The Muskingum Watershed Conservancy District (MWCD) has agreed to sell more water to Gulfport Energy Corp. for Utica Shale drilling activities, as it adopts a new short-term water sales policy and partners with the U.S. Geological Survey to study the impact of future water withdrawals.
MWCD spokesman Darrin Lautenschleger told NGI’s Shale Daily the district’s governing board on Friday approved an agreement to sell up to 38 million gallons of water from Piedmont Lake to Oklahoma City-based Gulfport at a rate of $8 per 1,000 gallons. He said the company needs the water to complete three horizontal wells on the northwest side of the lake, which spans Belmont, Guernsey and Harrison counties.
According to Lautenschleger, a temporary pipeline will supply water to the Gulfport wells. The water will be withdrawn between June 15 and Aug. 15, at rates of up to 2 million gallons per day (gpd) in June and July, but 1 million gpd in August. He added that the agreement stipulates that the withdrawals be curtailed or halted if lake levels drop too low.
Last month, the MWCD board agreed to sell Gulfport up to 25 million gallons from Clendening Lake in Harrison County through June 12 (see Shale Daily, April 23). The company had agreed to the same rate, $8 per 1,000 gallons.
The MWCD board also agreed on Friday to adopt a new policy for short-term sales of water to the oil and gas industry. The policy effectively limits water sales to oil and gas companies operating near lakes managed by the MWCD.
“They have to be working in the general vicinity, servicing an area that is already leased by the MWCD or that is capable of reaching MWCD property,” Lautenschleger said Tuesday.
In a statement, the district’s conservation chief, Sean Logan, said “it has never been the intent nor the goal of the MWCD that its surface water lakes serve as the sole or a primary source of water for the entire oil and gas industry in eastern Ohio. This policy provides very straight forward guidelines for how requests for sales of water for oil and gas production will be managed by the MWCD.”
Logan added that the district’s five water withdrawal agreements so far have saved tens of thousands of potential tanker truck trips on local roads that aren’t designed to handle the traffic. He said agreements to provide water from Clendening Lake alone have saved an estimated 14,000 one-way tanker truck trips.
“This has been an evolving process,” Logan said. “The industry’s increasing work in eastern Ohio and near the MWCD lakes makes it a natural that they will look toward the lakes as a source of water for the hydraulic fracturing process in the Utica Shale development.
“But it is very important for the MWCD to protect the reservoirs and protect the water in the lakes through documented conservation practices that also balance the benefits they create.”
To that end, the new policy, which immediately took effect Friday, requires oil and gas companies to agree that the MWCD has complete authority over the water withdrawals and can suspend or terminate the agreements for any reason.
Under the new policy, no water withdrawals may occur from Feb. 1 through April 30, unless waived by the MWCD. Withdrawals will also occur during three-month intervals: from May to July, August to October and November to January.
The policy also stipulates that a new agreement must be developed for each withdrawal deal. Any subsequent renewal for the next consecutive three-month period does not require board approval, but a renewal beyond 12 consecutive months does.
The MWCD board also approved a contract with the USGS to study water withdrawals from six lakes: Clendening; Piedmont; Charles Mill and Pleasant Hill lakes in Ashland and Richland counties; Seneca Lake in Guernsey and Noble counties, and Wills Creek Lake in Coshocton and Muskingum counties.
Last summer, the district said it would halt any future water sales for drilling until the USGS studied Clendening, Leesville and Atwood Lake in Carroll and Tuscarawas counties. It also called for studies on Piedmont and Seneca Lake, and Tappan Lake in Harrison County (see Shale Daily, Aug. 6, 2012; June 20, 2012).
The MWCD is a state government entity that controls an 8,000-square mile watershed, covering about one-fifth of Ohio.
In February, the MWCD agreed to a non-developmental lease with Antero Resources for 6,553 acres under Seneca Lake in exchange for a bonus and royalties amounting to $40.6 million (see Shale Daily, Feb. 21).
The district signed similar non-developmental leases with Gulfport in 2011 and Chesapeake Energy Corp. in 2012. Gulfport paid the MWCD a $15.6 million bonus plus royalties for 2,800 acres at Clendening Lake, while Chesapeake purchased the leasing rights to 3,700 acres at Leesville Lake for a bonus and royalties valued at $21.5 million.
Last September, the MWCD said it would consider temporary water sales from Clendening and Piedmont lakes during their upcoming drawdown, an annual event during which billions of gallons of water are released downstream to protect against flooding (see Shale Daily, Sept. 25, 2012). The board said terms of the temporary sales, including price and amounts to be sold, would be discussed in future negotiations with the industry.
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