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February 2014 Edition
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Gas & Oil
February 2014 Edition - Dix Communications
Table of Contents 4
Access Midstream Donates to Stark State
7
A Vision Realized John Lowe / Dix Communications
8
Priorities for Gas/Oil Industry
11
Energy Program Initiated
12
Attempt on Fracking Standard Launches
15
Choose Stark Event in Canton
18
Industry Backs Revamp of Tax Rates
21
EPA to Assess Drinking Water
22
A Year of Learning
24
Leveraging Benefits
27
State of the Utica
28
Bluegrass Pipeline Awards Grant
31
Researching Those Rights
32
Industrial Athletes
35
House Bill Seeks to Provide Transparency
36
Bluegrass Helps United Way
39
Investments on Heating Costs
40
Was the Unitization Fair?
42
Welders Keep Industry Together
Kimberly Lewis / Dix Communications
Judie Perkowski / Dix Communications Judie Perkowski / Dix Communications
Kevin Boggs / Associated Press
Laurie Huffman / Dix Communications Marc Kovac / Dix Capital Bureau
Paul Locher / Dix Communications
John Lowe / Dix Communication Laurie Huffman / Dix Communications
Bill Dannley / Leasemap Ohio
Laurie Huffman / Dix Communications
Judie Perkowski / Dix Communications
Southern Zone Edition
PUBLISHERS Andrew S. Dix Northern/ Southern Zone ASDix@dixcom.com G.C. Dix II Southern Zone GCDixII@dixcom.com David Dix Northern Zone DEDix@dixcom.com
EXECUTIVE EDITORS Ray Booth Southern Zone RBooth@dixcom.com Rob Todor Southern Zone RTodor@dixcom.com Lance White Northern Zone LWhite@dixcom.com Roger DiPaolo Northern Zone RDipaolo@dixcom.com
REGIONAL EDITORS Cathryn Stanley Southern Zone CStanley@dixcom.com Niki Wolfe Southern Zone NWolfe@dixcom.com Judie Perkowski Southern Zone JPerkowski@dixcom.com Kimberly Lewis Northern Zone KLewis@dixcom.com Erica Peterson Northern Zone EPeterson@dixcom.com
LAYOUT DESIGNER Ethan Vessels / Attorney
Abby Armbruster / Dix Communications
Pete Kiko “Gas & Oil” is a monthly publication jointly produced by Dix Communication newspapers across Ohio. Copyright 2013.
Dix Communications - Gas & Oil
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ADVERTISING DIRECTORS Kim Brenning Southern Zone Sales Cambridge, Ohio Office KBrenning@dixcom.com 740-439-3531
February 2014 Edition
Ohio
45
Sales Tax Climbing
46
Newly Rich? Now What?
49
Leasing Agreement at Piedmont Lake
50
MSC Announces Board Officers
53
Lawmaker Suggests Ways to Spend
54
Smith’s Trees Add Beauty
Rhonda Geer Northern Zone Sales Wooster & Holmes, Ohio Offices RGeer@dixcom.com 330-287-1653
57
Firefighters Train to Be Prepared
58
Zane State Opens Advanced Science Center
Harry Newman Northern Zone Sales Kent, Ohio Offices HNewman@dixcom.com 330-298-2002
61
Partners Gather ‘Coats for Kids’
62
4,000 Jobs, $5 Billion Invested
Janice Wyatt National Major Accounts Sales Manager JWyatt@dixcom.com 330-541-9450
64
Report Shows Strong Growth
67
Dramatic Utica Production Revealed
Jeff Pezzano VP Advertising Sales & Marketing Kent Ohio Office JPezzano@dixcom.com 330-541-9455
68
Disclosure Requirement
69
RJ Wright and Sons Purchasses Business
70
Opinion: Open For Business
72
Welcome to Pipeline 101
73
Asset Protection Planning
74
Natural Gas Locamotives
79
ODNR Releases Production Results
Peggy Murgatroyd Southern Zone Sales Barnesville and Newcomerstown, Ohio Offices PMurgatroyd@dixcom.com 740-425-1912 Barnesville 740-498-7117 Newcomerstown Jeff Kaplan Southern Zone Sales Alliance & Minerva, Ohio Office JKaplan@dixcom.com 330-821-1200
COVERAGE AREA OTTAWA
MORROW ORROW
GN
KNOX
COSHOCTON
MADISON
LICKING K US
HARRISON
GUERNSEY BELMONT
NOBLE PERRY
PICKAWAY AY
VINTON
MONROE
MORGAN WASHINGTON
HOCKING ROSS
MEIGS
JACKSON
Judie Perkowski / Dix Communication
Marc Kovac / Dix Capital Bureau
Tessa Strausser / Dix Communication
Judie Perkowski / Dix Communications
Shawn Bennett / Energy in Depth, Ohio
Shawn Bennett / Energy in Depth, Ohio David J. Wigham / Attorney
Marc Kovac / Dix Capital Bureau
Mark Watson / Environmental Defense Fund
Frank A. McClure / Attorney
Josh Funk / Associated Press
ATHENS
NORTHERN ZONE SOUTHERN ZONE PIKE
Judie Perkowski / Dix Communications
COLUMBIANA
CARROLL
M
FAIRFIELD
HLAND
UM
G
IN
FRANKLIN LIN
MAHONING
STARK ST
HOLMES
ARE UNION DELAWARE
FAYETTE
SUMMIT
WAYNE YNE
PORTAGE
JEFFERSON
CR
MARION
MEDINA ASHLAND
DIN
RICHLAND
WYANDOT
RD FO AW
TRUMBULL
LORAIN
HURON
SENECA
COCK
GEAUGA
TUSCARAWAS
ERIE
SANDUSKY
OD
CUYAHOGA
Marc Kovac / Dix Capital Bureau
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Gas & Oil
Southern Zone Edition
February 2014 Edition - Dix Communications
Access Midstream donates more than $12,000 to Stark State College for oil and gas safety gear Kimberly Lewis Dix Communications
N
orth Canton - Access Midstream, a natural gas services provider, has donated more than $12,000 for safety supplies for 150 students participating in Stark State College’s ShaleNET oil and gas credit programs. The kits include hard hats, gloves, ear protection, eye wear, a lockout/tagout lock and a fire-retardant lab coat. “Safety is the most important element stressed in all our courses,” said Kathleen Steere, Stark State’s coordinator of oil and gas programs. “We include workplace safety and compliance preparations in both internal and external labs so that these precautions become an essential part of life for all students. This generous donation will help our students avoid additional costs for safety gear.” “Access Midstream is excited about partnering with such a fine institution as Stark State College,” said Tim Habovick, engineering manager for Access Midstream in the Utica Shale. “Working together, we can provide superior educational opportunities for students interested in entering the burgeoning oil and gas industry here in Ohio.” Access Midstream, a member of Stark State College’s Oil and Gas Advisory Council, is a growth-oriented midstream natural gas services provider with operations focused on owning, operating, developing and acquiring midstream energy assets in the U.S. Access has a strong asset base and extensive intrastate pipeline infrastructure located strategically in several regions, including the Utica Shale area.
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Left to right: Representatives from Access Midstream Clay Robertson, operations superintendent; John Repp, construction superintendent; Scott Hallam, general manager - Utica; and Tim Habovick, engineering manager - Utica, presented Stark State President Para Jones (second from right) with a check for more than $12,000 for oil and gas safety gear.
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February 2014 Edition
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Gas & Oil
Southern Zone Edition
February 2014 Edition - Dix Communications
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February 2014 Edition
7
A VISION REALIZED Zane State Dedicates Cambridge Campus
John Lowe Dix Communications
C
AMBRIDGE —Local donors and dignitaries joined officials of Zane State College on Jan. 9 to dedicate the Cambridge campus’ “EPIC Center” with a ceremonial ribbon cutting. The EPIC Center will permit Zane State to offer courses that will enable students to earn an associate’s degree from the college without leaving Guernsey County. Cambridge is now a “college town,” said Zane State’s president, Dr. Paul Brown. The new facility is a 40,000 square foot building on the north side of Brick Church Road (Route 660), near the Cambridge Municipal Airport. It is connected to the Willett-Pratt Training Center on the south side of the road by a 200-foot, pedestrian bridge over the highway. Designed to be energy efficient and environmentally friendly, the building is warmed by geothermal heating. It has two laboratories, eight classrooms, a bookstore and a cafeteria and kitchen as well as ancillary rooms such as offices. Dr. Brown said that, as plans for the expansion of Zane State’s facilities coalesced, he had an epiphany. “The defining moment for me was when I realized this project was not an expansion of our training center, but the development of a comprehensive campus,” he said. “I was unable to contain my enthusiasm the next morning as I rushed over to announce the concept at a meeting of the [Community Industrial Association]. “The vision was enthusiastically embraced by the CIA board and they voted to grant us the land for the new campus center. “From that day on, a special bond was formed between the Cambridge community and Zane State College as we moved forward together to make Cambridge a college town.” John Knight, chairman of Zane State’s Board of Trustees, said he initially had doubts about proceeding with the plan because of the times. It was the beginning of the 2008 “Great Recession.”
However, he came to realize that the proposed expansion was not only a desirable expansion, but a necessary one. “As the education level of our population increases, so will the job opportunities,” he said. Brown expressed a similar belief when he said education is the key to the area’s progress and the sustainability of the area as a vibrant region. “We’re changing the fundamental fabric of our community from within by growing our own professionals,” he said. In addition to hearing the remarks of various area officials, the audience also heard from representatives of State Treasurer Josh Mandel and Gov. John Kasich, who offered their congratulations.
Michael Neilson/The Daily Jeffersonian Top: An exterior view of Zane State College’s new EPIC Center in Cambridge. Above: Taking part in the ribbon cutting for Zane State College’s new EPIC Center Thursday in Cambridge were, l to r, Gene McDonald, Al Brown, Bill Stewart, Mike Whitson, John Matesich, Dr. Paul Brown, John Knight, Chad Brown, Pamela Jira, Brandon Hess. Below: A large crowd was on hand Thursday for the ribbon cutting at Zane State College’s new EPIC Center in Cambridge.
8
Gas & Oil
Southern Zone Edition
February 2014 Edition - Dix Communications
Priorities for the gas/oil industry
Jack Gerard, President and Chief Executive Officer of the Ameircan Petroleum Institute.
Judie Perkowski Dix Communications
W
ASHINGTON — A new campaign designed to promote America’s resurgence as a prominent supplier of oil and gas and to encourage lawmakers to enact policies which would lead to energy independence, job creation and economic growth, was at the crux of American Petroleum Institute President and Chief Executive Officer Jack Gerard’s live webcast earlier this month. The API advertising campaign, America’s Energy, America’s Choice, uses television and print ads to announce significant projections for oil and gas development. Among the most mind-blowing: “Today America is the world’s number one natural gas producer, but that is just the beginning. America is projected top be the world’s number one oil producer by 2015.” Gerard emphasized that we now have a once-in-a-generation opportunity to become the world’s Energy Super Power. High on his agenda was the Keystone XL Pipeline, energy production, tax policy and federal regulations, which evoked questions from reporters at a press briefing following his State of American Energy report. • The Keystone XL Pipeline: Gerard said, “there are no more excuses for the president not to approve the project, which has been in its fourth year of review. Rarely do leading Republicans, Democrats, business leaders and labor unions all agree. But on Keystone XL, they do.” The operational Keystone pipeline (Phase 1) begins in Alberta, Canada, travels south 1,179 miles to Nebraska. Phase 2, completed in 2011, runs from Nebraska to the marketing and refining pipeline hub in Oklahoma. Phase 3 and 4, of the pipeline, which would connect Oklahoma to the Texas coast, faced criticism from environmentalists and some members of Congress. President Obama rejected the application. “The pipeline would bring a significant boost to U.S. energy security. This is good for consumers, good for U.S. jobs , good for the energy and economic security, and certainly serves our national interest,”he said. “We will decide if America continues its march toward global energy leadership — a once-in-ageneration choice — or remains content to play a supporting role in the global energy market. But only if we get our energy policy right.” • Energy production: Choosing to increase oil and gas pro-
duction could create 1.4 million new jobs in America. Choosing to produce and refine more oil and gas means more abundant, affordable supplies of energy families use every day. • Tax policies: The administration’s FY 2014 budget proposal contains $90 billion in targeted taxes on America’s oil and gas industry. U.S. oil and natural gas companies pay more of its profits in taxes than the average manufacturing company, and paid more in total taxes than any other sector. Based on S&P Research and S&P 1500, oil and gas companies paid an average tax rate of 44.6 percent among the top nine industries in the U.S. The tax rate was averaged over the years 2007-2012. • Federal regulations: “On what is clearly a politically motivated disconnect between today’s much-changed energy landscape and the political orthodoxy of some who continue to push for arbitrary and unfair limits, or an outright ban on energy resource exports. The American people understand that pro-growth energy policies will translate into millions of stable, good-paying jobs. The average upstream oil and natural gas job pays roughly seven times the federal minimum wage. The job potential could lower unemployment and shrink the “inequality gap.” “Our goal is to ensure our elected representatives and appointed officials make sure that energy policy reflects the will of the American people, is uppermost in their minds, and the dominant voice in energy public policy discussion. And, to make clear the link between developing America’s vast energy resources and greater energy independence, job creation and economic growth,” said Gerard.
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Dix Communications - Gas & Oil
February 2014 Edition
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Southern Zone Edition
February 2014 Edition - Dix Communications
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Dix Communications - Gas & Oil
February 2014 Edition
Petroleum/geology energy program initiated
11
Judie Perkowski Dix Communications
N
EW CONCORD — Muskingum University recently announced a new major program for a bachelor’s degree in petroleum geology beginning this fall. The new major is designed for students interested in entering the energy industry. The four new classes will add to Muskingum’s current majors in geology, environmental sciences, conservation science and earth science. Minors in earth science and geology are also offered. Head of the geology department, Associate Professor Dr. Stephen Van Horn, said his staff began talking about a petroleum geology major last year, after an email from a friend, who works in the oil and gas industry, saying that because of the discovery of the huge Utica shale play in our area, serious thought should be given to offering a program at Muskingum to accommodate students who are planning a career in oil and gas. Although Muskingum has offered a geology program for about 15 years, which has in recent years shown a steady growth, it did not incorporate subjects necessary for a position as a petroleum geologist. Van Horn went online to the American Association of Petroleum Geologists website and looked up requirements for a new degree program. One year later, Muskingum is on board to provide the credentials for students who have set their sights on the exciting, evolving and lucrative oil and gas industry. “The main difference in the petroleum geology program is that it requires true field work ... It requires a senior research project, where the students attends another school for six weeks mapping and reporting on the project,” said Van Horn. “It’s fun, it’s an adventure. But it is also getting down in the trenches, literally.” The 43 credit hour petroleum geology program includes all fundamental courses of the geology major, with the addition of four new courses: Introduction to Well Logging (3 credit hours); Sedimentary Petrology (3 credit hours); Petroleum Geology (3 credit hours), and Subsurface Geology (3 credit hours). “We feel it is possible to support the geology, earth science and petroleum geology majors with our current staff,” said Van Horn.
Associate Professor Dr. Stephen Van Horn in his rock-filled office at Muskingum University in New Concord, as he announced the new major petroleum geology degree program, which will begin this fall.
He says he “still has the passion for rocks.” He is giving this addition to the geology department a definite thumbs up, but says he still keeps his eyes on the ground. The U.S. Bureau of Labor Statistics indicates employment for geoscientists is projected to grow 16 percent from now until 2022, faster than the average for all occupations. Van Horn, a native Pennsylvanian, graduated with a bachelor’s degree in biology and geology from Indiana University of Pennsylvania, and earned his master’s degree at the University of Missouri-Columbia. As a grad student, he worked during the summer for Exxon. After graduation he worked for Shell in New Orleans, onshore and offshore. A few years later he earned his Ph.D in Geo-Science at the University of Connecticut, and was subsequently hired by Muskingum in 1999. Van Horn is also faculty executive secretary — a liaison between Muskingum faculty and administration — and assistant director of the Regional Planning Center. He and his wife, Debra, have two children and reside in New Concord. For more information about the petroleum geology degree program, or any other degree, visit www.muskingum.edu or call the admission office at (740) 826-8211.
12
Gas & Oil
Southern Zone Edition
February 2014 Edition - Dix Communications
New attempt on fracking standards launches Kevin Begos Associated Press process it expects to take six months. Place said he also expects EQT to apply in the spring, and Chevron and Consol are expected to release more details about their plans later Tuesday. The certification process is essentially an independent review of each applicant’s practices for drilling and environmental protection, measured against the CSSD standards. A firm that passes the review is also monitored for compliance over the next two years, at which point it must go through the review process again. A spokeswoman for the Sierra Club did not immediately respond to a request for comment. Online: www.sustainableshale.org
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ITTSBURGH (AP) — A hotly debated partnership between major oil and gas companies and some environmental groups moved forward on Jan. 21, almost a year after it was first announced. The Pittsburgh-based Center for Sustainable Shale said in a release that it is now accepting applications for a program that aims to enforce tough but voluntary new standards for fracking and other related activities in the Northeast. The CSSD said it has hired Bureau Veritas, a French global testing and inspection firm, to review applications and compliance by drillers. The Environmental Defense Fund, PennFuture and some other prominent environmental groups are part of CSSD, but others — such as the Sierra Club — have criticized the effort, saying it isn’t meaningful and that a voluntary program is no substitute for tough state or federal rules. But some energy companies, such as Chesapeake Energy, have suggested that there’s no need to go beyond existing state regulations, and have said they won’t join or support CSSD. The boom in Marcellus Shale gas drilling in Pennsylvania, West Virginia and Ohio has generated tens of billions of dollars, and reduced energy bills and imports. But it’s also led to significant concerns and protests over air and water pollution. Andrew Place, who has been the CSSD’s interim director, welcomed the scrutiny. “The substance is in the breadth and depth that we’re bringing to the oversight” of the industry, he said, calling Bureau Veritas — which was founded in 1828 — “the gold standard” for independent oversight. Place, who works for EQT Corp., a Pittsburgh energy company, said that the CSSD review will require testing of nearby water wells before and after drilling and noted that the CSSD’s new director, Susan LeGros, has extensive experience not only as an environmental lawyer in Philadelphia, but as a former Environmental Protection Agency staff member. The founding members of CSSD include energy companies Chevron, Shell, EQT and Consol Energy, along with the Clean Air Council, the Pennsylvania Environmental Council, and other environmental groups. The Heinz Endowments provided some startup funding but it’s not clear how involved the charity will be in the future. Curtis Smith, a spokesman for Shell, said the company will apply for CSSD certification in the second quarter of 2014, a
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February 2014 Edition
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Southern Zone Edition
February 2014 Edition - Dix Communications
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February 2014 Edition
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Economic impact of oil and gas industry is focus of Choose Stark event in Canton Laurie Huffman Dix Communications
C
ANTON -- Networking was at a high point during the Stark County Oil and Gas Partnership’s Choose Stark event held in early January at the Pro Football Hall of Fame in Canton. Dave Kirven, chair, gave a welcome to all present and introduced the speakers. The focus of the gathering was on the economic impact of gas and oil development on Stark County and surrounding areas. Presentations touched on job safety, pre-employment testing, developments in commercial real estate in the developing region, and a State of the Utica address. People in attendance included a large cross section of industries associated with oil and gas exploration and production. Representatives were on hand from drug companies, rental cars, fabricating and machining, consulting, legal services, insulation, water treatment, transportation, drug testing, industrial piping, utility infrastructure, construction contracting, and environmental health and safety. Individuals also attended including a property owner who leases property for oil and gas development, a consumer gas coop, a commercial property owner, several trade unions, hospitals, and oil and gas partnerships. Local attendees includes Tom Pukys, of Alliance Development, Stark County Commissioner Richard Regula, Louisville City Councilman Rick Guiley, and representatives from the North Canton Chamber of Commerce and Canton city’s business development department. Highlights of the talks included information from Bryce Custer, of NAI Spring Commercial Realty, who reported Stark County is proving to be a location that is desired by the oil and gas industry as well as the supporting industries that are following them into the area. He also said it has the infrastructure and housing that is required by these industries as well as fine schools and hospitals. John Kiste, of the Canton/Stark County Convention and Visitor’s Bureau, indicated Stark County has 2,400 hotel rooms currently in operation, with 600 more rooms being built in the next 18 months, primarily to serve the growing oil and gas industry. Three new hotels are being constructed in the Belden Village Mall area, plus one in Hartville, and two in the Carrollton area.
Joe Greco, of Buckeye STEPS (service, transmission, exploration, productions and safety), talked about the STEPS networks that have recently been established in Ohio and West Virginia. These networks share safety information with other safety service agencies, and establish specialized safety training opportunities for employees and supervisors in the various phases of the gas and oil industry. “I’m excited about the STEPS Network coming into Ohio. I think they will be able to give our oil and gas organizations a lot of help,” said Kirven. Jim Harris, of AultWorks/AultCare, talked about the WorkSteps pre-employment testing program they offer that also tests injured employees, to root out insurance fraud, and retests employees who have been injured and have been through rehabilitation. The pre-employment testing includes strength and agility screening to match employees properly with their job functions, as well as drug testing. Mike Chadsey, of the Ohio Oil and Gas Association, gave a State of the Utica address. He said a new pipeline project between a Canton refinery and Marathon has just been announced. He added the region will soon have full employment in the building and construction trades, due to the oil and gas industry’s development and the expansion at the Timken Company’s steel plants, in Stark County. Compared to the high rate of unemployment in 2009, this is good news, indeed, he pointed out. For more information, visit www.ChooseStark.com.
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Industry backs revamp of tax rates Marc Kovac Dix Capital Bureau HB 375 also includes additional tax breaks for well owners. The proposal is much revamped from the severance tax hike proposed by Kasich over the past two years. The governor is not endorsing HB 375, saying instead that his administration would work with Republican lawmakers on the legislation. During a committee hearing, Rep. Mike Foley (D-Cleveland) pressed Stewart on whether companies would really take their oil and gas production efforts to other states if Ohio increased its severance tax rates. “My contention is that this tax rate that’s being offered is too low,” he said. “We’ve got more valuable gas or oil coming out than other states do. The investment’s going to come here whether the tax rate is 1 and 2 percent or 4 or 5 percent.” But Stewart said there are 29 active shale oil production areas across the country, and companies are focusing their efforts where they can get the best return on their investment. Eastern Ohio’s oil and gas production ultimately will boost the state’s economy more than a big hike in related tax rates, he said. “Ohio stands to gain more by the production of oil and gas, and doing anything to suppress production would cause a reduction in supply to consumers and a price increase,” Stewart said. “The state is better served from the economic activity generated from the availability of energy than a bigger severance tax.” Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.
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OLUMBUS — Industry representatives voiced their support in early January for House Republicans’ plan to revamp tax rates on oil and gas produced in eastern Ohio emerging shale oilfields. They repeated many of the same arguments they’ve made over the past two years: that a previous plan offered by Gov. John Kasich’s administration would stifle horizontal hydraulic fracturing development at a time when companies are still trying to determine the most productive fracking areas. They said the new legislation, House Bill 375, offered a “sensible modification” to Ohio’s oil and gas tax structure, treating owners of conventional and horizontal wells fairly while supporting regulatory efforts. “HB 375 will provide much needed clarity for oil and gas producers who have already heavily invested capital in this state and plan to invest billions more to explore the state’s Utica Shale reservoir,” Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, told members of the Ohio House’s Ways and Means Committee. He added, “HB 375 provides much needed tax fairness and protection to eastern Ohio landowners who, in many cases, have been waiting all too long for opportunity to come their way.” Wednesday marked the second hearing for the proposed law changes, with testimony from individuals and groups that support the new approach. Opponents and interested parties will offer comments during future hearings. House Bill 375 would set lower tax rates on existing conventional wells and increasing rates on those drilled horizontally, with excess proceeds devoted to plugging abandoned wells and potentially cutting income tax rates. Horizontal wells would be subject to a 1 percent tax on gross receipts over the first five years of production, then 2 percent thereafter as long as production remains above certain levels. The lower rate during the initial years will allow producers to recoup their costs. Proceeds from the increased severance tax will first go to state regulators overseeing the fracking industry, with extra collections used to cap orphan oil and gas wells and for potential income tax rate cuts.
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Dix Communications - Gas & Oil
February 2014 Edition
EPA to assess drinking water
he U.S. Environmental Protection Agency has released an Overview of the Hydraulic Fracturing Drinking Water Assessment Report. According to the report, the assessment’s objectives are to identify and assess the potential effects of hydraulic fracturing activities on the quality or quantity of drinking water resources. To arrive at its conclusions, the report will draw upon peer-reviewed literature, government reports and technical papers, results from ongoing EPA research and information submitted by outside sources such as roundtables, workshops and the Science Advisory Board. The assessment will use the hydraulic fracturing water cycle to evaluate impacts on quality and quantity of drinking water. This cycle will include water acquisition, chemical mixing, well injection, flowback and produced water and
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wastewater treatment and waste disposal. Once the assessment is complete, the impacts will be evaluated. According to the report, impacts will be evaluated according the these criteria: • Impacts related to normal operations reflecting modern typical practices. • Potential and actual accidents or unintended events. • Potential immediate, short-term and long-term impacts. The assessment will look at multiple regions as well as multiple scales: single wells, clusters of wells, watershed and shale plays. The goal of the assessment will be to use the information gathered to understand the potential affect of hydraulic fracturing on drinking water resources and determine areas of greatest concern. The final report is expected in the spring of 2014.
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February 2014 Edition - Dix Communications
Southern Zone Edition
A Year of Learning...
Paul Locher Dix Communications
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RRVILLE - It has been a year since Orrville Ohio-based Smith Dairy Products Company cut the ribbon to open its new compressed natural gas filling station, and those involved with it say it has been a year of learning. Company officials had for a couple years prior to that been studying ways to make its 400-vehicle dairy products delivery fleet more fuel efficient, while at the same time reducing its carbon footprint and moving it increasingly toward environmental sustainability. As a result of those discussions, the century-old dairy decided to construct a CNG filling station adjacent to its fleet headquarters and set off on what it knew would be a learning odyssey. Nate Schmid, president of the family-owned company, said it has pursued a philosophy of frugality and environmental consciousness since its beginning, always looking for ways to make its bottles and packaging materials thinner, while recycling and reusing as much as it possibly could. Schmid said Smith’s saw entering the CNG field as an opportunity to participate in a green initiative while at the same time reducing its carbon footprint and saving money on petroleum fuels. Chuck Diehl, manager of Smith’s fleet which is composed largely of semi-tractor trailers which daily ply the roads of Ohio and surrounding states, said that during the first year “The problems (with the CNG station) have been manageable, although there has been a significant upward learning curve.” He added, “This is not just new to us, it’s a new technology. Every one of our vendors has been fantastic as he have worked our way through this.” Diehl said the biggest problems have stemmed from the fact that the natural gas that comes from both the Utica and Marcellus formations is “truly a ‘wet gas.’” He noted that that the product remaining after the butane, methane, propane and ethane have been drawn off has a high moisture content.
He said this fact was well known prior to Smith’s building the CNG station, and the company installed - along with the compressor - a sophisticated filter/dryer for the gas. Diehl noted that, based on the volume of compressed gas expected to be run through the compressor system, the filter/dryer should serve the station well until substantially rising volume in the future might create the need for a second such unit. However, the gas turned out to contain more water than thought. “We couldn’t let that water get to our engines, so we had to upgrade the fuel site,” said Diehl, noting the decision was made to purchase and install a second filter-dryer for the station. “That way,” Diehl noted, “we always have one filter/dryer that is drying out while the other one is working. It’s the biggest lesson we’ve learned.” Diehl said Smith’s pooled information on the water problem with Kimble waste hauling, SARTA and J-Rail Trucking, all of which have fleets that operate on compressed natural gas, and discovered that last winter some of those trucks experienced frozen fuel lines due to the water in the gas. “We immediately took corrective action,” said Diehl, adding that the problems “was solved through sharing and networking with these other companies. There are no problems now.” Diehl said that Smith’s has six employees trained in working with compressed natural gas, and that “They work both as a team, as well as by themselves.” As for people finding their way to Smith’s CNG station, Diehl said that hasn’t been a problem. With the station being listed both on the web site cngprices.com, and the U.S. Department of Energy website, it has become a regular stop for tour bus companies in the Midwest and South, refuse trucks, large equipment haulers and many others. Diehl said private cars are less frequent. When the station was first started and Smith Dairy drivers began using the fuel, there were major concerns about its trucks becoming stranded, simply because they didn’t get as
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much mileage as had been anticipated. Asked whether that has occurred, Diehl replied, “No, not even close.” He said the company’s dual fuel trucks run to Toledo and back to Orrville without having to refuel. To date Smith Dairy has done 16 of the 20 fuel conversions to its vehicles planned by the end of this year. Of the 20 planned, six trucks will be dedicated soley to CNG, while the others will be dual fuel trucks. Noting that the company wants to have moved completely away from diesel fuel before 2030, Diehl said it is “ahead of the game” plan. He said the CNG station was built for a 40-vehicle model for the company before expansion was needed. He said it is at 26 currently “and still ramping up. We’re right on target.” Diehl explained that Smith’s “never approached this as a short-term project. We wanted to get it to a certain level and then be able to maintain it.” Diehl said the company is working to change the public’s perception of CNG as an “alternative fuel” and instead get them to look at it as an “advanced fuel.” As for the drivers of Smith’s CNG trucks, Diehl said, “Mostly they have been positive, although it’s a change in their handling of things. Our goal is eliminate any problems to having what our drivers would see as a normal day.” Schmid said the company is doggedly following a “sustainability road map” it has created that attemps to “balance social, ecnomic and environmental concerns and keep all three in harmony.” He said that whild the company wants to operate within an environmental framework, he said those practices “must make economic sense.” Schmid said that in addition to instituting environmentally friendly practices for vehicle and plant maintenance, crap recycling and waste reduction, he said the company recently installed higher efficiency lighting with motion detectors that automatically turn off power ro areas of the plant not in use. He said the company is also working on efficiencies for its refrigeration processes. Smith’s, Schmid said, will always be an “adapter, not an innovator,” in energy sustainability, and hopes to consistently “bring the right lens” when it comes to making decisions about how the use of energy will affect its “product opportunities and investment decisions. That’s a critical piece for us, and certainly part of our operating formula.” Diehl said experts believe that the price of natural gas will have relative stability over the next four decades, compared with petroleum, the volatile worldwide price of which can fluctuate wildly from one week to the next, making planning fuel consumption costs for a truck fleet almost impossible. “It represents an opportunity for Smith’s to continue its positive environmental impact and reduce our carbon footprint,” said Diehl. plocher@the-daily-record.com.
Dix Communications - Gas & Oil
February 2014 Edition
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Above: Onlookers flock to view and take pictures of the under-thehood CNG equipment on one of Smith Dairy’s six trucks during a ribbon-cutting ceremony for the fueling island in 2012. The Orrville company saw entering the CNG field as an opportunity to participate in a green initiative while reducing its carbon footprint and saving money. Left: A CNG fueling demonstration was led by Smith Dairy Trucking employees Jeremiah Marty (center) and Jake Masters (right) while fleet manager Chuck Diehl talks about the process at the 2012 opening. Diehl says the biggest problems have stemmed from the natural gas that comes from the Utica and Marcellus formations because they are “’truly a ‘wet gas.”
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February 2014 Edition - Dix Communications
Leveraging benefits John Lowe Dix Communications
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AMBRIDGE — A report last fall that the population of Cambridge could grow tenfold as a result of the gas and oil boom in this part of Ohio has sparked a partnership between the county’s planning commission and The Ohio State University Extension. Together they will revisit the Guernsey County Comprehensive Strategic Plan. “We already have a development plan,” said Economic Development Director Norm Blanchard. “But we developed it in-house. This [partnership] will give us some expertise” to shore it up. The county developed its plan in October 2011 and updated it this past June. “It’s a great plan, but it’s not always focused on shale development,” said Cindy Bond, an OSU Extension educator for community development. “What we want to do with this is to expand on [the plan] the county already has and focus on shale development.” Blanchard said there will be a significant difference with this planning effort. “This process will end up with an action plan,” he said. “Ours did not.” The current plan implies that certain actions be taken, but it does not assign responsibility for seeing that those suggestions be implemented. Bond and her colleague, Myra Moss, met with Blanchard on
Wednesday to discuss the upcoming, inaugural, planning session which will be on Feb. 7 from 8 a.m. to noon in the EPIC Center at the Cambridge campus of Zane State College. So, will the population of Cambridge swell to 100,000 as predicted last fall by businessman William A. Meyer of Energy Related Properties? Blanchard doesn’t believe so. “I think he overshot it by 80,000,” Blanchard said. “Now, 5,000 or 10,000 — I could see that.” Bond said she believes there will be an influx of temporary workers, of whom 10 percent will stay to become permanent residents after the shale oil play runs its course. “When we say temporary workers, we’re not talking about six months,” Moss said. “We’re talking years.” “I’m thinking three to five years,” Bond said. Moss said the goal of the planning will focus on long-term sustainability of economic development rather than the boom-bust cycles, such as those associated with the coal and timber industries. “We want to be proactive and not only address the issues that are going to come up from shale development,” she said. “We want to look at ways to capture the advantages of shale development to build a long-term economic vitality.” That will be the overarching focus as the plan development progresses. jlowe@daily-jeff.com
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State of the
February 2014 Edition
Utica
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Mike Chadsey
Laurie Huffman Dix Communications
Other positive announcements he made included a new 49-mile pipeline that is being built by Marathon Petroleum to transport Shale liquids from natural gas processing and liquids fractionation plants in Harrison and Carroll counties to its refinery in Stark County. The project, called the Cornerstone Pipeline, is estimated to cost $140 million. The line, which will be eight inches in diameter, could transport about 40 million barrels per day.
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ANTON -- According to Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, OOGA has its work cut out for it as an agency that provides news, and legal, legislative, and tax information to the public, because, as he pointed out, Utica is in its infancy here, in Ohio. Chadsey gave a State of the Utica address during a recent Choose Stark event held at the Pro-Football Hall of Fame, in Canton. During his talk, he noted the Ohio Department of Natural Resources is putting a rule package together for well pad construction that OOGA believes it is necessary. “With companies like Halcon and BP coming in, they need to know what the rules are when they decide to take a risk in Stark County,” Chadsey said. However, he also reported the Ohio Supreme Court will hear oral arguments on Feb. 26 in a case involving a challenge to the ODNR’s sole and exclusive regulatory authority over all the oil and gas drilling in the state. In February of 2013, the Ninth District Court of Appeals ruled the city of Munroe Falls home rule ordinances attempting to regulate oil and gas well permitting could not be enforced because they conflicted with, and were pre-empted by by, the ODNR’s authority under Ohio Revised Code Chapter 1509. The Ohio Supreme Court agreed to hear the case in June of 2013. Chadsey also mentioned the proposal being considered by the U.S. Coast Guard that would allow oil and gas fracking companies to transport wastewater in barges via the Ohio River. Chadsey has stated this could reduce truck traffic and it is considered just “another mode of transportation,” while environmental groups are of the opinion it is too risky. On a more positive note, Chadsey said 2014 is slated to be a good year in terms of oil and gas activity, as it is stepping up. And, he said with 30 to 40 percent unemployment in 2009, the developments in the gas and oil industry are about to bring full employment in construction trades to the area.
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Gas & Oil
February 2014 Edition - Dix Communications
Southern Zone Edition
Bluegrass Pipeline awards community grants U
LSA, Okla. – In the first cycle of the Bluegrass Pipeline Community Grant Program, seven organizations in southeastern Ohio have received a total of $42,000 in grants to fund projects that directly benefit counties traversed by the pipeline project. Grants were awarded in late December for a variety of projects ranging from new equipment for first responders to wildlife habitat enhancement and conservation education. The following organizations in Ohio received funds during this first cycle of the grant program: • United Way of Guernsey and Noble Counties Inc. – Annual Campaign • Muskingum County EMA/LEPC Muskingum County – Pager Project • Caldwell Volunteer Fire Company – Personal Protective Equipment • United Way Services of Northern Columbiana County – Annual Campaign • Belle Valley Volunteer Fire Department – Backup Power Supply • Helping Appalachian Rural Peoples (HARP) – Appalachian Solutions • National Wild Turkey Federation/Ohio State Chapter – Save the Habitat. Save the Hunt. “Bluegrass Pipeline is proud to support each of these organizations in Ohio and their worthy projects,” said Wendell Hunt, local outreach business partner for Bluegrass Pipeline. “The mission of our program is to identify and help fund projects that directly benefit the community. We are committed to
being a strong member of the communities where we operate and look forward to providing continued support in the future.” Overall, Bluegrass Pipeline has awarded 24 grants totaling $178,000 in counties along the project route. There are several opportunities in 2014 to apply for grants. To learn more about the application guidelines or to apply, go tohttp://bluegrasspipeline.com/community-grants Projects funded by the Bluegrass Community Grant Program should provide community benefits, with specific emphasis for projects impacting: • First Responders / Emergency and Safety Preparedness • Youth or senior services • Education programs • Economic development • Enhancement of open spaces and park land for recreation • Enrichment of wildlife habitat • Promotion of environmental education • Preservation of wetlands and wildlife habitat Questions about the program should be sent to grants@ bluegrasspipeline.com. The proposed Bluegrass Pipeline would transport natural gas liquids such as propane, butane, ethane and natural gasoline, which are used in home heating and cooking, motor fuels, plastics production and industrial energy. Two companies, Williams and Boardwalk Pipeline Partners, are working together on the project.
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Researching those rights Bill Dannley Leasemap Ohio
M
ILLERSBURG — All oil and gas companies go through the same set of steps or procedures when they consider moving into a new area. First, their geologists identify their prospective area for development. Whatever the area, be it several townships or several counties, as a 35-year title abstractor and sometime petroleum landman in the oil and gas business, once the target area is identified I can tell you the next step: get somebody into the recorder’s office to research the oil and gas rights. Most good citizens know that their county courthouse contains something called a recorder’s office. If they’ve ever owned property, they know their deed and mortgage were taken to the courthouse and recorded — made part of the public record. Beyond that, very few people really know what the county recorder does or what resources are available in that office. As Rita Burkey, Deputy Recorder in the Holmes County Recorder’s Office said with a laugh, “When it comes down to it, I guess the public thinks we do everything but what we actually do.” According to Burkey, people often come into their office looking for cemetery burial records. They don’t keep those. They want to search marriage and divorce records; try the Clerk of Courts office. They think the recorder will do title searches, prepare deeds or make changes in already-recorded documents. None of the above. The function of the county recorder is to take in legal documents -- deeds, mortgages, leases, mechanic liens, affidavits, etc. — and enter them into the public record. According to Ohio law, all documents must meet certain statutory requirements; some recorders demand additional information as well. However, unless there are glaring flaws in the document or its execution, such as illegibility or being improperly witnessed or notarized, a document presented to the recorder will be accepted (there is a fee), assigned a volume/page reference and then be made part of the public record.
Although it would seem pretty obvious, a lot of the public doesn’t quite understand that the public record is, well, public. According to Burkey, some people “think they need ID to look at the records” and offer to show their driver’s license. “They also don’t think they have the right to look at other people’s records,” added Burkey. Oil and gas companies suffer no such illusions. Once an area is identified, the prospective developer then sends in a crew of title abstractors. These abstractors research landowners in the target areas to determine the legal status of their oil and gas rights — who is available for leasing, what other companies hold acreage in the target areas either through leases that are in term or held by production (HBP), whether or not the oil and gas is owned by the surface owner or was reserved or previously purchased by someone else, etc. That’s a lot of information to go through and requires a lot of abstractors to do it. That’s why so many county courthouses located in the Utica play have been overwhelmed by teams of abstractors (I fondly refer to them as the barbarian hoard.) And while the entire courthouse may have tables strewn with lap tops and legal documents lining the hallways, very few county offices are directly impacted. As you probably guessed, the epicenter of all that activity is the recorder’s office. So if you start hearing reports about your courthouse being uncharacteristically overrun by a bunch of outsiders, you will know what that means: your county has been identified for development. And if you are a landowner not under lease, don’t be surprised to be contacted by a landman shortly thereafter. And don’t be surprised if he or she knows more about your oil and gas rights than you do. Bill Dannley has worked in the oil and gas business for over 35 years as both a title abstractor and petroleum landman. He is a partner in Leasemap Ohio, which specializes in lease takoff research and has over 400 Ohio townships on file. Bill can be reached at 330-262-0588. For more information visit www. leasemapohio.com.
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February 2014 Edition - Dix Communications
Southern Zone Edition
WorkSteps treats oil, gas employees as ‘industrial athletes’ Laurie Huffman Dix Communications
1022171700
and another 10 to 15 percent do not return for the drug testing, Harris and Root indicated. Another good reason to use the program is that it can be used to root out medical conditions that would prevent a person from performing their job. “Companies cannot ask questions about medical conditions, but the functional testing provider can,” Harris and Root explained. In addition, WorkSteps disqualifies fraudulent injuries, while also providing baseline information on each employee. “If an employee is hurt, it is assumed they were in perfect condition before the accident,” said Harris. “Baseline testing establishes a norm for each employee as far as their flexibility and agility are concerned that can be used for rehabilitation purposes.” Along with pre-employment testing, WorkSteps offers post-employment testing to match employees in a job analysis, gather medical histories, and to measure the employee’s physical and weight lifting capabilities.
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ANTON -- AultWorks/AultCare is now offering a WorkSteps program at its Canton facility. “We are a new source for WorkSteps in this area. We kept hearing about WorkSteps, especially with companies from the South, so we added the program as one of the many services we now offer, said Jim Harris, associate vice president of Aultman Outpatient Centers and Sports Medicine. He said with use of the program, they treat the employees in the gas and oil industry as “industrial athletes.” “If the employee steps off a truck and hurts their ankle, or they fall and get a concussion, that is an injury just like any other, and we treat it with the same approach (no matter how the injury came about). We try to get the industrial athlete back to work and treat their injuries no differently than we would those of an athlete,” said Harris. Harris and and his associate, Matt Root, discussed the WorkSteps program during a Choose Stark event recently held in Canton with a focus on the economic impact of gas and oil development in the area. The two explained WorkSteps provides testing services to match employees with job requirements, and in the end, this can save a company a lot of money in healthcare benefits. The testing may also rule individuals out from being hired for a specific job. “A study was done by the University of Massachusetts that found 10 percent of the American workforce are physically not capable of performing their jobs. And, 75 percent of workrelated injuries occur among those same 10 percent,” said Harris. The initial, pre-employment testing measures strength, agility and flexibility. Approximately 7 percent of those tested fail,
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February 2014 Edition
35
House Bill seeks to provide ‘transparency’
OLUMBUS – State Reps. Jack Cera (D-Bellaire) and John Patrick Carney (D-Columbus) introduced House Bill 400 on Jan. 16 in an effort to bring transparency to oil and gas industry royalty statements provided to landowners. The bill seeks to provide these landowners with information about corporate activity and well activity on individual landowner’s property in conjunction with their routine royalty statements. “The standardization of royalty statements is a great first step in helping people understand the money they make from leasing their land to oil and gas companies,” Rep. Carney said. “When the lessor has no audit rights, companies can keep them totally in the dark about their profits. This bill will help provide transparency and ensure that Ohioans are receiving appropriate information and fair payments for activities on their land.” HB 400 would require oil and gas companies to provide information about production, sales, taxes and any deductions on routine royalty statements to landowners. Statements currently may show no deductions taken from landowners’ royalties. Yet numerous deductions are frequently taken out for severance taxes, production taxes, windfall profit taxes and a number of other costs that are being shifted from the com-
pany to the landowner. “This bill will provide landowners who have leased their oil and gas rights with clear and concise information about the production from wells on their property,” Rep. Cera said. “It is vital that landowners receive details on any loss in profits they incur.” HB 400 is modeled after similar laws in oil and gas producing states, Pennsylvania and Texas.
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36
Gas & Oil
Southern Zone Edition
February 2014 Edition - Dix Communications
Bluegrass helps United Way Judie Perkowski Dix Communications
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opportunities in 2014 to apply for grants. The next deadline is Jan. 31. To learn more about the application guidelines or to apply, go to http://bluegrasspipeline.com/community-grants Projects funded by the Bluegrass Community Grant Program should provide community benefits, with specific emphasis for projects impacting: First Responders / emergency and safety preparedness; youth or senior services education programs; economic development; enhancement of open spaces and park land for recreation; enrichment of wildlife habitat; promotion of environmental education; preservation of wetlands and wildlife habitat. jperkowski@daily-jeff.com
A $5,000 grant award from Bluegrass Pipeline was presented to the United Way of Guernsey and Noble Counties on Tuesday at the United Way office in Cambridge. Accepting the check is l to r: Penny Parnell, United Way board member and Stephanie Laube, United Way executive director. Presenting the check, r to l: Anthony Capp, field supervisor for Percheron Field Services, one of the several companies involved in the Bluegrass Pipeline project; and Wendell Hunt, local outreach business partner for Bluegrass Pipeline.
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AMBRIDGE -- Adding much needed cash to the United Way coffers, Wendell Hunt, local outreach business partner for Williams, a co-owner of Bluegrass Pipeline, and Anthony Capp, field supervisor for Percheron Field Services, also involved in the pipeline project, presented a check for $5,000 to United Way Executive Director Stephanie Laube, a contribution to the agency’s annual campaign fund on Tuesday at the United Way office in Cambridge. “We submitted the grant application to Bluegrass Pipeline on Oct. 31. We found out about the award about a month ago,” said Laube. “The money will go toward our general campaign fund so it will benefit all 14 United Way agencies.” “On behalf of Bluegrass Pipeline I am proud present this check in support of the United Way of Guernsey and Noble Counties, and the services the agency provides to their communities,” said Hunt. “The mission of our program is to identify and help fund projects that directly benefit the community, We are committed to being a strong member of the communities where we operate, and look forward to providing continued support in the future.” Capp reiterated Hunt’s comments, adding, “We are committed to continue working in, and for the community. We have an IPS office in Cambridge, where we employ several local people,” said Capp. “We are very happy to be a part of the Bluegrass Pipeline Project.” Bluegrass Pipeline grants were also presented on the same day by Hunt and Capp, to the Belle Valley Volunteer Fire Company for $7,500; and Helping Appalachian Rural People for $5,000. Williams and Boardwalk Pipeline Partners, LP, two leading energy infrastructure companies, have partnered to develop the Bluegrass Pipeline Project. The proposed 1,100-mile pipeline will transport natural gas liquids from the Marcellus and Utica shale producing areas in Pennsylvania, West Virginia and Ohio to the developing petrochemical market in the Northeast U.S., as well as the rapidly expanding petrochemical and export complex on the U.S. Gulf Coast. In the first cycle of the Bluegrass Pipeline Community Grant Program, seven organizations in Ohio have received a total of $42,000 in grants to fund projects that directly benefit counties traversed by the pipeline project. Overall, Bluegrass Pipeline has awarded 24 grants totaling $178,000 in counties along the project route. There are several
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Polar vortex points out impact of investments on heating costs
W
ASHINGTON — Recent cold weather spells have helped to underscore the importance of America’s natural gas supply lines and ongoing infrastructure investments, American Petroleum Institute Chief Economist John Felmy told reporters recently. “Reliable, affordable energy requires a 21st century system of transmission lines, pipelines and energy infrastructure,” said Felmy. “The recent cold snap provided a chilling reminder of what happens when demand approaches the limit of our current ability to bring abundant U.S. supplies to the regions that need it most. “A new study released last week by IHS* shows that capital spending on oil and gas infrastructure increased by 60 percent between 2010 and 2013, thanks to America’s shale energy revolution. With the right policy choices, these investments will accelerate, providing a major boost to the economy, creating jobs, and strengthening the supply chain to consumers. “In total, IHS anticipates up to $1.15 trillion in oil and gas infrastructure investments over the next 12 years, contributing as much as $120.58 billion to U.S. Gross Domestic Products (GDP is one the primary indicators used to gauge the health of a country’s economy), supporting as many as 1.15 million jobs; and providing an additional $27.45 billion in government revenues on average, annually between 2014 and 2025. These are private dollars — not public funds — ready to put shovels in the ground. “Public officials are taking notice, too. President Obama recently announced a new Quadrennial Energy Review of transmission and distribution infrastructure. Our message is simple: let’s recognize the value of investing in our energy transportation network and work together to streamline the regulatory and permitting process, so that small delays don’t potentially add up to huge costs for consumers across country.” Authorized Full Servicing Dealer Briggs & Stratton, Tecumseh, Kohler, Kawasaki, Honda, Bad Boy Mowers, MTD
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40
Gas & Oil
February 2014 Edition - Dix Communications
Southern Zone Edition
Was the unitization fair? Ethan Vessels Attorney
M
any oil & gas leases contain what is known as the “unitization” clause. This clause allows the lessee to take all, or a portion, of the owner’s (the lessor’s) land and “pool” it with neighboring lands in order to form a suitable drilling unit. This is desirable in many cases. A landowner with only fifteen acres has little to offer unless those fifteen acres can be combined with neighboring land. The lessee would not be able drill a well. The deeper the well, the more spacing is required by law. In Ohio, a relatively shallow well (1,000 to 2,000 feet) needs a unit of at least 10 acres; 20 acres for wells between 2,000 and 4,000 feet; and 40 acres for wells deeper than 4,000 feet. And, in practice, the deeper wells need more acreage. The new Utica developers usually want at least 640 acres, with many creating units of 1,000 acres or more. After all, they are now drilling horizontally. The “unitization” clauses typically state that if a lessee properly declares a unit and unitizes only a portion of the leased acreage, and then a well begins producing within the unit, that well’s production will hold the entire leased acreage. The landowner will cry foul if only 5 acres of his 100 is unitized, binding the entire 100 acres. Is this fair? Is this legal? It depends. The usual presumption is that the contractual agreement, the lease, is binding. But, not always. The general consensus is that a lessee must exercise its contractual right to unitize in good faith. Put differently, is the lessee legitimately using its power to create a unit of sufficient size for the purpose of producing gas or oil? Is the pool for the mutual benefit of both the lessors within the unit and the lessee? Or, is the lessee using its ability to unitize for its economic advantage at the expense of the landowner? For instance, a common red flag is the late pooling declaration. The lessee declares a pooled unit only days or weeks before the lease is to expire. This can be a sign that the lessee is actually trying to artificially extend the lease through the use of the unitization clause.
Another red flag is the lessee that unitizes only a very small portion of one property within a larger unit. For instance, the lessee may unitize only three acres of a 200-acre tract, within a pooling unit of only 80 acres. This leads to an inference that the lessee is using its pooling power to expand its hold on existing acreage, without actual development. Gerrymandering exists in the oil and gas business, just as it does in politics. Given the recent development of the Utica Shale, my observation is that some lessees are indeed using the unitization clause to artificially hold acreage and extend leases. As with any legal question, the end result will depend on the facts and circumstances of each case. Disclaimer. As with all articles on legal issues, this article is intended for educational and informational purposes. The reader should not rely on this article as a substitute for actual legal advice regarding his or her particular case. You should consult an attorney regarding the specifics of your situation. Ethan Vessels is an attorney in Marietta, Ohio with the firm of Fields, Dehmlow & Vessels, LLC. He is an NBTA Certified Civil Trial Advocate. His firm is actively representing landowners throughout East and Southeast Ohio regarding oil & gas lease forfeiture actions, lease disputes, and other oil & gas matters. Visit www.fieldsdehmlow.com for more information
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February 2014 Edition - Dix Communications
Welders keep
industry together
Southern Zone Edition
www.OhioGO.com
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February 2014 Edition
Welders keep industry together
43
Abby Armbruster Dix Communications
K
IDRON — “Have welding equipment, will travel.” That’s the motto that Kidron resident Jesse Saurer has with his business, JDS Portable Welding Company. As a fourth generation welder in his family, Saurer knew he wanted to get into welding at an early age. After a two-year stint at the Wayne County Schools Career Center, Saurer was ready to work. Saurer said he always looked up to his father and his friends when they were welding, and learning from their examples, he decided to start his own business. “I started (JDS) when I was 21...but I started welding when I was 9,” Saurer said. “I started young.” All of Saurer’s work is for commercial companies, although Saurer is contracted through local and state-wide companies. Saurer works as his own boss and sole employee of JDS, traveling as far as Pennsylvania or West Virginia, but he said he could go anywhere in the nation if he wanted to. All of Saurer’s equipment fits inside his truck, and he is able to head to his next job at any point in time. “They’re not really big companies,” he said. “They’re usually a one- or two-man operation.” Saurer recently got offered an opportunity to work in North Dakota. Even though Saurer has never welded there, he said it would be easy to pick up his life and drive out there. “All I would need to do is pack my clothes and go,” Saurer said. When he is doing work locally, Saurer said he focuses on gas company pipelines, either welding the main line or working on tie-ins or fabrication work, when the pipes change direction. “I specialize more on the pipeline side of it,” Saurer said. “I don’t like working in a shop. I like outside work.” Thankfully, Saurer said there is no shortage of work for him in the area. Currently, Saurer has been working in Lisbon on three miles of pipeline. The job started in October, and his deadline is to be done with the project by the end of January. Even in the slower winter months, Saurer said he is still working 60-hour weeks and can only take off one week a year for vacation. “The skill is just a dying art,” Saurer said. “No one wants to do the kind of stuff that I do.” In the future, Saurer said he is considering purchasing another truck to expand his business, possibly with his father driving the second truck. His father, whose expertise is with welding mining equipment, could diversify his future business, Saurer said.
“Half of the reason I haven’t (purchased a second truck) is because of the liability, having someone trustworthy enough to do this kind of work under your name,” Saurer said. Saurer may just have to wait another four years until his father retires before JDS can officially expand to two trucks, but for now, Saurer is content with his busy schedule. “I like to make nice welds,” Saurer said. aarmbruster@the-daily-record.com
Above: Kidron resident Jesse Saurer opened his business, JDS Portable Welding Company, when he was 21 but began welding as early as nine years old. Saurer comes from a family of like-minded men, with him marking the fourth generation of welding in his family. Left: Saurer recently finished a job in Lisbon, Ohio, welding three miles of pipeline for Access Midstream. The project began around October and was contracted to be completed by the end of January. Saurer said he prefers main pipeline to tie-ins, but also enjoys fabrication work.
Southern Zone Edition February 2014 Edition - Dix Communications Gas & Oil 44
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Employment flat but
sales tax climbing
Marc Kovac Dix Capital Bureau
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OLUMBUS — Shale oil drilling is increasingly focusing on eight counties in eastern Ohio, and those areas are seeing some of the biggest gains in sales tax receipts. But those same counties aren’t seeing substantial increases in their work force levels yet, as the industry awaits further exploration and infrastructure to accommodate oil and gas being produced via horizontal hydraulic fracturing. Those are some of the conclusions reached in the latest “Ohio Utica Shale Gas Monitor,” a new study released today by the Maxine Goodman Levin College of Urban Affairs at Cleveland State University. The report reviewed sales tax receipts, employment statistics, well permits and other data to determine the impact of horizontal hydraulic fracturing in eastern Ohio. “We’re still another year, 18 months out” from bigger economic impacts, said Ned Hill, dean of the college and one of the authors of the report. He added, “The south is clearly entering the production stage. The north, they’re very much in the science stage ... Overall, I’m still optimistic, still hopeful, but it’s still building out.” The report identifies eight counties in eastern Ohio as “strong” in terms of shale activity: Columbiana, Carroll, Jefferson, Harrison, Guernsey, Belmont, Noble and Monroe. Five others are labeled as “moderate,” including Mahoning, Trumbull, Portage, Stark and Tuscarawas. More than two dozen counties are categorized as “weak,” including Ashland, Wayne, Holmes, Medina, Washington and Muskingum counties. The remainder of the state is outside the shale formation. The report noted that employment in counties with the strongest fracking activity is “relatively flat,” though Hill said hiring is taking place in metro areas like Canton, Akron and Youngstown, where related services are basing their operations. “Through the second quarter of 2013, employment growth among the residents of shale country has again stagnated and
even declined a bit,” according to the report. “Employment among residents in the strong shale counties has decreased by 0.8 percent or by about 4,300 persons employed. Employment in moderate counties has increased slightly, by 0.5 percent in [the first quarter] and 0.4 percent in [the second quarter]. Employment in weak counties decreased slightly in 2013, and in non-shale counties it has increased.” Counties with increased drilling and production are seeing economic benefits, though, with double-digit increases in sales tax receipts. According to the report, “Increased sales reflect spending by land and mineral rights owners as well as spending of outof-state workers because hotel and lodging bills are subject to the sales and use tax in Ohio, as are restaurant meals. Robust increases in sales in the moderate shale counties reflect their locations: the Akron, Canton and Youngstown-Warren metropolitan areas border the group of strong shale counties and are located in moderately strong shale counties. These metropolitan areas have larger populations and stronger retailing presence than do the much more rural strong shale counties.” Fracking activities will have a larger economic impact once related infrastructure and processing facilities are created, particularly a “cracking” facility to process natural gas liquids. “We’re seeing true impact through spending,” Hill said. According to the report, “The excitement over the Utica Shale in Ohio is based on the limited presence of oil in the formation and the much more extensive presence of [natural gas liquids]. However, the degree to which the presence of NGLs changes the mid-term economic landscape of Ohio depends in no small part on where the NGLs are processed. This is especially so for ethane, a critical building block of industrial plastics. Large benefits will be reaped if ethane is ‘cracked’ into its commercially valuable components in or close to Ohio. Potential benefits will be reduced if it is barged or piped to Louisiana or Texas.” Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.
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Newly rich? Now what do you do? Judie Perkowski Dix Communications
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AMBRIDGE — Many people in Appalachian Ohio have been handed wealth they never even dreamed about. More money than they ever imagined in their lifetime. Money from Utica shale. Families sit around kitchen tables wondering, “What do we do now?” Buy stuff. Pay off the mortgage. Put the money in a bank. Invest. Invest in what? To address these “commonly asked questions,” representatives from PNC Wealth Management and the law firm of Roetzel and Andress presented various options and suggestions to help clients establish a plan for enjoying the fruits of their good fortune while minimizing complicated tax issues ingrained in the gas and oil industry. The legal experts were introduced by Jo Sexton, president of the Guernsey Energy Coalition’s January meeting at the Southgate Hotel in Cambridge. The Coalition was established by Sexton in July of 2011 as a venue for guest speakers from the gas and oil industry and its service providers, to offer accurate information relative to the pending oil boom. Four vice presidents of PNC and an attorney from the law firm of Roetzel and Andress offered advice on how to “plan ahead for a natural gas (and oil) windfall.” Susan Bottiggi, PNC vice president and market executive for the Columbus-based Financial Services Group, said “PNC partners with Roetzel and Andress with several offices in this area, to help clients plan for the future,” and introduced Bill Addington, PNC vice president and relationship manager, who, in turn, introduced his team of experts. Jeff Smith, PNC vice president and senior wealth planner, and John Shockley, vice president and senior trust advisor. Smith said, “income tax begins with the first dollar you receive. Bonus and royalty payments are ordinary income, in addition to pipelines and rights-of-way. If you are married filing jointly and your income is $457,601 or more, or if you are single and your income is $406,751, you will be included in the new tax bracket of 39.6 percent.”
Also new for 2013 taxpayers is the Medicare tax net investment income. The provision imposes a 3.8 percent tax (identical to the combined employer/employee tax rates on earned income) on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business. (Go online to read more at Medicare tax 2013) Answering the question, “what can I spend now,” Smith said to apply the “6-month rule,” and wait. Plan should include an emergency savings account for quick withdrawal, identifying future tax liabilities, establish on-going cash flow needs and decide on major purchases. “Remember that income stream from mineral rights if often unpredictable. All of these issues, and more, will be addressed in a personalized financial plan,” he said. Shockley answered questions about investments. His advice is to set up a savings account where you can have available cash for one year, depending on your needs. “What kind of risks are you willing to assume? Long term investments present a bigger risk, short term a lesser risk, but more than anything, you need to get financial advice and you need to diversify. Don’t put all your eggs in one basket,” he said. “But, the number one thing to remember is to get advice before you sign any kind of contract. Don’t wait until after the fact and then ask if it was the right thing to do.” Erica Haupt, attorney and partner in charge at Roetzel law firm, said everyone should have basic estate planning in place. Retain an expert to provide insight and advice about estate planning, asset protection, health care and financial powers of attorney, a trust fund, a living will and the gift tax. “The gift tax is the best way to give cash away. But the most important thing is: Do Not Do This Alone,” she said. For more information about tax liabilities and financial planning, contact a local PNC representative, certified public accountant, or an attorney whose practice includes estate planning. jperkowski@daily-jeff.com
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MWCD proposes oil/gas leasing agreement at Piedmont Lake Judie Perkowski Dix Communications
S
T. CLAIRSVILLE — An open house meeting to discuss and receive input about the Muskingum Watershed Conservancy District’s plan to lease property it owns at Piedmont Lake for oil and gas development in the Utica shale was held Jan. 15 at the James Carnes Center near St. Clairsville. “The meeting went well,” said Darrin Lautenschleger, public affairs administrator for the MWCD. “About 75 people attended, and less than 15 people spoke. Probably about half of them had some connection to Piedmont Lake, either they own property or used the facilities on a regular basis. A handful of attendees expressed their opposition to the oil and gas industry, in general, and to any drilling on the property in particular.” The MWCD manages more than 6,600 acres at Piedmont Lake, and most of it is not under lease for Utica Shale development. Overall, the MWCD owns 54,000 acres of public property at numerous regions in eastern Ohio, including three other lake regions where leases are in place: The lease of Clendening Lake in Harrison County (2011) restricts the number and location of drilling sites on MWCD-owned property; Leesville Lake in Carroll County (2012) and Seneca Lake in Guernsey/ Noble counties (2013) have nondevelopment leases. Lautenschleger said the Conservancy board will begin negotiating its strategy and go from there. “The MWCD is intent on negotiating nondevelopment leases,” he said. “This type of lease minimizes the impact that drilling has on the land and on the surrounding communties. We are going to protect the right for people to enjoy the natural beauty and recreation the lake has to offer.” Lautenschleger did not name the oil and gas company or companies that will be involved in negotiating the lease, but the previous three leases were signed with Antero at Senaca Lake, Gulfport at Clendening Lake and Chesapeake at Leesville.
“Once the negotiations are finished and the lease is complete, it will be posted on the website for public review and comments for a designated period of time,” he said. The bottom line for negotiating restricted leases on MWCD property, is of course, “The Bottom Line” — revenue. Reiterating Lautenschleger’s comments justifying lease agreements puts the issue in a common sense perspective. “The revenues generated from the signing bonuses agreed to in the leases have enabled the MWCD to pay down its debt and begin renovating and upgrading the public recreational facilities.” The MWCD is a political subdivision of the state organized in 1933 to develop and implement a plan to reduce flooding and conserve water for beneficial public uses in the Muskingum Rover Watershed, the largest wholly contained watershed in Ohio. Since construction, the 16 reservoirs and dams in the MWCD region have been credited with saving an estimated $10.7 billion worth of potential property damage from flooding, according to the federal government, as well as providing ppopular recreational opportunities that bolster the region’s economy. A significant portion of the reservoirs are managed by the MWCD and the dams are managed for flood-risk by the federal U.S. Army Corps of Engineers.
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MSC Announces 2014 Executive Board Officers
P
ittsburgh, Pa. – Range Resources Corporation vice president of government and regulatory affairs, K. Scott Roy, has been elected as the Marcellus Shale Coalition’s (MSC) next chairman by the organization’s board of directors. Roy previously served as the MSC’s vice chairman and treasurer. Heather Lamparter (Vice President, Legal, EXCO Resources (PA), LLC), Mark Hager (Senior Government Affairs Representative, Williams) and Gary Smith (Vice President and General Manager, EOG Resources) were elected to serve as vice chair, treasurer and secretary, respectively. “Scott’s leadership and experience, and our board’s collective laser focus on critical legislative and regulatory issues, will continue to serve our entire industry and the Commonwealth well,” said MSC president Dave Spigelmyer. “Our leadership team also recognizes the importance of sustained public education and outreach to communities in each of our 67 counties to ensure questions are answered, concerns are addressed and that Pennsylvanians are more aware of the opportunities and benefits tied to shale development.” Organized in late 2008, the MSC has grown from several exploration and production companies to a robust organization with nearly 300 members that span the broad shale supply chain. MSC member companies were responsible for 96 percent of Pennsylvania’s shale production in 2012. And according to a U.S. Energy Information Administration report issued this week, “The Marcellus region, which produced less than 2 Bcf/d as recently as 2010, is expected to provide 18% of
total U.S. natural gas production this month.” “It’s an honor to have been elected by my colleagues to serve as the MSC’s next chairman,” said Roy. “As a lifelong Pennsylvanian who has seen the ups and downs of our region’s economy firsthand, especially our manufacturing sector, it is deeply rewarding to see the new opportunities tied to responsible shale development that are cascading from Erie to Philadelphia, Scranton to Southpointe and all points in between. Our industry certainly appreciates the great responsibility that we have to continue to make certain that shale-related benefits are fully leveraged and that Pennsylvania remains a shining example regarding environmental compliance and responsible development.” Other executive board members include representatives from Chesapeake Energy, Chevron, CONSOL Energy, EQT Corporation, MarkWest Energy Partners, Pennsylvania General Energy, XTO Energy and executive board member atlarge, Noble Energy. About the MSC: Founded in 2008, the Marcellus Shale Coalition (MSC) works with exploration and production, midstream, and supply chain partners in the Appalachian Basin and across the country to address issues regarding the production of clean, job-creating, American natural gas from the Marcellus and Utica Shale plays. We provide in-depth environmental and economic information to policymakers, regulators, media, and other public stakeholders on the positive impacts responsible natural gas production is having on families, businesses, and communities across the region.
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Lawmaker suggests ways to spend increased gas/oil taxes C Marc Kovac Dix Capital Bureau
OLUMBUS — Increased taxes on oil and gas produced in eastern Ohio’s emerging shale oilfields would go to local governments, conservation efforts and a long-term fund to cover future job training efforts, under legislation offered by one state lawmaker. Rep. Bob Hagan (D-Youngstown), a frequent critic of the way Gov. John Kasich and the GOP-controlled legislature have handled the regulation of horizontal hydraulic fracturing and oil and gas production waste, offered his own severance tax proposal, HB 212, to counter plans being pursued by the governor and House Republicans. “... It is clear that Ohio needs to update its severance tax rate to ensure that our precious natural resources are not extracted without the appropriate compensation seen in other states,” Hagan told members of the Ohio House’s agriculture committee on Jan. 21, where the bill had a first hearing. “The influx of oil and gas drilling in Ohio’s eastern counties is significantly impacting the roads, bridges and environment of the affected communities, and it is critical that we protect them from having to bear these costs brought on by the oil and gas industry on their own.” The legislation would increase the state’s severance tax rate to 7.5 percent for oil and gas produce via fracking. That’s up from about 20 cents per barrel paid now, Hagan said. The bill proposes directing 5 percent of the total to local governments, with counties in eastern Ohio shale areas receiving more. Another 1.5 percent would be used for regulatory efforts, including hiring more inspectors and capping orphan wells. And the remaining 1 percent would be set aside in a Severance Tax Trust Fund that could not be tapped until 2020, when investment earnings could be used for job training and related efforts. “Instead of gifting yet another tax break to the wealthy, we should focus on restoring the resources to local governments so they can provide basic services to their citizens,” Hagan said. “HB 212 is a balanced, reasonable approach to leveraging our state’s natural resources in order to assist our local governments, ensure the integrity of the environment is not threatened by oil and gas activity and invest in the future
economy of our shale region.” Hagan’s bill is not supported by House Republicans, who are moving their own severance tax package in a different committee. That legislation, HB 375, would set lower tax rates on existing conventional wells and increasing rates on those drilled horizontally, with excess proceeds devoted to plugging abandoned wells and potentially cutting income tax rates. HB 375 has the support of industry groups. Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.
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Smith Evergreen trees add beauty to any property Tesa Strasser Dix Communications Many residents in Carroll and surrounding counties have enjoyed the benefits of great economic development over the last few years via the oil and gas industry. Unfortunately some of those same residents are disappointed with the unsightliness of parts of their properties. Smith Evergreen has a solution that will enhance the appearance of well or pipe line sites 12 months a year. Evergreen privacy screens could be the answer. Smith Evergreen has been a national wholesale nursery supplier for over 65 years. Their great trees are also available to the public at the same wholesale prices. They take great pride in their high survival rates and dig trees fresh for every order. All of the nursery stock is grown and nourished in some of northeastern Ohio’s best clay soils, which means our customers get healthy, vibrant trees that will continue to thrive when planted in the new location. Smith can do the planting or just deliver ordered trees. Since they have been growing trees for so long, they have the capability to supply nearly any size tree needed. Their tallest trees can reach heights of over 25’. Not many nurseries in the country can supply healthy trees of such height. Their specialties include balled and burlapped trees, field potted trees, seedlings and transplants, plus fresh-cut Christmas trees. Smith Evergreen Nursery is known for high quality trees, outstanding service and competitive pricing. In order to be up to date on current deals, special offers, pictures and events, sign up for the company e-newsletter, Tree Mail, at www.smithevergreen.com. Three generations of the Smith family are involved in the company and work hard every day to make certain their trees represent the family’s high standards and exceed the customers’ expectations. They take great pride in their trees and in the wide variety of evergreen species grown. It all began as a small Christmas tree business back in the 50s started by Grandpa RP Smith. Eventually, RP was joined in the business by his son, Mike. The small operation soon
grew to selling over 100,000 Christmas trees each year. Smith Evergreen began growing its wide variety of evergreen trees when customers recognized quality and started asking for more than just Christmas trees. They currently grow over 20 species of pine, spruce and fir trees. Smith Evergreen plants 50,000 – 100,000 evergreen seedlings or transplants each year and currently have over one million trees rooted firmly in 2,000 acres of clay soils of verdant, lush Carroll County. They employ 20-40 people, depending on the time of the year. These employees are all dedicated to growing, caring for, shipping and delivering quality Smith Evergreen trees to customers all over North America. For more information see smithevergreen.com. or contact Jim or Ian Smith at 330-866-5521 or toll free at 1-800-521-7328. Look for this company on Facebook, too.
Above: This back yard privacy screen was recently created by Smith Evergreen. In a few years the trees will hide the fence completely. Left: Smith Evergreen employees plant a property line with white spruce.
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P
ORTAGE Co. -- First responders from two Portage County fire departments recently participated in the Responding to Oilfield Emergencies training workshops hosted by the Ohio Oil and Gas Energy Education Program (OOGEEP). Fire Chief Mark Garvin, Assistant Fire Chief Charles Campbell, Lt. Paul Long, Bobby Abbuhl, Nick Boros, David Dunn Jr., Thomas Grund and Robert McKain with the Palmyra Township Fire Department and Capt. David Duncan, Fire Chief Derek Reed, Asstistant Fire Chief Frank Glista, James Anthony, David Bruce, Aaron Fox, Michael Glista and Kim Lochner with the Paris Township Fire Department were among the 109 participants from 33 Ohio fire departments to learn how to respond to potential drilling and production site emergencies and other response resources over the two-day training workshop offered by OOGEEP. OOGEEP created and implemented the nation’s first Oilfield Emergency Response Training Program. Since 2000, more than 1,000 Ohio firefighters from around the state have participated in this training program, along with firefighters from seven other states. “It’s in OOGEEP’s best interest to provide the training these first responders need and to keep up with the demand due to increased drilling in Ohio’s shale plays,” said Rhonda Reda, executive director of OOGEEP. “Our members, Ohio’s natural gas and crude oil companies, have a stake in protecting the communities where they are located and see the value investing in this topnotch training program.” The training course provides background information and practical guidelines to assist responders in communicating and evaluating a potential emergency site, and the ability to respond to both drilling and production emergencies. The hands-on training portion includes “live burns” utilizing both crude oil and natural gas props. The training program is funded 100% by Ohio’s natural gas and crude oil operators.“While there have been very few natural gas and crude oil emergencies in Ohio, often times fire departments are called to respond to non-emergency incidents simply because there is a lack of
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knowledge or unfamiliarity of equipment, standard practices and advanced technologies used by Ohio’s industry,” notes Charlie Dixon, lead fire instructor, and OOGEEP’s safety and workforce administrator. “The fact is not all incidents reported are emergencies, and we hope that this program will mitigate those types of reported incidents that could tie up community resources that may be needed elsewhere.” “This is by far one of the best training programs I have been involved in,” said Brent Gates, the New Concord fire chief who is an Ohio certified fire instructor and one of the instructors for the training. “The information and hands-on training we provide makes a difference to so many communities who are impacted by the development of oil and gas.” “Ohio’s oil and gas industry has always committed to safety and we believe it is our responsibility to help educate Ohio’s firefighters,” said Eric Smith, OOGEEP’s board chairman and an Ohio oil and gas operator. “In Ohio, we have drilled over 275,000 wells, and advanced technology will continue to make these operations safer and environmentally sound, while helping Ohio produce more of our own energy needs.” “It’s really a service we are providing to the emergency responders, but it also significantly benefits local communities,” said Ron Grosjean, OOGEEP board member and chairman of the Firefighter Training Committee. “We want the public to be confident that both the industry and emergency responders are well trained.” The workshops are endorsed by the Ohio Fire Chief’s Association, the Ohio Society of Fire Service Instructors and the Ohio Fire and Emergency Services Foundation. Upon completion of the training, each firefighter can also receive up to 12 CEU contact credit hours and an optional college graduate credit through Hocking College. The mission of OOGEEP is to facilitate educational, scholarship, safety and training programs; to promote public awareness about the industry; and to demonstrate to the general public the environmental, energy and economic benefits of Ohio’s independent natural gas and crude oil producers. OOGEEP is not funded with any taxpayer dollars.
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February 2014 Edition - Dix Communications
Zane State opens Advanced Science Center in Zanesville
Judie Perkowski Dix Communications
Z
ANESVILLE — The sign outside announcing the new facility is temporary and the landscaping won’t begin until spring, but the new two-story Zane State College Advanced Science and Technology Center in Zanesville is nothing short of spectacular. Opening remarks at the dedication and ceremonial ribboncutting on Jan. 8 by Pamela Jira, Zane State’s executive director of institutional advancement and college foundation, welcomed attendees to the official grand opening of “our beautiful, new cutting-edge designed, low maintenance, energy-efficient Advanced Science and Technology Center. “It has been a very busy but energizing year, driven by the passion of like-minded people. This center will offer many more opportunities to better serve our families, where it all begins. The Center offers families a chance to improve their education, which leads to higher income and improves the quality of their lives,” she said. Joining Jira and Zane State President Dr. Paul Brown in the celebration were college alumni, local dignitaries and the general public who witnessed Brown’s elation during his brief remarks. “This is truly a Thanksgiving Day. A dream I have had for a long time,” said Brown. “This learning center will better serve
our students, faculty and the community by incorporating science, technology, engineering, medicine and math career programs, the fastest growing programs at the college. Approximately 80 percent of degrees awarded by Zane State are in STEMM fields. “As we go forward with two new state-of-the-art facilities in Zanesville and Cambridge, we need to keep in mind our growth and success is the result of hard work, careful planning and informed decision-making. “Thanks to everyone for this beautiful, ultra-modern building and a beautiful future for our students. Thanks to our faculty, businesses and the community for your confidence and support. Together we are building a vibrant community, one student at a time.” The agenda also included remarks by Dr. Chad Brown, provost and executive vice president at Zane State, John Matesich, chair of the College Foundation board of directors, and John Knight, chair of the College Board of Trustees. “I am honored to have had the opportunity to pursue such a worthy and exciting vision with Dr. Brown, the college’s boards, staff and community partners,” said Knight. “And, I am proud to represent a college with one of the best track records for student success in the nation. It now has the resources to have a profound impact on the vibrancy of the region. Congratula-
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tions, not just to Zane State and Dr. Brown, but to our community.” It was only one short year ago that ground was broken for the project that actually began in 2008 with a proposal from Brown to the school’s board of directors to build a regional learning center that will attract high-achieving students, and ensure the region will be attractive to businesses considering locating in the area, help retain and expand existing businesses and contribute to economic growth. The “Building a Vibrant Community” campaign, initiated to fund both buildings, increase scholarships and purchase instructional equipment, was unveiled in 2010, the largest fundraising campaign in the school’s 44-year history. The project cost for each building is approximately $11 million. The first floor of the 43,000 square-foot Science Center is occupied by a dozen laboratories, state-of-the-art classrooms, lecture hall, student lounge, administrative and faculty office suite, conference rooms and a windmill court. In addition to more classrooms, the second floor houses several more labs and a roof garden. The building is designed to create a learning environment comparable to what students will encounter in the real world. Classes will begin in the new building on Monday, Jan. 13. For more information about the college or the Building a Vibrant Community campaign, contact Pamela Jira at (740) 588-1205 or pjira@zanestate.edu. jperkowski@daily-jeff.com
Dix Communications - Gas & Oil
February 2014 Edition
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Above: Cutting the ceremonial ribbon at the dedication of the Zane State College Advanced Science and Technology Center in Zanesville last week, From l to r, Al Brown, Vice President for Business Services Zane State College; Gene MacDonald, Zane State College Trustee, John C. Matesich, III, Chair, Zane State College Foundation Board of Directors and Campaign Co-Chair; Dr. Paul Brown, President, Zane State College; John W. Knight, Chair, Zane State College Board of Trustees and Campaign Co-Chair; Dr. William Stewart, Campaign Co-Chair; Dr. Chad Brown, Provost and Executive Vice President, Zane State College; Brandon Hess, Zane State College Foundation Board of Directors and Campaign Co-Chair; Pamela Jira, Executive Director of Institutional Advancement and College Foundation. Left: New Zane State College Advanced Science and Technology Center in Zanesville opens for classes Monday, Jan. 13.
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Partners gather ‘Coats for Kids’
H
OPEDALE — MarkWest Energy Partners and contractors constructing the Hopedale fractionation facility made the holidays a little brighter for disadvantaged kids in the Ohio Valley. Partnering with The Salvation Army and WTOV’s Coats for Kids program, MarkWest, its contractors and their employees, all pitched in to raise a total of $15,396.93 to help keep kids warm this winter, marking it the largest contribution in the program’s history. The WTOV Coats for Kids program is now in its 20th year raising funds for The Salvation Army, providing charitable contributions directly to disadvantaged school-aged children, and enabling them buy a brand new winter coat to keep warm. Initially, the group’s goal was to raise $5,000 for the program, however, early contributions allowed MarkWest and its affiliates to look well beyond its initial target. “From the go, the enthusiasm the staff demonstrated made it
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clear we were going to be able to exceed our initial goals,” said David Ledonne, MarkWest VP of Operations, Utica. “This is a great organization and a great opportunity for anyone to contribute to our community, and we’re very happy to have the opportunity to do so. Knowing these kids will be warm throughout the winter really means a lot to all of us.” In addition to MarkWest, Hartman and Hartman, McCarls, Bruce Merrilee, Kelchner Energy Services, Selinsky Force, CBC Services, Mac Safety, Bill Jones, Elite, Persimmon Group, Mannik and Smith, Mac Safety, Joe Safety, Optimized Process Design, CB&I, ASH-CTS and ERB all contributed to the successful effort. “From the companies to the employees, this was a collaborative effort from everyone to help give back to the community,” said Ledonne. “For all parties involved, this effort was a ‘no-brainer’.”
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February 2014 Edition - Dix Communications
Southern Zone Edition
4,000 jobs, $5 billion invested Mahoning County Seeing Impact Shawn Bennett Energy In Depth - Ohio
M
AHONING CO. -- In 2010, when Vallourec Star announced the building of a new carbon-alloy tubulars and line pipe facility, residents of the Mahoning Valley likely knew very little about how important shale development was going to be for the region. Since then, over 25 oil and gas projects have made the Mahoning Valley their home, contributing to at least 4,000 jobs and investments totaling more than $5 billion. “The people of the Valley have embraced the oil and gas industry because they have seen a significant turnaround in our economy – much of it from shale development and the growth of its supply chain,” said Tom Humphries, President & CEO of the Regional Chamber. The economic turnaround can also be seen by recent announcements by Pennant Midstream, which just began operations of its Hickory Bend Cryogenic Natural Gas Processing Plant in Southern Mahoning County. The $375 million project employed many local labor organizations and helped generate significant revenue for the region during the construction phase of the facility. Local staple Dearing Compressor and Pump just announced its own plans to expand its plant for the third time in 10 years to keep up with local demand. The company, which opened in 1945, now employs over 180 residents, up from just 45 in 2004. In addition to these two entities, other Mahoning Valley oil and gas-related projects include 10 companies that announced supply chain expansion or attraction projects; six companies expanding or establishing new service operations for the industry; five significant pipeline or processing plant projects; and four investments by oil and gas producing companies, according to the Youngstown-Warren Regional Chamber. All told, these projects have contributed to a 17 percent increase in sales tax apportionment since 2010 and a reduction in unemployment by more than five percent. “It’s amazing to me that we still have a small segment of population, the anti-oil and gas people, making false state-
ments that the industry is not generating jobs in the Valley,” said Humphries with the Regional Chamber. “That couldn’t be further from the truth. We’ve got to stop these people in their tracks when they continue to make ridiculous statements like that.” Humphries is referring to the two failed attempts at passing community “bill of rights” measure, which were both antibusiness and anti-jobs. The head of the local Plumbers and Pipefitters union even called the proposal a “jobs killer.” Unfortunately, those opposed to oil and gas development didn’t get the message the first two times when it was rejected, and they will be trying to kill local jobs yet again in the spring. Even though there is this small, out-of-touch segment of the population opposed to economic growth, there is nothing that can take away the great strides the Mahoning Valley has made since 2010. These projects have garnered national media attention for spurring economic recovery in the region, and last year Forbes Magazine ranked the Youngstown-Warren Metro area the fifth fastest growing industrial area in the country. Things are looking up in the MahoningValley. Jobs are being created, money is being invested and the economy is moving in the right direction.
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February 2014 Edition - Dix Communications
Southern Zone Edition
University report shows strong growth Shawn Bennett Energy In Depth - Ohio
I
n the latest Ohio Utica Shale Gas Monitor from Cleveland State University, researchers re-examined the overall impacts of Utica Shale development, finding strong growth in sales tax revenues, a rapid growth in permitting and activity, job creation, and even a redefining development boundaries. All of this activity has boded well for eastern Ohio, as companies are investing billions of dollars in a portion of the state that has needed an economic boost for quite some time. Following the data made available by companies and the Ohio Department of Natural Resources, the latest Ohio Utica Shale Gas Monitor changed its area of focus and redefined the Utica Shale activity area to more accurately represent where development will take place in the near future. From the report: • “Drilling and permitting have shifted in recent months, indicating the industry is migrating activity south and east, focusing its areas of investment. The number of counties with strong shale activity has gone to eight from 15, and moderate activity has gone to five from 30.” (p. 3; emphasis added) • “Strong shale counties have the highest potential for producing commercial amounts of NGLs. The strong shale counties are along Ohio’s eastern border in the Northern Appalachian portion of the state: Belmont, Carroll, Columbiana, Guernsey, Harrison, Jefferson, Monroe, and Noble.” (p. 4) • “Moderate shale counties are to the north and immediate west of the strong counties. Mahoning, Portage, Stark, Trumbull, and Tuscarawas are the five moderate counties.” (p. 4) The activity in the strong shale counties is progressing at a substantial rate, too. With Chesapeake as the clear leader in the development of the Utica Shale, other companies like Gulfport Energy, Antero Resources, PDC Energy, Rex Energy, CONSOL and Hess are all ramping up their Utica activity. More from the report:
• “By the end of 2012, the number of horizontal wells drilled in the strong shale counties had increased by 758% from the previous year, while the number of wells permitted had climbed by 482%.” (p. 16; emphasis added) • “An additional 164 wells were permitted during the second quarter of 2013 alone, an increase of 321% compared to the same quarter of 2012.” (p. 2) In the strong shale activity counties, the report found sales tax also rapidly increased. These collections can be connected to companies developing wells, building natural gas processing facilities, landowners receiving lease and royalty payments, money being spent by companies and workers in the community, and increased hotel receipts for lodging of skilled workers. This revenue, it should be stressed, helps plug public budgets and benefits all Ohioans. • “Second quarter sales receipts equaled to $1.3 billion in collection versus $1.16 billion in receipts in the second quarter in 2012 marking a 12.2% growth in collections. The moderate shale counties also saw significant growth in sales tax receipts increasing by 10.7%.” (p. 4; emphasis added) • “Strong Shale counties experienced a 20.4% increase in total sales activity in 2012 ($15.5 billion), compared to 2011 ($12.8 billion).” (p. 14; emphasis added) • “Sales receipt growth was robust in strong shale counties through the first quarter of 2013, with growth at or above 10% during each of the first three months. This continues to be the fastest growth in the state.” (p. 14; emphasis added) When discussing employment numbers, the report did point out that employment in strong shale counties was slower than anticipated with employment dropping by about a half percentage point in the first quarter and eight-tenths of a percent in the second. However, the report noted several factors played significant roles in the limited employment calculations, including the unfortunate loss of jobs in non-shale industries:
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University report shows strong growth • “Growth in shale jobs is being offset by employment losses in other industries.” (p. 14) • “The employment data analyzed here reflects total employment in Ohio counties and does not specifically focus on sectors or industries (i.e. manufacturing, construction, transportation) that are more likely to be more directly impacted by shale development.” (p. 22) • “As others within the shale arena have noted, Ohio’s workforce is still being trained and prepared to work within the oil and gas industry.” (p. 22) Without the first two external factors, growth would have been much more significant in the strong shale counties. As we move forward, the Ohio Oil and Gas Energy Education Program has already identified 70 programs that colleges, vocational schools and career centers have developed to train Ohio residents to pursue a career in the oil and gas industry. The training from these institutions will help our residents secure even more of these high-paying jobs as we move forward. Additionally, the development of the Utica Shale has provided a significant savings for Ohio’s residential and commercial consumers. Since the Utica Shale began to take off in the third quarter of 2011, natural gas prices have stayed lower than the national average. The CSU report found Ohio’s prices were 85 cents lower than the national average and $1.12
lower for commercial consumers. These substantial savings were much appreciated last week, as we all tried to keep warm in subzero temperatures. As noted in the report, Ohio remains to be in the exploration phase of development, and pipelines and other infrastructure continue to be built out, providing good jobs and economic stimulus. As Ohio moves into the production phase, increased benefits from shale development will only continue to grow statewide. Whether it is sales tax revenues for the counties, employment in the industry, or lower energy prices, Utica Shale development is a clear for Ohio and its workers.
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Dramatic Utica Production Revealed by Amendment to Ohio’s Oil and Gas Reporting Statute David J. Wigham Attorney
O
n June 30, 2013, Ohio Governor John Kasich signed House Bill 59, Ohio’s budget bill for fiscal years 2014 and 2015, into law. Among many other things, House Bill 59 amended Ohio’s oil and gas production reporting statute found at Ohio Revised Code § 1509.11. Under the old statute, all producers were required to submit annual oil and gas production statements with the Ohio Division of Natural Resources (ODNR) on or before March 31 of the year following production. In light of the recent shale boom, annual reporting requirements were not frequent enough to allow the public, including landowners, investors, competitors and other interested parties, to track Utica production in the expanding boom. In response to public outcry, House Bill 59 amended Revised Code §1509.11. Under the revised statute, the owner of “any horizontal well that is producing or capable of producing oil and gas” must file a production report with the ODNR no later than 45 days following the end of each calendar quarter. The amended statute became effective September 29, 2013. Thus, quarterly Utica production reports for the third quarter of 2013 were submitted and recently made public. Production data for the fourth quarter of 2013 will be due in February 2014. (Data from the first two quarters of 2013 will be released under the old annual reporting requirements and are therefore due no later than March 31, 2014). The production data submitted for the third quarter of
2013 revealed a drastic increase in horizontal well production. During the third quarter alone, 245 Utica Shale wells produced 1.34 million barrels of oil and 33.6 billion cubic feet of natural gas. This is in contrast to the ODNR’s 2012 annual report that only 85 Utica wells, which produced 636,000 barrels of oil and 12.84 billion cubic feet of natural gas during all of 2012. In other words, Ohio Utica production for the third quarter alone was triple the production for all of 2012! This drastic increase follows the rapid expansion of drilling in 2013. As of January 4, 2014, ODNR reported that 1,037 permits for horizontal wells had been issued. Of this amount, 369 wells were permitted, 401 were drilled or in the process of being drilled, and 251 wells were producing, with the remainder being plugged and abandoned. Given Ohio’s new quarterly reporting requirements for all horizontal wells, the public will be able to keep better tabs on the rapid expansion of the Utica Shale boom in eastern Ohio. This will benefit landowners, investors, service providers, taxing authorities, as well as other interested parties, all of whom will have access to more current production information in the areas of the boom. David J. Wigham is a second generation oil and gas attorney at the law firm of Critchfield, Critchfield & Johnston, in Wooster, Ohio, with more than 20 years of experience in the industry. He is also the current chair of the Natural Resources Committee of the Ohio State Bar Association.
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February 2014 Edition - Dix Communications
Ohio House considering disclosure requirement Marc Kovac Dix Capital Bureau
C
OLUMBUS — Energy companies would owner.” be required to disclose annual sales figThe bill is comparable to laws already in place in other ures and other information to landown- states and is modeled after legislation in Texas and Pennsylers for oil and gas produced from their properties, vania, Carney said. under legislation being considered in the Ohio “The standardization of royalty statements is a great first House. step in helping people understand their royalty payments,” he HB 400 was introduced by Reps. John Carney (D-Colum- said. “The intent of this bill is to ensure Ohioans are being bus) and Jack Cera (D-Bellaire) to give property owners a correctly paid what they are legally owed, nothing more, nothbetter idea of how their royalty payments are determined - ing less. This is a common sense update to what is, at base, an and whether a leasee is paying what’s really due. accounting and clerical procedure.” “... Ohio does not require a standardized royalty payment statement,” Carney told members of the House’s agriculture Marc Kovac is the Dix Capital Bureau Chief. Email him at committee. He added later, “Just as your pay stub includes de- mkovac@dixcom.com or on Twitter at OhioCapitalBlog. tailed information about payments and deductions in every check, you would expect the royalty statements, another form or payment, also would include information about deductions Specializing in… Equipment & Flatbed impacting your profits.” Horse & Livestock Enclosed Cargo The legislation has its first committee hearing Jan. 21. Utility & Landscape Dump & Aluminum HB 400 requires royalty payments to disclose the total
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amount and value of oil and gas produced, severance and other taxes paid and other details of the producer’s business. “Currently, royalty statements routinely show no deductions being made when, in reality, numerous deductions are built into the price received from the purchaser,” Cera said in testimony to the agriculture committee. “With an increase in the severance tax on the horizon that includes an income tax reduction for any severance taxes paid by a landowner, a concise format is necessary for reporting this data to the property
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J Wright and Sons in Newcomerstown announces the purchase of Richard Rutherford LLC in Caldwell on Jan. 1. Owners Ben Wright and Rick Wright are both excited for the new adventure and the opportunities that are in the area. RJ Wright and Sons is a family-owned and operated business that started in the 1960s by Dick Wright. They are proud of their rich and diverse heritage. Their goal is to provide our customers with the highest quality products delivered in the most efficient manner at the lowest possible price. Whether you need fuel to heat your home, fuel for your business needs, transportation of petroleum products, they are sure to meet your needs. RJ Wright and Sons has a strong commitment to their customers. They are a major contributor to the communities in which they do business. RJ Wright belongs to many trade and business organizations, and they also contribute to many community organizations. RJ Wright and Sons is proud to distribute BP and Marathon fuels. The company, headquartered in Newcomerstown, employs nearly 24 individuals.
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RJ Wright and Sons purchases Caldwell business
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February 2014 Edition
Pictured, l to r, are Richard Rutherford and Ben Wright.
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February 2014 Edition - Dix Communications
Opinion Piece:
Open For Business Mark Watson Environmental Defense Fund
T
he Center for Sustainable Shale Development has put out the Open For Business sign – a key milestone in this innovative effort to up the game on environmental protection in shale gas development. The question now is, will energy companies step up? We hope so. CSSD is an unprecedented collaboration – bringing together environmental groups, philanthropic organizations and energy companies to develop performance standards for reducing environmental impacts from shale gas production, and setting up a system so gas producers can have their operations audited and certified against those standards. CSSD isn’t a substitute for effective regulation. Strong rules and robust oversight is a nonnegotiable bottom line. But we like the idea of upping the ante. Why not have a program that recognizes companies for going beyond the regulatory minimums and doing more to protect communities and the environment? These companies are tough competitors – so let’s make environmental performance part of what they compete on. I like to use the U.S. Green Building Council’s LEED™ program as an analogy for what CSSD could be. Through its certifications, the LEED™ program has had an enormous influence in making sustainably built homes and offices a growing part of the market. At the same time, developers who build to LEED™ standards find they get higher rents, more attractive financing and better insurance rates. What if we could do the same thing here? What if we could introduce a whole new set of economic incentives for improving environmental performance in shale gas production? … It’s worth a shot. Now, the key pieces of the program are in place. The group has developed 15 initial performance standards that represent leading practices for protecting air, water and climate (new standards will be added over time, and each of the standards will be reviewed every year to make sure they continue to set a high bar for performance). A top-notch auditing firm has been hired. And a detailed set of protocols is in place to make
sure the company audits are rigorous, consistent and transparent. So, CSSD is open for business, and any operator in the Appalachian region can apply for certification. At the outset, four companies have said they will put their operations under the microscope and seek certification – Chevron, CONSOL Energy, EQT and Shell. That’s a great start. But it’s only a start. The real proof will be in what comes next. Will these first four companies get the kind of recognition they’re after? Will mineral owners and communities start asking operators if they’re CSSD certified before they open their doors to development? Will other companies see the advantage to committing themselves to meet a higher bar and come through the door to get certified? We hope so. That’s why we’ve invested the time to build a rigorous certification process in collaboration with energy companies, regulators, CSSD auditors, environmental groups and other stakeholders. We recognize that this project is no panacea for solving all the challenges associated with shale energy production. But the potential is there for raising the bar on performance – and if we can do that, it will have been worth the effort.
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February 2014 Edition - Dix Communications
Welcome to Pipeline 101 forests,and deserts. These same pipelines provide fuel to generate electricity and fertilizers to increase crop production. Pipelines also collect crude oil from many rural, and some not so rural, areas and deliver that crude oil to refineries and chemical plants to create all the products that come from petroleum and petrochemicals.
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ipelines are really the energy lifelines of almost every daily activity. Pipelines play a role in everyone’s lives and are essential to the nation’s industries. Yet few people are aware of the work done by the country’s 200,000mile petroleum pipeline network that delivers the products that are integral parts of America’s economy. It is a network that delivers the nation’s crude oil and petroleum products (such as gasoline, jet fuel, home heating oil) reliably, safely, efficiently, and economically. Why Pipeline 101? The term “101” refers to introductory courses on any given topic. “Pipeline 101” seeks to be your introductory resource for energy pipeline information, expanding in the future to provide more comprehensive content to meet the needs of various audiences. We invite you to explore the pipeline industry, from the steel in the ground, to the people and technologies that ensure reliable energy delivery and safe operation. The information in Pipeline 101 has been compiled from industry, government and research experts and published materials. More information on the liquid petroleum pipeline industry is continually being developed and added to Pipeline 101. Energy to You Everyone knows where their local gas station is, your home may be warmed by heating oil or natural gas and many homes use natural gas for cooking. But did you know that those products — gasoline, home heating oil and natural gas — travel long distances from refineries and natural gas plants to communities all over the nation through underground pipelines? These pipelines are one of the unsung heroes among the many utilities — water, sewer, telephone lines, oil pipelines and natural gas pipelines — tucked under our streets, through neighborhoods and communities, and stretched across farms,
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Seven Rules for Oil and Gas Asset Protection Planning Frank A. McClure Attorney
I
thought for article which is starting a new year that it would be appropriate to look at seven rules to follow for asset protection planning when dealing with Oil and Gas Assets or for that matter, any type of assets. There’s a gambling rule of thumb that says that you should systematically take your chips off the table as you win them, so that your potential for losses stays small. Asset protection planning is all about taking chips off the table in good times, so that you still can walk away from the table a winner no matter what happens in bad times. You don’t have to be a brain surgeon to be sued, because an average person often gets caught up in difficult situations, and thus if you have something to protect then the topic of asset protection should at least cross your mind. Therefore, here are seven rules you may want to think about: 1. Start Planning Before a Claim Arises Many things you can do will effectively provide asset protection before a claim or liability arises, but few things will afterwards. That’s because what you do after a claim rises could be undone by what is known as a “fraudulent transfer” rule and therefore the planning is ineffective. 2. Late Planning Usually Backfires Asset protection planning after a claim arises is apt to make matters worse; think of it as getting a flu shot while you have the flu, and the shot itself making you even sicker than you would have been. 3. Asset Protection Planning Is Not A Substitute for Insurance Asset protection planning should not be a substitute for liability insurance, but rather should supplement insurance. Good insurance in fact is one of the first steps to protecting yourself and your assets, but it may not be your last. 4. Personal Assets Are For Trusts; Business Assets Are For Business Entities Business entities such as corporations, partnerships and LLCs are meant to be vehicles for commercial operations, not to act as personal piggybanks. When personal assets are placed into a business entity, the potential for the entity to be pierced by a creditor on some theory or another increases. The place to put personal assets is in its own separate entity. 5. Too Much Control Can Be a Bad Thing Good asset protection planning attempts to reach a balance between having sufficient control so that the assets do not disappear, but at the same time not so much control that a creditor can successfully argue that the debtor and the asset protection structure are effectively one-and-the-same. 6. Asset Protection Planning and Tax & Estate Planning Don’t Always Mix Often asset protection planning and estate planning work togeth-
er, but sometimes they are at odds and what might be a good idea for estate planning may not be such a hot idea for asset protection. 7. If You Can’t Explain It, It May Never Work Asset protection plans can become so complicated that you cannot understand and explain how the assets are held or how those assets were transferred. It is important that you have some understanding of what you have created and how it works. Because of the above, you can see that you should be talking and working with an attorney who concentrates in the area of asset protection. Remember, the above are but seven rules you need to think about, there are more that can come into play. With anything that is of a legal technical nature, you can think of it as if you are walking through a mine field not knowing where the mines are located. It is much better to have someone directing you around the mines who know where and what the mines look like. If you would like more information about asset protection and estate planning or to review my past articles concerning asset protection, please go to www.fmcclurelaw.com.
Frank A. McClure Counsellor-At-Law Melissa M. Wilson Counsellor-At-Law Life is complicated enough, protecting your family and your assets shouldn’t be. Call us to register for our free workshop
“The 7 Threats to Your Family Security” Thursday, February 13th, 1:30 pm Thursday, February 27th, 1:30 pm
Serving Southeast Ohio to protect your oil and gas proceeds. Counselling. Solutions. Peace of Mind.
Frank McClure & Associates 1009 Steubenville Ave. Cambridge, Ohio 43725 (740) 432-7844 www.fmcclurelaw.com
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February 2014 Edition - Dix Communications
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Natural gas locomotives may prove cheaper, cleaner Josh Funk Associated Press
O
MAHA, Neb. (AP) — The diesel-burning locomotive, the workhorse of American railroads since World War II, will soon begin burning natural gas — a potentially historic shift that could cut fuel costs, reduce pollution and strengthen the advantage railroads hold over trucks in long-haul shipping. Rail companies want to take advantage of booming natural gas production that has cut the price of the fuel by as much as 50 percent. So they are preparing to experiment with redesigned engines capable of burning both diesel and liquefied natural gas. Natural gas “may revolutionize the industry much like the transition from steam to diesel,” said Jessica Taylor, a spokeswoman for General Electric’s locomotive division, one of several companies that will test new natural gas equipment later this year. Any changes are sure to happen slowly. A full-scale shift to natural gas would require expensive new infrastructure across the nation’s 140,000-mile freight-rail system, including scores of fueling stations. The change has been made possible by hydraulic fracturing
mining techniques, which have allowed U.S. drillers to tap into vast deposits of natural gas. The boom has created such abundance that prices dropped to an average of $3.73 per million British thermal units last year — less than one-third of their 2008 peak. Over the past couple of years, cheap gas has inspired many utilities to turn away from coal, a move that hurt railroads’ profits. And natural gas is becoming more widely used in transportation. More than 100,000 buses, trucks and other vehicles already run on it, although that figure represents only about 3 percent of the transportation sector. The savings could be considerable. The nation’s biggest freight railroad, Union Pacific, spent more than $3.6 billion on fuel in 2012, about a quarter of total expenses. But even under the most optimistic scenario, there’s no way all of that diesel will be replaced. Railroads and locomotive makers are looking primarily at ways to retrofit existing machines to burn a mix of diesel and natural gas because that will be the quickest and easiest way to adopt the new technology. Locomotive makers have not yet set the prices of their retrofit kits, but railroads expect they will be cheaper than a new
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Natural gas locomotives may prove cheaper, cleaner
locomotive costing roughly $2 million. Using both diesel and natural gas also offers some advantages over using natural gas alone. The diesel can provide the spark needed to ignite natural gas without redesigning locomotive engines, and the diesel helps provide horsepower. Railroads are planning to use liquefied natural gas, which is not as readily available as other forms of gas because it must be cooled to minus 260 degrees. That step adds to the price, but the amount varies based on how the process is done. “It’s so early in this that we’re still working to understand the potential savings,” said Louis Renjel, vice president of strategic infrastructure at CSX railroad. The projected cost comparisons do not include the millions of dollars railroads would have to spend on a network of natural gas fueling stations along their tracks. That expense won’t be clear until after the tests, when railroads decide whether to build their own liquefaction facilities or just store fuels. “There are a lot of factors that aren’t accounted for yet,” said Michael Iden, who oversees locomotive engineering at Union Pacific. Locomotive makers say natural-gas engines could also significantly reduce emissions compared with diesel locomotives, but the potential cost savings is the biggest reason the rail industry is eager to make the change. From the outside, natural gas locomotives will not look much different, but they will have to pull a tank car behind the engine to carry enough liquefied natural gas, or LNG, to have a similar range to diesel units. Both of the major locomotive manufacturers, General Electric and Caterpillar’s Electro-Motive Diesel, have developed prototypes that will be tested by Union Pacific, CSX, BNSF and Canadian National railroads beginning this year. If the projected cost savings are realized, railroads would improve their profits and better compete against trucks, where they already hold the advantage on deliveries longer than 500 miles. “They can lower their costs further and widen their advantage over trucks,” Edward Jones analyst Logan Purk said. But he sounded one note of caution: Natural gas prices have always been volatile, and they could climb if gas exports expand significantly and more industries switch over to natural gas. Another issue is the design for the fuel tender cars that will haul liquefied natural gas for the locomotives. That’s something that will have to be standardized because the major freight railroads regularly pass locomotives back and forth to keep trains moving efficiently. Once they agree on a design for the tenders, the railroads may have a hard time getting enough of them because tank car manufactures are already struggling to keep up with demand. Customers sometimes wait up to three years for new tankers. This isn’t the first time railroads have flirted with natural
gas locomotives. Both Union Pacific and BNSF spent several years working on the concept in the late 1980s and 1990s, so the industry isn’t starting from scratch. Industry officials say the rising natural gas prices that helped scuttle their earlier experimentation with the fuel should not pose a problem this time because significant new sources of natural gas are now available. Peter Roosen is CEO of VeRail, which is developing natural gas conversion kits for low-horsepower locomotives, such as those used in rail yards. “I think we’re going to have reasonably priced natural gas for decades,” Roosen said, “if not for a generation or two.” ___ Follow Josh Funk online at www.twitter.com/funkwrite Photo: This photo from Sept. 14, 2013, which was provided by General Electric, shows an experimental natural gas locomotive in Erie, Pennsylvania. The diesel locomotives that became freight railroads’ workhorse after World War II could be replaced in the next few years by units like this that burn a mix of natural gas and diesel. The switch could likely reduce fuel costs and pollution significantly while allowing railroads to take advantage of abundant domestic supplies of natural gas. But many questions about using natural gas locomotives remain unanswered, and those could easily derail the idea. (AP Photo/General Electric, Mark Fainstein)
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Southern Zone Edition
February 2014 Edition - Dix Communications
The Challenge T
he Challenge Program, Inc., a regional non-profit organization designed to provide high school students with incentives for success, kicked off the program with an orientation assembly at Martins Ferry High School in Belmont County on Jan. 10, and also at Harrison Central High School in Harrison County at an orientation assembly Jan. 30. The program partners with businesses to motivate high school students to excel, both in and out of the classroom. Hess Corporation is the sponsor of the program at Harrison Central High School and Martins Ferry High School. Fifteen students from each school in the sophomore, junior, and senior classes who excel in the areas of attendance, academic excellence, academic improvement, the STEM award,
and community service this school year, will receive an award in the amount of $200 for their efforts. The total amount of the awards is $3,000. Since 2003, through the generous support of businesses, foundations, and individuals, The Challenge Program, Inc. has been introduced to more than 330,000 students and checks totaling more than $2 million have been presented to over 8,000 high school students in more than 100 high schools in Pennsylvania, West Virginia, and Ohio. For additional information about The Challenge Program, Inc., contact either Mary Dreliszak, director of program development at 724.984.0860, or Barbara Grandinetti, executive director of The Challenge Program, Inc., at 814.533.7401.
OHIO WELL ACTIVITY
by the numbers
MARCELLUS SHALE
16 4 7 0 8 0 0 35
Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Plugged Total Horizontal Permits
UTICA SHALE
3 5 6 Wells Permitted 92 Wells Drilling 309 Wells Drilled 0 Not Drilled 2 91 Wells Producing 0 Inactive 0 Plugged 1048 Total Horizontal Permits
Data as of 01/18/14 Source: Ohio Department of Natural Resources
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February 2014 Edition
TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES
1. Carroll County 370 2. Harrison County 157 3. Columbiana County 98 4. Monroe County 86 5. Belmont County 77 6. Noble County 74 7. Guernsey County 64 8. Jefferson County 39 9. Mahoning County 29 10. Portage County 15 Tuscarawas County 15 Trumbull County 15 11. Stark County 13 12. Washington County 10 13. Coshocton County 5 14. Holmes County 3 Morgan County 3 Muskingum County 3 15. Knox County 2 16. Ashland County 1 Astabula County 1 Geauga County 1 Medina County 1 Wayne County 1 WELL SITES IN VARIOUS STAGES: PERMITTED, DRILLING, DRILLED, COMPLETED, PRODUCING, PLUGGED SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF 01/18/14
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February 2014 Edition - Dix Communications
Southern Zone Edition
Consol Energy donates towards fencing: CONSOL Energy made a $5,000 donation to Caldwell Exempted Village Schools to help fund the school district’s new safety and security initiatives. The donation will be directly used to purchase and assemble a four-foot high fence around the students’ playground and recess area. Pictured at the Jan. 15 check presentation are Bob DeJaegher, CONSOL Construction manager, Utica, and Caldwell Elementary/Middle School Principal Rebecca Johnson.
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ODNR releases production results C
OLUMBUS — Production results from Ohio’s horizontal shale wells for the third quarter of 2013 have been released by the Ohio Department of Natural Resources (ODNR). The report lists 285 wells, 245 of which reported production results. Forty wells reported no production as they are waiting on pipeline infrastructure. The 245 wells produced 1,332,477 barrels of oil and 33,606,075 Mcf (1,000 cubic feet) of natural gas. Of those 245 wells: • The average amount of oil produced was 5,439 barrels. • The average amount of gas produced was 137,168 Mcf. • The average number of days in production was 55.
at 1,249,739 Mcf during 89 days of production. Passed in Sub. House Bill 59, and effective Sept. 29, operators of horizontal oil and gas wells in Ohio were required to submit production data quarterly instead of annually. Companies must submit the data to ODNR 45 days after the end of the quarter. The increased reporting provides ODNR, the industry and the public with more accurate and timely information regarding Ohio’s oil and gas industry. Production data for the first and second quarters of 2013 will be made available as part of the 2013 oil and gas report. Moving forward, ODNR will release quarterly data online after it is compiled and verified for accuracy. All horizontal production reports can be accessed at: http://oilandgas.ohiodnr.gov/production. The highest producing oil well was the Gulfport Energy Ohio law does not require the separate reporting of Natural “Boy Scout” well in Harrison County at 41,617 barrels of oil Gas Liquids (NGL). Gas reporting totals listed on the report during 70 days of production. The highest producing gas well include NGLs. was the Gulfport Energy “Stutzman” well in Belmont County
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You’ll love the den we build for you. Your cat will love the den she thinks you built for her.
MeLinda Ricci and Nina from Sandusky, Ohio. A couple of cool cats.
Customization isn’t just about fixtures, finishes and personal taste. It’s about how you’ll live day to day. Since 1973 we’ve built thousands of homes for thousands of families on their own land. And none of our homes are ever created the same. Because none of our families are. Explore dozens of customizable floorplans at WayneHomes40.com or call the Delaware Model Center at 866-848-3727
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