West Virginia Gov. Earl Ray Tomblin has called the state legislature into a special session scheduled to begin Sunday (Dec. 11) to discuss, and possibly pass, a compromise Marcellus Shale regulatory reform bill as early as this week. The Joint Select Committee on Marcellus Shale (JSCMS), a 10-member bipartisan committee, has been working on legislation informally known as the Marcellus Draft Bill (MDB) for weeks. The JSCMS used a failed bill called the Natural Gas Horizontal Well Control Act, also known as SB 424, as the bill’s foundation (see NGI, Aug. 15). The shale gas industry is concerned by an amendment calling for operators to pay a $10,000 permitting fee for the first well drilled on a pad and $5,000 for each additional well well (see NGI, Nov. 28; Sept. 19). The West Virginia Department of Environmental Protection also has proposed increasing horizontal drilling fees to $10,000 — up from the current $650 paid by all drillers — to fund additional inspectors (see NGI, Feb. 14).

East Cheyenne Gas Storage (ECGS) has begun commercial operations in northeast Colorado as the first independent natural gas storage operation in the Rocky Mountain region, according to Houston-based developer Merchant Energy Holdings LLC. The withdrawal capability of the 18.9 Bcf facility is scheduled to be in place during the first quarter. The new storage facility is intended to serve growing gas demand for power generation and seasonal load growth along Colorado’s Front Range. ECGS is interconnected with Kinder Morgan’s Trailblazer Pipeline in Logan County and is authorized to connect with the Rockies Express Pipeline at the same location. ECGS plans to provide storage and hub service options to shippers using the Cheyenne Hub, in addition to serving Front Range customers and shippers moving gas to markets off the systems of Natural Gas Pipeline Co. and Northern Natural Gas Co.

Cardinal Gas Storage Partners LLC unit Cadeville Gas Storage LLC has executed a 10-year precedent agreement with Shell Energy North America (US) LP to construct a depleted reservoir gas storage facility in Ouachita Parish, LA, near the Perryville/Delhi Hub in northeast Louisiana. “…[A]bundant supply has triggered renewed interest in natural gas from a variety of industries, including power generation, commercial and manufacturing sectors,” said Shell Energy North America President Frans Everts. “Cadeville’s strategic location will enhance Shell Energy’s ability to provide attractive supply options to customers located east of the Rockies.” The facility is expected to be in service in 2013 and designed to have 17 Bcf of working gas capacity.

Consol Energy Inc. recently passed the 500 MMcf/d milestone, primarily from Marcellus Shale production but also from some coalbed methane and conventional gas activities. Considering its steady increases in the Marcellus, Consol said it is raising its fourth quarter production estimate to between 38 Bcf and 40 Bcf. The company also expects to expand its Appalachian Basin operations in 2012. Noble Energy Inc. recently paid Consol $1 billion for a 50% stake in its Marcellus assets. The companies plan to drill around 140 wells using eight rigs in 2012, compared to the 35 wells Consol drilled this year using four rigs. Consol plans to ramp up it joint venture with Hess Corp. in the Utica Shale of Ohio in the coming year.

Range Resources Corp. is now producing 400 MMcfe/d from the Marcellus Shale, its target for the year. The company exited 2010 producing 200 MMcfe/d from the play. For Range, hitting its target makes 2011 its eighth consecutive year of double-digit production growth, and the company expects to make it nine in a row next year. The company said it will be able to continue adding production in 2012 because it increased its firm transportation capacity and firm sales agreements to 650 MMcf/d, increased its natural gas processing capacity in southwestern Pennsylvania to 435 MMcf/d and executed the first ethane sales contract in the play. Those moves give Range room to meet its 2012 production targets, but Range said it will continue to expand infrastructure to meet its long-term needs for the region.

Comstock Resources Inc. has established a new core area in the Delaware Basin in West Texas, agreeing to pay Eagle Oil & Gas Co. $332.7 million for approximately 68,000 gross (44,000 net) acres in Reeves County, TX, the Frisco, TX-based company said. The deal is expected to close by the end of this month. The acreage is prospective for development in the Bone Spring and Wolfcamp shales in the Southern Delaware Basin and consists primarily of leasehold, but also includes an estimated 23.2 MMBoe of proved reserves and net production of approximately 1,400 Boe/d, Comstock said. The properties include 29 producing wells and five wells that are in various stages of completion. The deal would add more than 900 net identified vertical drilling locations in the Bone Spring and Wolfcamp shales.

Chesapeake Energy Corp. has completed the sale of $750 million of perpetual preferred shares of its newly formed entity CHK Utica LLC, the Oklahoma City-based producer said. In November Chesapeake completed the sale of $500 million of perpetual preferred shares of CHK Utica LLC to EIG Global Energy Partners (see NGI, Nov. 7). In the second and final offering shares were placed with a co-investment vehicle managed by EIG consisting of limited partners and qualified EIG employees, Blackstone Group affiliate GSO Capital Partners LP and the private asset management firm Magnetar Capital, Chesapeake said. CHK Utica owns about 700,000 net leasehold acres within an area of mutual interest in the Utica Shale in 13 counties primarily in eastern Ohio. Chesapeake holds all the common interests in CHK Utica.

EQT Corp. plans to create a master limited partnership (MLP) next year that would own portions of Equitrans LP, its interstate pipeline subsidiary. The Pittsburgh-based company would own the general partner interest in the MLP, but when the company conducts an initial public offering in the first quarter, it might also sell a limited partner interest, depending on market conditions. The company recently approved a $1.6 billion capital budget for 2012 that involves drilling 132 wells into the Marcellus Shale of Pennsylvania and West Virginia, and 120 wells into the Huron Shale of eastern Kentucky. EQT expects to produce between 255 Bcfe and 260 Bcfe in 2012, 32% more than 2011 projections.

SM Energy Co. and Mitsui & Co. Ltd. unit Mitsui E&P Texas LP have closed their acquisition and development agreement (ADA), giving Mitsui E&P a 12.5% working interest in SM Energy’s nonoperated Eagle Ford Shale acreage. SM Energy will retain a working interest of approximately 14.5% in the properties. The ADA provides that SM Energy will be carried for 90% of certain drilling and completion costs until Mitsui has expended $680 million for the company’s benefit. It should take about four years for the carry amount to be expended, SM Energy said. Mitsui also paid SM Energy about $101 million at closing, approximately $73 million of which was for reimbursement of capital and operating expenses, net of revenues, for the period between the effective date of March 1, 2011, and the closing date.

The Pennsylvania Senate Environmental Resources and Energy Committee has voted 10-1 to amend House Bill 1950 by essentially swapping out the language of the bill with the language of Senate Bill 1100, a competing measure. The move allows the Senate to vote and send it to the House of Representatives. As currently written, the measure would impose a $360,000 per well base fee, starting at $50,000 per well in the first year of production and gradually reducing over the first 20 years of production. The measure also includes an adjustment that increases the fee when natural gas reaches certain price thresholds (see NGI, Nov. 28; Nov. 21).

A nonbinding “free vote” to support responsible gas development in the emerging Frederick Brook Shale in New Brunswick has passed the Legislative Assembly along party lines, erasing fears that support for shale gas could be cracking among the governing Progressive Conservatives. The measure — put forth by Premier David Alward on Dec. 1 — passed by a 38-11 vote with all of the support from Conservatives and all of the dissenting votes coming from the opposition Liberal party.

Texas regulators have approved air emissions rules affecting producers in the Barnett Shale of North Texas. The rules change addresses emissions of volatile organic compounds (VOC) and requires “a more stringent level of control for VOC storage in the Dallas-Fort Worth 1997 eight-hour ozone nonattainment area and [the reduction of] VOC emissions, including benzene, from oil and gas production sources,” said the Texas Commission on Environmental Quality. As originally proposed, the changes to Texas Administrative Code Chapter 115 would have affected facilities emitting at least 25 tons of VOCs annually. However, the version of the rule that was adopted affects facilities emitting 50 tons of VOCs or more per year, a change that environmentalists were not happy with.

As the city of Dallas Gas Drilling Task Force works to finalize the recommendations it is scheduled to make to city council, members have decided on a few items. The task force will not recommend that gas drilling be restricted to particular zoning categories in the city. To do so, it was suggested, would only cause landowners wanting to allow drilling on their property to seek a change in their zoning category. The task force also decided that it will recommend that the city not allow injection wells for the disposal of drilling waste. Task force members feared that if injection wells were allowed, an effort to restrict their use to only drilling waste from Dallas would eventually be overtaken by commercial interests seeking to make the wells available for the disposal of waste generated outside the city. Members also voted 5-4 to recommend that well pad setbacks be 1,000 feet from protected areas. Recommendations from the task force are not final until voted on by council.

Cheaper heat, lower prices for electricity and cleaner air all could be possible for residents of Fairbanks, AK, and rural areas with greater reliance on natural gas, according to a new report compiled by PDC Harris Group for the Alaska Gasline Port Authority (AGPA). It predicted that the average Fairbanks household would save nearly $3,000 per year on home space heating with natural gas supplied by the All Alaska Gasline being sought by AGPA. The authority said liquefied natural gas could be shipped from Valdez to barge-accessible communities in Alaska to replace more costly fuels for space heating and power generation.

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