Shell Chemical LP is offering to pay western Pennsylvania localities millions for lost tax revenue affected by its proposed “world-scale” ethane cracker. The Beaver County Commissioners said the Royal Dutch Shell plc subsidiary had made an initial proposal to pay localities 110% of the annual property tax revenue currently being paid by Horsehead Holding Corp., which owns the proposed cracker site. State law caps payments-in-lieu-of-taxes at 110%. County tax records show Horsehead, a zinc producer, was assessed around $6.2 million for the 2013 tax year. At 110%, Shell’s offer could amount to an annual payment of about $6.82 million over 22 years, but the county said negotiations are needed. Local stakeholders are preparing to file an application to the state Department of Community and Economic Development for a Keystone Opportunity Expansion Zone for the ethane cracker site. Such a designation would, if approved, give Shell up to 22 years of tax exceptions and abatements.
The Pennsylvania Department of Environmental Protection (DEP) finalized technical guidance for single source air quality permitting for exploration, extraction and production activities from oil and natural gas operations. The guidance, outlined in an eight-page document and issued through the DEP’s Bureau of Air Quality, was to be published in Saturday’s issue of the Pennsylvania Bulletin. The document provides details on how the DEP will decide whether emission sources, such as natural gas compressor stations and well production pads, should be permitted separately or aggregated. Under the rules, DEP staff is to attempt to determine if the facilities can be treated as a single source under the federal guidelines. Special attention will also be given to facilities belonging to the same industrial grouping and those that are located on contiguous or adjacent properties or are under the control of the same person. The DEP said properties located one quarter-mile or less apart are considered contiguous or adjacent properties.
Carrizo Oil & Gas Inc. said OIL India Ltd. and Indian Oil Corp. Ltd. (IOC) will make their first foray into U.S. shale by taking a 30% stake in the Houston operator’s holdings in the Niobrara Formation of Colorado. The $82.5 million joint venture (JV) provides the India-based state-run producers a nonoperated interest in “substantially all” of Carrizo’s Niobrara operations, primarily in Weld and Adams counties, where it has an estimated 61,500 net acres in the Niobrara. Included is the sale of nearly 18,100 net acres and close to 555 boe/d from 24 gross producing wells. Under the terms of the JV, Carrizo would receive $41.25 million in cash and an additional $41.25 million in the form of a drilling carry that would be applied to fund a portion of its share of future Niobrara development costs. The carry is anticipated to be fully utilized by early 2014.
Chesapeake Energy Corp. is suing Gastar Exploration Ltd., alleging that it is owed $130 million from a failed joint venture (Chesapeake Exploration LLC et al. vs. Gastar Exploration Ltd. et al., No. 4:12-cv-2922). The lawsuit concerns an agreement to develop the Hilltop Prospect in the Deep Bossier of East Texas (see NGI, Sept. 26, 2005). In 2007 Gastar made a deal with Navasota Resources LP, which had claimed first mover rights, to sell a portion of the leasehold, which Chesapeake disputed. The lawsuit “involves contracts that were entered into based on a mutual mistake of fact.” Chesapeake has attempted to scuttle the agreements, but meanwhile, Gastar “continues to enjoy the financial benefits of these wells…,” and “has not suffered any damage on account of the parties’ mutual mistake and/or the court of appeals’ mandate.”
Energy XXI Ltd. said it has two deals on the table with ExxonMobil Corp. to buy some shallow water properties in the Gulf of Mexico (GOM) and to jointly explore some adjacent targets. The sales agreement, for an undisclosed sum, covers 5,000 gross acres on Vermilion Block 164, which currently produce 1,100 boe/d net. The asset has produced around 44 million boe since its discovery in 1957, Energy XXI noted. Separately ExxonMobil and Energy XXI executed a joint venture (JV) agreement to explore nine contiguous blocks adjacent to the Vermilion block. Energy XXI would operate the JV and is to drill the initial prospect, Pendragon, by the end of the year. Assuming “successful completions of two earning wells,” Energy XXI’s total capital commitment was estimated at $75 million. No other financial details were disclosed.
Broome County (NY) Supreme Court Judge Ferris Lebous has invalidated the City of Binghamton‘s two-year ban on hydraulic fracturing (fracking) and exploration activities, on the grounds that the city failed to meet the criteria for a properly enacted moratorium. Lebous said there was no imminent threat from fracking because the New York Department of Environmental Conservation hasn’t promulgated regulations or issued drilling permits, and said the city had no intention of studying the impacts from fracking (see related story). Mayor Matthew Ryan said Binghamton may appeal.
The Pittsburgh City Council has referred a series of proposed amendments, which would create 40-acre “mineral extraction districts” and possibly open the city to at least limited Marcellus Shale drilling, to the city’s planning commission. The proposed amendments, Nos. 756 through 759, were submitted by Councilman Patrick Dowd (D-7th district) (see NGI, Oct. 1). The amendments passed the muster of the city’s standing committee on Oct. 3. If approved by the planning commission, at least one public hearing would need to be held on the proposals.
Plaintiffs suing two municipalities in New York for enacting bans on hydraulic fracturing (fracking) will soon have their day in court, according to attorneys. Paperwork is nearing completion in Cooperstown Holstein Corp. v. Town of Middlefield, and Anschutz Exploration Corp. v. Town of Dryden. In 2011 Anschutz Exploration Corp. (AEC) and a private landowner filed separate lawsuits, respectively, against the Town of Dryden in Tompkins County and the Town of Middlefield in Otsego County for enacting fracking bans, which were upheld five months later (see NGI, Feb. 27; Sept. 26, 2011; Sept. 19, 2011). An appellate court also may decide whether to allow Norse Energy Corp. ASA to be substituted as the lead plaintiff in the Dryden case, replacing AEC.
Constellation Energy Partners LLC (CEP) wants to sell its natural gas-heavy Black Warrior Basin properties in Tuscaloosa County, AL. The Houston-based explorer has hired divestment firm Lantana Oil & Gas Partners Inc. to assist with the possible sale of Robinson’s Bend Field, a coalbed methane (CBM) operation. The properties, on 43,000 net acres, include 508 operating natural gas wells, and related leasehold interests and infrastructure. CEP’s average working interest in the wells is 100% with an average net revenue stake of 75%. Net production for the wells to date this year has averaged around 12 MMcf/d; daily production has averaged 160 MMcf/d. Total proved reserves are estimated at 280.4 Bcf with a present value of $85.6 million at the end of June.
Double Eagle Petroleum Co. is joining Warren Resources Inc. to increase its stakes in Wyoming’s Atlantic Rim by acquiring some of Anadarko Petroleum Corp.‘s remaining interests. The Atlantic Rim in Carbon County, WY, encompasses more than 270,000 acres and has long been a coalbed methane (CBM) target for natural gas producers. The play includes several operating units, including Catalina and Spyglass Hill. Double Eagle already has stakes in nearly 100,000 acres; it also operates and holds a 72.4% working interest (WI) in Catalina. The $6.8 million deal with Anadarko would add a total of 18.4 Bcf of proved producing reserves at a cost of 37 cents/Mcf, with an increase in net production volumes of 5.6 MMcf/d. Double Eagle also would increase its WI in Catalina to 86%; the Spyglass WI would jump to 30% from 20%. The transaction is expect to close this month with an effective date of Aug. 1, 2012. Warren in September said it had a $21 million deal on the table to acquire some of Anadarko’s stakes (see NGI, Sept. 10).
Penn Virginia Resource Partners LP (PVR) has begun service on a 30-mile, 24-inch diameter trunkline serving producers in north-central Pennsylvania with 750 MMcf/d of capacity, which may avoid constraints on Tennessee Gas Pipeline’s congested 300 Line. The Wyoming Pipeline runs from Wyoming County southward to an interconnection in Luzerne County with Williams‘ Transcontinental Gas Pipe Line, or Transco. PVR said it has agreements with five producers for firm and interruptible service with capacity available. The agreements are fee based and have no direct commodity price risk, PVR said.
A team of scientists, engineers and educators from the University of Colorado Boulder (CU-Boulder) has been charged by the National Science Foundation (NSF) to explore ways that maximize the benefits of natural gas development while minimizing potential negative effects.The NSF Sustainability Research Networks, which is providing a $12 million grant for the natural gas research, also agreed to fund equally an interdisciplinary team to look at sustainable climate risk management strategies, which would be led by Pennsylvania State University (Penn State) and involve nine other U.S. universities and research institutes. The CU-Boulder team would focus on the effects of natural gas development on air and water resources, while Penn State’s team would research how to adapt to and mitigate the risks of climate change, while developing new sustainability strategies in an altered world.
Calgary-based Keyera Corp. is planning a $210 million enhancement project to recover ethane and other natural gas liquids from the raw gas stream at the Rimbey gas plant in the Hoadley region of central Alberta. The project would include installing a 400 MMcf/d turbo expander unit and constructing a 34 kilometer, six-inch diameter ethane pipeline to connect to the Alberta Ethane Gathering System, allowing Keyera to recover more than 90% of the ethane at the plant. Once completed Keyera expects to extract up to 20,000 b/d of ethane through the turbo expander unit, which would be sold to a large consumer in Alberta under a long-term sales agreement. The company has also secured a long-term, fee-for-service processing agreement and is in discussions with other producers interested in contracting processing capacity at the plant. Construction of the expansion is expected to begin before the end of the year, with start-up in late 2014.
Deliberations have been continued into November with no timetable in sight at the New Mexico Oil Conservation Commission (OCC) on proposed modifications to the state’s pit rules for handling natural gas and oil drilling and production waste. The rules were put on hold by a state judge earlier this year (see NGI, Jan. 16). A petition by the Independent Petroleum Association of New Mexico and the New Mexico Oil and Gas Association is seeking administrative changes to the rules. In August New Mexico completed four months of hearings on the industry groups’ request that the regulations be modified to make them more cost-effective (see NGI, Sept. 3). Closing written statements from all parties were submitted in September.
Caliber Midstream Partners LP, a joint venture (JV) formed by Triangle Petroleum Corp. and First Reserve Corp.‘s Energy Infrastructure Fund, plans to focus on midstream and infrastructure opportunities in the Williston Basin of North Dakota and Montana initially with $180 million of equity commitments, with $150 million from the fund and $30 million from Triangle. Construction is underway on a Phase 1 pipeline system in McKenzie County, ND.. The JV plans to expand the system in McKenzie County and build infrastructure in other parts of North Dakota and Montana as needed by its customers. Phase 1 has a $100 million capital expenditures budget.
A policy analyst for the conservative think tank Opportunity Ohio, is blasting Gov. John Kasich‘s plans to levy severance taxes for natural gas because it would hurt the state’s competitiveness and ability to create jobs. In “Leveraging Our Natural Resources: Ohio’s Opportunity to Lead the World Again,” Mary McCleary said the proposal would jeopardize the 200,000 jobs that Kleinhenz & Associates Inc., a Cleveland-based economic research firm, said could be created in the Utica Shale by 2015 (see NGI, Sept. 26, 2011). Kasich’s tax proposal has been tabled in the House, even though negotiations are said to be continuing (see NGI, March 26; March 5).
1st NRG Corp. said it has a letter of intent with an undisclosed third party to begin exploring about 7,150 acres in the eastern Ohio portion of the Utica Shale. The Denver-based exploration and production company plans to drill a test well to earn the rights to offsetting locations and “to earn all depths below the Second Berea Sand, which in addition to the Utica Shale may also include other formations such as the Marcellus Shale, Clinton Sandstone, Trenton Limestone, Black River, Beekmantown Dolomite and Rose Run.”
Southern California-based Applied Natural Gas Fuels Inc. said it plans to double the output capability of its Topock, AZ, liquefied natural gas (LNG) production facility. The fuel supplier plans to add a second liquefaction train at Topock, eventually expanding its overall production capability from 90,000 gallons/day to 180,000 by early 2014. At the same time, storage capacity will double to 200,000 gallons by March 2013. Current LNG storage is100,000 gallons. The expanded facilities would include a second load rack for the trucks.
Calpine Corp. has purchased an 800 MW natural gas-fired generation complex in Texas from Bosque Power Co. LLC for $432 million, with closing set for November. Calpine said it paid $540/kW for the combined-cycle plant. Bosque filed for Chapter 11 bankruptcy in March 2010 and emerged the following October. The 280-acre generation facility site, is in Bosque County near the town of Laguna Park. The facility would be renamed as the Calpine Bosque Energy Center.
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