Ohio Gas & Oil Magazine January 2019 by Gannett NEO

January 2019

A Free Monthly Publication

NEW LAW ADDRESSES ORPHAN WELLS

OOGEEP OFFERING

INCIDENT RESPONSE TRAINING IN THIS ISSUE: $20 MILLLION OKâ&#x20AC;&#x2122;D FOR RAIL PROJECT IN MONROE COUNTY

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Table of Contents JANUARY 2019

A Look Ahead Gas & Oil Events

G ROUP PUBLISHER

New Law allows ODNR to Plug More Wells

Bill Albrecht

Firefighters from Across Ohio Train with OOGEEP Experts

EXECUTIVE EDITORS

$20 Million OK’d for Rail Project in Monroe County

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

CONTENT CO ORDINATOR Doris Sigg

dsigg@the-daily-record.com

OhioGas&Oil

Thor Hess receives Next Gen Award

Recent Reports are Clear: U.S. Air Quality is Improving

Ohio’s Seventh District Court of Appeals Further Clarifies Notice Requirements Under the 2006 DMA

OPINION: EPA’s Methane “Roll Back” will Actually Help the Environment

Report Highlights the Benefits of an Ethane Storage Hub located in the Appalachian Region

Ohio Well Activity

Horizontal Drilling Activity Graph

On The Cover:

Happy New Year from the staff of Ohio Gas & Oil. We hope you find the contents of this issue both helpful and uplifting. The future of oil and gas has never looked brighter.

JANUARY 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

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

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 Online registration is available until: 3/4/2019 Exhibitor Inquiries: Georgette McElroy

JANUARY 2019

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

MARCH 27-29, 2019

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OhioGas&Oil

New Law allows

ODNR to plug more wells Shane Hoover | GateHouse Ohio

The Ohio Department of Natural Resources is revving up its program to plug oil and gas wells that were left behind by their owners. State lawmakers more than doubled the plugging program’s budget earlier this year to $15 million. ODNR plans to plug 173 wells this fiscal year, and has entered contracts to plug 55 of those wells at a cost of $3.6 million since July 1. ODNR spent $6 million to plug 83 wells last fiscal year, a price tag and number of wells that were records for the plugging program, which has been around since the mid-1970s. The new funding has allowed the program to put together a robust plugging plan, said Steve Irwin, spokesman for ODNR’s Division of Oil and Gas Resources Management. “It’s exponential growth headed in the right direction,” Irwin said. Lingering problem Orphan wells are oil and gas wells that haven’t been plugged properly and don’t have an owner who could pay to do that work. Orphan wells leak oil, natural gas and brine into surrounding water and soil and can cause explosions when natural gas collects in any nearby buildings. ODNR has identified nearly 750 orphan wells in 61 counties across the state, but the true number is unknown. Some 250,000 wells have been drilled in the state since 1860 and just 61,000 are producing. The rest are potential orphans depending on if and how they were plugged, and whether the owners are still around. The cost to plug a well can range from $20,000 to nearly $200,000, depending on the well’s depth, location, and the difficulty of the job. New law State lawmakers passed House Bill 225 earlier this year to beef up ODNR’s plugging program, and the law took effect in late September. Ohio already earmarked a percentage of the Oil and Gas Well Fund, which collects a tax on oil and gas production and fees paid by drillers, for the plugging program. Shale drilling ballooned the fund from $8.2 million in 2013 to $75.7 million last fiscal year. The final version of House Bill 225 increased the plugging program’s share of the fund from 14 percent to 30 percent of the previous fiscal year’s collection. The bill also streamlined the steps ODNR must

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take to locate well owners before plugging a well and allows landowners to hire contractors who are then paid directly by ODNR. Previously, ODNR reimbursed landowners who hired contractors, creating a tax liability for the landowners. Irwin said ODNR has adopted changes to the scope of well-owner searches and notifications and in how it prioritizes which wells get plugged. ODNR also is working on a new contract for the landowner

“All Ohioans, especially those with orphan wells on their property, stand to benefit greatly from this bill.” grant program. ODNR also will have to give quarterly and annual reports on the plugging program, but those deadlines have not yet been reached, Irwin said. Groups representing landowners, environmentalists and the oil and gas industry supported the reforms. ODNR continued on page 5

Orphan well

JANUARY 2019

Another orphan well ODNR continued from page 4

“All Ohioans, especially those with orphan wells on their property, stand to benefit greatly from this bill,” Sarah Spence, government affairs director for the Ohio Environmental Council and the Ohio Environmental Council Action Fund, wrote in an email. Matthew Hammond, executive vice president of the Ohio Oil and Gas Association, said Ohio has a unique opportunity to eradicate orphan wells. More well plugging also should help the state’s conventional drillers, who often work as plugging contractors, and have not necessarily benefited from the boom in shale drilling. “I think it’s going to take some time for this program to really take off, I think we recognize that, but the framework is there that this program could be up and running at a pretty aggressive level and spending that statutory requirement,” Hammond said. Full circle Passage of the new law has raised awareness about orphan wells, and Irwin said he recently spoke to a Farm Bureau group in Guernsey County and plans to do another event in Cuyahoga County “Interest in the topic is bringing in new wells and so we’re certainly seeing more referrals,” he said. Some of new plugging projects are tied to the shale drilling that boosted the plugging fund, Irwin said. ODNR recently entered a contract to plug two wells that are under a new power line in Noble County. The new power line was there because of grid adjustments to accommodate new natural gas-burning power plants that have been built in Ohio to take advantage of abundant Utica Shale natural gas. “We’re kind of going full circle all in one little example,” Irwin said. Reach Shane at 330-580-8338 or shane.hoover@ cantonrep.com On Twitter: @shooverREP

JANUARY 2019

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Firefighters from Across Ohio

Train with OOGEEP Experts A recent two-day training provided Ohio firefighters with best practices and tactics for managing oil field and natural gas events. The 2018 Ohio Firefighter Academies, also known as the Oilfield Emergency Response Training Program, are provided free by the Ohio Oil and Gas Energy Education Program (OOGEEP) to help Ohio firefighters keep communities safe and connect them to an energy industry that is important to Ohio. Firefighters Tom Regan, Sydney Regan, Bryan Urdak and Bryan Williams from Pleasant City Fire Department; and Alex Brokaw and Ron Brokaw from Cassell Station Fire Department joined peers from across Ohio for classroom presentations, activities

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and â&#x20AC;&#x153;hands-on fire behavior labsâ&#x20AC;? that offered insight into how oil and gas is explored, drilled and produced, and the importance of establishing a unified command in the event of an emergency. The program is held at the OOGEEP outdoor fire-behavior lab within the Wayne County Regional Fire and Rescue Training Facility, and is endorsed by the Ohio Fire Chiefsâ&#x20AC;&#x2122; Association, Ohio Society of Fire Service Instructors, and Ohio Fire and Emergency Services Foundation. â&#x20AC;&#x153;In 18 years, we have trained more than 1,500 firefighters from Ohio and seven other states,â&#x20AC;? said Rhonda Reda, OOGEEP Executive Director. â&#x20AC;&#x153;Our pioneering training program utilizes state-certified instructors, and our curriculum brings together Ohioâ&#x20AC;&#x2122;s oil and gas industry, government regulators, firefighters and emergency response experts. FireFirefighters continued on page 7

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OOGEEP Firefighter Academies are provided free to Ohio fire personnel to support their efforts to keep their communities safe.

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JANUARY 2019

Firefighters continued from page 6

fighters across the country look at our Firefighters ing, attendees received a certificate of attendance, Academies as a model training program.” The Unit- field guide, spill response kit, Class B Foam and other materials that can be utilized by their departments. Participants also received documentation for up to 12 CEU contact credit hours. More information about the Ohio Firefighter Academies can be found at https://www.oogeep.org/firefighters/. To learn more about environmental, health and safety careers in Ohio’s oil and gas industry, visit http://www.oogeep.org/industry-workforce/ careers/. Links to OOGEEP’s “Oil and Gas Careers in Ohio” video series can be viewed at www.youtube.com/ user/OOGEEP1<http://www.youtube.com/user/OOGEEP1>. The Ohio Oil and Gas Energy Education Program (OOGEEP) is a non-profit statewide education and ed States Fire Administration notes there are cur- public outreach program. Created in 1998, OOGEEP rently 1,167 registered fire departments in the Ohio, provides a variety of programs throughout the State of which 61 percent are staffed by volunteer per- of Ohio. These programs primarily focus on teacher sonnel. Through the generosity of Ohio’s oil and gas workshops, scholarships, science fairs, firefighter producers, there is no cost for firefighters to attend trainings, industry safety trainings, career and workforce development, research and guest speaker prothe class. In addition to the education and hands-on train- grams.

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$20 Million

OK’d for Rail Project in Monroe County On Dec. 6, U.S. Sen. Sherrod Brown (D-OH) announced $20 million in new federal funding for the town of Hannibal, Ohio to invest in its rail transloading project. This funding will allow the Ohio Rail Development Commission to construct a rail yard and pipeline facility in order to increase the Long Ridge Energy Terminal’s capacity and connect it to existing rail infrastructure. This will give the area’s energy exports, including natural gas, better access to global markets. Brown wrote to the Department of Transportation in July in support of this project. “When our rural communities have up-to-date infrastructure, it helps them grow and support local jobs,” said Brown. “This project will have a significant economic impact on Hannibal and across Southeast Ohio.” The project will construct a pipeline-to-rail transloading facility at an energy terminal including truck racks with unloading bays, ladder tracks connecting to the recently constructed loop track, and rail loading arms. The funding for the project was made available through the Department of Transportation’s (DOT) through the Better Utilizing Investment to Leverage Development (BUILD) Transportation Discretionary Grants program. Brown serves as Ranking Member on the Senate Banking, Housing and Urban Affairs Committee, which oversees public transit. In March, he unveiled a new infrastructure proposal that would expand infrastructure investments through the TIGER Grant Program, now called the BUILD program. BUILD Transportation grants replace the pre-existing Transportation Investment Generating Economic Recovery (TIGER) grant program. FY 2018 BUILD Transportation grants are for investments in surface transportation infrastructure and are to be awarded on a competitive basis for projects that will have a significant local or regional impact. BUILD funding can support roads, bridges, transit, rail, ports or intermodal transportation. In July 2018, The Long Ridge Energy Terminal

OhioGas&Oil

(“Long Ridge”) announced the completion of its rail loop track construction project, enabling the facility to take up to three unit trains of frac sand and other commodities at any given point in time. This project was completed in response to the rapidly growing frac sand and natural gas liquids demand associated with the Marcellus and Utica shale in East Ohio and the West Virginia panhandle. Long Ridge is the only terminal in the Appalachian Basin with both unit train and barge transloading capabilities, providing customers with best-in-class optionality for sourcing frac sand and other commodities. In addition, Long Ridge has recently put into service a rail unloading pit, a frac sand conveyor belt system and frac sand silos with total storage capacity of 23,000 tons, and planned to commission a second barge dock in August 2018. About Long Ridge Energy Terminal The Long Ridge Energy Terminal is the Appalachian Basin’s leading multimodal energy terminal with nearly 300 acres of flat land, two barge docks on the Ohio River, a unit train capable loop track and direct access to Ohio Route 7. Long Ridge is a subsidiary of Fortress Transportation and Infrastructure Investors LLC, which trades on the New York Stock Exchange under the ticker FTAI. For more information on Long Ridge, please visit www.longridgeenergy.com. About Fortress Transportation and Infrastructure Investors LLC Fortress Transportation and Infrastructure Investors LLC (FTAI) owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation. FTAI is externally managed by an affiliate of Fortress Investment Group LLC, a leading, diversified global investment firm.

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OhioGas&Oil

THOR HESS RECEIVES NEXT GEN AWARD

Annual Honor Recognizes Central Ohio’s Next Generation Business Leaders Andrea Weitzenfeld | winsby inc.

Thor Hess, Executive Vice President at Southeastern Equipment Company, was honored Wednesday, November 14 at the Conway Center for Family Business’ 20th Annual Family Business Awards Program. Bestowed annually, the Next Gen Award recognizes emerging leaders who are making an impact in their businesses and in the Central Ohio business community at large. The Family Business Awards Program was established in 1999 to recognize excellence in family business and has honored over 250 local family businesses throughout that time. Thirty-five family businesses and individuals were honored in 2018 in the following categories: Community Engagement, Family Business of the Year, Legacy, Lifetime Achievement, Milestone Achievement, Re-Invention, Next-Gen, Rising Star, Succession Planning, and Support of Family Business. “Family businesses are the backbone of the American economy and are vital to the Central Ohio economy and community,” said Jill Hofmans, managing director of the Conway Center for Family Business. “Thor was recogThor Hess with award nized for the Next Gen 10 OhioGas&Oil

Award for the many accomplishments he’s made as a third gen family business leader.” “We are very proud to have Thor be a part of the future of this great company,” states Charlie Patterson, President at Southeastern Equipment Company. “His achievements and work ethic are going to go far at our company and this award is a great recognition of that. I look forward to seeing him grow as our next generation leadership.” The Family Business Awards Program is made possible through the generous support of Dispatch Media Group, First Merchants Bank, Gryphon Financial Partners, Ricart Automotive, Rider + Reinke Financial Group, Taft/, and White Castle. The Conway Center for Family Business is Central Ohio’s resource for educational programs, resources and networking opportunities to support the growth and success of more family-owned businesses. The Center celebrates the successes of family-owned businesses at its annual awards program and offers peer group opportunities for next-generation leaders, family business leaders, women family business owners, and more. The organization includes approximately 200 family-owned businesses from Central Ohio that employ more than 20,000 individuals. The Conway Center is celebrating its 20th Anniversary in 2018. About Southeastern Equipment Co., Inc. Southeastern Equipment has been selling, servicing and renting heavy machinery since 1957. The company has eighteen locations throughout Ohio, Michigan, Kentucky, and Indiana. Manufacturers represented by Southeastern Equipment include: CASE Construction, Kobelco, Bomag, Gradall, Kubota Construction, Vacall, Etnyre, Vacall, Terex, Schwarze, Alamo Industrial, Eager Beaver Trailers, Superior Broom, Midland Machinery, DuraPatcher, Fecon, Genie, Skytrak, JLG, Sullair, and a wide variety of companies that manufacture heavy equipment attachments. For more information, visit their website www.southeasternequip.com. JANUARY 2019

RECENT REPORTS ARE CLEAR:

U.S. AIR QUALITY IS IMPROVING EnergyInDepth.org

Air quality in the United States is improving at the further explained that over the 10-year period, these same time U.S. oil and natural gas production has emissions represented an average of 23.7 percent of skyrocketed, according to two reports issued this national emissions for CO2, 7.3 percent for CH4, and 1.5 percent for N2O. The decreases coincided with increased onshore

“Over the past 50 years, the U.S. has achieved robust economic growth while dramatically reducing emissions of harmful air pollutants.”

Emissions from Fossil Fuels Decline on U.S. Federal Lands 2005 - 2014

Carbon Dixoxide

Methane

Nitrogen Oxides

6.1% 10.5% 20.3% Sources: U.S. Geological Survey 2018

oil production on federal lands – production grew by nearly 62 percent from 2009 to 2014, according to DOI data. The United States is experiencing decreased emissions and an improved economy. These emissions declines aren’t only occurring on federal land. TPPF’s report takes a hard look at trends in U.S. air quality and the economy over several decades, highlighting the U.S. Environmental Protection Agency’s 2018 Our Nation’s Airreport, World Health Organization (WHO) data, and others that have found significant decreases in the six criteria air pollutants: carbon monoxide, lead, nitrogen dioxide, ozone, particulate matter and sulfur dioxide.

month. As one of the reports from the Texas Public Policy Foundation (TPPF) summed it up: Emissions on federal lands declined significantly for the three main gases typically associated with climate change. The U.S. Geological Survey this month wrapped up its 18-month U.S. Dept. of Interior-requested analysis of greenhouse gas emissions associated with the development and use of fossil fuels on federal lands from 2005 to 2014. Specifically, the agency studied carbon dioxide (CO2), methane For instance, the report explains: (CH4) and nitrogen oxides (N2O), and found: “ComFrom 1970 to 2017, the aggregate emissions for pared to 2005, the 2014 totals represent decreases the six criteria pollutants declined 73 percent – at Air continued on page 12 in emissions for all three greenhouse gases.” USGS JANUARY 2019

OhioGas&Oil 11

Air continued from page 11

PM 2.5 concentrations for select countries from 1990 to 2016 80

Average Annual PM 2.5 (ug/m3, population weighted)

India 70

China Global

Mexico Brazil France

United States 0 1990

1992

1994

1996

1998

2000

2002

Source: HEI

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the same time that U.S. gross domestic product increased 262 percent. And they have decreased an average of 64 percent since 1990. Emissions of particulate matter 2.5 (PM2.5) are five to 20 times higher in cities in developing countries than in U.S. cities, according to WHO. In fact, WHO data show that the United States is the only highly populated country to meet the organization’s safe limits for healthy air quality U.S. PM2.5 emissions declined 36 percent since 2005, according to Our Nation’s Air. This is particularly important, as EPA described in the report, because: “Exposures to PM, particularly fine particles referred to as PM2.5, can cause harmful effects on the cardiovascular system including heart attacks and strokes. These effects can result in emergency department visits, hospitalizations and, in some cases, premature death. PM exposures are also linked to harmful respiratory effects, including asthma attacks.” Bottom line: Both of these reports show that thanks to technological innovations, the United States has been able to reduce emissions while building its economy through increased energy production. As a spokesperson for the American Petroleum Institute explained to Oil and Gas Journal, U.S. natural gas production. and the resulting consumption is playing a “significant role in achieving 30-year lows in carbon dioxide emissions from power generation that we see today.

JANUARY 2019

OHIO’S SEVENTH DISTRICT COURT OF APPEALS

FURTHER CLARIFIES NOTICE REQUIREMENTS UNDER THE 2006 DMA David J. Wigham | Attorney

On November 26, 2018, Ohio’s Seventh District Court of Appeals issued a ruling that clarified the “reasonable due diligence” standard that applies to surface owners who are attempting to comply with the notice requirements of the abandonment procedure in the 2006 Dormant Mineral Act (2006 DMA). (The Seventh District Court of Appeals includes Belmont, Carroll, Columbiana, Harrison, Jefferson, Mahoning, Monroe and Noble Counties.) In Sharp v. Miller, 2018-Ohio4740, the Court held surface owners are not required to perform an internet search in every case to demonstrate reasonable diligence was used to locate mineral owners for DMA notice purposes, stating that it “did not establish … a bright-line rule or definition of ‘reasonable diligence’” that would require an online search in every case. Explaining further, the Sharp Court noted, “Because the standard relies on the reasonableness of any party’s actions, whether that party’s efforts constitute ‘due diligence’ will depend on the facts and circumstances of each individual case. In other words, reasonable actions in one case may not be reasonable in another case.” (Emphasis added.) The Court was urged to adopt a

rule that required surface owners to conduct an internet search in every case as part of the due diligence required to locate mineral owners for the service of a 2006 DMA abandonment notice. The Sharp Court stopped short of this, adopting a reasonableness standard that requires a case-by-case review. This decision answers an important question left open in the Seventh District’s earlier ruling in Shilts v. Beardmore, 2018-Ohio863, which held that the certified mail service requirement in the 2006 DMA is not necessary “when a reasonable search fails to reveal the addresses or even the names of the potential heirs that must be served.” Since the due diligence under scrutiny in the Shilts case involved an internet search, many mineral holders have argued post-Shilts that an internet search should be required of every surface owner seeking to follow the 2006 DMA abandonment procedure in every case. Sharp v. Miller has rejected this argument. A review of the facts in Sharp v. Miller is important to understand its holding. The original parties who reserved the mineral interest in dispute where named I.W. Poole and R.S. Smith. In 1944, Poole and Smith transferred the surface rights to the property in question,

“excepting and reserving all mineral rights.” In 2014, the current surface owners, the Millers, were seeking to abandon this severed mineral interest under the 2006 DMA and attempted to locate the Smith/Poole heirs. Unable to locate them, the Millers published a notice of their intent to declare the Poole/Smith mineral interests abandoned, without first attempting service of the notice via certified mail. Thereafter, the Smith/ Poole heirs filed suit to quiet title to the minerals, claiming among other things that the Miller did not comply with the 2006 DMA. To establish the surface owners’ due diligence, there was evidence that the Millers searched the public records, including the probate and deed records of Jefferson County, Ohio, the county where the property is located. There was also evidence of a subsequent internet search that was conducted during trial preparation in the underlying case that was also unsuccessful in locating heirs. Importantly, the Court of Appeals noted that at issue was the reasonableness of the surface owner’s search that occurred before the abandonment notice was filed, not any search that was done after the abandonment notice was filed. Ruling in favor of the surface owners, the Court stated that 2006 continued on page 14

JANUARY 2019

OhioGas&Oil 13

2006 continued from page 13

“[t]here was no evidence that a simple internet search would have revealed the actual Smith/Poole heirs.” Therefore, the Court concluded that a public record search of the Jefferson County deed and probate records constituted reasonable due diligence. Several important aspects of this decision are noteworthy. First, although the Court states that the surface owner’s preabandonment due diligence is the only relevant search, it also cited to a lengthy post-abandonment internet search to conclude that a pre-abandonment internet search would not have been successful. It seems that a post-abandonment search would always be relevant to test the reasonableness of a surface owner’s pre-abandonment search, because each

search and each case is different, and the reasonableness standard is applied on a case-by-case basis. Some mineral owners are easier to find than others. And the internet is a powerful tool commonly used to locate mineral owners. In fact, there are situations where the surface owner’s pre-abandonment search did not include an internet search and a post-abandonment search located the heirs within minutes. In this instance, the reasonableness of the surface owner’s pre-abandonment search may be viewed as unreasonable, given the ease with which mineral owners where located on the internet. Second, Sharp v. Miller was based on a set of facts that were unfavorable for the mineral owners. For example, it appears that the Smith/Poole heirs did not introduce any evidence about the

reasonableness of the internet search at all, and therefore were not able to rebut the surface owner’s evidence of reasonableness of its search efforts. From the mineral owner’s standpoint, in order to challenge a surface owner’s due diligence, it is critical to re-trace the steps necessary to locate the heirs. If the heirs were easily located, mineral owners can to introduce evidence of how the heirs were located and how the surface owners search efforts fell short of being reasonable. Therefore, the online search element remains a vital tool when challenging a surface owner’s pre-abandonment search and whether such search was reasonable. It may not be required of the surface owner in every case, as the Sharp v. Miller Court held, but the only way to DMA continued on page 15

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Roetzel’s experienced Oil and Gas attorneys provide a wide array of legal services focused on landowner representation including: • Leasing and lease renewals, ratiﬁcations and amendments • Litigation, including: { Lack of production { Dormant Mineral Act { Marketable Title Act

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For additional information, contact Dave Wigham at dwigham@ralaw.com, Randy Moore at rmoore@ralaw.com, or Tim Pettorini at tpettorini@ralaw.com. RALAW.COM ROETZEL & ANDRESS, A LEGAL PROFESSIONAL ASSOCIATION

Gas & Oil Team Members Luke Palmer, Sara Fanning, Ben Fraifogl, Bret McNab and Pat Hanley

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JANUARY 2019

DMA continued from page 14

know in each case is through a post-abandonment search. Also, the Smith/Poole heirs received actual notice of the publication of the abandonment notice in time to file an affidavit to preserve their mineral interest, had an opportunity to file an affidavit to preserve, but failed to do so. On appeal, the Court noted that there was “no reasonable excuse” as to why they waited until it was too late to file a preservation claim. In fact, the Smith/Poole heirs were alerted about the Millers’ published notice of abandonment by a company known as East Ohio Minerals Recovery, LLC (EOMR). So, at the very least, EOMR was able to locate the Smith/Poole heirs (presumably when EOMR saw the Millers’ abandonment notice published in the local newspaper) and even alert them about the notice within the 60-day deadline to file a preservation affidavit. There was no mention in the Court’s decision as to how EOMR was able to locate the Smith/Poole heirs so fast, and certainly their search efforts would have been relevant evidence to challenge the reasonableness of the Miller’s due diligence: EOMR located the heirs,

why couldn’t the Millers? Instead, the Smith/Poole relied on the argument that, because the Millers did not conduct an internet search, they did not use reasonable diligence under the 2006 DMA. The Sharp case further demonstrates that the legal battles in Ohio courts over ownership of valuable mineral rights are far from over. Surface owners and mineral owners still have an array of potential statutory and common law claims to assert when seeking to abandon or preserve ownership of severed mineral interests. The law in this area is evolving seemingly every day. The Sharp case illustrates the complexity of the legal issues and highlights the importance of retaining 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.

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OPINION: EPA’s Methane “Roll Back” will Actually Help the Environment Drew Johnson | National Center for Public Policy Research

AR-10657685

When the Environmental Protection Agency issued a proposal last month to ease Obama-era restrictions on methane emissions from oil and gas facilities, green activists turned bright red with anger. Unfortunately, their biggest worry seems to be the effect the proposed methane change will have on Obama’s legacy, not the environment. If they were actually interested in keeping the earth green, environmentalists would be championing the EPA’s proposal, not protesting it. Why? Because the amended rule would at last give oil and gas firms adequate time to prevent methane leaks via thorough inspections and repairs. Methane is a greenhouse gas released from oil and gas equipment -- like tanks, wells, and pipelines -during fossil fuel production and transportation. Current methane rules require oil and gas firms to test wells for methane leaks every six months and fix detected leaks within 30 days. The EPA’s proposal would require annual inspections and allow 60 days for repairs. Green activists were quick to accuse the EPA of “gutting” environmental regulations. But the revised rule simply accommodates the physical realities of energy production. The proposal would give firms the time they need to adequately repair their infrastructure and avoid future leaks, rather than rushing a repair through to meet an arbitrary deadline. The extra time is especially important for facilities in remote locations. Even without government intervention, energy companies would be working to reduce methane

16 OhioGas&Oil

leakage. When properly captured, methane is a marketable commodity. Leaks are not only a potential liability but also a waste of a valuable product. Telling the energy industry to reduce methane leaks is like telling a farmer not to throw out his harvest -- it’s unnecessary. In fact, late last year, 26 oil and gas producers formed the Environmental Partnership, a voluntary program to reduce emissions by monitoring and repairing leaks with the latest technology. The consortium is replacing or retrofitting outdated infrastructure with state-of-the art components and removing liquids that inhibit the flow of natural gas in aging wells. Since its founding, the group has grown to 43 members. And just last month, Exxon, Shell, Aramco, and 10 other energy companies pledged to reduce their methane emissions to less than .25 percent of their total natural gas production by 2025. These industry efforts are working. Between 1990 and last year, a period during which natural gas production rose 50 percent, methane emissions fell 19 percent. And despite its status as the top oil and natural gas producer in the world, America’s energyrelated methane emissions represent only about 10 percent of the global total. Most of that progress can be attributed to new energy industry technology. “The decrease in production emissions is due to increased voluntary reductions, from activities such as replacing high bleed pneumatic devices, regulatory reductions, and the increased use of plunger lifts for liquids unloading,” according to an EPA analysis conducted during the Obama administration. Easing regulations surrounding natural gas production will help lower emissions of other harmful gases as well. Advanced hydraulic fracturing techniques have yielded an abundant domestic supply of natural gas, which burns twice as clean as coal. We have America’s adoption of natural gas to thank for a 25year low in carbon dioxide emissions. Flexible, incentive-based and voluntary initiatives like the Environmental Partnership lead to real solutions in the real world; burdensome regulations, by contrast, only compound problems. Despite the green movement’s reactionary rhetoric, the EPA’s methane proposal will be a boon for the environment. JANUARY 2019

Report Highlights the Benefits of an Ethane Storage Hub located in the Appalachian Region T he *U.S. Department of Energy* (DOE) published a Report to Congress: *Ethane Storage and Distribution Hub in the United States* The report highlights the potential in Appalachia for the development of a new ethane hub based on the tremendous low-cost resource from the Marcellus and Utica shales, and the accompanying security and reliability benefits derived from geographic diversity in the nation’s petrochemicals manufacturing base. “There is an incredible opportunity to establish an ethane storage and distribution hub in the Appalachian region and build a robust petrochemical industry in Appalachia,” said U.S. Secretary of Energy Rick Perry today at the annual National Petroleum Council Meeting in Washington D.C. “As our report shows, there is sufficient global need, and enough regional resources, to help the U.S. gain a signifi-

cant share of the global petrochemical market. The Trump Administration would also support an Appalachia hub to strengthen our energy and manufacturing security by increasing our geographic production diversity.” The United States is now the top producer of oil and natural gas in the world, with an additional benefit in the form of increased natural gas liquids (NGLs), including ethane. Some NGLs are burned for space heating and cooking while others are blended into vehicle fuel. Ethane is particularly useful as a feedstock for petrochemical manufacturing. Ethane production in the Appalachian basin is projected to continue its rapid growth through 2025 to a total of 640,000 barrels per day, more than 20 times greater than just 5 years ago. Storage continued on page 18

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Storage continued from page 17

The Appalachian region has experienced nearexponential growth in natural gas production, and that production is expected to increase for decades to come. The region is home to the Marcellus and Utica shale formations, and were it an independent country, Appalachia would be the third-largest natural gas producer in the world. According to the Energy Information Administration, production in Ohio, Pennsylvania, and West Virginia has increased so rapidly that their combined share of total U.S. natural gas production has jumped from only 2% in 2008 to 27% in 2017. In addition, natural gas liquids (NGLs) processing and fractionating capacity in Appalachia has grown quickly to match this increase in natural gas production. However, the Appalachian region currently lacks other physical infrastructure for a “hub” that connect supply and demand sources, including storage for the liquids. This Report to Congress examines the potential for a hub by comparing it to existing ones that already service the Gulf Coast and Permian Basin, which account for most of the U.S. growth in NGLs outside of Appalachia. In addition, market analysis

from the report emphasizes that the development of an Appalachian hub may offer a competitive advantage for the U.S. to gain global petrochemical market share while not being in conflict with Gulf Coast expansion. The report explains that a new Appalachian hub would enhance the geographic diversity of the vital US petrochemical industrial sector, supporting U.S. economic security.

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OHIO WELL ACTIVITY by the numbers

UTICA SHALE

MARCELLUS SHALE 22 8 7 23

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

Data as of 12/15/18

484 132 245 2092

2953

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........ 604 2. Carroll County......... 526 3. Monroe County.........470 4. Harrison County....... 437 5. Guernsey County.......251 6. Noble County.......... 223 7. Jefferson County....... 207 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 12/15/18

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The nationâ&#x20AC;&#x2122;s premier source of energy information

The U.S. Energy Information Administration collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment. www.eia.gov

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