Interior Secretary Ken Salazar has unveiled a draft secretarial order to end a long-standing conflict between the oil and natural gas industry, and potash companies, within the Secretary’s Potash Area (SPA) in Southeast New Mexico. An agreement leading up to the draft secretarial order required an “unprecedented level of cooperation” and proposes buffer zones between wells and potash mining operations that are designed to provide added protection to the resources. The draft order, published in the Federal Register, is open to a 30-day comment that began July 13. A final rule is expected this fall. The SPA contains deposits of both potash and oil and gas on more than 400,000 acres of land, most of which is managed by Interior’s Bureau of Land Management. It currently produces 75% of the potash mined in the United States and is also home to nearly 800 federal oil and gas leases. The draft order is available for review at

With the Gulf of Mexico (GOM) giving it a lift, Chevron Corp.‘s estimated U.S. upstream production climbed 14,000 boe in April and May from the first three months of 2012. Using data from two-thirds of 2Q2012 only, Chevron estimated that domestic output averaged 665,000 boe/d, versus 651,000 boe/d in 1Q2012. The 2.1% increase compares with a 4.2% decline for April, May and June 2011. June 2012 estimated output is to be included in Chevron’s quarterly report on July 27. Realized U.S. natural gas prices averaged $2.05/Mcf in April and May, which was more than half as much (53%) as a year ago and 17% lower than in the first quarter. U.S. crude oil prices in the two months averaged $108.80/bbl, almost flat from $108.37 in the first quarter and a year ago.

NiSource Inc. and Hicorp Energy Co. have partnered in the Utica/Point Pleasant formation to expand midstream services and to explore a “significant” swath of land in northeast Ohio and western Pennsylvania. NiSource in early May indicated it was in advanced talks with a potential partner (see NGI, May 7). NiSource Gas Transmission & Storage (NGT&S) unit Midstream & Minerals Group LLC would combine acreage in northeast Ohio with Houston-based Hilcorp’s holdings to form an exploration block that Hilcorp would operate and manage; NiSource would be a nonoperating owner. Pennant Midstream LLC, the midstream JV, initially would build 50 miles of wet gas gathering pipeline facilities with 400 MMcf/d of capacity. A gas processing complex with 200 Mcf/d of cryogenic gas processing capacity and an associated residue line in Ohio would process gas for the partners and other interested parties.

Williams Partners LP (WPZ) is expanding a business venture in the Utica Shale with Caiman Energy II by funding almost half of a midstream infrastructure development. About $800 million is slated to be spent to develop natural gas, natural gas liquids (NGL) and crude oil infrastructure by Caiman and WPZ, and their partners EnCap Flatrock Midstream of San Antonio and Highstar Capital of New York. WPZ has agreed to fund $380 million of the total. In March WPZ paid $2.5 billion to buy Caiman’s midstream business to give it a bigger footprint in northern West Virginia, southwestern Pennsylvania and eastern Ohio and at that time they established a partnership to build a Utica business (see NGI, March 26).

The Interior Department’s Office of Natural Resources Revenue (ONRR) has fined Denver-based QEP Resources Inc. $1.2 million for the “knowing or willful maintenance” of inaccurate oil and natural gas royalty and/or production reports. ONRR imposed the civil penalty after determining that QEP allegedly failed to correct royalty and production reports for 35 leases, following repeated assurances that it would do so, according to the agency. The civil penalty covers royalty and production reports filed between March 2008 and December 2009 and the fine includes penalties that accrued through July 11. Penalties are to continue to accrue for each reporting month until QEP corrects the reports, ONRR said. QEP is allowed to request a hearing.

Ohio Gov. John Kasich has signed an executive order (2012-09K), which gives the chief of the Division of Oil Gas Resources Management additional power to regulate wastewater injection wells used by oil and natural gas drilling operations, including requiring additional testing before wells are drilled and setting a maximum allowable injection pressures. The order is to remain in effect for around three months; to become permanent the state requires a public hearing, a comment period and a review by the Joint Committee on Agency Rule Review, a legislative panel composed of 10 members of the Ohio General Assembly.

Researchers at Duke University said in a report hydraulic fracturing probably is not the cause of brine migration in the Marcellus Shale, but the stimulation practice could increase the potential for drinking water supply contamination in the future. In the evaluation of 426 samples from groundwater aquifers in six counties overlying the Marcellus in northeastern Pennsylvania, the locations of water samples containing brine did not correlate with the locations of shale gas wells. But the geochemical fingerprint of the salinity detected in well water from the Lock Haven, Alluvium and Catskill aquifers suggests that a network of natural pathways may exist in some locations, especially in valleys. Those pathways may have allowed gases and Marcellus brine to migrate up into shallow groundwater aquifers from deeper underground shale gas deposits. Last year the team released a study that found high levels of leaked methane in well water collected near shale gas drilling and fracking sites in the Marcellus, but the researchers said there was no evidence that fracking fluids contaminated the water wells (see NGI, May 16, 2011).

Chesapeake Energy Corp. plans to appeal a court order to pay more than $100 million for reneging on agreements to purchase some natural gas mineral rights in Texas. Three producers filed a lawsuit in November 2008 claiming that Chesapeake had failed to complete contracts for lease contracts (Preston Exploration Co. LP et al. vs GSF LLC et al., No. 4:08-cv-03341). The U.S. District Court for the Southern District of Texas in Houston sided with Chesapeake in the first trial, ruling that because the contracts weren’t final Chesapeake was not required to pay for the rights. The U.S. Court of Appeals for the Fifth Circuit in New Orleans reversed the ruling and the case was returned to Houston’s district court where U.S. District Judge Gray Miller, in a 10-page ruling, affirmed the Fifth Circuit’s decision. “The evidence in this case indicates that the closing did not occur because Chesapeake — the buyer — declined to attend…Clearly, the Fifth Circuit believed, having considered all of Chesapeake’s arguments, that Chesapeake breached the contract.” Separately Chesapeake also is appealing a $19.7 million judgment involving mineral rights in Texas (Richard Coe et al. v. Chesapeake Exploration LLC et al., No. 11-41003).

Flaws in a study of potential impacts of hydraulic fracturing on drinking water supplies being conducting by the Environmental Protection Agency (EPA) must be addressed in order for the agency’s final report to be credible, according to a review by the Battelle Memorial Institute. According to 166-page review, requested by America’s Natural Gas Alliance and the American Petroleum Institute, EPA’s Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water Resources is weakened by a lack of collaboration and transparency. Battelle also found “deficiencies in the rigor, funding, focus and stakeholder inclusiveness of EPA’s plan,” API upstream senior policy adviser Stephanie Meadows said.

Lower oil prices and rig counts will slow natural gas liquids (NGL) growth from a prior model, said Raymond James & Associates Inc. analysts. “Specifically, we are now forecasting an approximate 150,000 b/d annual increase through 2015,” with production by then about 25% higher than in 2011, or about 2.95 million b/d versus a prior model of about 3.15 million b/d. Total NGL pipeline capacity is forecast to increase by more than 60% (about 2.4 million b/d currently to about 3.9 million b/d by mid-2014), “providing ample capacity to keep pace with incremental volume growth.”

Denver-based explorer Voyager Oil & Gas Inc. has agreed to buy Emerald Oil, the U.S. unit of Australia’s Emerald Oil & Gas NL that would establish a Rocky Mountains operator focused on unconventional natural gas and oil. Voyager, which was trading at around $1.89/share on the day day of the announcement July 10, agreed to exchange 1.1% of its common stock, or an estimated 11.6 million shares for 100% of Emerald Oil and assume $19 million in debt. Voyager shareholders would own 80% of the merged company, to be called Emerald Oil, while Emerald Australia would own the remaining stake.

Devon Energy Corp.’s initial production rates in its fourth completed horizontal well in the Tuscaloosa Marine Shale (TMS) show the strongest oil production results to date at 384 b/d, according to the Louisiana Department of Natural Resources (DNR). The newest well is in northern St. Helena Parish. Devon also has two TMS well projects in progress in Tangipahoa and West Feliciana parishes, according to DNR. In June DNR issued EOG Resources its first permit for a TMS test well in Avoyelles Parish, the Dupuy Land Co. No. 1.

Questions continue to surround Southern California Gas Co.’s (SoCalGas) proposed $1.4 billion, four-year upgrade plans for its natural gas pipelines, which were submitted in 2011 to the California Public Utilities Commission (CPUC), according to the Division of Ratepayer Advocates (DRA), the commission’s ratepayer advocacy unit. In June DRA recommended that parent Sempra shareholders, not the utility ratepayers, to pay for most of the proposed safety upgrade work. SoCalGas asked the CPUC to charge utility customers for $587 million of its proposed costs through 2015 with the remainder collected over several years after that.

Chesapeake Energy Corp. and the City of Salem, OH, have agreed to sign a three-year nondevelopmental lease, with an option for an additional three years, for 381 combined acres of land owned by the city. Chesapeake agreed to pay a signing bonus of $3,500/acre, plus 20% royalties on gross revenue on any production. As opposed to a development lease, which allows for encroachment on the surface of the land for drilling and operating the well, a nondevelopment lease is for use of the subsurface minerals only and no surface trespass is involved. Ken Kenst, the city’s service and safety director, told NGI the lease is for 22 noncontiguous parcels, which are in rural areas but within the city limits. The largest parcel, about 112 acres, is home to the city’s reservoir. According to Kenst, if the lease is extended for another three years, an additional $3,500 per acre is be paid, for a total of $7,000 per acre.

A federal grand jury indicted 33-year-old Anson Chi of Plano, TX, for allegedly attempting to blow up an Atmos Energy Corp. natural gas pipeline in suburban Dallas on June 18. The U.S. Attorney’s Office for the Eastern District of Texas said Chi has been charged with possession of an unregistered firearm or explosive device, a felony that carries a maximum penalty of 10 years in federal prison if convicted. Media reports said agents with the Federal Bureau of Investigation found weapons, chemicals and instructions to make bombs at Chi’s home. He remained in federal custody without bond pending trial. The blast reportedly caused little damage to the Atmos pipeline but Chi was injured.

The drilling boom in the Eagle Ford Shale of South Texas has increased instances of illegal drilling waste hauling in the region, while some South Texas counties have seen highway fatalities skyrocket, blamed largely on increased commercial truck traffic. Late last month in Jim Wells County, 21 people pleaded guilty to charges of illegal dumping, and eight others who were charged requested a trial. Nine others who were charged failed to appear in court and warrants were issued for their arrest, according to the Caller Times of Corpus Christi, TX. Another Eagle Ford-related traffic issue plaguing some South Texas counties is high traffic in general, particularly truck traffic. In Karnes County, the sheriff told the San Antonio News that the county has seen 12 traffic fatalities in the last six months. That’s 12 times as many fatalities as were reported to the Texas Department of Transportation in 2008, which is when oil and gas drilling started to take off in the Eagle Ford.

As the Bakken and Eagle Ford shale plays have shown, oil and gas wells go up long before there are enough homes for all the workers who flock to the energy patch for high-paying jobs. A new study intends to lay out a strategy for Eagle Ford counties in South Texas to meet regional housing needs over the next 10-15 years. The study — commissioned by the the University of Texas at San Antonio Small Business Development Center‘s Rural Business Program — considered three scenarios for Eagle Ford development: 3,000 wells per year between 2010 and 2020 (the high, short-term case); 1,700 wells per year between 2010 and 2025 (the low, long-term case and the “most likely”); and 3,000 wells per year between 2010 and 2030 (the high, long-term case). The six counties studied are Dimmitt, Frio, La Salle, Maverick, Webb and Zavala. Research relied in part upon findings of an earlier university-supported study of Eagle Ford economic development (see NGI, May 14). Over the next 14 years under the most likely scenario, the region will see the creation of 7,913 transient and permanent rig-related jobs, the study said.

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