October 2015 Gas & Oil Magazine-Ohio edition by Gannett NEO

OCTOBER 2015 • A FREE MONTHLY PUBLICATION

What Lull? Gas & Oil Goes to the fair The Future is in Gas & Oil New Programs in the industry

YOUR BUSINESS HERE To Advertise in Gas & Oil Magazine Contact: ALLIANCE Jeff Kaplan 330-821-1200 ASHLAND Mark Kraker 419-281-0581 CAMBRIDGE Kim Brenning 740-439-3531 RAVENNA Kelly Contini 330-298-2012 Joe Gasper 330-541-9401 WOOSTER Kelly Gearheart 330-264-1125

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October 2015

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Gas & Oil

October 2015

Ohio Edition

Table of Contents 4

OHIO CONCLUDES REVIEW OF MONROE COUNTY WELL PAD FIRE

$100M TO BE SPENT ON STUDY IN BELMONT COUNTY

CHAMBERS DISCUSS PROPOSED EPA REGULATIONS

OPINION: TAKE LEADERSHIP ROLE IN ARCTIC COUNCIL

UPCOMING EVENTS

WHAT DOES THE MAN BEHIND THE SCREEN (IN THE WIZARD OF OZ) HAVE TO DO WITH PROTECTING YOUR OIL AND GAS INTERESTS?

SEN. PORTMAN: KEEP DEVELOPMENT GOING

GOING LONG, A GOOD IDEA?

SHALE INSIGHTTM 2015: WHAT THEY ARE SAYING

OOGEEP’S ‘ROCKING IN OHIO’ EDUCATES AND EXCITES

PUBLISHERS Andrew S. Dix ASDix@dixcom.com G.C. Dix II GCDixII@dixcom.com David Dix DEDix@dixcom.com

EXECUTIVE EDITORS Ray Booth RBooth@dixcom.com Rob Todor RTodor@dixcom.com Lance White LWhite@dixcom.com Roger DiPaolo RDipaolo@dixcom.com

REGIONAL EDITORS

ODNR RELEASES SECOND QUARTER PRODUCTION NUMBERS FOR OIL AND GAS

MILLENIALS PREPARE FOR INDUSTRY CAREERS

CONFERENCE AGENDA ANNOUNCED FOR PIOGA’S EASTERN OIL & GAS CONFERENCE AND TRADE SHOW

ROVER PIPELINE AWARDS $34M CONTRACT

Cathryn Stanley CStanley@dixcom.com Niki Wolfe NWolfe@dixcom.com Judie Perkowski JPerkowski@dixcom.com Erica Peterson EPeterson@dixcom.com

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ADVERTISING Kim Brenning Cambridge, Ohio Office KBrenning@dixcom.com 740-439-3531 Jeff Kaplan Alliance & Minerva, Ohio Office JKaplan@dixcom.com 330-821-1200 Kelly Gearhart Wooster & Holmes, Ohio Offices KGearhart@the-daily-record.com 330-287-1653 Janice Wyatt National Major Accounts Sales Manager JWyatt@dixcom.com 330-541-9450 Diane K Ringer Kent, Ohio Offices DRinger@recordpub.com 330-298-2002 Jeff Pezzano VP Advertising Sales & Marketing Kent Ohio Office JPezzano@dixcom.com 330-541-9455

DIGITAL MEDIA MANAGER

Brad Tansey BTansey@dixcom.com

LAYOUT DESIGNER Elizabeth Horne

October 2015

OHIO WELL ACTIVITY

ODOT, OHIO STATE PATROL SAY ‘SAFETY FIRST’

ROAD AGREEMENT HELPS PIPELINE PROJECTS

WHAT LULL?

UTICA STATUS UPDATE

LANDOWNER ROYALTY AUDITS: AN EMERGING TOPIC IN THE UTICA SHALE BOOM

GAS & OIL COMES TO THE COUNTY FAIR

STUDENTS CAN GET OIL, GAS INDUSTRY TRAINING AT ZANE STATE COLLEGE

MANY OHIO INSTITUTIONS OFFER INDUSTRY EDUCATIONAL OPPORTUNITIES

OPINION: IRAN WILL EXPORT OIL. WHY NOT THE US?

DROP IN MARKET IS CONCERNING

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY

STARK STATE: TRAINING FOR A FUTURE IN PETROLEUM TECHNOLOGY

BUILT FOR THE OIL PATCH

EHorne@the-daily-record.com

Gas & Oil

October 2015

Ohio Edition

Ohio concludes review of Monroe County well pad fire T

he State of Ohio has completed its extensive review of a well pad fire in Monroe County from June 2014, and is in the process of assessing penalties for the loss of aquatic species, spill cleanup and water quality violations. Both the Ohio Environmental Protection Agency (Ohio EPA) and Ohio Department of Natural Resources (ODNR) conducted reviews of the incident at Statoil’s Eisenbarth well pad. “Last year’s well pad fire in Monroe County was an unfortunate incident that negatively impacted habitat in the surrounding area while forcing nearby residents to leave their homes,” said Ohio EPA Director Craig W. Butler. “Thankfully, there were no injuries and we were able to learn from the incident and take significant steps to strengthen statewide response efforts.” ODNR’s investigation concluded that 1) fluids left the well pad, which is a violation of state law; 2) the company failed to maintain operational control on the well pad; and 3) the company disposed of brine fluid in an unapproved method. It was confirmed the fluids from the well pad depleted oxygen levels in the stream, which negatively impacted aquatic life. Further, the fluids leaving the well pad violated several Ohio EPA water-quality standards designed to protect aquatic life. “Ohio is demonstrating how state agencies can collaborate to solve problems as our oil and gas industry continues to grow,” said ODNR Director James Zehringer. ”We’ll continue working to improve our safety protocols to be as efficient and effective as possible when responding to future incidents.” Since the incident, Ohio EPA and ODNR have implemented a number of policies to strengthen efforts to respond to oil and gas-related emergencies, including: • Requiring onsite, unified incident command for first responders and private companies, in order to ensure the safety and pro-

tection of individuals, resources and the environment. • Forming and activating within ODNR an Emergency Response Team of highly trained experts that can be deployed at any time to work alongside Ohio EPA and local responders to address oilfield incidents. The team includes biologists, hydrologists, radiologists and engineers. ODNR responds to spills on the well pad, and Ohio EPA focuses on off-site releases. • Holding nine regional tabletop training exercises with state and local responders and industry representatives to practice command processes and priorities in order to make leaders more effective and aware of available resources. One such resource is the improved notification system to ensure that when an incident is reported, it will be routed to all necessary agencies and first responders. • Overhauling ODNR’s oil and gas databases to track oilfield incidents and corrective actions. • Executing new Memorandums of Understanding between ODNR, the Public Utilities Commission of Ohio, Ohio EPA and the Ohio Department of Commerce to help Ohio’s state agencies improve incident response, including the full disclosure with Ohio EPA of chemicals used by any private company covered by trade secret and to establish broader authorization for the Department of Commerce to inspect oilfield structures at ODNR’s request. Both ODNR and Ohio EPA are pursuing civil penalties to address violations that occurred as a result of the incident. After the penalties have been assessed and collected, the State plans to provide as much as $75,000 to local first responders to aid in their efforts to respond to future incidents. Once Statoil fully complies with state penalties, it can work with ODNR toward restarting production at its Eisenbarth well pad.

Gas & Oil

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October 2015

$100M to be spent on study in Belmont County Marc Kovac - Dix Capital Bureau

OLUMBUS — A Thailand company will invest $100 million to determine whether to move forward with an ethane cracker facility in Belmont County — a significant next step in bringing the project to fruition. PTT Global Chemical, Gov. John Kasich and representatives of JobsOhio announced the plan Sept. 3, calling it “one of the biggest development projects that Ohio’s seen in quite some time.” “Building an ethane gas cracker in eastern Ohio has the ability to be a real game changer for our economy as we make our state a hub for the energy industry,” Kasich said in a released statement. “The company’s decision to start the engineering phase of this potential project is an enormous step toward making this project a reality.” A cracker plant would process ethane from natural gas produced in eastern Ohio’s emerging shale oilfields, processing it into plastics. The project ultimately would mean a multi-billiondollar investment, plus thousands of related jobs. “This is a big, big deal... ,” said Republican Congressman Bill Johnson, who represents the area where the cracker facility would be located. “... It is a really big deal for the folks that live

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and work in eastern and southern Ohio.” State Sen. Lou Gentile (D-Steubenville) added, “We’re talking thousands of construction jobs, the type of investment that would revitalize the region, would create living-wage jobs for families, for workers, and I think would help strengthen our communities. ... We’ve been really hungry for good-paying, long-term sustainable living-wage jobs ... today’s announcement puts us a lot closer to that finish line.” The project isn’t a done deal, however. PTT’s new investment will go toward a “detailed engineering design” for the proposed facility, which would be located at the former FirstEnergy plant in Mead Township. Agreements already are in place for the purchase of the site, and the engineering firm has been hired to do the work, said John Minor, president and chief investment officer at JobsOhio, the nonprofit that spearheads the state’s economic development efforts Kasich said it could take more than four years to build the facility. “This is not some little hut we’re building,” Kasich said. “This is a big-time operation.” Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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Gov. John Kasich and PTT Global Chemical President and Chief Executive Officer Supattanapong Punmeechaow announce the company’s plans to invest $100 million toward determining the feasibility of establishing an ethane cracker facility in Belmont County.

Gas & Oil

October 2015

Ohio Edition

Chambers discuss proposed EPA regulations Judie Perkowski - Dix Communications

OLUMBUS — The U.S. Environmental Protection Agency is pushing forward a new national ozone standard, from its current level of 75 ppb (parts per billion) to between 65-70 ppb, primarily to curb its appetite for hydrocarbon energy — gas and oil — and increase use of renewable energy like wind and solar. The Clean Air Act Amendments passed by Congress requires the U.S. EPA to develop and implement regulations for the responsible management of ozone-depleting substances in the United States. Under the Act, the EPA has created several regulatory programs to address numerous issues, including ending the production of ozone-depleting substances. And, since 1980 air quality has improved almost 70 percent on average, nation wide. The EPA is currently reviewing the National Ambient Air Quality Standards for ground level ozone. And, according to a panel of experts at a recent conference, the clock is ticking for all 50 states. The Impacts of Ozone Regulations on Jobs in our Community Conference at the Hilton Columbus at Easton, sponsored by the U.S. Chamber of Commerce, the National Black Chamber of Commerce and the Ohio State Black Chamber of Commerce, gave a diverse group of panel members a venue to explain the proposed standard, the importance of the ozone, and why we should care about more rules and regulations that have no obvious consequences — at least at the moment. Moderating the event was William L. Kovacs, senior vice president of Environment, Technology and Regulatory Affairs for the U.S. Chamber of Commerce. Kovacs said the current proposal of 65-70 ppb is directly tied to President Obama’s Clean Power Plan, which calls for increased solar and wind projects, phasing out coal as a source of energy generation. With natural gas next on the list. “So, it is no coincidence that the EPA’s new proposal is in support of the President’s Clean Power Plan,” said Kovacs. “The ozone standard proposal will become the new ozone standard Oct. 1. There are two ways to try and stop the proposal: Sue the EPA in court, or talk to your governors. They control the fate of their state. They can tell the EPA that they just cannot afford it. “The EPA asked for public comment about the standard reduction in 2014 until May of 2015 — a requirement by Congress before any regulations are changed — and received an avalanche of opposition from all levels of government and business, including state EPAs, legal experts, state and national business groups and associations, and the gas and oil industry.” America’s natural gas boom has been a rare economic bright

spot, and even President Obama likes to take credit for it. But as his term winds down, the administration is waging a war of regulatory attrition to raise drilling costs and reduce its competitive advantage over wind and solar power. “Everyone should be in compliance with the EPA’s last standard change in 2008, before issuing a new one,” said Harry Alford, President and CEO of the Ohio State Black Chamber of Commerce and keynote speaker at the event. “We have done a good job so far. From 1980 to 2013, according to the U.S. EPA, ozone levels were reduced by 33 percent. “Ohio has just met two parts of the 2008 standard of 75 ppb, and has a year extension on the third part, in line with many other states. But, lowering the standard to 65 ppb could cause huge areas of the entire country to fall into non-attainment or non-compliance, that will result in staggering losses to economic development, jobs and the U.S. Gross Domestic Product. “ The GDP is one the primary indicators used to gauge the health of a country’s economy. It represents the total dollar value of all goods and services produced over a specific period of time. “The bottom line is new construction and expansion of existing businesses would be very difficult in non-attainment areas. Less jobs, less money, less opportunities for roads, bridges, and dozens of other state and federally-funded projects. “According to the National Associations of Manufacturers, Approximately $22 billion in GDP will be lost from 2017-2040; 22, 914 lost jobs per year; $840 million in total compliance costs and $440 drop in discretionary income per year.” Also on the panel Steve Hightower, president and CEO of Hightowers Petroleum Co., said there are ways of getting there [to be in compliance with the new proposed ozone standard], but definitely not now. “The way things are for the oil and gas industry ... is the worse possible time to be enacting new regulations, especially before a comprehensive report is presented about the results of the 2008 regulations.” The National Association of Manufacturers recent survey finds that by a wide margin, Ohioans think the bigger problem for their area is less economic growth and job opportunities caused by regulations, rather than lower air quality caused by pollution. Ohioans overwhelmingly have a high opinion of the quality and cleanliness of their air. Sixty-five percent of Ohio voters rate their air as excellent or good. The American Petroleum Institute and other industry groups rallied against tighter federal standards on ozone emissions at the U.S. Chamber of Commerce forum in Columbus last week.

Gas & Oil

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The panelists for the ‘Impacts of Ozone Regulations on Jobs in our Community’ conference this week at the Hilton Columbus Hotel at Easton. From l to r, William L. Kovacs, senior vice president, U.S. Chamber of Commerce Environment, Technology and Regulatory Affairs and moderator of the event; Steve Hightower, president and CEO, Hightowers Petroleum Co.; former Congressman Ed Wynn; Khary Cauthen, American Petroleum Institute, senior director, Federal Relations; and Jenn Klein, president, Ohio Chemistry Technology Council.

The rules, which are expected to be finalized by Oct. 1, would drive most cities into non-compliance status, hampering economic growth and key infrastructure projects, the group said, including the controversial Keystone XL Pipeline. America’s natural gas boom has been a rare economic bright spot, and even President Obama likes to take credit for it. But as his term winds down, the administration is waging a war of regulatory attrition to raise drilling costs and reduce its competitive advantage over wind and solar power. jperkowski@daily-jeff.com

Harry Alford, l, president and CEO, National Black Chamber of Commerce, and Rafeal Underwood, president and CEO, Ohio State Black Chamber of Commerce, introduced Alford at the ‘Impacts of Ozone Regulations on Jobs in our Community’ conference this week in Columbus. Alford was keynote speaker at the Black Chambers first official conference addressing the U.S. Environmental Protection Agency’s proposed reduction in the ozone standard.

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Gas & Oil

Ohio Edition

October 2015

Opinion:

Take Leadership Role in Arctic Council Cong. Bill Johnson (R-Marietta - Ohio 6th District)

hances are, most Ohioans are not thinking of the Arctic Circle. But something big is going on up there, something that could set our nation on a course for serious energy discovery, and sustain Ohio’s own energy economy far into the future. Later this month, President Obama is traveling to Alaska to join leaders of our neighboring Arctic nations and those with a vested interest in the Arctic, as part of the GLACIER conference. This is a golden opportunity for the United States to show leadership, as our nation begins our new role as Chair of the Arctic Council. The Arctic Council is an intergovernmental forum that includes Canada, Iceland, Denmark, Sweden, Norway, Finland, Russia, and the United States. As Chair of the Council for the next two years, America can demonstrate leadership in the safe and responsible development of Arctic energy resources. This opportunity starts this summer, as Royal Dutch Shell begins exploration in the Chukchi Sea. Right now, the massive vessels that will lead this drilling effort are moving into place. The Obama administration, citing “rigorous safety standards” and a long review process, granted approval for this project. Watchers of energy news probably saw the ironic spectacle of the Seattle “kayaktivists” who were protesting Shell’s efforts to get exploratory drilling underway. I say ironic, because the paddling protestors were in kayaks mostly made of plastic materials from oil-based petrochemicals. Despite years of federal delays and the actions of environmental extremists, the company is prepared to explore leases held in the Outer Continental Shelf. To prepare for this vast undertaking, Shell has spent more than $5 billion, and will draw on several decades of experience in Arctic regions. The company has said its top priority is a commitment to safe and environmentally responsible operations. This energy initiative in the Arctic is critical not just to increase domestic energy supply, but also to reassert and maintain our

nation’s leadership role in the world. The Arctic region of Alaska alone is home to the world's largest remaining untapped gas reserves and some of the largest undeveloped oil reserves. Tapping these reserves and getting the Trans-Alaskan Pipeline flowing at peak capacity again would create thousands of jobs, add billions to our economy, and reduce our dependence on unreliable foreign sources of energy. All we lack to gain access to 27 billion barrels of oil and 132 trillion cubic feet of natural gas is leadership. Let me emphasize something about the Trans-Alaskan Pipeline. Did you know that many of the compressors on this pipeline came from Ohio? This Arctic-region pipeline is proof positive that Arctic energy matters greatly to Ohio, and not just to increase supply, but also to sustain our current energy economy. Arctic exploration has the potential to sustain an average of 55,000 new jobs for 50 years, with nearly 100,000 jobs at peak employment. These jobs will exist throughout the nation, but especially in Ohio, because of our place as a premier manufacturer of supplies critical to the oil and gas industry. Our steel industry, as well as compressor, bearings, and tubular manufacturers, to name just a few, will be well positioned to participate in Arctic energy production. In addition, our state is a world leader in polymer research and products, which depend on petroleum as a feedstock. Ohio’s Utica and Marcellus shale regions are making serious contributions to America’s growing energy supply, thanks to repurposed technologies to improve hydraulic fracturing and horizontal drilling. In fact, we've surpassed Saudi Arabia to become the world's largest producer of petroleum. Right now, our nation has the opportunity to lead in the Arctic. My sincere hope is that this opportunity is not squandered. I hope we work with our Arctic Council neighbors, to show our citizens at home and to observers all around the world that economic development and environmental stewardship are not antagonistic, but complementary goals.

Gas & Oil

www.GasandOilMag.com

October 2015

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Gas & Oil

October 2015

Ohio Edition

WHAT DOES THE MAN BEHIND THE SCREEN (IN THE WIZARD OF OZ) HAVE TO DO WITH PROTECTING YOUR OIL AND GAS INTERESTS? Frank McClure - Attorney

n this article I want to discuss something, really someone that has become important in the asset protection world, when using irrevocable trusts. In fact I use them even in revocable trusts, for the reason that these trusts will become irrevocable at some point. In fact it used to be that you would create your trust, name some trustees and hope in the future for the best for all of eternity. But, increasingly, clients aren't leaving it to luck. They are appointing a "trust protector," someone given broad power to reshape your trust, if it is necessary over time. Trust protectors, first came into use for offshore trusts many years ago and have gained traction over the past decade in the United States as trust vehicles have become more diverse and complex and especially for irrevocable trusts for asset protection. A trust protector is defined as an independent third party or institution given the authority to perform certain duties with regard to a trust to insure that the wishes and intent of the grantor are fulfilled. Letâ&#x20AC;&#x2122;s say one of the beneficiaries you named grows up to be a spendthrift or a drug addict. If the trustees wanted to cut him out of the trust, they would have to petition a court, spending money and time and with no guarantee of success. A trust protector could simply step in and do the job. A trust protector could also replace a lazy trustee, move the trust to a state with new, more trust-friendly, laws or even dissolve the trust, distributing the assets to beneficiaries outright. In short, the trust protector can do almost anything to make sure your intentions are fulfilled. What if there is a change in the law and the trust administratively will not function, call on the trust protector? A trust protector can be especially valuable for use in irrevocable trusts, which, by definition, cannot be changed by a grantor or the trustees. Remember we don't know what the world will look like or what the relationship will be between trustees and beneficiaries or where beneficiaries reside. There are all sorts of possible nuances. A legacy trust, the domestic asset protection trust in Ohio, which could continue in perpetuity, may need a trust protector to make sure the grantor's wishes and intentions are followed. That is no easy feat, given the longevity of the trust; plenty can change when the time frame could be "forever." As the years go by, the present trustees didnâ&#x20AC;&#x2122;t necessarily know the grantor of the trust and because they have a standard as a fiduciary may want to take actions that are not

what the grantor intended. At this point the trust protector makes an appearance like the man behind the screen in the Wizard of Oz! Hence the title to this article. The trust protector is not like a trustee who has a day to day responsibility to take care of the trust. Like the man behind the screen, the trust protector just shows up when needed to protect the intentions of the grantor. I would be remiss if I did not give credit to Attorney James Hardgrove who originally came up with the analogy of the man behind the screen, as we were doing a presentation together in Dallas, Texas, about trust protectors, for the National Network of Estate Planning Attorneys. It is difficult to image a type of trust that would not need a trust protector. Consider revocable living trusts (RLT). This is a trust that you create for your own benefit while you are alive. You are the trustee of your own trust, and the beneficiary of your own trust. You are in total control and can use the trust assets freely, and make whatever changes that you wish while you are alive. So why would an RLT need a trust protector? The problem is, you will eventually die. When you die, your heirs then become the beneficiary of the trust, and whoever you have appointed as the successor trustee in your trust document will become the acting trustee. Remember the RLT is now an irrevocable trust. Therefore, the same reasons I have stated about, now become things which are now pertinent to what started life as an RLT! So who should the trust protector be? Like the trustee, it should be somebody that you place your trust in. The trust protector should generally be an attorney or a CPA. Why you may ask? Because they are trusted advisors and they should know something about trust laws. Remember, they are coming out from behind the screen and making a decision and then returning behind the screen. The trust will naturally set forth what the trust protector can and cannot do. This is necessary because a trust is a contract and all the pertinent powers and provisions must be contained in the document. So if you are wanting to protect your oil and gas interests, it is important to understand what you need in your asset protection and estate planning documents. It is important that you counsel with an attorney who concentrates their practice in the asset protection area of the law. If you would like more information about asset protection and estate planning or to review my past articles concerning asset protection, please go to our firm website at www.fmcclurelaw.com.

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Gas & Oil

October 2015

Sen. Portman: Keep development going Bobby Warren - Dix Communications

OOSTER — Though gas and oil pric- get involved and to provide another layer of bureaucracy.” This es have been dropping, U.S. Sen. Rob will make it harder and more expensive for companies to proPortman said he believes they are still duce gas and oil. high enough to keep development going and to crePortman is a member of U.S. Senate Energy and Natural Reate new jobs. sources Committee, and he said he views part of his job is to proThe Cincinnati-area Republican was in Wooster over the sum- tect Ohio's energy interests. mer to meet with members of the chambers of commerce from Overall, gas and oil exploration and production has been a very Wooster and Orrville. good thing for the state, but it needs to be done right, Portman “We've got some great opportunities here in the state of Ohio said. He believes Ohio’s regulations are solid. in energy,” Portman said. “The Marcellus and Utica shale finds “Let's do it right and not cut corners,” he said, so it will benefit have given us, right here in Ohio, the ability to be an energy state Ohio for decades. again.” Portman said he believes the country can be more energy effiDespite the state having a long history of gas and oil explora- cient. He wrote the bipartisan Energy Efficiency Act of 2015 that tion and production, Ohio has been a net importer of gas and oil. was signed into law in April of 2015, and is the sponsor of the EnThe natural gas and wet gas are very valuable, he said. The in- ergy Savings and Industrial Competitiveness (ESIC) Act, which dustry has produced between 150,000-200,000 jobs in past several reduces energy consumption by incentivizing energy efficiency years. “Prices are low right now, which is good for consumer, but technologies in residential, commercial and industrial sectors, acnot so good if you are looking to put a new well in,” Portman said. cording to his website. But, “Prices are high enough to keep it going and high enough to He said it was time to approve the Keystone XL pipeline. He is keep creating jobs. hopeful the country will become energy independent in the next “My concern is the federal government keeps threatening to few years.

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Gas & Oil

Ohio Edition

October 2015

Going Long, A Good Idea? Don Gadd - Landman

erhaps you are one of the many wishing you had taken advantage of the boom in oil and gas these last several years. Like many booms money seemed to be flowing from endless streams and lease money kept going up and up. Yea, it did. But, like I pointed out, there comes a day when it ends and in most cases this end comes without warning and all your hopes and dreams of big money seem dashed. Though this appears to be true out of the current “fairway” of activity, there is activity still going on in the oil patch. It’s just that it has transferred to the “mid-stream” part of the business. In short, that’s the part of the business that is needed to frac the drilled wells and separate out the fluids in these wells with wet gas. If you are one of the adventurous types that have driven around where these wells are being drilled, you can see the rigs

10179445

MINERALS // LEASES

and all their associated equipment while drilling is going on. But, in order to put it into production, the wells are fracked with huge amounts of water, facilities to handle the production on site need to be put in place and the “cracking” plants needed to separate the oils from the gas have to be built . Plus, many more pipelines (the true arteries of the business) have to be built in order to get the gas and oil products out. This process takes a lot of material, man power, and machinery to accomplish all of these. True, the courthouses and motels are missing many of the paper pushers working the records over the last several years. The out of town companies have left or significantly reduced, but there is still many in this area making a living and continuing to work in the mid-stream. This part of the business may affect you also as many more wells need fracked. Water hauling and disposal have picked up and there is going to be even a greater need for pipeline as these wells come on line and no stream of trucks can keep up with the production off some of these wells. So, have faith. There may be some exposure for you out there yet. Even though this business is the only one I know of that makes you less the better you get at it. As production gets better prices fall. It’s crazy and it may be several years before it gets hot again, but it will (I have lived through several of these cycles). Current talk from those within the industry is that it may three to five years before pricing get sufficiently high enough to warrant drilling and other operations again. If this is so then there won’t be a lot of leasing and the fever to lease will die down somewhat. Then what? It appears there is a committed effort to go long in this area with purchasing of the oil and gas mineral rights. I have bought and sold a few tracts myself and believe this will become the trend to look for in the next several years as prices continue to be lower. Generally, the price for these minerals reflect at or near the high prices offered for leasing a couple of years ago and in some cases may be the last true high prices you will see for the oil and gas assets on your property as leasing will become more targeted and the frenzy seen these last several years will die down. So, should you sell? There are some parameters to consider in deciding whether you should and that includes more than just money. Going long may be a good idea not only for the buyer, but also for you in the short run. I will discuss that next time.

Gas & Oil

8 www.GasandOilMag.com Gas & Oil August 2015

Ohio Edition October 2015

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Gas & Oil

October 2015

Ohio Edition

SHALE INSIGHT™ 2015: What They Are Saying Marcellus Shale Coalition

HILADELPHIA -- With shale development’s benefits extending throughout the Commonwealth, it was a natural fit for Philadelphia to host SHALE INSIGHT™ 2015 – a leading annual industry conference. Through continued natural gas infrastructure development, Philadelphia is in the midst of an energy hub transformation that will create important and long-term consumer and manufacturing benefits. Throughout the two-day conference – which attracted more than 1,300 attendees – the expert panels, keynote speakers, and engaging discussions covered topics ranging from consumer energy savings to cleaner air and American energy security.

Here’s what they’re saying: SHALE DRIVES MANUFACTURING GROWTH • Shale Leads to Revival of Del. Co.’s Marcus Hook: Betting big on predictions of inexpensive and plentiful natural gas liquids in the Marcellus Shale, the facility that once made Marcus Hook an oil town is turning its attention to gas. Close to 200 permanent jobs have returned. A floundering economy – slowly – is forging ahead. … After purchasing the Sunoco refinery in early 2013 for $60 million, Sunoco Logistics began moving forward with a plan, called Mariner East 1, to use existing pipeline to transport natural gas liquids from Western Pa. to Marcus Hook. Construction crews were brought in and – gradually – the facility, renamed the Marcus Hook Industrial Complex, began to see vitality that resembled the once-booming oil empire. … The Phila.-based company is currently acquiring approvals for another pipeline, called Mariner East 2. … The company is considering adding another pipeline to the plan, and eventually, it hopes to build a propane cracker. … In total, the $3 billion projects could add as many as 440 permanent jobs and have a one-time economic impact of $4.2 billion, according to a study by Econsult Solutions. Annually, ongoing operations could generate as much as $150 million. (Phila. Inq., 9/14/15) • Emerging Phila. Energy Hub to Create, Sustain Jobs: The Shale Insight 2015 conference at the Convention Center, spon

sored by the MSC, is placing an emphasis on the industry’s ties to the Phila. region as a potential energy hub, if the pipelines to deliver shale-gas products can be built. “We’re trying to shed a light on the skin in the game that Phila. has with shale,” said David Spigelmyer, the coalition’s president. … The coalition has enlisted support from area labor unions, whose members are building pipelines or constructing the Sunoco Logistics terminal in Marcus Hook. (Phila. Inq., 9/15/15) • Affordable Energy Attracts Businesses to Pa.: At the annual Shale Insight conference of the state’s gas industry leaders, officials urged a sharp increase in pipeline capacity, which they said would enable the creation of a so-called “energy hub” in Phila. where an influx of cheap, plentiful gas would attract manufacturers andspark an economic resurgence in the region. Speakers also called on manufacturers and other heavy energy users to consider Phila. as a location where a newly plentiful supply of gas would be available in addition to a skilled workforce, brownfield sites, good transportation links to the Northeast, and port access to export markets. … Some 85% of PECO’s gas now comes from the Marcellus Shale, up from almost none only five years ago, and low prices resulting from Pa.’s huge reserves of shale gas have saved the typical customer $1,000 a year. … James O’Toole, an attorney who is heading a needs assessment as part of the team’s effort, said the energy hub is based on the idea that low energy prices will attract businesses to Phila. (StateImpact, 9/16/15) • An “Ideal Energy Terminal”: Representatives of industry, labor, and government said Pa.’s natural gas production could represent a tremendous economic opportunity for Phila. at the end of the pipeline. … Energy-hub advocates say Phila.’s proximity to northeastern U.S. and European markets, and an abundance of vacant industrial land tied into rail and port facilities, make it an ideal location as an energy terminal, and also for energy-intensive manufacturing. “You need new consumption, and the place to do that is in Phila.,” said Philip Rinaldi, chief executive of Phila. Energy Solutions. “You have a long history of manufacturing, and an inventory of brownfield sites that are just dying to convert themselves into value-added businesses.” (Phila. Inq., 9/16/15)

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Gas & Oil

October 2015

PIPELINES DELIVER SHALE’S BROAD BENE- the region’s role in this charge. Sunoco Logistics is set to accept at its Marcus Hook terminal many of the NGLs MarkWest is proFITS • Infrastructure Growth Delivers “Low-Cost and Plentiful Marcellus Gas”: The new focus for the shale region is getting that cheap gas to market and making new markets for gas and liquids where none exist. … State and local officials, union leaders, chambers of commerce and end users that have bet big on Phila. — Sunoco Logistics; Phila. Energy Solutions; the plastics maker Braskem SA; and utilities such as UGI Corp. and PECO Energy Co., will be talking up a future of using low-cost and plentiful Marcellus gas and liquids to make value-added products such as plastics, fertilizer, custom fuels, steel, concrete and glass. (SNL, 9/15/15) • Pipelines “Ensure Continuous Access to Low-Cost Energy”: The buildout of pipelines needed to move natural gas from Pa.’s shale fields to markets could last another 20 years, the head of one of the state’s largest utilities said Wednesday. “That’s probably a two-decade period to put the infrastructure in place to ensure continuous access to low-cost energy,” UGI Corp. CEO John Walsh told several hundred energy industry leaders during an annual conference. … A revived energy hub that has developed here at the end of crude oil rail lines and natural gas liquid pipelines “is basically a taste of what is yet to come,” said Philip Rinaldi, CEO of Phila. Energy Solutions. “This is a region that already is acting as a funnel for energy products.” (Tribune-Review,9/16/15) • Pipelines Connect Abundant Natural Gas Resources with Consumers, Manufacturers: If one word was mentioned more than any other during this year’s Shale Insight gas industry conference this week it was pipelines. Speeches and sessions over two days here in the Pa. Convention Center revolved around where, how and mostly why to build the pipes necessary to connect the still-growing number of shale wells to consumers. … Randy Nickerson, executive vice president at MarkWest Energy Partners [spent] about 30 minutes outlining efforts to process and move NGLs such as ethane and propane through its plants. Many of the speakers and panelists that preceded Nickerson talked up

cessing in the shale fields. “We need to make sure that happens,” state Chamber of Business and Industry head Gene Barr said about adding to the site with manufacturers and other big users. (Tribune-Review, 9/17/15)

SHALE STRENGTHENS AMERICA’S NATIONAL SECURITY • NYC Mayor Giuliani: Shale Essential to Strengthening America: Delivering the keynote at the 2015 Shale Insight conference, [fmr. NYC mayor Rudy] Giuliani contended that natural gas development was essential both to growing the domestic economy and improving the country’s geopolitical standing. … He said that the shale boom, which was benefiting Pa. drillers all the way to the New York border, could provide a considerable number of jobs. … He stressed that the success of the industry was critical not just for the domestic economy, but for the country’s stature abroad. He called for President Obama to sign an executive order easing the export of natural gas, saying that opening the spigots would take away Russia’s ability to “threaten and extort” the U.S., as well as change the balance of power with Iran. (Law360, 9/16/15)

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Gas & Oil

October 2015

Ohio Edition

OOGEEP’S ‘Rocking in Ohio’ Educates and Excites “Rocking in Ohio” helps participants learn about pipelines, product transportation and geology. Mark Bruce - OOGEEP Communications Director

RANVILLE, Ohio – The Ohio Oil and Gas Energy Education Program (OOGEEP) recently completed a successful run of the science-based stage show “Rocking in Ohio.” Returning to several county fair stages, the show engaged children and their families through interactive games and music. The event explains how Ohio’s oil and gas industry uses science and technology to produce the energy Ohioans use every day. “Rocking in Ohio” demonstrates how science, technology, engineering and math (STEM) principles are crucial to Ohio’s oil and gas development. The performance takes guests on a scientific path from formation to exploration, drilling and ultimately to creating the thousands of every day products made from these resources. STEM facts presented throughout the program demonstrate to guests the importance of science to the industry and also help to educate children and families about the more than 75 careers available. “Now more than ever, we must broaden our education and outreach efforts in order to explain to Ohioans how crucial our industry is to them,” said Marty Miller, OOGEEP Board Chairman and Sr. VP of Operations for Alliance Petroleum Corporation. “We are always looking for creative ways to tell people what we do and ‘Rocking in Ohio’ is a perfect vehicle to spread that message of science and technology using fun, music, games and prizes.” Recently, “Rocking in Ohio” took over stages at the Shaleabration in Cambridge, Monroe County Fair in Woodsfield, Wayne County Fair in Wooster, Tuscarawas County Fair in Dover and Coshocton County Fair in Coshocton. OOGEEP started the “Rocking in Ohio” program in 2013 through a former partnership with Radio Disney. Recognizing the need to continue to educate the public in exciting and innovative means, OOGEEP resurrected the program through new partnerships. “OOGEEP was determined not to let a few vocal anti-development opponents deprive Ohio’s families and students of an interactive, science-based program,” said Rhonda Reda, OOGEEP Executive Director. “Many teachers and industry experts enjoyed the message shared during our ‘Rocking in Ohio’ performances so we felt it was important to bring it back to Ohio’s communities.” Programs like “Rocking in Ohio” are important public education tools that assist OOGEEP and Ohio’s oil and gas industry in reaching a broader audience and explaining the vital role energy production plays in the lives of every Ohioan.

Gas & Oil

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ODNR Releases second quarter production numbers for oil and gas Ohio’s oil and gas production continues to rise to record numbers

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OLUMBUS, OH - During the second quarter of 2015, Ohio’s horizontal shale wells produced 5,578,255 barrels of oil (bbls) and 221,860,169 Mcf (221 billion cubic feet) of natural gas, according to figures released today by the Ohio Department of Natural Resources (ODNR). These numbers break all previous production reporting records for the last 100 years. Production continues to rise as oil increased by more than 3.1 million barrels and gas by more than 133 billion cubic feet compared to the second quarter of 2014. TOTALS (1ST & 2ND QTR) 2014 Barrels of oil: 4,423,381 Mcf of gas: 156,132,032

2015 INCREASE YEAR TO YEAR 10,010,559 126% 405,445,420 160%

These figures represent a 126 percent increase in oil production compared to the first half of last year while natural gas production rose 160 percent. For further comparison, only 11 million barrels of oil and 450 Mcf of gas were produced in all of 2014. The new report lists 1,020 wells, 978 of which reported production, an increase of 94 percent from the 504 wells reporting production halfway through 2014. Forty-two wells reported no production as they are waiting on pipeline infrastructure. Of the 978 wells reporting production results: TOTALS (1ST & 2ND QTR) 2014 Avg. oil produced: 4,904 bbls Avg. gas produced: 176,116 Mcf Avg. days in production: 75

2015 INCREASE YEAR TO YEAR 5,704 bbls 16% 226,851 Mcf 28% 83 10%

All horizontal production reports can be accessed at: oilandgas. ohiodnr.gov/production. Ohio law does not require the separate reporting of Natural Gas Liquids (NGL). Gas reporting totals listed on the report include NGLs. ODNR ensures a balance between wise use and protection of our natural resources for the benefit of all. Visit the ODNR website at ohiodnr.gov. For more information, contact: Eric Heis, ODNR Ofﬁce of Communications 614-265-6860.

Gas & Oil

Ohio Edition

October 2015

Millenials prepare for industry careers Sen. Troy Balderson

he Ohio Oil and Gas Energy Education Program (OOGEEP) recently awarded 56 students, pursuing careers in the oil and gas industry, scholarships of up to $1,000 for the 2015 academic year. These students represent 19 universities, colleges or technical institutions and all share a common pursuit toward careers in the energy industry. These annual scholarships are funded by industry training funds, memorial contributions and general donations from Ohio’s oil and gas industry. As Ohio’s oil and gas workforce ages – the average age of an oilfield worker is 55 – we must

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continue to invest in training opportunities to fill positions within this in-demand industry. Through the available scholarships, OOGEEP is making it mutually beneficial for students who wish to study in the field. OOGEEP scholarships are available for various career paths, and are not exclusively for students pursuing four-year degrees; students enrolled at accredited technical schools may also be eligible for the scholarships. Past recipients have come from various fields of study including petroleum engineering, geology, welding, diesel mechanics, civil engineering, chemical engineering, finance and business administration. Scholarships are renewable for up to four years, contingent on maintaining a 2.5 GPA or better. Since 2007, the OOGEEP has awarded over 250 scholarships to students from 99 different towns across 48 Ohio counties, totaling $251,000. Minimum eligibility requirements for OOGEEP scholarships include the following: Must be a U.S. citizen; Must have a career goal related to energy or the oil and natural gas industry; Must be an Ohio resident, or a student attending an accredited Ohio college, university or trade school; Must include an essay describing the applicants personal and career goals, academic achievements, extracurricular activities, awards, community service, work history, financial needs and influences. Submission of transcripts are encouraged, but not required. These scholarships exemplify how Ohio’s Oil and Gas Energy Education Program is taking a pro-active approach to strengthening the future of the oil and gas workforce. These programs play an important role in supporting the oil and gas industry and Ohio’s economy. Above all, these programs make a positive difference in our communities and provide meaningful opportunities for Ohio’s young people. Interested candidates can find more information and apply online athttp://oogeep.org/teachers-students/scholarships/.

www.GasandOilMag.com

Gas & Oil

October 2015

Conference Agenda Announced for PIOGA’s Eastern Oil & Gas Conference and Trade Show T

he 2015 edition of the Pennsylvania Independent Oil & Gas Association's Eastern Oil & Gas Conference and Trade Show will explore the question, "Where Are We, Where Are We Going?" with a lineup of speakers who will offer their perspective on the current state of the industry and their expectations for the future as the Northeast's shale plays continue to have a tremendous impact on the energy market. The event takes place October 27 and 28 at the Monroeville Convention Center, just outside Pittsburgh, and features a dayand-a-half conference, a two-day trade show and networking events. "Our industry is in a painful state of flux, pressured by persistent low product prices and new government-imposed costs, while looking for relief in the form of pipeline expansions and other new market opportunities for our abundant natural gas," commented Louis D. D'Amico, the trade association's President and Executive Director. "We expect our program will offer unique insights into how and when things will turn around, as well as strategies companies can employ to get them through these tough times."

Justin Weber, Pepper Hamilton. • Market Dynamics Influencing Future Pricing of Natural Gas and Oil - Tim Bigler, Direct Energy. Trade show hours are 9 a.m. to 5 p.m. on Tuesday, October 27, and 9 .m. to 3 p.m. on Wednesday the 28th, leaving plenty of time to conferees to visit the show floor. Conference registrants can also participate in Monday evening's Exhibitor Appreciation Reception, along with a networking reception at the close of Tuesday's program, followed by a Halloween-themed mixer. For complete event information, including registration and exhibitor and sponsorship opportunities, click on the PIOGA Events link at www.pioga.org.

Among the conference presentations are:

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• Addresses by Pennsylvania Governor Tom Wolf (invited) and State House Speaker Mike Turzai. • Natural Gas Production Company Executives' Panel, headlined by top officials from Enervest and CNX who will discuss current efforts and future plans and will be asked to consult their personal "crystal ball" for the what the future holds for the industry. • Dr. Bernard Weinstein of SMU's Macguire Energy Institute on the benefits of oil and gas in Pennsylvania. • Mergers and Acquisitions / Analysis of Results of Marcellus and Utica Wells - Timothy S. Knoblock, James Knoblock Petroleum Consultants, Inc. • Overview of Natural Gas Supply and Demand - Mathew Hoza, BTU Analytics. • Natural Gas Migration Incidence and Mitigation - Timothy Erikson, Moody and Associates, Inc. • Pooling and Unitization in Pennsylvania - John Carroll and

Gas & Oil

Ohio Edition

October 2015

Rover Pipeline awards $34M contract

over Pipeline LLC, a subsidiary of Dallas-based Energy Transfer Partners and Mount Vernon, Ohio-based Ariel Corporation announced today that Oho-based Ariel Corp. has been awarded the contract to supply 39 natural gas compressors to the Rover Pipeline. The total cost of the contract is estimated at more than $34 million. Rover Pipeline is a natural gas pipeline that will transport domestically produced natural gas from multiple processing facilities in Northeast Ohio, West Virginia and Pennsylvania to multiple markets in the central United States including Ohio and Michigan. The pipeline also will facilitate natural gas deliveries to markets in the Northeast, Great Lakes and Gulf Coast regions of the United States as well as to Canadian Provinces. The $4.2 billion pipeline is designed to transport up to 3.25 billion cubic feet of natural gas through 36” and 42” diameter pipeline. “Energy Transfer has a ‘buy American’ mentality,” said Joey Mahmoud, senior vice president, Energy Transfer Partners

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and project executive for Rover Pipeline. “We are proud to announce this contract with Ariel as they have been an integral part of the Ohio business community for nearly 50 years. Their deep Ohio ties are especially important to us as more than 200 miles of our proposed route passes through Ohio. “We are looking forward to becoming an integral part of the Ohio business and civic communities as well through the anticipated 6,500 construction jobs we will be bringing to the state and the 30-40 permanent jobs associated with the Ohio section of our Rover Pipeline.” Rover Pipeline purchased a combination of Caterpillar natural gas engines and Ariel compressors providing in excess of 211,000 horsepower at nine compressor stations along its proposed 711-mile route. “Ariel Corporation is proud to play a significant role in our country’s growing energy sector,” said Robert Drews, Director of Marketing. “The depth of our experience and the quality of our products and distribution partners uniquely position us to deliver compressors to support Rover Pipeline’s compression needs.” Houston-based SEC Energy has been contracted by Rover Pipeline to package the 39 compressor units. SEC is a leading packager of large-scale natural gas compression equipment, and the only company in the industry to offer a full range of gas, electric and dual drive compressors. Established in 1966 and headquartered in Mount Vernon, Ohio, Ariel Corporation is the world’s largest manufacturer of separable reciprocating gas compressors utilized by the global energy industry. As a world-class manufacturer, Ariel sets the industry standard through industry-leading research & development, expert design & manufacturing, and unmatched customer support.

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Gas & Oil

www.GasandOilMag.com

October 2015

OHIO WELL ACTIVITY

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MARCELLUS SHALE

15 1 8 0 19 0 0 43

Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Plugged Total Horizontal Permits

UTICA SHALE

4 2 2 Wells Permitted 172 Wells Drilling 410 Wells Drilled 0 Not Drilled 1009 Wells Producing 0 Inactive 0 Plugged 2013 Total Horizontal Permits

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Gas & Oil

October 2015

Ohio Edition

ODOT, Ohio State Patrol say

‘Safety First’

Judie Perkowski - Dix Communications

AMBRIDGE -- Another indication of the impact the gas and oil industry has on southeastern Ohio is the creation of additional positions in state agencies. Speaking to attendees at the recent Guernsey Energy Coalition meeting at the Southgate Hotel in Cambridge, Anna Kuzmich, a professional engineer and statewide shale coordinator for the Ohio Department of Transportation, and Sgt. Greg McCutcheon, Office of Field Operations for the Ohio State Highway Patrol, said their jobs were created in 2012 to act as liaisons to the energy industry. Kuzmich and McCutcheon were introduced by Mike Chadsey, director of public relations for the Ohio Oil and Gas Association. Chadsey was filling in for an incapacitated Chamber of Commerce President Jo Sexton, usual moderator of the Coalition meetings since its introduction in 2011. Both speakers explained how their jobs are an integral part of the industry’s recent projects focused on pipeline construction. “My job is to help gas and oil companies determine the best route for them to deliver their equipment and associated products to the construction site. And, this takes months of planning,” said Kuzmich. The biggest complaint from the public is that the pipeline construction process is dirty,” said Kuzmich. “Dirty and noisy. But, you can say that about any kind of construction. We understand, but we just issue permits, we are not a regulatory agency.” She said special hauling permits are issued for movement of vehicles which exceed the limitations on length, height and weight as established in the Ohio Revised Code. An insurance policy endorsement form must be filed with the ODOT Special Hauling Permits section prior to processing a permit application. Although individuals may contact ODOT District 9’s offices with general questions regarding permits, the district office no longer accepts paper applications. Permit requests can be made via the department’s web site. Kuzmich said approximately 300,000 permits were issued last year, and although the permitting process is online, special hauling permits require staffers’ hands-on attention.

Kuzmich described one of her first encounters with industry heavyweights was with Denver-based MarkWest, the company that built a huge processing facility in Harrison County. The company was sending six storage tanks via barges on the Ohio River to Steubenville, then on to Hopedale by semis, which required special hauling permits. When she asked when this was going to happen, he said in the spring of 2013, which was about six months from then. “Hopedale is 22 miles from Steubenville. I didn’t think it would take that long to figure out a plan for such a short distance. But I found why,” said Kuzmich. When she heard the size of the equipment, she was flabbergasted — each storage tank was 20 feet wide, 17 ft. 4 in. high, 260 feet long and 570,000 pounds gross weight. And the most direct route was through Wintersville, a small town of 3,300 where U.S. 22 is the main highway. “It took 10 hours to deliver the first tank. We are much better now. The last one took only about six hours,” she said. In addition to road conditions, other factors used to determine the best possible route for trucking huge cargo, include overhead electrical wires and signs, waterways, bridges and residential areas. McCutcheon said he was part of the escort team for the MarkWest project. “It takes a lot of planning with Anna’s department to be successful. Moving heavy loads rely primarily on the interstate and county roads. Companies want their equipment or machinery transported on the most direct and safest route. It’s when you get off the paved main roads where it get a little tricky. We (the state highway patrol) are hired by the company as transportation escorts, in addition to the company’s private escorts,” said McCutcheon. “We also coordinate the travel route with airborne surveillance.” “Other factors which are of great concern to gas and oil companies are protestors. They have tried every trick in the book, and go out of their way to interrupt gas and oil projects from going forward. “Another issue that draws complaints from residents is heavy traffic on local roads,” he said. “There was a lot of traffic in Guernsey County in 2014, but nothing like Carroll County,

Gas & Oil

www.GasandOilMag.com

October 2015

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Trailer Mounted Diesel Powered Hot Water Multi-Gun Systems Wet Sand Blast attachment Mike Chadsey, l, director of public relations for the Ohio Oil and Gas Association, introduced guest speakers at the Guernsey Energy Coalition meeting last week at the Southgate Hotel in Cambridge. Anna Kuzmich, a professional engineer and statewide shale coordinator for the Ohio Department of Transportation, and Sgt. Greg McCutcheon, of the Ohio State Highway Patrol, teamed up to talk about working together to accommodate the gas and oil industry’s logistics when transporting heavy equipment.

which had a 73 percent increase in truck traffic since 2011. “Of course, more traffic means more crashes and traffic-related incidents. It has slowed down, but it will increase. There will be a lot more trucks in Guernsey County doing seismic testing for pipeline construction. “We have an outreach program that includes safety-related meetings with companies, their service providers and law enforcement to talk about issues that have an impact on traffic and communities. We communicate through social media. We want everyone to know that the gas and oil people do a good job policing their own, but if anyone has a problem, they can contact us at the Office of Field Operations, District 7, 7051 Glenn Highway, Cambridge, or call (740) 439-1388.” For more information about the Ohio Department of Transportation, 2201 Reiser Ave., SE, New Philadelphia, or call (330) 308-3997. jperkowski@daily-jeff.com

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Gas & Oil

October 2015

Ohio Edition

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Gas & Oil

www.GasandOilMag.com

October 2015

Road agreement helps pipeline projects Roger Terril

Bobby Warren - Dix Communications

OOSTER - In an effort to protect county and township roads from deterioration associated with pipeline construction, the Wayne County engineer instituted a maintenance agreement gas and oil companies will have to follow. The Wayne County commissioners approved the road use maintenance agreement presented to them by Engineer Roger Terrill. Companies wanting to construct gas and oil pipelines in the county will need to turn in a plan and inform the engineer what roads will be used for hauling materials in and out. Also, video will be taken of the roads, and the Engineer’s Office will see if any improvements need to be made before the pipe and materials are transported over the roads. Companies will have put up a bond in order to protect the county in case any roads, culverts or bridges are damaged, Terrill said. The bond amount for bridges is $500,000. Initially, the amount was set at $250,000, but after receiving outside comments about the amount needing to be higher, Terrill decided to go with $500,000. Commissioner Ann Obrecht said she is glad Terrill presented RUMA for approval. With the agreement in place, pipeline projects can move forward. There are three pipeline projects. The ET Rover Pipeline, along with Kinder Morgan’s Utopia Pipeline, are projected to follow similar paths through the southern part of the county. The pipelines will enter Wayne County east of Mount Eaton in Paint Township and exit west of New Pittsburg. Affected townships in Wayne are Paint, Salt Creek, East Union, Franklin, Wooster, Plain and Chester. The NEXUS pipeline is slated to cut across northeastern Chippewa Township. ET Rover and NEXUS are interstate lines. Terrill would like to see each board of township trustees in Wayne County adopt this RUMA. It will provide consistency across the county. “I hope (the township trustees) look at it,” Obrecht said.

“It will be easier for the companies if everyone had the same agreement.” Companies will have to pay the Engineer’s Office for staff time involved in reviewing plans, documents and roads. Someone from the office will monitor the roads during the construction project. If the township trustees choose to adopt the agreement, then Terrill said he can work with them on monitoring the township roads. Reporter Bobby Warren can be reached at 330-287-1639 or bwarren@the-daily-record.com. He is @BobbyWarrenTDR on Twitter.

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Gas & Oil

Ohio Edition

October 2015

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Medicines

Medicines such as aspirin, antihistamines, Vaseline, alcohol, ammonia, antibiotics and antiseptics all contain petrochemicals.

Waxes

Waxes are used to make waxed paper, candy, gum, candles, crayons and soap.

Cosmetics

Soap, cleansing creams, toothpaste, shampoo, hair spray, lotion, cologne, baby oil, lipstick, lip balm, nail polish, hand cream, shaving cream and suntan lotion among others all come from crude oil!

Natural Gas and Propane

Nearly 6 out of every 10 homes are heated with natural gas. It cooks our food, warms our home, dries our clothes and heats our water. Businesses use it in many ways, from cooking to fueling high temperature ballast furnaces.

Fuels

Gasoline, jet fuel, kerosene and other products help fuel automobiles, trucks, motorcycles, airplanes, golf carts, lawn mowers and edgers.

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Gas & Oil

www.GasandOilMag.com

October 2015

What Lull? Despite Downturn, Ohio’s Oil and Gas Industry More Important Now Than Ever Rhonda Reda, Executive Director Ohio Oil and Gas Energy Education Program here is no question, it’s tough times for Ohio’s oil and gas industry. Prices for crude oil and natural gas are at their lowest levels in decades. The downturn in prices and drilling activity has caused many people to ask the questions: Is Ohio’s oil and gas industry still a major contributor to our local economy? How important in this industry to the average Ohioan? The answers are unequivocally yes and in fact more important now than ever. As energy, economics and jobs dominate the headlines, a homegrown industry continues to supply these benefits to the Buckeye State. Ohio has a long and proud oil and gas history. In fact, Ohio’s oil and gas industry has been producing crude oil and natural gas from various geological formations beneath our feet for more than 150 years. The past several years has also brought many new companies, jobs and innovations to Ohio’s industry, leading to unprecedented and record energy production levels. As a result, Ohioans are intertwined with the state’s oil and gas industry more than ever before. In 2013, the Energy Information Administration reported that Ohioans used approximately 913 billion cubic feet of natural gas to heat our homes, power our electricity generation plans and to operate our businesses, schools, hospitals and factories. In fact, Ohio ranks 7th in the country for natural gas consumption, and 7 out of every 10 Ohio homes use natural gas as its primary heating source. By the end of 2015, it is projected that Ohio may produce enough natural gas to fulfill all of our local energy needs. Today, Ohioans also use crude oil and natural gas for much more than heating or energy power. In fact, crude oil and

natural gas are an integral part of our daily lives unaffected by current market or weather conditions. More than 6,000 products are produced, wholly or in part, from Ohio’s 60,000+ crude oil and natural gas wells. Life saving products such as medicines and artificial hearts wouldn’t exist without petroleum products. Synthetic rubbers and fabric, asphalts and computer components are made from crude oil and natural gas. Waxes, paints and inks are too; as are hundreds of the personal care products used around our homes. And of course, plastic and most fuels would not be possible without petroleum. Simply put, Ohioans can not live their daily lives without using petroleum based products. In fact, the average person uses the equivalent of three gallons of refined petroleum-based products each and every day. This Ohio industry is directly part of every Ohioan’s life. Our standard and cost of living would be harder and higher without petroleum products, and our life expectancy would be dramatically shorter without oil and gas development. Through new technologies and advanced production techniques, Ohio’s oil and gas industry continues to innovate to enhance production efficiency while minimizing environmental impact. The state of Ohio’s oil and gas industry matters to everyone because it’s a part of who we are, what we do and how we do it. Keeping our energy dollars and energy jobs at home is also positive for the economy and our natural security. Now more than ever, we need to continue to support local energy production, pipelines, and processing/ cracking facilities and refineries that will continue to benefit all Ohioans.

Gas & Oil

Ohio Edition

October 2015

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Gas & Oil

October 2015

Utica Status Update Shawn Bennett Executive vice president Ohio Oil and Gas Association.

his time last year, Ohio had 42 drilling rigs operating in the state targeting the Utica/Point Pleasant formation. Today, more than half of them have been idled or simply moved to other states. Falling commodity prices have caused significant turmoil in the oil and gas industry in Ohio and across the United States. The question foremost on many people’s minds would be “What does this mean for the Utica?” It’s a great question given the fact that this is still a relatively new play and producers haven’t really hit the development phase yet. The good news is, we are not alone. Across the United States alone, more than a thousand rigs have been laid down since this time last year. The reason is simple, OPEC has decided to wage an economic war on the U.S. domestic oil and gas industry. Commodity prices for oil, natural gas and natural gas liquids have dropped considerably which is great for the consumer, but for those in the industry it has created some serious consternation. It is true that less money is being spent on the exploration and development of natural gas and oil this year which is why we have seen a slowdown of drilling in eastern Ohio. It truly bothers me when I drive Interstates 70 or 77 and I don’t see a rig or a flare in the distance, because that means energy and jobs aren’t being sustained. When there is a temporary slowdown, often you’ll see a change in focus to other sectors of the industry to help improve the ones that are in distress. Right now the change in focus we are seeing is on pipeline projects. There are many pipeline projects being proposed, some that are in the middle of the permitting process or being constructed in the Appalachian Basin. In some ways, pipelines are actually more important to the Utica and Marcellus Shales than the price of crude. Ohio’s Utica Shale is primarily a natural gas/natural gas liquids play with some associated oil production as you continue to move west. Historically, most of the state’s natural gas came from the south or the west but with the advent of shale production we have changed the game and are producing an abundance of it in the region. To make this play flourish, we need an outlet for our plentiful supply of natural gas which can be accomplished in two ways, use it here, or ship it out of the region. Without a growing manufacturing base on the eastern side of the state

to utilize all of this natural gas, we need to focus on pipelines to transport the natural gas to markets that offer a fair return for our product. The construction of pipelines to expanding marketplaces like the northeast, southeast, west or even north to Chicago and Canada will help increase production in both Ohio and Pennsylvania. Thankfully there are over 34 proposed pipeline projects in various stages being planned through 2018. While not all of them will be completed, the ones that do see completion should help start providing relief from the glut of natural gas within the next several years. In the meantime, we are still seeing a lot of development take place in the eastern portion of the play, namely in the dry gas regions of Belmont and Monroe Counties as well as Harrison County. The focus on dry gas is due to the minimal amount of processing needed to get it to market. As the price of crude rebounds, we will likely begin to see development expand west since the price of the heavier natural gas liquids are tied to the price of crude. As with any commodity, the market ebbs and flows. Right now oil and gas producers, mineral owners and residents of eastern Ohio just need to sit tight and not lose focus on the fact that this gift remains very important to the economic vitality of our region. We continue to see some very outstanding wells being brought online and there are plenty more still to be tapped. Even with the construction of pipelines, we, as a region and state, must focus on how to attract large-scale users of natural gas that will create and sustain thousands of jobs in our communities. More importantly, we as a nation must figure out how to attract manufactures who years ago left the United States due to lower energy costs in other countries and have them reshore the projects here in the Appalachian Basin. There is tremendous opportunity here in Ohio. As an industry, we are producing low cost energy for residential consumers as well as large scale industrial users in eastern Ohio. The better question for decision makers and community leaders across the state is how can we think outside of the box and capitalize on attracting businesses to the region who can use our abundant energy while also diversifying our economy?

Gas & Oil

Ohio Edition

October 2015

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Gas & Oil

October 2015

LANDOWNER ROYALTY AUDITS: AN EMERGING TOPIC IN THE UTICA SHALE BOOM David J. Wigham - Attorney

ore than 1,000 horizontal wells have been drilled to date in the Utica Shale formation in Ohio. Many landowners affected by this oil and gas development have already encountered a wide array of legal issues, such as clearing title to their minerals, and negotiating leases and lease ratifications to dealing with surface use and pipeline right-of-way issues. As production ramps up, landowners are beginning to reap the benefits through royalty checks. However, landowners are beginning to realize the royalty payments present a host of potential legal issues involving the percentage of the royalties paid, the pricing on which their royalties are based, and the many deductions withheld from their royalties. Producers pay landowner royalties based on a number of factors. First, landowners typically receive their share of royalties from a drilling unit based upon what percentage their mineral acreage bears to the total acreage in the overall drilling unit. Secondly, there are typically multiple producing wells within a single Utica Shale drilling unit. Each well has its own unique production characteristics. Finally, the landowner’s oil and gas lease governs the percentage of the royalty paid to the landowner for his or her acreage, what deductions (if any) may be taken from a landowner’s royalty, and what rights the landowner has to contest royalty payments and deductions. Many landowners receiving Utica Shale royalties are seeing large, unexpected deductions from their royalty checks. These deductions are usually described in an accompanying royalty statement from the producer. These royalty statements are oftentimes very difficult to read, use language that landowners do not understand and frequently omit critical information. This leaves landowners in a position of not knowing what these deductions are for and whether they are appropriate. Landowners considering challenging their royalty payments and deductions should first retain the services of an experienced oil and gas attorney to guide them through the audit process. Another important first step is to attempt to organize with other landowners who also own acreage in the drilling unit from which royalties are being paid and deductions are being made, because a drilling unit is a single economic unit

sharing many common characteristics, such as production and cost data. Also, the audit cost can be shared pro rata by participating landowners. Typically the next step would be to retain the services of an experienced royalty auditor to conduct a royalty audit. There are many types of royalty audits, and they have different price points, depending on the level of detail. A Level One audit typically involves an analysis of royalty statements, drilling plats, lease documents, state production and completion records, published index prices and other information available to the public in order for the auditor to develop a conclusion about whether appropriate royalties are being paid and whether the deductions are appropriate. Armed with a Level One audit, the landowner’s attorney should be able to advise the landowners of their legal rights and remedies based on the lease documents. If it appears from the Level One audit that royalties were underpaid or there is an excessive amount of deductions, the attorney may advise the landowners to proceed with a Level Two audit that would be used in anticipation of potential litigation. A Level Two audit would involve a formal audit of the producer’s books and records relating to the payment of landowner royalties from the drilling unit in question. Such documents would include gas and oil sales remittance data and related contracts, production reports, title opinions and well cost reports. Just when landowners believed they were out of the legal thicket related to the development of their minerals rights, they are being confronted with post production issues. The payment of landowner royalties is the latest emerging issue related to the Utica Shale boom. Landowners are encouraged to carefully review their royalty checks, royalty statements and leases. If there are questions or if there is confusion about the amounts being paid and the deductions withheld, landowners are urged the contact an experienced oil and gas attorney to advise them of the audit process to determine whether they are being treated fairly by the producer. David J. Wigham is a second generation oil and gas attorney at the law firm of Critchfield, Critchfield & Johnston, in Wooster, Ohio, with nearly 25 years of industry experience.

Gas & Oil

October 2015

Ohio Edition

Gas & Oil comes to the County Fair W

OOSTER — OOGEEP presenters could have simply told the young people attending their Rocking in Ohio presentation that more than 6,000 products are refined from natural gas and crude oil. They could have cited examples from categories including plastics, synthetic fabrics, synthetic rubber, medicines and waxes. But the Ohio Oil and Gas Energy Education Program’s show at the 2015 Wayne County Fair in September gave participants the opportunity to experience facts about the industry for themselves. “A lot of the things you use every day are made out of oil and gas,” OOGEEP’s marketing group’s master of ceremonies explained to two teams of children of all ages assigned to their own stash of everyday items — tote bags, beach balls, water bottles and spatulas — from which they were told to extract the ones they believed were gas and oil-related. While each team correctly identified some of them, they learned every single product in their inventory, from floaters and flip-flops to strainers and plastic cups, qualified. “Tons of things we use every day are made out of oil and gas,” the MC told them. Even computers and cell phones have their origin in the industry. Fair-goers watching and engaging in Rocking in Ohio learned about the journey encompassing gas and oil, starting with the formation of crude oil and gas and moving on to exploration, drilling, production and refining. The game-playing and resulting human energy in the fair crowd generated from experiential learning was punctuated with “did you know” fun facts about

the topics explored. Participants got to flex their “STEM” muscles to come up with what the acronym stands for, with one young man discovering that the “t” isn’t short for temperature, but rather, technology. “The stage show curriculum was modeled directly from OOGEEP’s STEM curriculum, which was developed by Ohio teachers,” said OOGEEP’s executive director, Rhonda Reda. “The curriculum meets state and national science standards and has won numerous state and national awards,” Reda said. “In addition to the OOGEEP staff and our teacher consultants, we have also hired a team that specializes in executing outdoor educational programs.” STEM (science, technology, engineering and math) content was interspersed throughout the highly energetic and entertaining program, in which young people played hands-on learning games and won prizes provided by OOGEEP. A team of friends from Edgewood Middle School in Wooster, Gavin Tichenor. 11; Ethan Hann, 11; and Jordan Marty, 12, collected prizes for putting the layers of the earth in order in a timed event. “The ‘Rocking in Ohio” program demonstrates how STEM is crucial to Ohio’s oil and gas development,” Reda said, adding, “The stage show is a perfect vehicle to educate young adults and their families about science and technology through music, interactive activities and prizes.” Presenters also distributed activity bags, encouraging recipients to color, connect the dots, complete a maze and unscramble letters as educational, but fun, tools for learning oil and gas

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Gas & Oil

October 2015

Left: OOGEEP presenter Jami Kinton divides a group of youth at the 2015 Wayne County Fair into teams to choose which items they think are produced from the oil and gas industry. Participants attending the "Rocking in Ohio” outreach program at the fair learned that more than 6,000 products, many used every day, are refined from natural gas and crude oil. Pictures by Linda Hall.

industry facts. One of the “fun Ohio oil facts” demonstrated the state’s significance in the industry, stating, “The first discovery of crude oil in the (United States) was in Noble County, Ohio” in 1814. According to the information, the men who were drilling were actually searching for salt, needed for food preservation, and instead came up with oil, which they sold as a “medicine” and “hair tonic.” Students involved in OOGEEP activities across the state throughout the year learn how far the industry has come since the 1800s and how they can be involved in it through study, acquisition of industry-related skills and career choice. OOGEEP, a non-profit statewide education and public outreach program initiated in 1998, is active throughout the state in the areas of education — offering teacher workshops, curriculum for schools, speakers for classrooms and career development. “This year, the stage show has been primarily geared towards county fairs; however, we have also held these events at schools and at science educational institutes around the state,” Reda said. “It is designed for interaction between school age kids, their parents and educators.” In discussing the overarching purpose of the program and how it fits in with other OOGEEP educational efforts, Reda pointed out, “The U.S. currently ranks 52nd in the world in science and math initiatives. “This is a shameful statistic and why you are seeing so much emphasis on STEM (Science, Technology, Engineering and Math) programs nationwide. “Ohio’s oil and gas producers have graciously provided funding for these OOGEEP STEM related projects,” Reda said, highlighting beyond the “Rocking in Ohio” event other OO-

GEEP programs, including science fairs; and scholarship, workforce development and scouting programs. “More than 2,600 teachers from all 88 Ohio counties have now participated in the teacher workshops; and last year OOGEEP, on behalf of the industry, awarded 56 scholarships and over 30 state Science Day awards to Ohio students,” Reda said.

Above: OOGEEP "Rocking in Ohio” presenter Jami Kinton oversees a rock toss - one of the high-energy activities involving young people at the 2015 Wayne County Fair in learning about the oil and gas industry. Pictures by Linda Hall. Below: Presenter Jami Kinton directs a "pipeline” of children at the 2015 Wayne County Fair in one of the hands-on educational activities about natural oil and gas offered by OOGEEP, the Ohio Oil and Gas Energy Education Program outreach. "Rocking in Ohio” participants played learning games and won prizes. Pictures by Linda Hall.

Gas & Oil

Ohio Edition

October 2015

Students can get oil, gas industry training at Zane State College Sophie Kruse - Dix Communications

ince 2011, Zane State College has been offering training for students wishing to pursue a career in the oil and gas industry. The program offers a two-year associate degree in Oil and Gas Engineering Technology. Classes offer a look into each part of the industry — like drilling, production and gas distribution. The program returned to Zane State in 2011, with the third class graduating this past May. According to Paul Paslay, an instructor within the school, a three-course sequence is offered in natural gas compression station operation.

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“The curriculum for this sequence was assembled for Zane State College by the Eastern Gas Compression Roundtable, an industry organization for compressor and compressor accessory manufacturers and operators. Students can choose to add these courses to the two-year degree for added value, or they can choose to pursue our one-year certificate in Gas Compression Station Operation,” Paslay said. The three-course sequence is what forms the core of said certificate program, combined with general education and technical courses. However, the sequence is also available to students studying in other programs that might be interested in a more technical elective — which have so far included environmental science and electrical engineering students. Something that sets Zane State apart is their outdoor lab called the OGET Land Lab, which allows students to get handson experience with equipment used within the industry. One of these pieces is a simulated well site. “Several of the pieces were donated, and were put together and installed by students,” Palsay said. “The well is approximately 20 feet deep, and a food-grade mineral oil is pumped through a closed-loop system into the well. Surface equipment for the well as all real and full-size, comparable to what a student will see on the job.” Other stations are a tank battery and gas metering run, a simulated pig launcher and work is currently in progress on a monument that will showcase rock layers that have been significant to the industry in Ohio. Since the program provides students with background in all sections of the industry, students have a very open opportunity to find jobs in whatever aspect they find the best. “Zane State College has an excellent relationship with the industry,” Palsay said. We have no shortage of professionals willing to give tours to students and serve as guest speakers. We have also been fortunate to have had many students receive summer internships. Summer interns from our program have worked as disposal facility operators, well inspectors, cement inspectors, and more.”

Gas & Oil

www.GasandOilMag.com

October 2015

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Gas & Oil

October 2015

Ohio Edition

Many Ohio institutions offer industry educational opportunities

3302766508 The Vendor An antidrug group in New York distributed free Sophie Kruse pencils to school kids with the antidrug message: Dix Communications 30  June 1, 2011 Phone 3302766508 The Vendor Too Cool to Do Drugs. 30  June 1, 2011 Phone 3302766508 The Vendor An antidrug group in New York distributed free It started out okay, but gots the worseoil andand worse gas industry is quickly Polaris Career Center, Scioto County Career Technical Center, An antidrug group in New York distributed free pencils to school kids with the antidrug message: when the kids actually used the pencils. As the pen growing in Ohio, so are the programs Stark State College, The Career Center, Trumbull Career and pencils to school kids with the antidrug message: Too Cool to Do Drugs. cils were worn down and sharpened, the message to each thoseToo Cool to Do Drugs. entering Technical It started outthe okay,industry. but got worse and worse Center, Warren County Career Center, Washington changed to: Cool to Do Drugs. Then: Do Drugs.when the kids actually used the pencils. As the pen It started out okay, but got worse and worse More than 200,000 jobs have been created within the field State Community College, Washington County Career Cenwhen the kids actually used the pencils. As the pen cils were worn down and sharpened, the message since 2011 in Ohio with a steady growth since that year. ter, Youngstown State University and Zane State College. cils were worn down and sharpened, the message changed to: Cool to Do Drugs. Then: Do Drugs. When you give honest advice, have one foot According to Ohio Energy Pathways, there are 27 instituWithin each of these schools, there are a number of differchanged to: Cool to Do Drugs. Then: Do Drugs. out the door. tions that provide education that would lend itself to the in- ent programs. Many are strictly industry related — like Stark When you give honest advice, have one foot When you give honest advice, have one foot dustry. State’s ShaleNET program or Zane State’s oil and gas engiout the door. Here’s what Dave Barry says he would do if out the door. These institutions are: Apollo Career Center, Ashland neering technology program. However, a number of them feasomeone fell asleep at a meeting: Here’s whatCounty Dave Barry says he would do if County-West Holmes Career Center, Astabula Techture training Here’s what Dave Barry says he would do if in fields that could definitely lend themselves to a “Have everybody leave the room, then collect a someone fell asleep at a meeting: nical and Career Center, Belmont someone fell asleep at a meeting: College, Central Ohio career within the industry — including welding, CDL training group of total strangers, from right off the street “Have everybody leave the room, then collect a “Have everybody leave the room, then collect a Technical College, Eastern Gateway Community College, truck driving, geology and land management. group of total strangers, from right off the street and have them sit around the sleeping person and group of total strangers, from right off the street and have them sit around the sleeping person and EHOVE Career Center, Eastland Fairfi eld Career and TechThere are others that prep for more non-traditional careers stare at him until he wakes up. Then have one of and have them sit around the sleeping person and stare at him until he wakes up. Then have one of nical Schools, Hondros College, Lorain County Joint Vocawithin the industry: Belmont College offers a one-year certifithem say to him, in a very somber voice, ‘Bob, stare at him until he wakes up. Then have one of them say to him, in a very somber voice, ‘Bob, tional School, Lorain County Community College, Madison cate for oil and gas accounting. them say to him, in a very somber voice, ‘Bob, your plan is very, very risky, but you’ve given us your plan is very, very risky, but you’ve given us Adult Career Center, Mahoning CTC, Marietta College, Luckily your plan is very, very risky, but you’ve given us no choice but to try it. I only hope, for your sake, for students, all of these schools are dispersed across no choice but to try it. I only hope, for your sake, no choice but to try it. I only hope, for your sake, Medina County Career Center, Mid-East Career & Technol- the yourself state. For some areas there is more concentration: Marithat you know what . . . you’re getting that you know what . . . you’re getting yourself that you know what . . . you’re getting yourself into.’ Then they should file quietly from the room.” ogy Centers, Pickaway-Ross Career & Technology Center, etta is home to Marietta College, Washington County Career into.’ Then they should file quietly from the room.” into.’ Then they should file quietly from the room.” Center and Washington State Community College. One of the most robust oil and gas programs is at Stark State. According to ShaleNET’s website, “The original intent Hoses of ShaleNET was to respond quickly to natural gas industry English & Metric. Made While You Wait. needs by creating an effective and efficient entry level training program featuring five high demand upstream occupations including roustabout, welder’s helper, CDL, floor hand and production technician.” Now, there are a number of associate We Feature Hydraulic degrees, one-year certificates, short-term offering certificates Oil Bulk & Containers and credit and non-credit classes offered at Stark State. The WE STOCK A LARGE SELECTION Available OF CHAR-LYNN / EATON MOTORS Lubricants courses are stackable, and students are able to complete their degrees at a number of hubs across the nation. 12317 Dover Road •Apple Creek, Ohio 44606 There seems to be no shortage of opportunities for students Phone: 330-857-0001 • Fax: 330-857-2446 wishing to enter the industry.

Gas & Oil

www.GasandOilMag.com

October 2015

OPINION:

Iran Will Export Oil. Why Not the US? Michael James Barton

s part of the new nuclear agreement, the Iranian energy industry will be allowed to export its oil. If only America was so lucky. Astonishingly, America is the only major crude oil country in the world with a self-imposed ban on exportation -- a restriction that has been in place for over 40 years. This outdated policy needlessly impedes production, distorts prices, and kills jobs. It's time for Congress to kill it. To understand the ban, we have to travel all the way back to 1975, during the Administration of Gerald Ford. The Organization of Petroleum Exporting Countries, largely consisting of oil-rich Middle East nations, had colluded to drive up gas prices over the previous two years in retaliation for American saving Israel from annihilation in the Yom Kippur War. Congress panicked. In desperation and under great pressure to "do something", it responded by imposing this ban, which prohibited American firms from exporting oil anywhere but Canada. This rule was intended to protect the country from an unstable oil market, keep as much domestic oil as possible at home, and curb U.S. reliance on imports. After a slight drop in oil importations at the end of the 1970s, they steadily inched up soon after. Fast-forward 40 years, when only three Congressman and a lone senator from 1975 remain in office. Thanks to the innovation of fracking technology, which uses a mix of oil and sand to extract buried energy deposits, America is in the midst of an oil revolution. States like Texas and North Dakota have become world-class energy developers. Today, the United States now produces more than 11 million barrels of oil a day -- and that figure will likely leap up to 18 million by 2040. In terms of oil production, America is the new Saudi Arabia. And there is no similar export ban on natural gas, which is poised to make huge leaps in exports over the next decade. We're on our way to a domestic oil surplus. But, thanks to the antiquated export ban, there's nowhere for that excess oil to go. An oil bottleneck is dragging down prices and curtailing production. In fact, American oil rigs have cut back on production by 50 percent over the last year. Meanwhile, Iran is readying to reenter the global oil market -- with America's blessing. Iran was the second biggest OPEC oil producer before being hit with sanctions in 2012. Their mullah-controlled industry will produce about one million barrels of crude oil every 24 hours. And it intends to ship 500,000 barrels abroad every day.

It's time for America to get involved in the international energy market. Lifting the ban will pump an estimated $23 billion into the U.S. economy and create 125,000 new jobs by 2030. Thankfully, the Senate Energy Subcommittee recently passed a bill lifting the export ban. Next, it will have to pass a vote from the full Senate, where some legislators remain dubious. They need not be. The oil export ban is an artifact from an era a majority of Americans have no memory of: gasoline lines oil shortages and embargoes. It's hurting a vital national industry, costing countless jobs, and limiting economic opportunity. Congress should lift its oil embargo on America immediately. Michael James Barton is the Energy Advisor at ARTIS Research and speaks around the country on energy and energy security matters. He previously served as the deputy director of Middle East policy at the Pentagon.

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Gas & Oil

October 2015

Ohio Edition

Drop in market is concerning KEVIN LYNCH - Dix Communications

ILLERSBURG — During his long career toiling in the oil industry Brent Smith of family-owned and operated Bands Co. in Millersburg, has seen the volatile oil market fluctuate. But Smith said the current drop in oil prices is the worst it's ever been and he doesn't see any improvement on the horizon. “This is probably the worst I've ever seen in my 40 years in the industry,” Smith said. “In the early 1980s, I saw it drop from $36 a barrel down to $8. There was another stretch in the '90s when prices dipped down below $20 a barrel.” But then prices just started to skyrocket, maxing out at more than $140 a barrel in 2008. “You can never count on higher prices, because you don't know how long they are going to stay around. What I think is happening is that Middle Eastern countries are getting concerned that we are becoming independent of them,” Smith said. “With our natural gas production, all this horizontal drilling, that explains why the natural gas prices are way down, because we have an overabundance of gas. Prices all reflect supply and demand.” Some of the horizontal wells are producing millions of cubic feet of gas per day, according to Smith. “Until we find a way to liquify natural gas, or find another use for natural gas, we're going to be stuck with these prices for a while.” he said. “You just have to prepare for the long haul, and hope you can survive.” So how does a company survive through these turbulent times? “You just have to keep plugging away,” Smith said. “You have to tighten your belt, listen to your accountant. When it gets like this, you have to watch your spending, concentrate on your income, push that as far as you can and put it to the best use that you can. Be diversified. “I've seen oil companies come and go,” he continued. “We're one of the few survivors in Holmes Co. You have to keep drilling and keep production up. It's a lot like farming. Farmers prices fluctuate just asd much as ours do, but they never stop planting.” Smith graduated from West Holmes High School in 1975, but didn't get into his family business for nearly 10 years after graduating “I started out thinking I was going to go to work for my dad. He told me to go out and work for someone else before working for him. I worked for Bob McVicker (Mac Oil Field Service) for eight years. He taught me everything there was to know about every aspect of the pre-drilling business. We hauled water, we did

roustabout work, we pumped water, and the whole point of that was, my dad always told me never ask anybody to do something you haven't done yourself. “I learned to run a dozer, a hoe. After that I went to work for Con-Petro for a few years, then I did a short stint with Oxford Oil,” he added. “I ran a swamp truck for them and after about two weeks, I realized I wasn't cut out to do that. After Oxford, I went to work for a company called Tripp Development, one of the first rotary rigs that came in the area. I really enjoyed that, because it was new to the area. I took that experience and carried it over to what I'm doing now. “My dad finally let me come to work for him when I was 28 years old,” Smith said. “He figured by then I was mature enough, and I had pretty much everything out of my system and was ready to go to work. So, I went to work for the family business.” Brent and his brother-in-law Chris Hager oversee everything that is going on in the field, while Mike Brown, Sis Brown and Susie Hager run the office for Bands Co. “I have a pretty good idea what's going on in the office, but I don't know enough to go in and operate the office,” Smith said. “The same with Mike, Sis and Susie in the office. They take care of what they know in the office, and they do a super job, and they let us do our job out in the field. The balance is really great. In my opinion, that's the secret to success in running a family business: Let everybody have their own responsibility, and just stay out of the other person's responsibility.” Smith says a process like fracking, which has been in the news a lot lately, has been going on for many years, as far back as the 1940s when his grandfather started Bands Co. “I don't know where all the attention came from,” he said. “That probably started with all the horizontal drilling in the massive fracks with the flow-back returns. It's all so closely monitored, and the penalties are so severe, that you don't even want to try and get away with anything.” He also noted that when oil prices went up, so did the prices of everything else. But when the oil prices dropped, other prices stayed sky high. “What used to cost $220,000 to drill now costs $600,000 in the span of about five years,” Smith said. “That's because of the extra strings of pipe needed to run and state guidelines to protect fresh water. My grandfather was doing things pretty much the way we're doing it now, and there were never any issues back then, that I'm aware of.”

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October 2015

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October 2015

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Gas & Oil

October 2015

Stark State: Training for a future in petroleum technology Sara Klein Dix Communications

ANTON -- This summer the Ohio Department of Natural Resources reported that production numbers from horizontal shale wells in the state from April to June “break all previous production reporting records for the last 100 years.” During those three months, oil and gas companies harvested more than 5.5 million barrels of oil and more than 221 billion cubic feet of natural gas, according to the ODNR’s Aug. 27 report. Meanwhile, results from a study conducted by the U.S. Geological Survey and partner institutions have more than quadrupled estimates calculated a year ago of the amount of natural gas and oil products that could be harvested from the Utica shale formation in Ohio and nearby states. The results, which were released this July, change previous estimates of 188.6 trillion cubic feet of gas and 830 million barrels of oil to 782 trillion cubic feet of natural gas and nearly 2 billion barrels of oil that could be recovered using today’s horizontal drilling technologies. The studies are important news for Dan Schweitzer, a former geologist who directs Stark State College’s oil and gas technologies program. He added that the news about Utica shale production has another new headline: researchers now estimate that about half of Ohio sits over the oil- and gas-rich rock formation. What all of this news means, he explained, is that more of the state has the potential to produce recoverable oil and gas products for many more years than previously thought using new technologies. However, the success of those technologies depends on the people who are trained to operate them. This is where Stark State College, Schweitzer and his colleagues in the college’s Department of Oil and Gas Technologies come in. This August the college celebrated the second anniversary of its oil and gas technologies program, which Schweitzer and his colleagues operate in the college’s $2.3 million Well Site Training Center and $4.9 million satellite center in downtown Canton. Established with $10 million in seed money from the State of Ohio’s ShaleNET initiative and expanded with funding from industry partners, the program offers associate degrees, career enhancement certificates, one-year certificates and credit and noncredit courses in all aspects of the oil and gas industry.

Nearly 100 students are currently enrolled in Stark State’s oiland gas- related courses each semester with about 20 new students joining the program each term. Schweitzer emphasized that today’s careers in oil and gas are not all about working the all-day-all-week schedule of a roustabout, a point he said is important for prospective students and

Photo/Sara Klein. Staff who run Stark State’s oil and gas education programs include (front) instructor Fred Albrecht, (back, from left) ShaleNET technician and laboratory director Eric Keller, program coordinator Dan Schweitzer, student adviser and case manager Jean Barbato and curriculum director and instructor David Sigmund.

Gas & Oil

Ohio Edition

October 2015

Cont. Stark State: Training for a future in petroleum technology the public to understand. “The general public thinks of the ‘Black Gold’ series, the slogging, back-breaking work all the time, but it’s not all that,” he stated. He explained that although Stark State’s program offers periodic training for floor hands and roustabouts, it is primarily designed to prepare students for more structured positions as technicians, repair experts and maintenance staff, jobs that he said come into play at all well sites and will be needed for the long-term. Jean Barbato, the program’s student adviser and case manager, added that the program offers five educational pathways that give students diverse possibilities in these long-term positions. “...They have something when they come out. They can still be in Ohio, they can stay close to home. ...There’s something there for everyone. They can leave, they can go out of state, (or) they can stay,” she remarked. David Sigmund, the program’s curriculum developer and one of its instructors, said he and the program’s other instructors, including Schweitzer, have designed courses to reflect the unique range of technologies that oil and gas workers need to understand. For example, the program requires that students learn about programmable logic controls, or PLCs, which are digital computers that automate industrial machines and processes. “Today programmable logic controls are used in everything. I can’t think of any type of medium that would not be using those,” said Sigmund. “Even the lowest tech needs to have a familiarity with this programmable logic control. Even a trucker who comes onto the (well) pad has to know a little about those,” he added. The program is also designed to address what Schweitzer and Sigmund call the industry’s high-tech-low-tech systems.

“To me it’s really compelling because it’s so high-tech in some regards and so low-tech in other regards,” Schweitzer said. “We still have to teach the old-fashioned way of doing things because there’s a lot of small operations that still use the old methods,” Sigmund stated. “It’s fun because you’re diverse. You’re teaching both to the students.” A third component of the program focuses on “soft skills.” Sigmund and Schweitzer said the Stark State programming requires that students maintain a strong attendance record, work productively with their classroom peers, and apply their technical “hard skills” to troubleshooting and fixing problems, all of which he said translate directly to, and are essential in, oil and gas careers. “It marries the hands-on part and what employers need with the tech and the computerized part,” Sigmund explained. To accomplish these educational goals, Stark State’s program invites the industry experience of lab director and program technician Eric Keller and instructors like Fred Albrecht, who teaches pipeline technologies; Tim Garber, who teaches technology related to well rigging and preventative maintenance; and Steve Tornero, who teaches compression system technologies. About 12 adjunct faculty members who currently work in the oil and gas industry complete the team that educates students in the program. Keller noted that over the program’s first two years the curriculum has changed to focus on core classes of petroleum technology, ensuring that students all get the same foundation of training before they specialize in different areas. The program also enables students who want to pursue fouryear degrees in their field to do so using online courses in partnership with Ohio University and with the Pennsylvania College of Technology, one of Stark State’s ShaleNET partners. Schweitzer said partnerships with not only other educational

Photo/Sara Klein. Stark State College instructor Fred Albrecht (seated right) gives students in the college’s oil and gas technologies program a hands-on demonstration as part of his class about pipeline technologies.

Stark State College ShaleNET coordinator Dan Schweitzer demonstrates the operation of a GPU, or three-phase separator, at the college’s outdoor well pad training area. The GPU is designed to separate raw products harvested from the well head into gaseous products, which are transferred to a pipeline; oil; and brine. Oil and brine are stored in a "tank battery” at the well pad.

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institutions but also oil and gas companies continue to provide students with opportunities to get hands-on training with the latest in oil and gas technology as well as to secure funding for their studies. “We’ve been able to get confidence of the businesses, and that’s been a key thing we’ve done inviting them to come in and interact with students, to participate in guest lectures,” said Schweitzer. “Momentum (Utica East Ohio) has been very helpful. They come to address classes, they’ve also hired people, they’ve helped with curriculum development.” Businesses like Timken, Dominion Energy, Chesapeake Energy, Marathon, Valtronic, Williams (formerly Access Midstream) and Atlas have also chipped in with in-kind donations of equipment or guest lectures by industry experts as well as funds for the purchase of equipment and for student scholarships. As Stark State’s program evolves, so too are the types of students who enroll in the program. Barbato and Schweitzer explained that the program initially attracted what are often called “non-traditional students,” adults in their 30s, 40s, and 50s who have worked in a previous career and are seeking a change. For example, Stark State’s program participates in the state’s TAA, or Trade Adjustment Assistance, program, designed to help employees find new jobs where they live after they are laid off from a company that has sent jobs overseas. Schweitzer said some of the program’s earliest students included workers in their 40s and 50s who had either been downsized or worked seasonal jobs. With educational funding from TAA, the students earned oneyear certificates at Stark State that got them jobs as technicians in oil and gas companies. “I love that aspect of the one-year certificate and the older person who needs to change their career,” Schweitzer commented. While adult students continue to make up a large part of the college’s program, Stark State is now reaching out to students in their 20s and teens to build a metaphorical pipeline that leads students from high school to the college’s oil and gas program. The school has begun to work with the Ohio Department of Education on K-12 education initiatives that align high school classes with college classes, particularly in the Utica/Marcellus regions of Ohio. Called “College Credit Plus,” the program enables high school students to earn college credit by taking college-level courses online. Schweitzer said Stark State currently offers its course “Petroleum 101” online to high school students as part of the College Credit Plus program. The program is also reaching out to women and racial minorities in response to oil and gas employers’ desires to recruit more employees. “It’s been a white male dominated profession forever, and now the companies are very motivated to diversify,” Schweitzer explained. “We have a lot of opportunities. We can get women and African Americans...and that’s not always been the case.”

Gas & Oil

October 2015

Attracting students who already work full-time, an initiative that Schweitzer said is a top goal for the oil and gas program, is also helping the oil and gas program’s student population to expand and evolve. “We’re trying to add flexibility,” Schweitzer said, adding that the program is developing more online lectures and pre-laboratory exercises along with flexible schedules for students’ hands-on laboratory work with equipment, an element that Sigmund noted is essential to students’ success. “You have to be here and physically handle this stuff. This is what’s exciting about what our capability will become,” Sigmund commented. The college is also stepping in to help full-time and part-time students with educational funding. Sigmund noted that any student is eligible for scholarship money if his or her grades meet the requirements for entry into Stark State’s honor society, which Sigmund coordinates. As new technologies to harvest oil and gas products continue to be developed, Schweitzer and his team say they will continue to expand efforts to recruit students who can become the operators and maintainers of those technologies. “We have industry support...It’s here. Now we just need people to come,” Schweitzer said. “Stark State College is poised...to become the number one two-year petroleum oil and gas school in the country,” Sigmund added. “That is my goal, to develop those courses...but also the instructors and...what they need,” he noted. “We would be remiss in our responsibility to the community to not provide the education for those students.”

Photo/Sara Klein. Stark State College’s $2.3 million Well Site Training Center includes an outdoor well pad area as well as this indoor laboratory containing equipment for hands-on projects that students complete as part of their education in the college’s petroleum technologies program. Oil and gas companies that partner with the program have donated much of the equipment.

Gas & Oil

Ohio Edition

October 2015

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October 2015

Built for the oil patch PAUL LOCHER - Dix Communications

OOSTER -- Rayco Industries recently showed off equipment , such as dump beds, tanks of various types, cranes, an unusual new vehicle at the Wayne County Fair. drills or crew carriers. Built for working in the oil and gas fields – but The RCT-80, introduced to the market last year, is completely having numerous other potential applications through custom- built at Rayco's Wooster plant. ization -- the Rayco RCT80 crawler truck is a 9,200-pound rubber tracked behemoth built to carry materials over rough terrain. The vehicle is available in three sizes (vehicle shown is the smallest). The RCT80, painted tan like the company's well-known stump grinders, is about 13 feet in length and six feet in width. It has 18-inch-wide rubber tracks and can haul a payload of 8,000 pounds. Operated by a joystick, it can carry one or two people and has two speeds, cruising at about six miles an hour. It has a fully customizable platform and can be equipped with a variety of beds and lifts, in addition to having a front-mounted winch. J.R. Bowling, vice president of marketing, said the vehicle evolved from Rayco's relationship with numerous companies involved in the seismic industries. He said Rayco saw the need there for an American-made, off-road tracked vehicle with a versatile chassis built to accommodate interchangable beds and

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