Ohio Gas & Oil Magazine February 2019 by Gannett NEO

February 2019

A Free Monthly Publication

CELEBRATING A RECORD-SHATTERING 2018 FOR U.S. OIL & NATURAL GAS

WHAT OHIOâ&#x20AC;&#x2122;S SHALE REVOLUTION CAN MEAN

IN THIS ISSUE: OHIO REGULATORS OK MERGER OF 4 SMALL GAS COMPANIES

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FEBRUARY 2019

OhioGas&Oil

Table of Contents FEBRUARY 2019

A Look Ahead Gas & Oil Events

G ROUP PUBLISHER

Celebrating a Record-Shattering 2018 for U.S. Oil & Natural Gas

Bill Albrecht

It’s Bigger Than You Think! What Ohio’s Shale Revolution can mean

EXECUTIVE EDITORS

Ohio Regulators OK Merger of 4 Small Gas Companies

Official: U.S. now World’s Largest Crude Oil Producer

Ray Booth rbooth@daily-jeff.com Ted Daniels tdaniels@the-daily-record.com

CONTENT CO ORDINATOR Doris Sigg

dsigg@the-daily-record.com

Guest Column: What a Team! Shale Crescent Region

OOGA Welcomes New Leadership

Ohio Supreme Court Interprets the MTA to Preserve A Severed Mineral Interest

Progress Continues on Harrison County Power Plant

Rover Pipeline Announces Donation to Ohio 4-H Foundation

Utica Oil and Gas Production Soars During Third Quartert

Ohio EPA Issues Modified Water Permit to Belmont County Ethane Cracker Plant

Ohio Well Activity

Horizontal Drilling Activity Graph

FEBRUARY 2019 ADVER TISING John Kridelbaugh Cambridge, Ohio Office jkridelbaugh@daily-jeff.com 740-439-3531 Kelly Gearhart Wooster & Holmes, and Ashland, Ohio Offices kgearhart@the-daily-record.com 330-287-1653 419-281-0581 Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200 Kim Brenning Kent, Ohio Office kbrenning@recordpub.com 330-298-2012

L AYOUT DESIG NER Phil Luks

pluks@recordpub.com

On The Cover:

OhioGas&Oil

We are celebrating a Record-Shattering 2018 for the U.S. Oil & Natural Gas industry.

A Division of GateHouse Media Ohio 212 E. Liberty St. Wooster, OH 44691 330-264-1125 editor@spectrumpubs.com. FEBRUARY 2019

A Look Ahead

Gas & Oil Events MARCH 6, 2019 BWC SAFETY CONGRESS OIL AND GAS COMMITTEE SESSIONS,

March 6, 2019. Greater Columbus Convention Center Columbus, Ohio Attend the 2019 Ohio Safety Congress & Expo (OSC19), where YOU can connect with thousands of resources under one roof. Last year, more than 8,000 representatives from Ohio businesses and government attended this FREE safety congress, the largest and longest-running regional occupational safety, health and workers’ compensation conference in the U.S.

MARCH 6-8, 2019

THE OHIO OIL AND GAS ASSOCIATION’S 72ND ANNUAL MEETING, March 6 - March 8, 2019. Hilton Columbus at Easton, 3900 Chagrin Drive, Columbus, Ohio 43219 Contact: Deneen Welker dwelker@ooga.org 614-824-3901

FEBRUARY 2019

Online registration is available until: 3/4/2019 Exhibitor Inquiries: Georgette McElroy gmcelroy@ooga.org Join us. This event brings together top state and national industry leaders who will discuss current issues impacting the Ohio oil and gas industry. In addition to the business sessions, vendors exhibiting products and services pertinent to the industry will participate in the trade show portion of the event. The Annual Meeting is the principal business meeting of the Association and the premier networking event of the year. A sampling of this annual gathering includes: • Business Sessions • Trade Show

APRIL 23 & 24, 2019

OHIO VALLEY OIL & GAS EXPO,

April 23, 2019 Network Night Reception 5:30pm Speakers April 24, 2019. Expo 7am - 3pm The OHIO VALLEY OIL & GAS EXPO is the Premier 2019 Oil and Gas Event in the Marcellus and Utica Shale Regions! This two day business to business gathering features a network reception with leading industry speakers on Tues., April 23rd and a one day expo display on Wed., April 24th. Situated in the rural and rich shale region of Belmont County, space is limited and it continues to be a SOLD OUT event year after year! Secure your exhibitor spot today to WOMEN IN ENERGY NATIONAL avoid the waiting list! Sponsorships CONFERENCE, are available and can be customizWednesday, March 27 - Friday, able. Please contact the expo staff March 29, 2019. Gaylord Rockies at expo@mprsupplychain.com or 740-671-9822 x7. Resort & Convention Center 6700 N. Gaylord Rockies Boulevard Aurora, CO 80019 USA. For more info, visit www.womensenergynetwork.org

MARCH 27-29, 2019

OhioGas&Oil

Celebrating

a Record-Shattering 2018 for U.S. Oil & Natural Gas LINDSAY MACKINSON | Energy In Depth The International Energy Agency further projects the United States will continue to dominate global growth in oil and natural gas through 2025. The United States is exporting more oil and natural gas than ever before.

The U.S. oil and natural gas industry shattered records in 2018 while boosting American energy security and delivering huge benefits for both our economy and environment. Let’s take a look back at some of the biggest achievements of the year: Soaring oil and natural gas production cemented America’s position as a global energy leader. In August, U.S. crude oil production exceeded 11 million barrels per day (b/d) for the first time, more than doubling 2008 production and surpassing Russia as the world’s largest crude oil producer, according to Energy Information Administration data. Much of the increase in oil production over the past 10 years was “driven mainly by production from tight oil formations using horizontal drilling and hydraulic fracturing,” according to Energy Information Administration (EIA). The agency estimated in August that crude production from shale or “tight” formations represented about 55 percent of total national production.EIA’s December Short Term Energy Outlook finds that natural gas production will also break records this year. From the STEO: “[D]ry natural gas production will average 83.3 billion cubic feet per day (Bcf/d) in 2018, up 8.5 Bcf/d from 2017. Both the level and volume growth of natural gas production in 2018 would establish new records. EIA expects natural gas production will continue to rise in 2019 to an average of 90.0 Bcf/d.” (emphasis added)

During the week of Nov. 30, the U.S. broke yet another record – this time for exports. The U.S. became a net exporter of petroleum liquids for the first time in 75 years, exporting more crude oil and other oil-derived liquids than it imported from other countries. The EIA predicts that U.S. crude oil production will average 10.9 million b/d in 2018 and 12.1 million b/d in 2019, a projected increase of over 28% from 2017. Even more impressive, the EIA believes the U.S. will become a net energy exporter by 2022. Natural gas is also fueling that push. After securing the title of net natural gas exporter for the first time in 60 years in 2017, the U.S. more than doubled its daily exports in the first half of 2018, averaging 0.87 Bcf/d. Between January and September, the United States exported over 762 million cubic feet of natural gas, up 64% from the same time period in 2017. These exports provide jobs for hard-working Americans. Using EIA projections, one study found that roughly 50,000 to 100,000 jobs will be supported by LNG exporters through 2050. Record continued on page 5

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Record continued from page 4

Daniel Yergin, vice chairman of research firm IHS Markit, described America’s international energy leadership best, saying: “A country that was thought to be on the road to becoming the largest importer of natural gas is now on the road to being one of the major exporters of natural gas and indeed is the largest producer of natural gas in the world.” Proved U.S. oil and natural gas reserves reached an “all-time high.” If our thriving production and exports weren’t enough, U.S. proved oil and natural gas reserves also hit an “alltime high,” thanks to the continued development and exploration of shale formations nationwide, according to newly released data from the EIA. Technological advances have increased the ability to access and explore previously unrecoverable shale reserves, doubling reserve levels from a decade ago. EIA’s 2018 report noted that the United States beat its 1970 record of 39 billion barrels of proved crude oil in 2017. In addition, the U.S. proved natural gas reserves grew 19 percent from 2014 to 2017, when the previous record of 388.8 trillion cubic feet was set.

as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation.” Global petroleum industry leaders look to the United States for oil and natural gas investment. Unsurprisingly, the United States remains the world’s most attractive region for oil and gas investment, according to the Fraser Institute’s 2018 survey of senior global petroleum industry leaders. In fact, the country is now home to nine of the top 10 jurisdictions for investment – led by Texas, Oklahoma, Kansas, Wyoming, and North Dakota – and across the board, U.S. jurisdictions improved their ranking in this year’s results.

The U.S. leads the world in carbon emissions reductions. As U.S. energy production soared, the United States maintained its commitment to lowering emissions and protecting the environment. In fact, the country has led the world in carbon emissions reductions from 2005 to 2017, according to BP’s 2018 Statistical Review of World Energy.

The future of U.S. reserves looks especially bright thanks to a new discovery in the Permian Basin. In December, the U.S. Geological Survey revealed the largest pool of oil and gas reserves ever assessed lies in the Wolfcamp Shale and Bone Spring Formations in the Permian Basin. Together, they contain 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids. The U.S. Environmental Protection AgenThen-U.S. Secretary of the Interior Ryan Zinke react- cy found that air pollution declined 73 percent from ed to the news, saying, 1970 to 2017, while America’s gross domestic prod“American strength flows from American energy, and uct rose 262 percent. U.S. greenhouse gas emisCelebrating continued on page 7 FEBRUARY 2019

OhioGas&Oil

It’s Bigger Than You Think!

What Ohio’s shale revolution can mean GREG KOZERA | Shale Crescent USA “If Ohio, Pennsylvania and West Virginia (The Shale Crescent USA) were a country, we would be the #3 natural gas producer in the world! Only the rest of the USA without The Shale Crescent #1 and Russia #2 produce more natural gas.” This was part of the message that David Hill, President of David Hill. Inc., shared with over 100 attendees of the Ohio Mid-Eastern Government Association (OMEGA) at a meeting in Cambridge. Hill told the group that this region produces a lot of natural gas that has created local jobs in the natural gas industry and in support of the industry like hospitality, services and supply. He said the more important factor is that it creates jobs in manufacturing that will use natural gas and natural gas liquids (NGLs) produced in Ohio to make the products used every day. Cracker plants like the one Shell is building near Pitts-

The program shared by Hill was developed by Shale Crescent USA, a non-profit, non-government organization based in Marietta, founded by a group of community and business leaders. Shale Crescent USA’s mission is to create global awareness of the Ohio, Pennsylvania and West Virginia area they have branded as the Shale Crescent USA Region to compete with the US Gulf Coast. Their goal is to bring back high wage permanent manufacturing jobs and to raise the standard of living for people in the Shale Crescent USA region. Their marketing is reaching around the world and creating awareness of this region. More information is available at www. shalecrescentusa.com.

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burgh and the proposed PTT cracker in Belmont County will take ethane produced as part of the natural gas stream and turn it into polyethylene pellets. The polyethylene pellets are turned into the products used every day by manufacturers. Seventy percent of the polyethylene demand is within a few hour’s drive from Cambridge. With over 75,000 people employed in the plastics industry Ohio ranks second nationally. These local manufacturers are dependent on the Gulf Coast for their feedstock and are directly impacted by hurricanes like Harvey that disrupted supply and increased pellet costs. Today most of the USA’s polyethylene is made by crackers on the Gulf Coast and is shipped here by rail. Hill said local cracker plants are important and will create a local polyethylene supply. The plants will require over 5,000 skilled workers to build and will employ hundreds of people. But for OMEGA the big deal is the growth of existing manufacturers and the explosion of new companies that will come here because of a dependable local polyethylene supply and significantly lower pellet transportation cost, Hill said. These companies will make automobile and computer components, containers, films and packaging to keep food fresh and healthy along with hundreds of other products. It is difficult to go even an hour and not touch something made from polyethylene. Hill also shared other advantages many people may not have thought about when it comes to this region; • We have cheap abundant natural gas for heating and electricity; • We have an experienced and willing workforce; • We have an abundant water supply; • We are within a day’s drive of 50% of the US and Canadian markets and these are the people who buy the products Ohio plastics manufacturers make.

OhioGas&Oil

FEBRUARY 2019

Celebrating continued from page 5

sions declined 2.6 percent in 2017 alone and by 12 percent since 2011. The EIA released complementary data this year, revealing that C02 emissions are at their lowest levels per capita since 1950!

tween 2009 and 2014, according to DOI data. American Petroleum Institute Senior Director of Regulatory and Scientific Affairs Howard Feldman said it best: “The United States leads the world both in natural gas and oil production and in cutting GHG emissions – clean natural gas produced through advanced technologies like hydraulic fracturing is playing a significant role in driving carbon dioxide emissions to 25-year lows. Americans have the cleanest air in decades due in part to the increased use of natural gas to generate electricity, demonstrating that environmental protection and economic growth are not mutually exclusive.” Conclusion This record-breaking year for oil and natural gas has given us much to be thankful for: our environment is cleaner, our economy is improving, electricity costs are at record lows, consumers are saving billions of dollars on natural gas, and 2018 affirms that the United States will continue to be a world-leader in oil and natural gas.

Similarly, the U.S. Geological Survey just completed its 18-month analysis of greenhouse gas emissions associated with the development and use of fossil fuels on federal lands. The agency studied carbon dioxide (CO2), methane, (CH4) and nitrogen oxides (N2O), and found that, “compared to 2005, the 2014 totals represent decreases in emissions for all three greenhouse gases.” These decreases coincided with a 62-percent increase in onshore oil production on federal lands be-

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OhioGas&Oil

Ohio Regulators

OK Merger of 4 Small Gas Companies STAFF REPORTS | GateHouse Ohio The Public Utilities Commission of Ohio has approved the merger of four small natural gas companies that serve parts of Northeast Ohio. The PUCO on Thursday said Brainard Gas Corp and Orwell Natural Gas Company, both based in Ashtabula County, Pleasantville-based Northeast Ohio NaturalGas Corp., and Mentor-based Spelman Pipeline, can merge. The PUCO said the merger will not cause changes in customer charges or distribution rates. Affected customers will be notified of the merger within 30 days. The companies will be merged into Northeast Ohio Natural Gas Corp., according to filings with the state. The businesses, all considered utilities, are owned

by the same parent company, PHC Utilities Inc, which in turn is a wholly owned subsidiary of privately held Hearthstone Utilities Inc., a Montana company. Ohio counties served by the companies include Portage, Stark, Wayne, Medina, Geauga, Lake, Ashtabula, Trumbull, Mahoning, Carroll, Tuscarawas, Harrison, Fairfield, Coshocton, and Holmes. Brainard has about 220 customers, while Orwell provides gas distribution services to about 10,410 customers. Northeast Ohio Natural Gas provides natural gas distribution service to about 18,440 customers, while Spelman maintains about 121 miles of natural gas pipeline.

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OhioGas&Oil

FEBRUARY 2019

Official: U.S. Now World’s

largest crude oil producer JOHN LOWE | GateHouse Ohio Petroleum and natural gas imports to the United States are at the lowest level they have been in 50 years, according to an official of the largest U.S. trade association for the oil and natural gas industry. “As the world’s leading natural gas and oil producer, our nation is in a position of strength after decades of feeling captive to faraway events and the decisions of others,” Chris Zeigler said. Zeigler, who is executive director of American Petroleum Institute Ohio, spoke Jan. 10 at the Southgate Hotel during the monthly “Coffee and Commerce” meeting. Coffee and Commerce is sponsored by the Cambridge Area Chamber of Commerce. Founded in 1919 mere months after the end of World War I, the American Petroleum Institute has more than 600 member companies nationwide and 34 members in Ohio, Zeigler said. API, as it is known, is a standards making organization for the industry, he said. In addition to the standards division, API has advocacy and mobilization divisions. In a wide ranging overview of the state of the industry, Zeigler said it is particularly robust right now. “We are now the world’s number one producer of crude oil, 11.6 million barrels per day” he said. “We set a record for crude oil exports, 2.4 million barrels per day. [We had] a record natural gas liquids production of 4.8 million barrels per day and the lowest net imports in more than 50 years.”

Zeigler said that the United States still imports quite a bit of crude oil, mainly from Canada. The reason for that is because of the way American refineries are set up. “Because we had a downturn in domestic production a couple of decades ago, our refineries are set up to run heavier, sour crude. And a lot of that crude we get from Canada. “So, even as we have record amounts of domestic production, we’re still not ever going to be an island necessarily, at least not in the near future. “We still need resources like we get from Canada in order to run the refineries we have here in the U.S.” Ohio has four refineries, Ziegler said. The state also 12,000 miles of pipeline for transporting natural gas. The Ohio counties with the largest production of natural gas are Belmont, Monroe, Jefferson, Harrison and Carroll. Of those Belmont, Monroe and Jefferson counties account for 74 percent of the production, he said. As for Guernsey County, economic trends with respect to the industry are looking up, Jo Sexton said. Sexton is president of the Cambridge Chamber. “We had a board meeting yesterday and we heard that [gas and oil] companies who were here four years ago or eight years ago are coming back in,” she said. “They left and they’re coming back and we’re seeing increased activity.”

Chris Zeigler, left, executive director of American Petroleum Institute Ohio, chats with Jo Sexton, president of the Cambridge Area Chamber of Commerce, prior to a Chamber sponsored “Coffee and Commerce” meeting on Jan. 10. FEBRUARY 2019

OhioGas&Oil

What a Team!

Shale Crescent Region Guest Column

GREG KOZERA | Shale Crescent USA This was an important week for Shale Crescent USA and our Region. We had our first company visit from our marketing efforts. We have had other companies visit from the leads of Jobs Ohio, AEP or the WV Development Office. They got the lead and we supported their efforts with our study and other basic research. This week was different. A company we met through a conference presentation we gave, came to the Shale Crescent USA to look at possible sites for their expansion. For over two years we have been marketing the Shale Crescent Region, trying to convince companies to come here and see what we have to offer. Our print and internet articles in places like Forbes, New York Daily News, and Yahoo Finance have had global reach. We have been to conferences and expos as presenters and exhibitors around the USA and in Japan. We have done basic research like our IHSMarkit Study comparing a cracker built here to one built in Texas. We won! The Study showed this region is more profitable in practically every case. Shortly after our study’s release, the US Department of Energy (DOE) expressed interest in it. Last week the DOE released a report to Congress on ethane storage and distribution, promoting the benefits of expanding America’s petrochemical asset base beyond the Gulf Coast to the Shale Crescent USA. The report referred specifically to the Shale Crescent USA brand and IHS- Shale Crescent USA study. Because of reports and studies like these, Shale Crescent USA members have been interviewed by The Economist, The Hill, The Houston Chronicle, and The Pittsburgh Post-Gazette, to name a few. We have been on TV spots like Bloomberg’s “Commodities Edge” and Comcast’s “Newsmakers” that reaches 22 million homes. We have been guests on numerous radio shows in the USA and Canada, some nationally syndicated. This week we were on “The John Fredrick’s Show” that airs in Virginia and the Carolinas, also on “The Midday

Show” in Chicago and on WAJR in Morgantown. I tell you this not to brag, but to show that it takes a strong marketing effort to create the global awareness we need to begin to get petrochemical and manufacturing companies to consider coming to the Shale Crescent USA Region. After over two years of hard work, it is starting to pay off with our first Greg Kozera company group coming to the region. Marketing (creating awareness) always precedes sales. This is true in any business. No one is coming to your new restaurant no matter how good the food and service if they don’t know you exist. Marketing takes time. I’ll call our guest company “SCUSA-1”. They need natural gas as a feed stock to make their products. SCUSA-1 was looking at a number of locations around the country but not here, until the conference that connected us. After numerous contacts in a three- month period, I got a call from SCUSA-1’s VP. He said, “Kozera, you and your team have convinced us. We’re coming to The Crescent.” I met the President and VP of SCUSA-1 this week in the Upper Ohio Valley after they landed in Pittsburgh. They looked at sites on both sides of the Ohio River, and we worked our way down to Parkersburg. We introduced them to people from APEG and the West Virginia Development Office. They met Keith Burdette of the Polymer Alliance Zone and Lindsey Piersol of the Wood County Development Authority. Jerry James of Shale Crescent USA gave them detailed information of our Region’s natural gas resources, natural gas marCrescent continued on page 11

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Crescent continued from page 10

kets, and accessibility. We had an exceptional dinner in Parkersburg where they spent the night. After more site visits the next day, they headed to John Glenn International Airport in Columbus for their trip home. SCUSA-1 liked what they saw, not just the sites but the people. “Our guests loved their accommodations. They had great food and service for dinner. Everyone was friendly and welcoming. People love their state and community. The employees they met liked their jobs. On the last day, the administrative assistant who welcomed us and got us through security bubbled with enthusiasm. She was very efficient, the kind of person anyone would want on their team.” You can’t fake this stuff. I was able to watch and listen at the business meetings. I liked the chemistry I saw between SCUSA-1 and the companies they met with. Jeffrey Gitomer, national sales expert says, “If they know you, and like you and trust you, they may buy from you.” Every sale starts with knowing, liking and trusting. I received a text message from SCUSA-1 after they got home thanking me for the intros and coordinating the trip. They added, “The whole trip was awesome! There wasn’t a bad meeting. We need to make the most out of it now.”

FEBRUARY 2019

A successful visit like this required a lot of planning and a total team effort between state and local governments, the business community, local workers, members of the communities and the Shale Crescent USA Team. Our guests felt welcome. They sense that the people they met cared about their needs. One of the strengths of Shale Crescent USA is our ability to be neutral when it comes to individual communities and sites in Ohio and West Virginia. Our goal is to introduce our guests to people who can meet their needs. The parties must come to their own agreement. We stay involved to keep the process moving and help clear up any issues that arise. May the best site and community win. The process isn’t quick. It will take months. The rewards for everyone including SCUSA-1 are great. We call that a win-win-win. We all have a lot to be proud of. Success and the achievement of a big dream doesn’t happen in a day. It happens by what we all do day by day. Thoughts to ponder. © 2018 Learned Leadership LLC

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OOGA

Welcomes New Leadership STEVE DOWNEY | EnerVest Operating So how did a guy from West Virginia become the President of the Ohio Oil and Gas Association? It is a good question and I often wonder myself; but as I reflect on my years as a member of the Association, the Board of Trustees, the Executive Committee, and my career, I guess it is not that hard to figure out. I’ve had the great pleasure to work for several companies throughout my 30 years in the oil and gas business. From my time at Columbia Transmission, Triana Energy, Chesapeake Energy, and currently EnerVest Operating, which has allowed me to not only join but engage in several state Associations. Through that engagement, I’ve had the opportunity to meet and interact with some amazing people and have been lucky enough to be mentored by many of them. They may not have realized that they were mentoring me, but probably most leaders do not realize the effect they have on others because it just comes naturally to them. As I page through my OOGA directory and read the names of the Past Presidents and Hall of Fame members of the last many years, I count those leaders as my mentors. As they look at me, I’m sure they are thinking, “there goes the neighborhood!” With all kidding aside, what they taught me is to become engaged, express your opinion, and get involved in the Committees to make a difference. To that end, I’ve endeavored to do so. My first stint was co-chairing the

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OOGA President Steve Downey Commerce Committee, then ultimately chairing wherein we worked through many issues affecting the Industry. From that, we conceived the Midstream Subcommittee, given the activity surrounding processing, fractionation, and pipeline construction. My simplistic view was that it would ultimately help us get our product to market and improve our netbacks, so it would be an offshoot of the Commerce Committee. Little did I know, this Subcommittee’s first charge was to draft legislation to fend off the onerous rules that regulatory agencies were trying to burden the midstream industry with and make the construction and operation of the facilities more difficult than necessary. Thereafter, it was ultimately decided that this facet of the Industry was so impor-

tant that it needed to be separated as its own Committee. I take great pride in that! Through my work in the committees, I was given the opportunity to become a member of the Executive Committee, ultimately leading to the Board electing me an officer; and for that, I thank you! So the answer to the question I earlier posed, is through committee engagement. Being a trustee is not a rite of passage nor a ceremonial appointment. It was a charge that was given to me by the trustees that voted for me, and the mentors that shaped me, both of whom expect me to help carry the load. As we enter 2019, we will have a new Governor, Administration and new department heads that we must become acclimated to and contend with. The more things change, the more they stay the same, so expect many of the battles that have raged in the past to rage again along with new ones we probably haven’t even thought of yet. However, be assured that your Association will be at the forefront of the issues and working in unison with our members to craft a viable outcome for our Industry. To that end, I urge you to become involved in the committees and be engaged so that your voice will be heard and you will be part of the solution. The Association is only as strong as its members and committees, in order to succeed, we all have to be engaged. Please accept the challenge!

FEBRUARY 2019

Ohio Supreme Court Interprets the MTA

to Preserve A Severed Mineral Interest David J. Wigham | Attorney On December 13, 2018, “DMA”). The issue raised by Justice the Supreme Court of DeGenaro is currently pending beOhio clarified the type fore her former court, the Seventh of deed reference that District Court of Appeals, in several would preserve a re- cases led by Stalder v. Bucher, Case served oil and gas royalty interest No. CA2017-017. from being extinguished under the In general, the MTA automatically Ohio Market Title Act (the “MTA”) extinguishes property interests crein Blackstone v. Moore, 2018-Ohio- ated prior to a landowner’s chain of 4959. In an interesting concurring title to property, if the landowner opinion, one justice of the Supreme has an unbroken chain of title for Court, Justice Mary DeGenaro, cau- more than 40 years after the prior tioned that the court’s decision property interest was created and should not be interpreted to hold there are no specific references to that the MTA would apply to ex- the prior interest in the landowner’s tinguish mineral interests, in light chain of title. The issue in Blackof the more specific provisions of stone was whether the deed referOhio’s Dormant Mineral Act (the ence to the prior interest was suf-

ficient to preserve the interest. The royalty reservation at issue in Blackstone was originally created in 1915, when Nick Kuhn conveyed a 60-acre parcel to the Browns, and excepted a “one half interest in oil and gas royalty.” Each subsequent deed transferring the property made reference to the Kuhn royalty interest. In 1969, Alfred Carpenter transferred the property to David Blackstone, and this deed also excepted the Kuhn royalty interest, without any citation to the volume or page number of the 1915 deed. On appeal, the Seventh District Court of Appeals held that the Kuhn royalty Mineral continued on page 14

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Mineral continued from page 13

interest had been preserved in the 1969 deed, and the Blackstones appealed to the Supreme Court of Ohio. In its opinion, the Supreme Court analyzed the MTA and the question of whether the reference to the Kuhn royalty interest in the 1969 deed was specific enough to preserve the interest. The court concluded that because the 1969 deed reference identified the type of interest being reserved (a one-half royalty interest) and who originally reserved it (Nick Kuhn), there was no question that interest was preserved under the MTA. In a separate concurring opinion, Justice DeGenaro emphasized that the Blackstone opinion “should not be read to implicitly hold that the more general Marketable Title Act continues to apply to mineral interests following the enactment of the Dormant Mineral Act, R.C. 5301.56— a more specific statute providing for the termination of those interests.” Blackstone, at ¶ 19 Under Ohio law applicable to resolving conflicts between statutes, when two statutes are in conflict, the specific statute controls over the more general statute. In the context of the MTA and the DMA, Justice DeGenaro stated that the more specific DMA would apply to the preservation and termination of reserved mineral interests over the more general MTA, because the two statutes are in conflict. The Blackstone case was closely followed because of a recent surge in MTA claims filed by surface owners seeking to terminate reserved mineral interests. Specifically, surface owners have been attempting to utilize the MTA to extinguish severed mineral interests, rather than relying on the 2006 DMA, which requires surface owners to first notify mineral owners before seeking an abandonment of their minerals, and also allows mineral owners to permanently preserve the interest. Prior to September 15 2016, the date of the Supreme Court of Ohio’s landmark ruling in Corban v. Chesa-

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peake Exploration, L.L.C., surface owners had been able to rely on the automatic abandonment provisions of the 1989 DMA, which allowed surface owners to abandon reserved mineral interests based on a showing that they were not actively used for a period of 20 years, and there was no need to pursue MTA claims. As a result of Corban, the 1989 DMA was no longer applicable to the abandonment of minerals, which in turn lead to the recent spate of MTA cases filed by surface owners seeking alternate ways to automatically eliminate severed mineral interests. The problem is that the MTA and the 2006 DMA are arguably in conflict with each other. For example, on one hand, while the MTA allows for automatic extinguishment of prior mineral interests where there is no reference to the prior interest within the surface owner’s 40-year chain of title, the 2006 DMA requires surface owners to give notice before seeking to abandon a mineral interest and also allows mineral owners to statutorily preserve the same interests. So mineral owners could face possible challenges to the validity of their interests—and potentially inconsistent results—under two different statutes. In addition, there are several cases pending before the Seventh District Court of Appeals in which this very issue is in dispute; that is, whether the MTA is applicable to terminate reserved minerals interests or whether the more specific DMA applies. The leading case is Stalder v. Bucher, Seventh District Court of Appeals, Case No. CA2017-017. The Stadler case was briefed in early 2018, but an opinion has not been issued as of this writing. At the same time, several lower courts are issuing rulings that the DMA, and not the MTA, is the statute that controls the termination of reserved minerals, including the Monroe County Common Pleas Court. To add another layer of intrigue, Justice DeGenaro served as a judge on the Seventh District Court of Ap-

peals for 17 years before being appointed to the Supreme Court of Ohio in early 2018, to fill the seat vacated by the retirement of Justice William O’Neill. However, Justice DeGenaro was recently defeated in the November 2018 general election, and therefore is no longer on the Supreme Court. The Justice’s concurring opinion in Blackstone is not binding, so it remains to be seen how the Seventh District rules in Stalder v. Bucher. Regardless of how the court of appeals rules, scores of pending MTA cases involving mineral interests will be impacted. If the court rules that the MTA applies, then surface owners will have an additional basis to attempt to terminate reserved mineral interests covering their property. If the court rules that only the DMA applies, then surface owners will be limited to following the DMA when attempting to terminate mineral interests. Regardless of how the court rules, the opinion undoubtedly will be appealed to the Supreme Court of Ohio, where the issues will be decided without the involvement of Justice DeGenaro. In short, even after the Supreme Court’s ruling in the Blackstone case, surface owners and severed mineral owners in Ohio continue to face significant hurdles under the MTA and the DMA when seeking to terminate or preserve ownership of valuable mineral interests. There are several pending cases that will impact these interests. Ohio law in this area is in flux and is evolving seemingly every day. This uncertainty highlights the importance of retaining an experienced oil and gas attorney to advise clients with regard to the abandonment, preservation and the ownership of mineral interests. David J. Wigham is a second-generation Ohio oil and gas attorney with more than 26 years of experience. He practices at the law firm of Roetzel & Andress and maintains offices in Akron and Wooster, Ohio. He can be reached at 330-762-7969, or dwigham@ralaw.com.

FEBRUARY 2019

Progress Continues on Harrison County Power Plant

NICHOLAS A. HOMRIGHAUSEN | Community Improvement Corporation of Harrison County Harrison Power LLC and its affiliate EmberClear of Houston, Texas, recently announced that progress continues on the development of a natural gas-fired electric power generating plant slated for Cadiz in Harrison County. According to Raj Suri, CEO of EmberClear, while the facility’s groundbreaking originally slated for the Fall of 2018 has been delayed until the first half of 2019, significant milestones have been achieved that continue to move the project forward. EmberClear intends to construct a 1050 MW natural gas-fired electric power generation facility on about 100 acres in the Harrison County Industrial Park. EmberClear, which will invest nearly $1 billion in the construction, estimates that the facility will provide enough electricity to power one million homes. The project is expected to bring about 700 construction jobs to the county for three years, and then create over 20 permanent skilled jobs. The plant is being built near shale formations containing prolific amounts of low-priced natural gas. Several pipelines operated by Dominion East, Spectra, Energy Transfer and Columbia are already located within a few miles of the project site. In addition, several fractionation and gas distillation facilities already in Harrison County have plans to expand production. Earlier this year, the Harrison County Commissioners approved an enterprise zone tax exemption for Harrison Power LLC. The Public Utilities Commission of Ohio also issued a Certificate of Operation for the facility. In November, it issued a similar certificate to a related entity, Harrison Power Transmission LLC for the transmission line that will connect the facility to the AEP Ohio Transmission Company, Inc. Nottingham Substation. According to Suri, while he is pleased with the forward momentum, “the regulatory process has been slower than expected, likely due to the increased volume of activity in Ohio’s oil and gas industry.” “Harrison County is pleased to see progress continue on this important facility,” said Nick Homrighau-

sen, Harrison County’s Executive Director of Community & Economic Development. “In a large and complex project with as many regulatory hurdles as this one has, having slight delays is not uncommon. We continue to work diligently with the developer towards completion of this project. This project shows Harrison County’s potential to be a major player in the shale oil and gas industry. I’m excited to see additional projects come our way.” For further information, please contact: Nicholas A. Homrighausen, Community Improvement Corporation of Harrison County. at (P) 740-942-2027 or (E) nhomrighausen@harrisoncountyohio.org.

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Rover Pipeline Announces Donation to

Ohio 4-H Foundation New drone design challenge utilizes STEM for innovative agriculture solutions Alexis Daniel | EnergyTransfer.com

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Rover Pipeline LLC announced a new partnership with the Ohio 4-H Foundation that includes a $40,000 donation to fund its drone design challenge which will focus on habitat restoration, native pollinators and agricultural land stewardship practices utilizing drone technology. Design challenge learning gives Ohio 4-H members the opportunity for hands-on learning about solutions to science and engineering challenges. Because design challenge experiences are based on current technologies and real-world problems, they help participants learn how science, technology, engineering, and math (STEM) can be utilized in solving those problems. The drone challenge will launch in the summer of 2019 at 4-H Camp Palmer in Fulton County, Ohio, and 4-H Camp Piedmont, in Belmont County, Ohio. The drone challenge will also be available for 4-H participants in the 18 Ohio counties where the Rover Pipeline is located and various county fairs. Members will participate in teams, comprised of three to five members working together as engineers and utilizing their STEM skills. The teams will find ways to better reseed native habitats for native pollinators using drones. This includes conducting drone videography to map target areas using digital software, and applying the engineering process to design, build and tether a flock of drones to seed a native pollinator mixture of warm season grasses and flowers known to be

16 OhioGas&Oil

beneficial for native pollinators. Innovative agriculture solutions such as this could enable landowners to access areas not possible with a traditional seeder, decrease planting costs, reduce soil erosion, improve water quality, inhibit the expansion of invasive species, and provide the food and habitat for insects and wildlife. According to Dr. Bob Horton, 4-H Educational Design Specialist, “We are very grateful for the generous donation from Rover Pipeline and Energy Transfer to be able to offer new ways to advance STEM to young Ohioans. This program will give youth hands-on experience in understanding the innovative ways unmanned aerial vehicles are used in agriculture today and help them think about some amazing career opportunities.” Career connections are central to the design challenge helping youth to explore engineering, seed genetics, entomology, wildlife and natural resources. 4-H camps and clubs will be supplied with supplemental 4-H learning kits to enrich the experience. More information and a demonstration of the drones can be found at https://ohio4h.org/news/rover-pipeline-supports-new-4-h-initiative.

left to right: Dale Arnold, Ohio 4-H Foundation; Dr. Bob Horton, Ohio 4-H; Patty House, Ohio 4-H; Dr. Roger Rennekamp, OSUE; Maddie Allman, Ohio 4-H member; Bill Barth, Rover Pipeline; Troy Clayton, Rover Pipeline)

FEBRUARY 2019

Utica Oil and Gas

Production Soars During Third Quarter Reprinted with permission from the The Business Journal, based in Youngstown. BusinessJournalDaily.com Natural gas and oil production across the Utica shale soared during the three months ended Sept. 30, according to the most recent data made available by the Ohio Department of Natural Resources. The bulk of production comes from wells located in the southern tier of the play, the so-called “sweet spot” of eastern Ohio’s Utica. Oil and gas production, however, slowed slightly in the northern tier of the Utica, which includes Mahoning, Trumbull and Columbiana counties, most when compared to the previous quarter, ac-

cording to records. Seventy-four wells reported production in Columbiana County during the period, which together yielded 7.953 billion cubic feet of gas. In the second quarter, the county’s wells delivered 8.992 billion cubic feet of gas. The most productive well in Columbiana County during the third quarter was Chesapeake Energy Corp.’s Paige 3H well in Franklin Township, which produced 727.584 million cubic feet of natural gas over 92 days.

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Ohio EPA Issues

Modified Water Permit to Belmont County Ethane Cracker Plant HEIDI GRIESMER | Ohio EPA Ohio EPA issued modifications to the wastewater discharge permit related to the proposed PTTGCA Petrochemical Complex that would be located at Old Route 7 and Ferry Landing Road (Hwy. 2), Shadyside. “With today’s issuance of this modified permit, Ohio EPA’s environmental review of PTTGC America’s proposed ethane cracker plant is complete,” said Ohio EPA Director Craig W. Butler. “We have been careful to ensure this facility will not have an adverse impact on the air, water or health of the surrounding communities.” The modifications to the wastewater discharge permit conditions will: • decrease the levels of pollutants to be discharged to the Ohio River; • change the locations where storm water, which is water that runs off impervious surfaces after rain events, will be discharged; and

• modify limits at an internal monitoring station that does not directly discharge to surface water.

Ohio EPA held a public information session and hearing in Belmont County on Dec. 12, 2018, and considered all comments received before making a final decision on this permit. These comments are addressed in a Response to Comments document. The final permit and the Response to Comments document are available on Ohio EPA’s website at epa.ohio.gov/Portals/35/permits/ SCOSW-ONLYP18122713180.pdf. Issuance of final permit modifications can be appealed to the Ohio Environmental Review Appeals Commission (ERAC). Appeals generally must be filed within 30 days of issuing a final action; therefore, anyone considering filing an appeal should contact ERAC at (614) 466-8950 for more information.

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OHIO WELL ACTIVITY by the numbers

UTICA SHALE

MARCELLUS SHALE 23 10 8

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

Data as of 1/12/19

471 142 235 2128

2976

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

Source: Ohio Department of Natural Resources

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TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES

1. Belmont County......... 616 2. Carroll County......... 526 3. Monroe County.........473 4. Harrison County....... 443 5. Guernsey County.......251 6. Noble County.......... 223 7. Jefferson County........ 212 8. Columbiana County...159 9. Mahoning County....... 30 10. Washington County... 22 11. Tuscarawas County.... 20 12. Portage County........ 15 Trumbull County........ 15 13. Stark County............ 13 14. Coshocton County....... 5 15. Morgan County.......... 3 Muskingum County...... 3 Holmes County........... 3 16. Knox County.............. 2 17. Ashland County.......... 1 Astabula County......... 1 Geauga County.......... 1 Medina County........... 1 Wayne County............ 1 I VARIOUS SSTAGES: PERMITTED DRILLING, ,D WELL SITESS IN PLETED PRODUCING, PRODUCINGPLUGGED, PLUGGED DRILLED, COMPLETED, SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF D L A 1/12/19

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