the end of the year.

Federal and state investigators found and disarmed a potential explosive device that was left along a natural gas transmission line near Okemah, OK. Investigators have not disclosed what company owns the pipeline, but the Federal Bureau of Investigation (FBI) said it was working on filing charges in the case and was close to making an arrest. The FBI said the device, a 12 inch-by-12 inch diameter pipe bomb with a timing mechanism, was attached to a pipeline approximately five miles south of Okemah. The pipeline was described as a very small gathering line in a rural area that had segments that ran above the ground. Bomb technicians disarmed the device and no additional devices were found. The FBI is handling the investigation.

French producer Toreador Resources Corp. and ZaZa Energy LLC, a privately held oil and gas company based in Houston, will merge in a cash and stock deal valued at approximately $294 million. The combined company will be called ZaZa Energy Corp. and will control about 423,000 net acres in Texas and France combined, mostly in the Eagle Ford shale play and the Paris Basin. Combined net production figures from the Eagle Ford and the Paris Basin are expected to exceed 1,100 boe/d by the end of 2011, and increase further to 5,000 boe/d by the end of 2013. The transaction is expected to close during 4Q2011.

Anschutz Exploration Corp. has exited the Bakken Shale play after closing the sale of its remaining operated and nonoperated oil and gas producing properties in the Williston Basin, including undeveloped acreage, to an undisclosed Canadian oil company for $115 million. The deal comes less than a year after the company sold 180,000 net acres to Oxy USA in December 2010 for $1.4 billion.

Magnum Hunter Resources Corp. will acquire a working interest in oil and gas leases and 191 wells on approximately 15,500 gross acres in the Williston Basin from a privately held company for $57 million. Gross production from the properties is about 833 boe/d, and total proved reserves are estimated to be about 2.6 MMboe. Magnum Hunter already owns an approximate 47% interest in the properties, and upon closing will have an approximate 95% interest. The company hopes to close the deal by Aug. 18.

DCP Midstream Partners LP will construct a 200 MMcf/d natural gas processing plant in the Eagle Ford. The $120 million Eagle Plant project will be supported by a 15-year fee-based agreement to process the company’s natural gas volumes. The facility, which will compliment the company’s five existing processing plants and capacity of 800 MMcf/d in South Texas, is expected to be completed during 4Q2012.

GreenHunter Energy Inc., which provides water services to the oil and gas industry, said subsidiary GreenHunter Water will acquire approximately 99 mineral acres and 84 surface acres in West Virginia to build a commercial water service facility. The plant will be able to treat oilfield produced water, frac water and drilling mud, one or more salt water disposal wells and a heavy equipment and frac tank lay-down yard. The location of the facility was not disclosed.

The city council of Wellsburg, WV, voted 5-3 to repeal an ordinance enacted three months earlier that banned natural gas drilling within the city and an adjacent one-mile buffer zone. Since Wellsburg enacted its ban on May 10, the city of Morgantown, WV, implemented a similar one in June and was immediately sued in circuit court by Northeast Natural Energy, which is drilling two Marcellus Shale natural gas wells in an industrial park outside the city limits but within its buffer zone (see NGI, July 4). Gov. Earl Ray Tomblin then issued an executive order on July 12, calling for several new safeguards on drilling and a review of state regulations (see NGI, July 18).

A Southwest Gas Corp. rate case settlement valued at $52.6-54.9 million begins hearings before the Arizona Corporation Commission (ACC) this week (Aug. 15-19). A pair of proposed alternatives attempt to decouple monthly gas utility charges from revenues among other things to avoid penalizing the utility for successful energy saving efforts. In the hearing process the ACC will consider Alternative A, which calls for a partial revenue decoupling mechanism, a monthly weather adjuster and an overall proposed annual revenue increase of $54.9 million, carrying a return on equity (ROE) of 9.75% and a fair value rate of return (FVROR) of 7.02%. Alternative B would include a full revenue decoupling, a monthly weather adjuster and overall annual revenue increases of $52.6 million, including a 9.5% ROE and a 6.93% FVROR, based on the ACC staff’s fair value methodology. The Residential Utility Consumer Office, which intervened in the case, recommended that the increase be slashed to $29.2 million, with a 9% ROE.

A Palmdale, CA, hybrid natural gas and solar power generation project won approval of the California Energy Commission (CEC). However, it could be some time before the City of Palmdale starts construction of the 570 MW hybrid plant, which still needs to find a buyer for the bulk of the proposed plant’s output and secure a private-sector developer. Nonetheless, the CEC’s 4-0 vote gives approval to what could become the state’s first large-scale combination of natural gas and solar facility to produce baseload electricity. During daylight hours when parabolic solar thermal collectors are in use, the solar field at the 600-acre site would provide up to 10% of the peak power generated. Part of the project would require Sempra Energy’s Southern California Gas Co. unit to build an 8.7-mile transmission pipeline extension to serve the plant.

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