The growth of the natural gas industry in Pennsylvania’s eastern Marcellus Shale helped the area avoid the worst of the 2008 recession, and the positive effects have only just begun, according to a study by the Institute for Public Policy and Economic Development (IPPED). A comparison of the impact of the Marcellus on Pennsylvania’s 10th congressional district, the Barnett Shale in Texas and the Fayetteville Shale in Arkansas led IPPED to conclude “that there is definite potential for growth in wealth, employment and housing” within Pennsylvania’s 10th congressional district, which includes many of the top producing counties. Core drilling counties fared better than noncore drilling counties, but the economic benefits of the Marcellus spilled over throughout the region.

The Ohio Department of Natural Resources (ODNR) has issued 431 permits for drilling horizontal wells into the Utica Shale and have drilled 178 wells, according to data from the ODNR’s Division of Oil and Gas Resources Management. The agency said 36 of the drilled wells were producing as of Oct. 27. Carroll County had the most issued permits with 149, while Columbiana was second with 58 and Harrison third with 51. The ODNR said 24 drilling rigs at the end of October were operating in eastern Ohio and targeting the Utica. Twelve permits were approved from Oct. 21 through 27 — six to leading operator Chesapeake Exploration LLC, two to Gulfport Energy Corp., two to R.E. Gas Development LLC, one to Hess Ohio Developments LLC and one to Hilcorp Energy Co.

Gulfport Energy Corp. reported its latest Utica Shale results, with its Ryser 1-25H well in Moorfield in Harrison County testing at a peak rate of 1,488 b/d of condensate, 5.9 MMcf/d of natural gas and 649 b/d of natural gas liquids (NGL), assuming full ethane recovery and a natural gas shrink of 21%, or 2,914 boe/d. The Groh 1-12H well in Madison in Guernsey County tested at a peak rate of 1,186 b/d of condensate, 2.8 MMcf/d of natural gas and 367 b/d of NGLs, assuming full ethane recovery and a gas shrink of 18%, or 1,935 boe/d.

Benteler Steel/Tube CEO Matthias Jaeger said the company has a deal to construct a $900 million hot-rolling tube mill in Caddo, LA, strengthening the German steelmaker’s position in the North American oil country tubular goods market. “With the growing demand for high-quality steel tubes for exploratory drilling in the U.S. and Louisiana ‘s proximity and access to energy customers, Benteler Steel/Tube’s Caddo Parish plant is poised to play an important role in meeting U.S. domestic energy needs,” Jaeger said. Louisiana was selected following a competitive site-selection process that included more than a dozen states and 100 potential sites. Groundbreaking on the facility is slated for next spring; completion is planned for the second half of 2015. A memorandum of understanding was signed by Benteler, the state of Louisiana, the Louisiana Economic Development, the North Louisiana Economic Partnership, The Port-Caddo-Bossier, The Red River Waterway Commission and other key community partners in Caddo Parish, according to Gov. Bobby Jindal.

The U.S. Army Corps of Engineers issued a record of decision (ROD) and Section 404 wetlands permit that are needed to begin construction on the North Slope of Alaska for the Point Thomson liquid condensate project. The permit, said Alaska Natural Resources Commissioner Dan Sullivan, “is critical to finalizing so many other state and North Slope Borough permits for this multi-billion-dollar project.” Point Thomson “should also serve as a pre-investment for large-scale North Slope gas commercialization…” Point Thomson is Alaska’s largest undeveloped oil and gas field, containing 25% of the North Slope’s known conventional natural gas. ExxonMobil Corp., which is leading the project, plans to build an initial production system to send 10,000 b/d of liquid condensate through the Trans-Alaska Pipeline System.

Maine Natural Gas (MNG), which has seen its plans to build an 80-mile-long natural gas pipeline to the state capital and the surrounding Kennebec Valley hampered by a competitor’s challenge, has signed a 10-year agreement to supply gas to a new regional hospital in Augusta. It’s a deal that could help MNG build the pipeline even if the state isn’t a customer. MaineGeneral Medical Center (MGMC) expects to use about 100,000 Dth annually at a hospital it is building in Augusta and at its Thayer Campus in Waterville, ME, according to a report in the Kennebec Journal. The facility is scheduled to open late next year. MNG’s deal with MGMC starts on Nov. 1, 2013, MNG spokesman Dan Hucko told NGI. The rate MGMC is paying for the gas was not disclosed. “The agreement was based on guaranteed minimum volumes of natural gas consumption by the hospital and is of a sufficient value (along with some other key agreements we have) as to make building the pipeline to Augusta a financially viable proposition for MNG even without a state contract,” Hucko said. A legal battle over MNG’s proposal to build the Kennebec Valley pipeline took another turn with a lawsuit filed recently by MNG, which claims Summit Natural Gas of Maine Inc.’s previously successful challenge to the project was filed too late (see NGI, Oct. 22).

A Pennsylvania lawmaker is calling for federal and state authorities to investigate the state Department of Environmental Protection (DEP), alleging that it committed fraud and misconduct when it tested water supplies suspected of being tainted by natural gas drilling. Rep. Jesse White (D-Cecil) said the testimony of DEP Bureau of Laboratories Technical Director Taru Upadhyay being used in a lawsuit against a Marcellus Shale operator showed that the department was aware how water supplies could be adversely affected by drilling, but it failed to issue notices of violation. Upadhyay testified before the state Environmental Hearing Board on Sept. 26 (Kiskadden v. DEP, No. 2-11-149-R). According to hearing documents, Upadhyay was deposed for several hours by plaintiff’s attorney Kendra Smith. At issue was the apparent failure of state regulators to report to the plaintiffs results of tests for 16 metals (aluminum, beryllium, boron, cadmium, chromium, cobalt, copper, lithium, molybdenum, nickel, silicon, silver, tin, titanium, vanadium and zinc) in water sampling. The plaintiffs were told of the results of tests for eight metals: barium, calcium, iron, magnesium, manganese, potassium, sodium and strontium.

Commonwealth Court Senior Judge Keith Quigley ruled that the Pennsylvania Public Utility Commission (PUC) has no authority to review local drilling ordinances for compliance with Act 13, a decision that could force the agency to release nearly $1 million in impact fee revenue withheld for noncompliance (see NGI, Oct. 22). Quigley said the court’s ruling on July 26, which found portions of Act 13 unconstitutional (see NGI, July 30), had permanently enjoined the state from enforcing Section 3304 of the Oil and Gas Act, which addresses the uniformity of local ordinances. The PUC is reviewing Quigley’s ruling.

More than 50 municipalities across upstate New York’s Finger Lakes region that touch the Marcellus Shale have asked a state appeals court for permission to weigh in on whether they may ban oil and natural gas drilling within their jurisdictions. According to the court filing, 53 municipalities, as well as New York’s Association of Towns, the Conference of Mayors and the Planning Foundation, asked to submit briefs in favor of home rule authority. Affidavits in support of the filing were submitted to the Supreme Court of the State of New York’s Appellate Division, Third Judicial Department in Ostego County (Cooperstown Holstein Corp. v Town of Middlefield, No. 515498). The Appellate Division has to approve the municipalities’ request before they may submit briefs for the court’s consideration. Dairy operator Cooperstown Holstein last year filed a lawsuit against Middlefield, NY, accusing municipal officials of overstepping their authority by enacting a ban on drilling operations (see NGI, Sept. 19, 2011). Middlefield’s town board had repealed its zoning ordinance and replaced it with laws that prohibited drilling operations. Dryden, NY, town officials also were sued last year by Anschutz Exploration Corp. for banning drilling development (see NGI, Oct. 8).

As a hedge against higher natural gas prices, a subsidiary of chemical and equipment manufacturer LSB Industries Inc. has bought an interest in a package of wells and potential drilling locations in Pennsylvania’s Marcellus Shale. LSB’s chemical business paid $49 million for a 7.7% average working interest in a leasehold in Wyoming County, PA, that includes interests in 14 proved producing natural gas wells, seven proved nonproducing gas wells and 36 proved undeveloped future drilling locations. The company expects to spend $38-40 million to develop its share of the leasehold through 2015. LSB facilities in Alabama and Oklahoma have the capacity to consume more than 12 Bcf of gas annually in the production of nitrogen products, including anhydrous ammonia and urea ammonium nitrate, according to CEO Jack E. Golsen.

The Oregon Public Utility Commission (PUC) has cut rates for all three of the state’s gas utilities on lower wholesale gas prices. NW Natural cut its rates by 6.9%, or about $4.36/month for a typical residential customer; Avista Utilities dropped rates 7.7%, on average about $4.78/month; and Cascade Natural Gas Corp. rates were cut 17.3%, or a decrease on average of $9.79/month.

Customer fuel-switching, growing gas-fired generation needs tied to more reliance on renewable power and pipeline infrastructure expansions in the western parts of Wisconsin have led to a growing role for natural gas, according to Wisconsin Energy CEO Gale Klappa. Klappa said the utility has experienced a 14% growth in gas customers while overall gas and power consumption experienced “modest” growth of less than 1% on an annual basis. The utility is converting a coal-fired generation plant to natural gas and is pursuing gas pipeline expansion projects totaling $150-200 million in western Wisconsin, where there are more customer conversions to natural gas from propane. “Our natural gas use nearly doubled from 28.5 MMcf/d last year to more than 50 MMcf/d this year,” Klappa said of 3Q2012 performance.

Philadelphia Councilman James Kenney wants the city-owned Philadelphia Gas Works (PGW) to use natural gas produced in the Marcellus Shale instead of Gulf of Mexico (GOM) gas received via pipeline. In an interview with WHYY, Kenney lauded the opportunities available to PGW through Philadelphia Energy Solutions, the joint venture (JV) between Carlyle Group LC and Sunoco Inc., which now runs Sunoco’s Philadelphia refinery (see NGI, July 9). However, in a separate interview with StateImpact Pennsylvania, PGW spokesman Barry O’Sullivan warned that it would be difficult for the utility to use Marcellus Shale gas because it had already signed long-term contracts for GOM gas, and there presently is no pipeline running directly from the Marcellus to the city.

Methanex Corp. is moving closer to inking a long-term supply contract for its plan to relocate a large production plant to Louisiana, said CEO Bruce Aitken. Earlier this year, the Vancouver, BC-based company said it planned to relocate a $550 million methanol plant originally planned for Chile to a 225-acre site in Geismar, LA — its first U.S.-based production facility in more than a decade. The plant is expected to employ 130 and create 996 indirect jobs. The project is slated for completion in late 2014.

WPX Energy Inc. lost $64 million net in 3Q2012, but it tripled natural gas output from the Marcellus Shale and had solid liquids growth in the Bakken Shale. Quarterly losses were primarily driven by low natural gas and natural gas liquids (NGL) prices from a year ago. Revenues declined 24% year/year because of lower net realized average prices for gas and NGLs. CEO Ralph Hill added that WPX is levered toward a gas price recovery, especially in the Piceance Basin of Colorado and in Susquehanna County, PA. WPX, which spun off from Williams at the end of 2011, is now among the top 10 natural gas producers in the United States with 5.2 Tcfe in gas, oil and NGL reserves.

Atlas Pipeline Partners LP surpassed a record for processed natural gas volumes in 3Q2012, which were up 36% from a year ago. “Producer activity around our systems continues unabated in Texas, Oklahoma and Kansas,” said CEO Eugene Dubay. However, “the industry and Atlas are continuing to play catch-up,” with processing capacity somewhat overwhelmed by new production. Adjusted earnings were $55.9 million in 3Q2012. Processed gas volumes averaged 769 MMcf/d, more than one-third higher year/year. Profits in the latest period were impacted by lower gas prices, with the weighted average natural gas liquids price at 87 cents/gal, a 32% decrease from a year earlier. Distributable cash flow was $37.6 million (70 cents/unit) versus $37.3 million. A net loss was $6.4 million was recorded in the quarter, versus a loss of $50.3 million in 3Q2011.

Houston-based independent Sanchez Energy Corp. grew its production by more than 350% from a year ago as of the end of the third quarter, said the company, which has a 95,000 net acre position targeting the liquids-rich Eagle Ford Shale, Pearsall Shale, Austin Chalk and Buda Limestone. Sanchez estimated net production at Sept. 30 was 1,700 boe/d, of which 86% was oil. This represents a 42% increase over June 30 production of 1,200 boe/d and an increase of more than 350% from the same period a year ago. “Production is expected to significantly increase during the fourth quarter as the company executes the remainder of its 2012 drilling plan and adds seven wells already drilled and currently waiting on completion,” Sanchez said. The company reaffirmed its 2012 production exit rate guidance range of 4,000-5,000 boe/d.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.