Posts Tagged ‘Writer’

Gov. says drilling industry’s top issues will be dealt with separate from taxes.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania’s Legislature is a place where victory almost always arrives in the form of a hard-won compromise, and the state’s rapidly growing natural gas industry may be about to discover that.

So far, the industry has been successful in dodging efforts by Gov. Ed Rendell and many Democratic lawmakers to slap an extraction tax on the methane they pump from the rich Marcellus Shale reserve that lies underneath much of the state.

But the drilling companies will need help from those adversaries in addressing a wish list of changes in state laws they are seeking to make it easier for them to pursue the gas.

Paying a tax just might be the price.

“What we’ve said all along is that the conversation begins and ends with the extraction tax,” said Brett Marcy, a spokesman for House Majority Leader Todd Eachus, D-Butler Township . “We cannot even begin to seriously discuss some of the issues that the natural gas industry wants us to take action on until we get the necessary support for a natural gas extraction tax.”

The Rendell administration says the industry’s top issues — such as a law that could limit municipal zoning authority over where drilling can occur — will be dealt with separate from the pursuit of a tax.

“Those are apples and oranges in some respects,” said Rendell’s chief of staff, Steve Crawford. “We’re not willing to say, ’We will roll local governments in this state if you support a tax.”’

But Dave Spigelmyer, a Chesapeake Energy Corp. executive who is also vice chairman of the Marcellus Shale Coalition, said the administration has told the industry group that a discussion of drilling issues will include talking about a tax.

For now, talk is in the early stages and industry-backed legislation that encompasses the wish list has not been introduced.

Two of the top issues could be controversial.

One would essentially outlaw a municipality from using zoning to prevent the collection of gas from below the property of someone who wishes to sell it — a change opposed by the Pennsylvania State Association of Township Supervisors.

Municipalities “have the ability to properly zone different activities within the jurisdictions. With the industry being able to drill horizontally up to a mile, why do they need to have zoning done away with?” asked Elam Herr, the association’s assistant executive director.

The other would allow a state authority to force a holdout landowner into a pool with neighbors who wish to sell their mineral rights in a block to a drilling company.

The state would decide how the holdout is to be compensated for the gas, based on the agreements between the willing landowners and the company.

Copyright: Times Leader

The order against EOG Resources Inc. will remain in place until DEP can finish its investigation.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania regulators halted work Monday at dozens of unfinished natural gas wells being drilled by the company whose out-of-control well spewed out explosive gas and polluted water for 16 hours last week.

The order against Houston-based EOG Resources Inc. will remain in place until the Department of Environmental Protection can finish its investigation and until after the company makes whatever changes may be needed, Gov. Ed Rendell said.

The order stops EOG from drilling and hydraulically fracturing wells. It affects about 70 unfinished EOG wells into the gas-rich Marcellus Shale formation.

Another concern was the apparently bungled attempts to notify the right emergency-response officials about the accident. Fines are likely, said Environmental Protection Secretary John Hanger.

Nobody was hurt in Thursday’s blowout in a heavily forested section of north-central Pennsylvania.

The accident shot highly pressurized gas and wastewater as high as 75 feet. The gas never caught fire, but state officials had worried about an explosion and ordered electrical service to the area cut before specialists secured the well at about noon Friday.

About 35,000 gallons of wastewater have been pumped into holding tanks so far, the company said.

Monitors in a nearby spring show signs of pollution, although Hanger said the spring is in such a rural area that it is not viewed as a public health hazard. Officials say they have detected no pollution in larger waterways that feed public water supplies.

The state says the company is cooperating and is supportive of the stop-work order.

Gary L. Smith, vice president and general manager of EOG’s Pittsburgh office, said the company regrets the accident and would continue to work with Pennsylvania officials.

“After the investigations are complete, we will carefully review the findings with the goal of enhancing our practices,” Smith said.

“When all outstanding issues are resolved, we look forward to resuming full operations in Pennsylvania,” Smith added.

DEP officials said the well’s blowout preventer failed, and they were investigating whether the failed equipment was the primary cause.

A blowout preventer is a series of valves that sit atop a well and allow workers to control the pressure inside.

Hanger and EOG said the blowout preventer had been tested successfully by the company on Wednesday morning.

Copyright: Times Leader

MARC LEVY Associated Press Writer

HARRISBURG — State environmental regulators worked Sunday to get to the bottom of what caused a natural-gas well to spew explosive gas and polluted water for 16 hours last week before it could be brought under control.

Neil Weaver, spokesman for the Department of Environmental Protection, blamed a failure on the well’s blowout preventer, a series of valves that sit atop a well and allow workers to control the pressure inside. Investigators are trying to figure out what caused the malfunction.

The blowout is the latest in a string of accidents connected by regulators to the rapidly growing pursuit of the rich Marcellus Shale gas reserve that lies beneath much of Pennsylvania.

It seems likely the Pennsylvania blowout will enter the debate in the Capitol, where legislators are battling over the merits of an extraction tax and tighter regulations on an industry that has spent several billion dollars and drilled more than 1,000 wells in Pennsylvania in just a couple years.

State Rep. David Levdansky, D-Allegheny, said such oil problems could bring increased interest in a moratorium on leasing public land for gas drilling and a severance tax that could largely fund existing environmental protection and cleanup programs. Levdansky is a leading environmental advocate.

Weaver declined to discuss whether investigators have found anything so far or whether well driller EOG Resources Inc. of Houston committed any violations that could lead to fines or any other penalties.

An EOG spokeswoman said Sunday the investigation into the cause is ongoing, and the company had no light to shed on the blowout.

Crews evacuated the site Thursday night and didn’t regain control over it until just past noon Friday. No one was injured, the gas didn’t explode and polluted water didn’t reach a nearby waterway, officials said.

The blowout sent highly pressurized gas and polluted water 75 feet into the air. Huge tanks were required to cart off chemical- and mineral-laced water collected on the grounds of the private hunting club where the well had just been drilled.

Copyright: Times Leader

By Libby A. Nelson (Staff Writer)
Published: May 28, 2010

Families appealed decision

GREENFIELD TWP. – A decision on the fate of the first Marcellus Shale natural-gas well in Lackawanna County will be delayed for up to 45 days, as the township’s zoning board considers arguments over a zoning change that allowed the drilling.

Exco Resources (PA) Inc., a gas exploration company formerly named Exco-North Coast Energy Resources, drilled the well in late September and October. In December, a resident complained to township supervisors that the land where the well was located, on Route 247 adjacent to the Skyline Golf Course, was not zoned to permit gas drilling.

The family that owned the land requested a zoning change from commercial recreational to rural agricultural, which would permit drilling as a conditional use, and Exco agreed to stop work until the question was resolved.

The board of supervisors unanimously approved the zoning change in March. A group of six families opposed to the drilling appealed the decision, arguing in a hearing Thursday night that the change was an example of “spot zoning” and should not be permitted.

Spot zoning occurs when a municipality rezones a small parcel of land to permit uses that are not allowed on similar land in the surrounding area. Greenfield’s zoning law permits drilling in rural agricultural zones, but opponents of the change said that the drilling is at odds with the township’s rural atmosphere.

“In my opinion, it is not a compatible use,” said Marvin Brotter, a planning expert who testified that he believed the ordinance constituted spot zoning. “I would not want that use next to my residence.”

In Susquehanna County, drilling has ruined roads and produced “disturbing” dust and noise, said Victoria Switzer, who was party to a lawsuit over contamination allegedly caused by gas drilling near Dimock.

“It’s a total industrialization of a rural community,” Ms. Switzer said.

About 35 people, including some who testified, attended the appeal. The zoning board has 45 days to issue a written decision.

Contact the writer: lnelson@timesshamrock.com

To see the original of this article, click here.

Copyright:  The Times-Tribune

By MURRAY EVANS Associated Press Writer

OKLAHOMA CITY — Chesapeake Energy Corp. said Monday it plans to raise about $5 billion over the next two years in an effort to expand its investment in oil and natural gas liquids and to reduce its debt.

Oklahoma City-based Chesapeake announced a “strategic and financial plan” that includes the sale of up to a 20 percent equity interest in its Chesapeake Appalachia LLC subsidiary to investors within the next three to 12 months. Chesapeake is a key driller in the Appalachian Basin, with 24 operating rigs in the Marcellus Shale natural gas play.

Chesapeake also announced a private placement of $600 million of a new series of convertible preferred stock to investors in Asia. The investors, Maju Investments (Mauritius) Pte Ltd. and Hampton Asset Holding Ltd., will have an option for up to $500 million more shares within the next 30 days.

Of the $5 billion to be raised, Chesapeake said it plans to use $3.5 billion to pay off its debt and $1.5 billion to focus on drilling for oil and natural gas liquids.

Chesapeake also is looking at negotiating various joint ventures as part of its plan, which the company said is ultimately designed to achieve an investment grade rating for its debt securities.

Chesapeake is one of the top independent natural gas producers in the U.S. but has gradually expanded its oil and natural gas liquids portfolio in recent months. Company spokesman Jim Gipson said natural gas accounted for about 90 percent of Chesapeake’s production in the first quarter of 2010, down from 93 percent a year ago.

Chesapeake’s CEO Aubrey McClendon has spoken in recent weeks about the company’s interest in expanding its oil and natural gas liquids production, noting that oil prices are rising while the cost of natural gas is stagnant. Crude oil rose $1.69 to $76.80 per barrel Monday on the New York Mercantile Exchange while natural gas rose 15.5 cents to $4.170 per 1,000 cubic feet.

In a production update issued last week, Chesapeake said it is trying to identify more supplies of oil and natural gas liquids.

Copyright: Times Leader

MARC LEVY Associated Press Writer

HARRISBURG — Gov. Ed Rendell says the cash-strapped state government is leasing more public forest land to a company that wants to drill for natural gas in the vast Marcellus Shale reserve.

As a result, Rendell said Tuesday he will support legislation to temporarily halt additional leasing of state forest land for gas drilling.

Rendell says Houston-based Anadarko Petroleum Corp. has agreed to pay Pennsylvania $120 million for the right to drill on 33,000 acres in northcentral Pennsylvania.

The company owns the rights to surrounding tracts. The additional land is considered “disturbed” because it has been leased for shallow gas drilling in previous decades, although no drilling is actively occurring.

Still, a bill to halt new leasing of state forest land for drilling appears unlikely to pass the Senate.

Copyright: Times Leader

Sporting groups, conservationists and anti-drilling neighbors protest the large-scale gas exploration.

MICHAEL RUBINKAM Associated Press Writer

PLEASANT MOUNT, Pa. — A few hundred yards from Louis Matoushek’s farmhouse is a well that could soon produce not only natural gas, but a drilling boom in the wild and scenic Delaware River watershed.

Energy companies have leased thousands of acres of land in Pennsylvania’s unspoiled northeastern tip, hoping to tap vast stores of gas in a sprawling rock formation — the Marcellus Shale — that some experts believe could become the nation’s most productive gas field.

Plenty of folks like Matoushek are eager for the gas, and the royalty checks, to start flowing — including farmers who see Marcellus money as a way to keep their struggling operations afloat.

“It’s a depressed area,” Matoushek said. “This is going to mean new jobs, real jobs, not government jobs.”

Standing in the way is a loose coalition of sporting groups, conservationists and anti-drilling neighbors. They contend that large-scale gas exploration so close to crucial waterways will threaten drinking water, ruin a renowned wild trout fishery, wreck property values, and transform a rural area popular with tourists into an industrial zone with constant noise and truck traffic.

Both sides are furiously lobbying the Delaware River Basin Commission, the powerful federal-interstate compact agency that monitors water supplies for 15 million people, including half the population of New York City. The commission has jurisdiction because the drilling process will require withdrawing huge amounts of water from the watershed’s streams and rivers and because of the potential for groundwater pollution.

The well on Matoushek’s 200-acre spread in the northern Pocono Mountains in Wayne County is up first. The commission is reviewing an application by Stone Energy Corp. of Lafayette, La., to extract gas from the well — the first of what could be thousands of applications by energy companies to sink wells in an area roughly the size of Connecticut.

Stone Energy’s application has already generated more than 1,700 written comments to the DRBC. The company, which paid a $70,000 penalty for drilling the Matoushek well without DRBC approval in 2008, has already received a permit from the Pennsylvania Department of Environmental Protection.

Eager gas companies have leased more than 300 square miles of watershed land, conservation officials estimate.

“This is certainly just the start. There’s a lot of acreage out there, and a lot of people interested in leasing their land,” said Tracy Carluccio, deputy director of the anti-drilling Delaware Riverkeeper Network.

The Marcellus Shale is a rock formation 6,000 to 8,000 feet beneath Pennsylvania, New York, West Virginia and Ohio, including about 36 percent of the Delaware River basin. New drilling techniques now allow affordable access to supplies in the Marcellus and other shales in the U.S. that once were too expensive to tap.

Energy companies combine horizontal drilling with hydraulic fracturing, or “fracking,” a technique that injects vast amounts of water, along with sand and chemicals, underground to break up the shale and release the gas.

While gas companies refuse to identify the chemicals they use — claiming that is proprietary information — critics cite contamination problems in other natural gas drilling fields. They worry that unregulated fracking can taint drinking water, deplete aquifers and produce briny wastewater that can kill fish. In Dimock, Pa., about 40 miles west of the Matoushek well but outside the Delaware basin, state environmental regulators say that cracked casings on fracked wells have tainted residential water supplies with methane gas.

The Environmental Protection Agency announced last month that it will study the impact of fracking on the environment and human health. The EPA said in 2004 there was no evidence that fracking threatens drinking water quality, but critics, including a veteran engineer in the Denver regional EPA office, argued that report’s methodology was flawed.

The industry contends environmental concerns are overblown. It says the drilling techniques are safe and that there has never been a proven case of groundwater contamination caused by fracking — in part because fracking occurs far below the water table. Congress exempted hydraulic fracturing from federal oversight in 2005.

Dozens of people told the DRBC at a recent public hearing why they oppose the watershed drilling. A few supporters called it an economic boon and a property-rights issue.

Richard Kreznar, who owns property in the Pennsylvania riverfront community of Damascus, said gas drilling primarily benefits large landowners and exploration companies.

“After the Delaware River and the stream next to my house are messed up, what compensation will I get? Who will put it back together again?” he asked DRBC staff.

Lee Hartman, the Delaware River chairman for Trout Unlimited, worries that large water withdrawals required for fracking will create low stream flows in the Delaware’s tributaries, damaging fish habitat. For the Matoushek well, Stone Energy wants to take 700,000 gallons a day from the Lackawaxen River’s narrow west branch.

Hartman and others say the DRBC should first study the cumulative environmental impacts of drilling in the Delaware watershed, and pass drilling regulations, before it allows any gas extraction to take place. The agency has asked for $250,000 in federal funds for a study, but commissioners have not said whether they will wait before voting on Matoushek’s well.

Opponents say they will sue if Stone Energy’s application is approved.

Downstream communities that rely on the Delaware for drinking water are worried about the coming gas boom. New York City Mayor Michael Bloomberg opposes any drilling in the watershed, while the Philadelphia City Council has asked the basin commission for an environmental study.

New York state regulators have put a moratorium on drilling in the Marcellus region, saying they won’t approve permits until they are finished drafting new regulations.

Back in northeastern Pennsylvania, Matoushek, 68, a semiretired farmer who signed a lease with Stone Energy three years ago, said he is counting on royalty checks from gas production to help fund his golden years and secure the land for future generations of his family. As far he’s concerned, the benefits far outweigh any theoretical harm.

Copyright: Times Leader

Pa. is biggest natural gas producer that does not impose some type of tax.

MARC LEVY Associated Press Writer

HARRISBURG — The natural gas industry in one of the nation’s hottest exploration spots is bracing for a political tussle over whether and how Pennsylvania will tax methane from the potentially lucrative Marcellus Shale formation.

An industry trade association, the Marcellus Shale Coalition, said Thursday it wants any discussion of a tax to involve the high cost to drill a shale well and cumbersome state laws that make it costly to operate.

A tax enacted without addressing issues that hamper exploration companies could encourage some to move resources to shale formations in other states, said coalition president Kathryn Klaber.

“What is important is to look at the broad issues, not just a tax, as to how we make this climate best for growth,” Klaber said. “There are a lot of modernization policies that need to be put in place to develop this massive natural resource.”

On Tuesday, Gov. Ed Rendell issued his annual spending plan for the state and renewed his call to enact a tax identical to West Virginia’s: 5 percent on the value of sale, plus 4.7 cents per thousand cubic feet produced.

Rendell projects the tax would produce $180 million in the fiscal year beginning July 1 and increase to nearly $530 million after five years, including 10 percent set aside for local governments.

Rendell wants money to shore up a state treasury that faces a projected $5.6 billion gap in 2011 and 2012 resulting from spiraling public pension costs and the expiration of federal stimulus budget aid.

Pennsylvania is the biggest natural gas producer that does not impose some type of tax on it.

However, the coalition wants to steer talk of a tax to reflect those imposed by shale states, such as Texas, Arkansas and Louisiana. In those states, the tax is discounted initially to allow the exploration companies to recoup a multimillion-dollar investment in each well.

For instance, Texas imposes a 7.5 percent tax but discounts it for 10 years or until the operator recovers 50 percent of the drilling and completion costs. In Arkansas, the state imposes a 5 percent tax on natural gas production but discounts it to 1.5 percent for at least three years.

Last year, Rendell called for the same tax rate on gas. After months of Republican-led opposition, he relented, saying he did not want to hurt an industry in its infancy.

In recent weeks, Rendell has said he believes the industry can afford to pay a tax, and pointed to the heavy influx of cash into Marcellus Shale exploration ventures.

For now, production from the Marcellus Shale is still in the early stages. Fewer than half of the approximately 1,100 wells drilled in Pennsylvania are connected to pipelines that can bring the gas to customers.

Environmental groups and the Pennsylvania State Association of Township Supervisors support a tax. The Senate’s Republican majority has not ruled out the eventual imposition of a tax, although Senate Appropriations Committee Chairman Jake Corman, R-Centre, called it “premature.”

Copyright: Times Leader

MARC LEVY Associated Press Writer

HARRISBURG— Citing three recent chemical spills at one well site, Pennsylvania regulators said Friday they had ordered Cabot Oil and Gas Corp. to halt its use of a drilling technique that uses liquids to fracture rock and release natural gas.

The state Department of Environmental Protection’s order applies to eight of Cabot’s drilling sites, all in Susquehanna County in northeastern Pennsylvania.

The company, which received the order Thursday, voluntarily shut down its use of the drilling technique — called hydraulic fracturing, or “fracking” — at the spill-plagued site there earlier this week. It has seven other drilling sites that eventually will require fracking to complete.

“The department took this action because of our concern about Cabot’s current fracking process and to ensure that the environment in Susquehanna County is properly protected,” the DEP’s northcentral regional director, Robert Yowell, said in a statement.

Under the state’s order, Cabot must complete a number of engineering and safety tasks before it can resume its fracking process as it drills into the potentially lucrative Marcellus Shale formation.

Cabot spokesman Ken Komoroski said Friday that the company disagrees with some of the agency’s allegations in the order, but it is committed to completing the tasks required by the order.

Copyright: Times Leader

Court will hear landowners’ claims that gas companies took advantage of them.

MARC LEVY Associated Press Writer

HARRISBURG — Pennsylvania landowners who want to snatch a better deal from natural gas companies hoping to drill into their ground and the potentially lucrative Marcellus Shale formation beneath it will get the ear of the state’s highest court.

Wednesday’s oral arguments in front of the state Supreme Court are certain to be watched closely for its impact on one of Pennsylvania’s biggest economic opportunities and environmental challenges in decades.

For exploration companies with offices from Calgary to Canonsburg, the decision could either bring a huge sigh of relief or the havoc of renegotiating land leases across the state, possibly throwing the entire gas industry into chaos.

The fact that the court moved quickly to hear the case — and resolve a burgeoning number of complaints in state and federal courts — demonstrates the seriousness of the matter.

“By its actions, I think the court recognizes that this really is an extraordinary issue for Pennsylvania and it’s critically important that it is resolved,” said David Fine, a Harrisburg-based lawyer representing ElexCo Land Services Inc. and Southwestern Energy Production Co.

To some extent, justices will hear plaintiffs’ attorneys tell a story of big corporations taking advantage of unsuspecting landowners, paying them a fraction of the upfront per-acre leasing fee that they later paid to other landowners as competition in the land rush intensified.

“They didn’t know Marcellus Shale from a hole in the wall and they feel the gas companies came in and got them to sell away the rights to their property,” said attorney Laurence M. Kelly, who is representing Susquehanna County landowner Herbert Kilmer and his family.

The real legal question will be whether some tens of thousands of leases were never valid because they violate a state law that guarantees landowners a minimum one-eighth royalty from the production of oil and gas on their land.

The lawsuits are just the latest sign that Pennsylvania’s laws governing mineral rights and environmental protection are lagging behind the large, modern-day industry presence that has descended here.

Dozens of exploration companies and contractors have flocked here since early 2008 from as far away as Houston, Denver, and Calgary, Alberta, in a rush to lock up land rights over the thickest portions of the shale. That rush has eased somewhat since the recession drove down natural gas prices — but the legal disputes have not.

By Fine’s estimate, more than 70 lawsuits have been filed in federal and state courts by plaintiffs seeking a judgment that the leases they signed were never valid.

In general, the leases in question give the exploration company the right to subtract certain costs — such as taxes, assessments or transportation — before paying the 12.5 percent royalty. That violates the law, plaintiffs say.

The law, however, is silent on the meaning of “royalty” and whether it is determined before or after those expenses.

Fine and industry officials say it is standard language in leases to deduct those costs — a contention disputed by landowner advocates in Pennsylvania and elsewhere.

But judicial decisions in two of the cases raised the prospect of a myriad of different legal opinions.

In Susquehanna County, the judge in the Kilmer vs. ElexCo case handed the companies an initial victory, saying the law does not specifically prohibit the subtraction of costs. Kilmer has appealed to state Superior Court.

Separately, a federal judge in Scranton hearing a case against Cabot Oil & Gas Corp. denied a motion to dismiss the case, saying the law’s silence does not necessarily mean the costs can be legally deducted.

Fine decided to ask the state Supreme Court to take up Kilmer vs. Elexco immediately, and effectively settle the matter for everyone.

Still, the high court’s decision could create a new kind of chaos. Records of oil and gas leases dating back to the royalty law of 1979 are kept in county courthouses, often in arcane filing systems, making it nearly impossible to know how many landowners and leases are potentially affected.

“I’m sure that no one person knows,” Kelly said.

Copyright: Times Leader