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Table of Contents 5

New Facility to Open in Newcomerstown

OOGA Unveils New Website Sophie Kruse / Dix Communications

Scholarships are Made Available

Nexus Pipeline to Generate Revenue

Ohio Debating Raising Severance Tax

Cashing in on Sand Dollars

Website Provides Tool to Estimate Royalties

Millions in Revenues from Shale Development

Petition to Protect Slope Creek Reservior

Severance Tax or Drilling Ban

Obama Floats Plan for Atlantic Drilling

Opinion: Arctic Territory for U.S. Exploration

Strike Has Little Bite at Gas Pump

New Rules for Gas Wells

Niki Wolfe / Dix Communications

PUBLISHERS Andrew S. Dix

Thomas Doohan / Dix Communications Marc Kovac / Dix Capital Bureau

G.C. Dix II David Dix

Judie Perkowski / Dix Communications

Jackie Stewart / Energy In Depth - Ohio

EXECUTIVE EDITORS Ray Booth Rob Todor Lance White

Louis Dâ&#x20AC;&#x2122;Amico / Pennsylvania Independent Oil & Gas Association

Roger DiPaolo

Dina Cappiello / Associate Press Pat Sink / I.E.O.U. Local 18

Jonathan Fahey / AP Energy

Julie Carr Smyth / Associated Press

REGIONAL EDITORS Cathryn Stanley Niki Wolfe Judie Perkowski Erica Peterson

ADVERTISING Kim Brenning

Jeff Kaplan

Rhonda Geer

Obama Rejects Keystone XL Pipeline Bill

Keystone Veto Not a Death Blow

Land Stewards to Watch Rover Pipeline

42 Harry Newman

45 46

Janice Wyatt

48 Jeff Pezzano

51 55 56

DIGITAL MEDIA MANAGER

Brad Tansey

59 60

ART DIRECTOR Pete Kiko

Josh Lederman / Associated Press

Associate Press

Bobby Warren / Dix Communications

Potemtial Pitfalls in Estate Planning Frank McClure / Attorney

Positive Impact of Marcellus and Utica Joe Massaro / Energy In Depth - Marcellus

Lower Court Logjam David J. Wigham / Attorney

Video Security Goes High-Tech

Judie Perkowski / Dix Communications

Still Bullish on Natural Gas Dan Garcia / Attorney

Fund Creates Educational Opportunities Noble County to Receive $6.2 Million Kristen Spicker / Dix Communications

Chamber Executive Honored in Ohio Company Takes Break from Original Plans Judie Perkowski / Dix Communications

Legislation Would Hasten Decisions Marc Kovac / Dix Capital Bureau

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Niki Wolfe Dix Communications While the new business is expected to create some jobs for the area, an estimated 17 full-time job positions is planned to be created within the next two years. The job salaries for those positions are expected to be in the $60,000 to $80,000 range. The nature of the business involves the distribution of ceramic proppant via transload facility. The facility’s intended purpose is to serve the growing oil field clients in Ohio. The new $14.6 million facility will be a distribution center for Carbo proppants, which are ceramic beads that are made to keep a hydraulic fracture open during its operation. The products will be delivered to the site by rail and stored in silos that are able to hold 180 million pounds of ceramic proppant before being transported by truck. “With that, the company will be using the railroad as part of its operation,” said Mayor Friel, “and was granted a railroad spur from the Newcomerstown CIC (Community Improvement Corporation).” The facility is also reportedly looking at proposed sites in Pennsylvania and West Virginia with intentions of establishing additional transload facilities that are located within the Utica Shale play. Oppidan Investment Company, based in Minnetonka, Minn., is the developer and construction manager on behalf of CARBO.

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EWCOMERSTOWN, OH -- “There’s activity back out there again,” said Newcomerstown Mayor Jim Friel regarding the construction of Carbo Ceramics Inc., just east of Newcomerstown. Work has slowed at the site and rumors had it that the company was leaving even before it made roots in Newcomerstown. But that’s not the case. Mayor Friel said he talked with Shannon Ruck of Oppidan Construction Co. of Minnetonka, Minn., the construction company building the Carbo Ceramics facility. She told him that the completion date is set for Aug. 1. The 28 acre lot has been under construction since last September. “It will bring more income to the village with those working there living and shopping at businesses in town,” said Mayor Friel. Newcomerstown Village Council authorized an enterprise zone agreement with the Houston-based company to locate to the Newcomerstown Industrial Park. The agreement includes an approval for tax abatement of 25 percent for five years. The business was originally asking for an abatement of 100 percent for 30 years.

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OLUMBUS -- As members of the orgaBeing a member has a multitude of benefits, including acnization may have noticed, the Ohio Oil cess to OOGA events, information and contacts within the asand Gas Association has recently un- sociation. Chadsey said that contacts to others in the industry veiled a revamped website and a new member- are a main reason for people to join. ship system. Corporate membership is available at $12,000 for 25 indiThe association decided to make these changes to keep up- vidual memberships, $6,000 for 12 and $3,000 for 6. Individual to-date with current technology. memberships are available as well. An annual membership for “You’ve got to stay relevant, current and up-to-date,” said a producer, contractor, allied industry, professional or associMike Chadsey, director of public relations at OOGA. ate is $250, for royalty owners is $25 and students are $30. The new membership software, powered through YourMembership.com, allows for members to renew their membership, update information, sign up for events and contact other OOGA members on the site. More features at expected to roll out in the next few months. There is also increased security and members are required to sign in with each visit to the site. “It’s another way to get (members) engaged,” said Chadsey. “It’s a portal for members to get out there.” OOGA is a trade association with more than 3,100 members. These members include everyone from large oil and gas producers to lawyers and CPAs involved in the industry. It also includes people and businesses who want to get involved with the industry.

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RANVILLE, Ohio – The Ohio Oil and Gas Energy Education Program and Ohio Oil and Gas Energy Education Foundation are now accepting scholarship applications from students pursuing careers or training in the crude oil and natural gas industry. Applications will be accepted until March 31, 2015. The Foundation is an approved 501 (c) 3 non-profit organization funded voluntarily by Ohio’s oil and gas producers, associated companies and individual donors dedicated to developing Ohio’s oil and natural gas resources. OOGEEP and the Foundation work to educate Ohioans about the oil and gas industry and the varied careers available. “The Foundation anticipates awarding a record number of scholarships in 2015, indicating the continued interest from young people in pursuing careers in Ohio’s oil and natural gas industry,” said Frank Gonzalez, GonzOil, Inc. and Scholarship Committee chair. “As an experienced Ohio producer, it’s refreshing to see such enthusiasm and eagerness from the next generation who will develop the resources to power our state and country for years to come.” Students must be either an Ohio resident or planning to attend an accredited Ohio college, university or trade school. Applicants also must have a career goal in the oil and natural gas industry or other energy related field. Students are judged on academic achievement, an essay, community service/outside activities, letters of recommendation, awards and special recognitions. To date, the Foundation has awarded 195 scholarships to 113 students from 85 Ohio cities, 43 counties, and 28 different colleges or universities. Each scholarship is worth a minimum of $1,000 per year and can be renewed for up to four years. The minimum scholarship applicant criteria includes: - Must be a U.S. citizen. - Must have a career goal in the crude oil and natural gas industry, or related energy field.

- Must be an OHIO resident OR a student attending, or planning to attend, an accredited OHIO College, University or Trade School. - Must maintain a 2.50, or better, G.P.A. for renewal. - Submission of transcripts is encouraged, but not required. “In 2014, Ohio celebrates the 200th Anniversary of the first discovery of crude oil in the U.S.,” said Rhonda Reda, executive director, OOGEEP and the Foundation “Since then more than 275,000 natural gas and crude oil wells have been drilled. Changes in technology and energy demand drive our need to encourage more students to pursue careers in domestic energy production. By establishing scholarship opportunities, we want to reward these outstanding students who will certainly help develop, produce and supply tomorrow’s energy needs.” “It’s always been my dream to pursue a career in the oil and gas industry, and the OOGEEP scholarship is making that possible,” said Emily Zbasnik, scholarship recipient and University of Mount Union senior. “I hope more students see the benefits of an oil and gas industry related career and take advantage of the opportunities available for training, support and scholarships.” To apply or learn more about the Foundation scholarship, or to inquire about making a tax-deductible donation to the Foundation, please visit www.oogeep.org. The Ohio Oil & Gas Energy Education Program (OOGEEP) is a nonprofit organization responsible for public outreach on behalf of Ohio’s natural gas and crude oil industry. The mission of OOGEEP is to facilitate educational, scholarship and safety programs, and to promote public awareness about the industry and its positive impact on the economy. For more information, visit www.oogeep.org.

Thomas Doohan Dix Communications

OOSTER, OH — Elected officials from Wayne and Medina counties converged on the Medina Public Library recently to talk about the Nexus pipeline. Wayne Soil and Water Conservation District water management engineer Rob Kastner said officials associated with the pipeline developers, DTE Energy and Spectra Energy, updated the group on the details of the pipeline and even the project’s filing status with the Federal Energy Regulatory Commission. “It’s still in draft form,” Kastner said. While the exact route has yet to be determined, he said the specifications of the pipeline are more set in stone. The line will run through the northeast section of Wayne County for about 6.12 miles. That includes Chippewa Township and a portion of Doylestown. Kastner said the line will come up from southeast Ohio and travel north to meet up with a pipeline in Michigan. This draft, he said, consists of one 42-inch line. It will be capable of moving 1.5 billion cubic feet of natural gas a day and will not exceed a pressure of 1,440 pounds per square inch, Kastner explained. “This is really the time to comment,” he said, explaining the pipeline is in the pre-filing process with the FERC. As such, Kastner said, the developers will hold open houses to talk with area landowners to get feedback on where the line should go. When the best route is determined, Kastner said, the developers hope to file a permit with the FERC in November. He said developers hope to begin construction in 2017. Wayne County Auditor Jarra Underwood was at the meeting and said the proposed pipeline will have significant implications on the tax base. She said it is expected to generate about $850,000 in annual tax revenue. “They are predicting that won’t happen until 2018,” Underwood said. Once construction begins, she said, the developers would have to file with the Public Utilities Commission of Ohio. This likely would occur in September 2017, and Underwood said the county would start collecting in 2018.

The Chippewa Local School District would get the largest portion of those dollars, Underwood said. However, funds also would go Doylestown, the Wayne County Public Library, Medway Drug Enforcement Agency, Wayne County government and other voted levies. While Underwood was neither in favor of or opposed to the pipeline, she said the positive effect it will have on the tax base is undeniable. “Every little bit helps,” she said. In addition to generating tax dollars, Underwood said, property owners who plan to develop their land for industry will be permitted to tap into the line and bring natural gas to their property. “If we have property owners that can tap into that natural gas ... it would stimulate some growth in that area,” she said. “I think it can be a positive thing.” It was the impact on industry that concerned Doylestown Mayor Terry L. Lindeman. He said the pipeline runs through a 68-acre area in the village slated for business and highway development. As the village ran water and sewer lines to the area, Lindeman said, he is particularly concerned it may have an impact on how effectively the land is used. Wayne County Engineer Roger Terrill said he left the meeting with some concerns. He said the roads that will provide construction crews with access to the lines are not designed for heavy truck traffic, something that will inevitably come. If too much traffic goes through the area, Terrill said, there could be problems. “It may end up basically overloading the roadway base,” he said. “We want to make sure it’s not damaged.” Terrill said he recommended the developers work closely with his agency. Kastner said the developers will also need a close relationship with his office as they will need to file all the same paperwork required from other developers, including a Construction Application for Permit. Reporter Thomas Doohan can be reached at 330-287-1635 or tdoohan@the-daily-record.com.

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odds on the issue for several years. Kasich proposed severance tax increases in past budget bills, and Republican lawmakers have balked at the changes. They appeared ready to balk again this time round, saying oil prices and other factors have been having an negative impact on fracking activities in eastern Ohio. “My understanding... is that the Utica shale becomes marginal right around $60 a barrel,” said Rep. Robert Sprague (R-Findlay). “So, if we implement at 6.5 percent severance tax, how many wells are we going to be shutting down in the state of Ohio? ... It seems those companies are highly leveraged with a lot of debt. If their revenues go down, they’re going to have to shut those wells off or go bankrupt.” Testa said Ohio’s emerging shale oilfields have been more focused on natural gas production, and those prices have not dropped like oil prices. He added that the administration used conservative production projections in developing its biennial budget that should take into account any fluctuations due to changes in commodity prices. “What is most responsive to the interests of the people of Ohio, rather than the interests of mostly out-of-state natural gas and oil companies?” Testa said. “Someone can always argue that there is never a right time to fix Ohio’s obsolete severance tax. The proposed tax changes will have little influence upon the decisions made by drilling companies; the price they can get for the product they extract will ultimately determine the level of drilling and extraction activity.”

OLUMBUS — State officials continue to defend the governor’s plan to increase tax rates on oil and gas produced via horizontal hydraulic fracturing. But Republican members of the House Finance Committee don’t appear to be supporting the severance tax proposal, based on their questions and comments to the head of the Ohio Department of Taxation on Feb. 12. “Baby steps do tend to be a little more acceptable than large steps,” said Rep. Tim Derickson (R-Oxford), noting House Republicans backed a smaller severance tax increase package last session. “This does seem to be a rather large step for me compared to what we were proposing in the last general assembly.” But state tax Commissioner Joe Testa countered that Ohio’s severance tax rates remain too low — 20 cents on a barrel of oil, 3 cents per thousand cubic feet of natural gas produced. “We think it’s time,” Testa said. “... They’ve had almost four years of practically no severance tax.” Testa was the latest cabinet member to give testimony before the House panel, offering comments and answering questions about Gov. John Kasich’s executive budget proposal for several hours Thursday. The reform package includes a mix of tax cuts and hikes that, administration officials say, would result in a net tax reduction of more than $520 million. Included is an increase on taxes for oil and gas produced via fracking, with a portion of the proceeds directed to eastern Ohio communities dealing with increased drilling Marc Kovac is the Dix Capital Bureau Chief. Email him activities. at mkovac@dixcom.com or on Twitter at OhioCapitalBlog. The governor and Republican lawmakers have been at

Judie Perkowski Dix Communications

EWCOMERSTOWN, OH — George Darr, owner/operator of Darr Farms, a 1,500-acre family-owned homestead since the mid-1950s, has learned through the years that you cannot put all of your eggs in one basket. Although the farm’s staples are typical agriculture: grain, vegetables, soybeans, wheat, straw, melons, and, according to Roy Patterson, the farm’s manager, “the best pumpkins in the Midwest.” They also sell Pioneer Seed and sand. The farm employs 15 full-time workers, including Patterson, who has worked on the farm since 1983. He said he “grew up down the road and earned spending money there during the summer,” but the primary products were produce and cattle, and did not include sand. Sand is usually associated with something in a backyard for children to play in, or used in case of an emergency to help contain flood waters, but, in the past few years we have learned that sand is used in fracking a well. But fracking sand is not the kind you find on a beach, it is a high purity quartz sand, a natural material made from sandstone. Although the demand for this desirable grain of sand has skyrocketed, ordinary beach sand has also found its niche in the oil and gas industry. About three years ago a friend told Darr that the gas and oil people were looking for a sand supplier for one of their

gas and oil operations. The sand that was available adjacent to Darr’s property was not the kind of sand drillers use for hydraulic fracturing, it was ordinary “beach” sand. But, as the Darr company soon found out, the same sand that fills children’s sand boxes, or is used to shore up levees and dams against a raging river, is just what pipeline companies use during the construction of pipelines. Sand bags, that weigh in at 40 pounds each, act as a cushion for the pipe when it is placed underground. Sand bags are also used also to form “trench breakers” or trench plugs, which look like dams when stacked on the side of a hill. The steepness of the hill depends on the number of trench plugs needed to shore up the hill about every 10 to 15 feet. By 2012, the sand business grew so rapidly, Darr had a 4,800 square-foot building constructed on the farm exclusively for filling and storing sand bags. “Last year, we saw a rise in demand for bagged sand from May through September,” said Patterson. “The average size delivery is by the semi load, which contains 16 Super Sacs — 1,200 40 -pound bags per load. We pack 75 40-pound bags in each Super Sac. The weight of each bag is filled by timing. It takes so many second to fill a bag. And our bags are double stitched.” Cost of a 40-pound bag is $1.50, if “you buy one bag or a thousand,” said Patterson. “Forty pound bags are the stan-

dard, but other sizes are available upon request.” The one-shift operation involves a dump truck to collect the sand and unload it into a hopper, and three people to fill, then seal the bags by feeding each bag through a machine that seldom drops a stitch. “The sand bags are kept in a heated building until it is loaded on a semi or straight truck for delivery. We try to do same-day delivery, if possible,” said Patterson. “We have never missed a delivery. The majority of our orders are delivered, but smaller orders are sometimes picked up.” After a tour of the facility, Patterson pointed to an Amish buggy where its owner was waiting to pick up an order. Transportation vehicles include three semis and six straight trucks. The view of Darr Farms from State Street represents the epitome of a mid-western farm. Nestled in the rolling hills of Cochocton County, the farm’s buildings and silos are surrounded by acres of green and gold vegetation, reminiscent of a farm scene in a Grant Wood painting of Americana. Since George Darr’s acquisition of the farm more than 60 years ago, he has maintained its classic Midwest image while embracing the entrepreneurial spirit of the modern day farmer, by taking advantage of an opportunity that was literally beneath his feet. jperkowski@daily-jeff.com

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ANTON — WellRev Ohio LLC released the “Ohio Shale Well Royalty Calculator” (www.wellrevohio. com) in conjunction with the launch of its “Oil & Gas Tax Revenue Service” web application for county government, school district and local government clients. The Ohio Shale Well Royalty Calculator is a free website that allows landowners to select any of the producing Utica or Marcellus shale oil and gas wells in Ohio, enter in the user’s specific information, and then calculate an estimated royalty. “The average landowner has not had an independent way to check to see if the royalties they receive from oil and gas wells are even remotely close to being correct. Now, with the Ohio Shale Well Royalty Calculator, they have a simple way to estimate what their royalties should be and allow them to be better informed royalty interest holders,” said Erik Parker, president of WellRev Ohio, The calculator allows users to enter in the name of a shale well, number of acres they receive royalties on in the drill unit, the gross royalty interest negotiated with the producer, and select the year and quarter of production. Based on the production numbers that the oil and gas

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ax revenues, thanks to Utica shale development, are flooding county and city coffers and quite literally saving rural Ohio from massive budget deficits. That’s what county auditors are saying in areas where oil and gas development is occurring in Ohio. Energy In Depth conducted research and spoke with several auditors and elected officials on their recent analysis of their tax collections from 2014. Here’s what we found: • Increase in bed tax revenue Throughout the past few years, hotels have been popping up all across eastern and southeastern Ohio, and that means an increase in bed tax revenue to local governments. Take a look at Cambridge, where new hotels continue to be built to support the industry. In one year, the bed taxes in Cambridge increased by 60 percent from $375, 950 to $599,440 year-to-year. Even more astounding, in 2010 Marietta had bed taxes that went from $517,580 to $1,128,491. That’s an increase of 118 percent. Back in 2010, many cited hotel construction and economic activity as being a direct impact of shale development to communities that would result in real job creation and tax revenue sources. This has certainly become a reality. As Marietta Mayor Joe Matthews explained, “We are very happy with the increase we see in hotel and motel traffic and bed tax revenues.They have been increasing steadily and we believe it will remain for 25-30 years to come, thanks to the oil and gas industry.” Norm Blanchard of the Cambridge-Guernsey County Community Improvement Corporation said, “The dramatic rise in the county bed tax reflects the significant numbers of gas/oil workers who fill our restaurants, buy gas, patronize our laundromats, buy groceries, purchase vehicles, and generally make positive contributions to our community. Bed tax revenues have infused vital capital into the civic center and Visitors and Convention Bureau while assisting the City of Cambridge in major upgrades to city streets.

The positives have been numerous and the negatives nearly non-existent.” • Sales tax revenues Increases in sales tax revenues play a part in saving local governments. In addition, tax revenues going into the general funds at the county level are also on the rise and are bringing millions to local governments. The county sales tax is a major means of funding for government services and has become necessary as the Local Government Fund from the state General Fund was cut drastically over the past few years. The state budget cuts to Appalachia, and particularly areas where much of the oil and gas development has been occurring in Ohio, would have been devastating to county budgets. However, thanks to economic activity created largely by oil and natural gas development, not only have these government services continued, county budgets have quite literally been saved. “Five years ago this county was struggling financially,” Leroy VanHorne, Carroll County auditor said. “We had to reconvene our elected officials to make sure we had enough money to pay our bills and so we wouldn’t finish the year in the red, cuts the Local Government Fund and other cuts from the state, left us with practically nothing. Now, with the gas play, we have sufficient funds to support all necessary government services once again.” Three counties, Carroll, Columbiana, and Harrison, have collectively brought in over $10 million in new taxes just over the past few years. Sales tax revenues are a great indicator of how the oil and gas industry continues to drive overall economic development in Ohio. As Carroll County’s auditor explained, every dollar in sales tax generated in Carroll County produces 5.75 percent to the state in sales tax. So if $10 million in additional sales tax was generated into the coffers of these three counties, then the state of Ohio has received over $50 million in NEW taxes, thanks in large part to oil and gas development. Here’s how that works: a business in Carroll

County pays 6.75 percent in sales tax revenue so a $100 sale requires $6.75 in sales tax. The business sends that $6.75 to the state of Ohio and the state takes $5.75 and returns $1.00 to the county where the business is operating. In Carroll County, their portion of those revenues has resulted in $3.8 million in 2014. Columbiana County has experienced record highs in sales tax revenues. Last year was another banner year with tax revenues jumping 40 percent going from $11.7 million in 2010 up to a staggering $16.3 million in 2014. As Mike Halleck, Columbiana County Commissioner and President of the Ohio County Commissioners Association said, “Our sales tax has exponentially increased as a result of the oil and gas development in Columbiana County over the last four years. Since 2009, our sales tax revenues have increased by 40 percent. Columbiana County has continued to see increases in sales tax revenues year-to-year, and 2014 continued that trend as revenues reached more than $16 million. These numbers are a sign of real economic impact to our region.” It’s clear that shale development in Ohio is not only creating thousands of jobs; it’s also providing our local governments with millions in tax revenues, which are allowing much-needed government services to continue for our citizens. One thing is certain: the outlook of these counties would not be nearly as bright without development in the Utica Shale.

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ARNESVILLE, OH -- When the village of Barnesville announced an agreement to allow oil and gas drilling at the Slope Creek Reservoir, a number of Barnesville area residents voiced concern over the potential dangers of water contamination from hydraulic fracturing. Slope Creek is the largest of the three Barnesville reservoirs, representing 82% of the drinking water for about 13,000 people, including Bethesda, Quaker City, and the Switzerland of Ohio Water District, which includes Somerton, Malaga, Jerusalem, and Beallsville. Gulfport Energy has plans to place multiple well pads within 500 feet of Slope Creek Reservoir. Citing evidence of well casing and cement failures, contaminant spills, and other environmental disasters in the shale gas industry, concerned citizens asked the Village Council if the proposed well pads could be moved outside the immediate watershed of the reservoir. While the council expressed similar concerns and agreed to approach Gulfport about moving the proposed well pads, members of the community took action of their own, starting a petition that now has over 2,300 signatures. “We felt it was imperative that Gulfport fully understood how important this issue is to the communities served by Slope Creek“ stated Lacy Burkhart, one of the volunteers for the petition drive. The petition became a focal point for the newly formed Concerned Barnesville Area Residents, an organization dedicated to preserving the quality of local water resources, including water and air. The petition circulated in both paper and Internet formats over the summer and fall, with support coming from a broad spectrum of the community. “Slope Creek is the largest water source for our communities, our medical facilities, our locally owned business, our schools, and our homes. What would our communities become without a source of clean drinking water?” Burkhart emphasized. “The petition is simply an opportunity for Gulfport to join us in protecting our clean drinking water supply.” The text of the petition states: The Slope Creek Reservoir is the primary water source for approximately 13,000 customers in parts of four counties. Gulfport Energy is planning two shale gas well pads close to and within the watershed of Slope Creek Reservoir. Given the serious risk of contamination from accidents and gas and chemical migration from flawed or failing cement jobs, which would threaten contamination of

the water supply to those customers and endanger their health and welfare, we submit that Slope Creek is not a safe location for shale well pads. We respectfully ask Gulfport to relocate these planned pads out of the Slope Creek Watershed. One of the signatories to the petition, Marie McCrate, a former Barnesville village clerk, provides some historical perspective, pointing out that Slope Creek Reservoir was developed in the 1960s to provide water for area residents. “Through careful planning, construction, and updating the facilities to treat the water, the Village has been able to supply water not only to Barnesville, but the surrounding communities,” McCrate said. “The current proposal to allow well sites to be established near the Reservoir puts the water supply at risk. Accidents, spills, or unforeseen disasters can happen, not if, but when. If our water supply is compromised, it could be the end of this part of Belmont County. Without water, nothing else matters. Why have the risk?” For many in the community, local incidents, such as the June 28 fire and chemical spill at the Eisenbarth Pad in Monroe County, which resulted 25,000 gallons of toxic run-off contaminating Opossum Creek (and killing an estimated 70,000 fish) confirmed the inherent danger of accidents and provided additional momentum to the petition drive. Dr. Doug Huff, Barnesville resident and business owner, believes moving a drill pad away from the water supply “is just common sense. There are places in your life where you can take risks, this is not one of them.” He hopes “Gulfport will continue being a good neighbor” and not locate the drilling near the reservoir. The Concerned Barnesville Area Residents believe the time is right to deliver the petition to Gulfport and Antero. CBAR spokesperson, Dave Castle says the petition will be sent directly to Mr. Michael G. Moore, the CEO of Gulfport Energy. “We could gather signatures indefinitely and probably gather hundreds more,” Castle remarked, “but the point should be clear to Gulfport – this is an issue of tremendous concern to our community. It is important.” Asked when he thought CBAR might get a response, Castle said “we hope we will get an answer soon. The best possible Christmas present that Gulfport could give to the people of Barnesville and those in the surrounding communities is a confirmation to move the planned well pads away from Slope Creek Reservoir.”

Louis D. D’Amico President & Executive Director, Pennsylvania Independent Oil & Gas Association

“T

he alternative is not really no tax, the alternative is no drilling, a ban as in the case of New York.” Those 21 words, spoken by Gov. Tom Wolf at a Feb. 11 news conference announcing his plans for a severance tax in the Commonwealth supposedly modeled on West Virginia’s, established an unfortunate position for his administration in the debate over the future of Pennsylvania’s natural gas industry. The Governor has attempted to disavow those comments in subsequent interviews, but the fact remains that he volunteered the statement in the first airing of his severance tax proposal. For natural gas producers and service companies, his message was clear: either agree to a tax or face a moratorium. Those are the alternatives. The Pennsylvania Independent Oil & Gas Association is vowing to fight any additional taxes on the industry, regardless of the Governor’s extortion threat. As an organization, we believe either option will decimate natural gas production, employment, economic impacts and tax payments to the Commonwealth. And, we will educate legislators and the public about these issues in the coming months. “West Virginia has a mix so that it can take into account volume regardless of price and price increases. The key is this is what our neighboring state has done and it’s worked. They have a healthy industry” The governor cited West Virginia as an example of a “healthy” natural gas industry, when there is little to substantiate that statement. West Virginia’s severance tax has been a drag on the industry, evidenced by recent statistics from Baker Hughes, and tax collection and labor agencies in both states. Pennsylvania’s rig count drilling unconventional wells averaged 110 in 2011, 59 in 2013 is currently in the range of 55. West Virginia’s remained in the mid-20s during the period between 2011-2013, and has fallen to 16 today.

In the key area of natural gas production, Pennsylvania’s quadrupled between 2011 and 2014, reaching 4 TCF/ year last year, while West Virginia only doubled its level of production between 2011-2013. In a similar fashion, the number of jobs in the Mountain State associated with the industry has consistently been about 10 percent of that in Pennsylvania. West Virginia’s increased production is important to our nation’s energy boom, but it is hardly a “healthy” industry when compared to the success Pennsylvania has realized. “I’m making this [proposal] because I believe it’s in the best interest of the Commonwealth of Pennsylvania as well as the industry. This is a way of making partners out of Pennsylvania citizens and the industry.” With this statement, the governor ignores the fact that natural gas producers have been operating in the Commonwealth for more than 135 years, starting with the nation’s first commercial natural gas well in Murrysville, Westmoreland County. The industry has been a “partner” with tens of thousands of property owners, hundreds of local governments and dozens of counties, producing energy, generating royalty and lease payments, providing good jobs and extracting natural gas by-products used to manufacture more than 6,000 different products across every sector of our economy. PIOGA understands there are some Pennsylvania citizens, such as Gov. Wolf, who may not feel they are “partners” with the industry, because they have little or no experience with energy production. Many of these uninformed citizens hail from counties in southcentral or southeastern Pennsylvania who believe electricity comes from a hole in the wall and natural gas from a pipe in the basement – both just magically arriving, ready to use. While these regions do not have the coal, oil or natural gas reserves that many other areas of the state count among their assets, they do benefit from those resources every time they turn on a light bulb or light their stove. A

“thank you” to their counties to the west and north might be more appropriate than another tax. A recent study by Raymond James Advisors found that 90 percent of the jobs created in Pennsylvania between 2005-2012 were tied to the state’s natural gas industry. Unemployment in counties with gas production has consistently been well below state and national averages, and those workers and businesses have paid billions in taxes to state and local governments. Some of those jobs are now being lost due to low commodity prices for natural gas, and more will likely be impacted in the future. PIOGA will not sit idle, however, and allow either a new tax to steadily erode those jobs even further or a moratorium that would send every industry worker immediately to the unemployment line. We will fight to keep people employed, to provide income to landowners, to maintain economic growth in the state and to produce Americanmade energy. Louis D. D’Amico is President & Executive Director of the Pennsylvania Independent Oil & Gas Association, representing over 900 businesses engaged in all aspects of oil and natural gas development in the Commonwealth.

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AMBRIDGE, OH -- A presentation by environmental specialist Justin Campbell, of Fenstermaker & Associates at the Cambridge Area Chamber of Commercesponsored Guernsey Energy Coalition meeting recently, introduced some eye-opening facts about our waterways. Fenstermaker & Associates headquarters is in Louisiana, and has an office in Cambridge. “We have lost 90 percent of our wetlands since the 18th century,” said Campbell. “Of course, many disappeared because of community development, construction and natural disasters. But, thanks to the passage of the Clean Water Act and offshoot environmental agencies, the government has been able to monitor, assess and designate protection of our water sources.” After centuries of abusing our lakes, streams, and wetlands, the Federal Water Pollution Control Act of 1948 established the basic structure for regulating discharges of pollutants into U.S. waters and regulating quality standards for surface waters. In 1972 the act was significantly reorganized and expanded and renamed the Clean Water Act. The U.S. Environmental Protection Agency was officially created in 1970 because of concerns abut air and water pollution, and to consolidate in one agency a variety of federal research, monitoring, standard-setting and enforcement activities to ensure environmental protection. The EPA works with its federal, state and tribal regulatory partners to ensure communities obey environmental laws and regulations through on-site visits by inspectors, and a review of information the EPA requires to be submitted. Under the Clean Water Act, assistance is provided to businesses, federal facilities, local governments and tribes to help meet environmental regulatory requirements. “In Ohio, the Ohio Revised Code Chapter 6111 refers to water pollution control of all waters above, in and below Ohio ... In fact, Ohio has’s regulations has been a model for other states. Regulations are divided into three categories: lowest quality, medium quality and high quality, determined by wildlife habitat, connectivity to other bodies of water and vegetation.

“Federal and state regulations cover all streams, ponds, lakes, rivers, navigable and unnavigable, and includes wetlands: swamps, marshes and bogs. A ditch is not a wetland,” he said. “Some of the common impacts on our waterways in southeast Ohio are farming, mining, infrastructure, commercial enterprise, boat ramps, construction, dams, dikes and ditches, and auto traffic, and most recently, energy development.” Campbell said some ways to help reduce contamination and/or degradation of a wetland, stream, etc., is through mitigation; fence off livestock, rotate grazing, construct pipelines over, under or around wetlands in addition to monitoring topsoil, and create a buffer zone between buildings and construction For more information, contact the Ohio Wetland Association, the Ohio Department of Natural Resources, Ohio Wetland Foundation and Resource Environmental Solutions. The meeting’s agenda also included brief remarks by Gretchen Addington, environmental and safety specialist for Eclipse Resources at the Zanesville office. “We have a very good plan in Ohio ... We protect our wetlands better than the federal government. “Eclipse does a field review of the designated property to check the area for potential well pad construction. “We monitor the site before — actually one to two years prior — during and after drilling and completion. We follow all regulations for waterways, vegetation and wildlife,” said Addington. Addington can be reached at the Eclipse Zanesville office, 740.452.4503, ext. 217. Chamber President Jo Sexton announced the guest speaker for the March 5 Coalition meeting is Jimmy Stewart of the Ohio Gas Association. Sexton said she wants to hear from the community about program topics. If anyone has a topic and speaker(s) they would like to present at the monthly meetings, contact the Chamber office at 740.439.6688, or email jsexton@cambridgeohiochamber.com. jperkowski@daily-jeff.com

OBAMA FLOATS PLAN FOR ATLANTIC DRILLING Dina Cappiello Associated Press

ASHINGTON (AP) — The Obama administration floated a plan on Jan. 27 that for the first time would open up a broad swath of the Atlantic Coast to drilling, even as it moved to restrict drilling indefinitely in environmentally-sensitive areas off Alaska. The proposal envisions auctioning areas located more than 50 miles off Virginia, North and South Carolina, and Georgia to oil companies no earlier than 2021, long after President Barack Obama leaves office. For decades, oil companies have been barred from drilling in the Atlantic Ocean, where a moratorium was in place up until 2008. The plan also calls for leasing 10 areas in the Gulf of Mexico, long the epicenter of U.S. offshore oil production, and three off the Alaska coast. “This is a balanced proposal that would make available nearly 80 percent of the undiscovered technically recoverable resources, while protecting areas that are simply too special to develop,” Interior Secretary Sally Jewell said in a conference call with reporters. “The areas off the table are very small in comparison to areas on the table.” The plan, which covers potential lease sales in the 20172022 time frame, drew immediate reaction from Capitol Hill, where Sen. Lisa Murkowski, R-Alaska, called it a war on her home state, and where Northeastern Democrats objected to the proposal for the Atlantic Ocean. The proposal comes as the U.S. is in the midst of an oil boom and when oil prices, and pump prices, are at near-historic lows. “Opening up the Atlantic coast to drill for fossil fuel is unnecessary, poses a serious threat to coastal communities throughout the region, and is the wrong approach to energy development in this country,” said New Jersey Sens. Cory Booker and Robert Menendez, and Rep. Frank Pallone, in a statement. Interior Department officials cautioned that they were in the early stages of a multi-year process, with Jewell saying they were only “considering’ a lease sale in the Atlantic and that areas could be “narrowed or taken out entirely in the future.”

For Alaska, President Barack Obama issued a memorandum Tuesday placing 9.8 million acres of the state’s offshore resources off limits indefinitely. The memorandum withdraws from leasing parts of the Beaufort and Chukchi seas, as well as a shallow 30-mile shelf in northwestern Alaska called Hanna Shoal, citing their importance to Alaska natives and the sensitive environmental resources. “There are some places that are too special to drill, and these areas certainly fit that bill,” Jewell said. Obama in early 2010 announced his intention to allow drilling 50 miles off the Virginia coast, only to scrap it after the BP oil spill in the Gulf of Mexico. But the administration has allowed oil and gas companies to explore for oil and gas in the Atlantic in the meantime, which is the initial step prior to drilling. Environmental groups were quick to criticize the proposal, saying offshore drilling had not gotten safer in the years after the BP disaster. Congress, despite recommendations, has not passed any new laws to deal with the lapses identified in the wake of the spill, which was the largest offshore incident in U.S. history. “This 5-year plan could destroy our coastal economies for decades to come, costing future generations the fishing livelihoods that have been part of their local fabric for genOver a million homes... one address CutlerHomes.com

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erations,” said Oceana’s vice president Jacqueline Savitz. But the oil industry applauded the move, saying much of the U.S.’s offshore potential remains untapped. Production from offshore areas accounts for 16 percent of the oil produced in the U.S. now. The Independent Petroleum Association of America said in a statement that while the proposal is a step in the right direction, it “urges the administration to keep all offshore areas available to exploration.” According to documents obtained by The Associated Press through the Freedom of Information Act, at least four firms have filed applications with federal fisheries managers to conduct wide-scale seismic imaging surveys in the Atlantic to explore for oil and gas deposits. The applications for “incidental harassment” of marine animals including endangered right whales are currently being reviewed by NOAA Fisheries. The projects involve towing seismic air guns behind vessels for hundreds of miles, over months and years. The guns emit strong bursts of air and sound, which allow crews to create two-and-three-dimensional images of the seafloor.

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Associated Press reporter Jason Dearen contributed reporting from Miami.

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Pat Sink International Union of Operating Engineers Local 18

he September 2014 announcement that significant pools of oil and natural gas were found in the Arctic by the Russian company Rosneft should give pause to anyone concerned about what this portends for the United States, whose inactivity in this part of the world is as disturbing as the find is exhilarating. Drilling under the Kara Sea, Rosneft and its handful of partners, including Irving, Texas-based ExxonMobile, America’s largest energy company, found what could amount to nearly a billion barrels of crude oil and 330 billion cubic meters of gas. If the amounts turn out to be accurate, the discovery could provide an economic boon to Russia, Rosneft and ExxonMobil. But what about the United States? Has our country been as persistent as the Russians in exploring what might truly be the last frontier on earth? The answer is no and every day that passes puts the U.S. one more day behind catching up to the Russian investment. Here at home, we are witnessing a great rebound in domestic oil and natural gas production across the country and an accompanying resurgence in manufacturing that is creating jobs, investing in communities and making us less dependent on unfriendly nations for energy resources. In Ohio alone, announced investment by companies exploring the Utica shale formation increased by $9 billion from October 2013 to October 2014, bringing the total investment since 2010 to more than $22 billion. This growth has had tremendous impact on the 15,000 members of the organization I am proud to help lead, the International Union of Operating Engineers Local 18. Our members are building platforms and pads, producing pipe, laying roadways and bridges, and working on countless

other projects to create a safe, productive domestic energy infrastructure. We are doing this in Ohio and across the nation, and if there were a serious commitment to Arctic energy production, it would mean jobs for us far into the future. A healthy and sensible Arctic policy will benefit Ohio’s economy in several ways. Ohio is the second largest U.S. producer of raw steel, and the domestic energy industry relies upon state-based manufacturers for items like steel pipes and drilling platform equipment. The state’s largest manufacturing industry — 130,000 jobs and 2,400 companies — is built around polymers that are made from oil derivatives and used as components in a multitude of products including medical equipment, food packaging, toys, modified road asphalt and fuel cells. Eight Ohio universities attract students to their world-class polymer research programs with the University of Akron’s Institute of Polymer Science and Polymer Engineering the nation’s largest. A commitment to Arctic exploration means much for Ohio consumers as well. Stronger oil autonomy means stability in availability and more jobs. A report from the Northern Economics Study determined oil production from Alaska’s Outer Continental Shelf could create 55,000 new jobs nationwide per year for 50 years. But until the federal government sheds its cloak of obstinacy, Russia will remain king of the Arctic oil throne and hopes for a closer connection linking Ohio’s know-how to Alaska’s Arctic resources will remain buried beneath the ocean floor.

By: Jonathan Fahey AP Energy Writer

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EW YORK (AP) — Gasoline prices can spike for all kinds of reasons that make skeptical drivers roll their eyes: “tension” in the Middle East, a refinery suddenly shuts down for maintenance, or the annual springtime switch to summer blends of gasoline. A refinery strike, however, would seem understandable. Yet three weeks into a walkout at 11 refineries around the country, the impact on the prices of gasoline, diesel and other fuels is barely discernable. Gasoline prices have gone up this month, but mostly due to a sharp increase in the price of oil and because gas prices almost always rise at this time of year, according to Tom Kloza, chief oil analyst at the Oil Price Information Service. If autoworkers strike, cars stop coming off the line. If teachers strike, kids don’t go to school. But refineries are different. They are like giant pressure cookers, and once they are up and running they don’t need all that much elbow grease to keep oil flowing in and fuels coming out. “We can continue on running with the staffing levels that we have ... for a very long period of time,” Tesoro CEO Geoff Goff told investors last week. Tesoro owns three of the refineries undergoing strikes. The United Steelworkers union, which represents workers at 230 refineries, oil terminals, pipelines and petrochemical facilities in the U.S., called a strike February 1 after failing to come to agreement over a new contract. The union accuses the refinery operators of creating unsafe conditions by tiring out union workers with extensive overtime requirements and using more and more contract workers, who they say aren’t as well-trained as USW members. They have asked Royal Dutch Shell, which was chosen by the union to negotiate an agreement that would serve as a template for other operators, to produce information that details its use of overtime and contract work. The union expects bargaining to resume Wednesday, though a Shell spokesman would only confirm they would try to restart negotiations sometime this week.

If negotiations break down further, the strike could spread to other refineries, and could slow U.S. output enough to scare traders into bidding gasoline prices higher. The USW covers workers that operate two-thirds of the nation’s refining capacity. In the meantime, the Shell refinery in Deer Park, Texas, along with nearly all the other refineries targeted by the union in California, Indiana, Kentucky, Ohio, Texas and Washington, are operating at near-normal levels because they have been able to line up enough managers, former employees, employees from other locations and contract workers to keep the refineries going. Also, improved technology has made refinery operations more automated. Today’s refineries are “an order of magnitude more sophisticated than they were 10 years ago,” says Skip York, an analyst at Wood Mackenzie. Refinery control rooms, he said, “look like they are about to launch something to Mars.” While the affected refineries have the capacity to produce about 2 million barrels per day, the strike is likely reducing output by about 200,000 barrels per day, York estimates. That’s a little more than 1 percent of daily U.S. consumption of 19 million barrels per day. A Tesoro refinery in Martinez, California that was running at half-speed anyway has been shut down, and output is slightly lower at the other plants, York says. The amount of gasoline in storage is higher than average for this time of year, according to the Energy Department, which provides a buffer to any possible supply disruption. And because this is a slow time of year for refineries, they have the capacity to quickly dial up their production if prices started to rise. “All this is mitigating the impact of the strike,” York said. The national average price of a gallon of gasoline is $2.26, according to AAA. That’s 18 cents more than last month, but $1.10 cheaper than this time last year. Jonathan Fahey can be reached at http://twitter.com/JonathanFahey.

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OLUMBUS, Ohio (AP) — An Ohio legislative panel approved new rules on Jan. 26 for the construction of oil and gas drilling wells, amid an underground shale exploration boom in the state. The state’s rule-setting committee also cleared new guidelines for drilling permits and set certain industry standards, primarily affecting wells in the Utica and Marcellus shale formations. Larry Wolpert, executive director of the Joint Committee on Agency Rule Review, said the panel must clear or reject rules based on technical criteria not policy. He said no one objected to the rules, which conform regulations to a bill passed two years ago. The new rules are expected to take effect Aug. 1. The panel did not take up any of the environmental or public health concerns debated at public forums in Ohio, Pennsylvania, New York and other states involving hydraulic fracturing, or fracking. And a Sierra Club spokesman said the group considers the committee action as procedural. In the rush to release new deposits as a result of advances in horizontal drilling, Ohio has issued 207 new permits for wells in the Utica Shale in eastern Ohio over a year’s period that ended in March. Monthly permits rose tenfold over that time. Fracking involves blasting millions of gallons of water, mixed with chemicals and sand, at the underground shale to create fissures in the rock and release gas and oil deposits. Environmentalists and people living near drilling sites say the risks include contaminated water wells and

air pollution. The industry says those fears are exaggerated and the process has been used safely on tens of thousands of wells. Jack Shaner, a spokesman for the Ohio Environmental Council, said Monday the organization was generally supportive of the new well construction rules. “We are satisfied that DNR has done a good job on these rules,” he said. “However, Ohio needs to put many more protections in place and that’s the center of the debate right now in the Legislature. Well construction is a critical part of this, but it’s not the only part.” Shaner said environmentalists are still fighting for strong public notice requirements, full disclosure of the chemicals used in the drilling process, and tough fines, among other things. In a letter Friday to nearly 1,400 oil and gas producers, state natural resources director James Zehringer said the new rules would be both environmentally safe and business-friendly. Zehringer also pitched smaller oil and gas producers on the fact that a severance tax increase on high-volume wells, proposed by Gov. John Kasich, would not apply to them. The tax hike has been opposed by the Ohio Oil and Gas Association as an unfair burden on the industry. Department spokesman Carlo LoParo said the letter was not an attempt to muster support among smaller drillers for the governor’s proposal, which has stalled at the Statehouse. He said regulatory updates are sent routinely to affected businesses.

V Josh Lederman Associated Press

ASHINGTON (AP) — Defying the Republican-run Congress, President Barack Obama rejected a bill on Feb. 24 to approve construction of the Keystone XL oil pipeline, wielding his veto power for only the third time in his presidency. Obama offered no indication of whether he’ll eventually issue a permit for the pipeline, whose construction has become a flashpoint in the U.S. debate about environmental policy and climate change. Instead, Obama sought to reassert his authority to make the decision himself, rebuffing GOP lawmakers who will control both the House and Senate for the remainder of the president’s term. “The presidential power to veto legislation is one I take seriously,” Obama said in a brief notice delivered to the Senate. “But I also take seriously my responsibility to the American people.” Obama vetoed the bill in private with no fanfare, in contrast to the televised ceremony Republican leaders staged earlier this month when they signed the bill and sent it to the president. House Speaker John Boehner, R-Ohio, said Republicans were “not even close” to giving up the fight and derided the veto as a “national embarrassment.”

veto by March 3. Republicans were also considering inserting Keystone into other critical legislation dealing with energy, spending or infrastructure that Obama would be less likely to veto, said Hoeven. Obama last wielded his veto power in October 2010, nixing a relatively mundane bill dealing with recognition of documents notarized out of state. With the Keystone bill, Obama’s veto count stands at just three — far fewer than most of his predecessors. Yet his veto threats have been piling up rapidly since Republicans took full control of Congress, numbering more than a dozen so far this year. The president has said he won’t approve Keystone if it’s found to significantly increase U.S. emissions of carbon dioxide, the chief greenhouse gas blamed for global warming. A State Department analysis found that the tar sands would be developed one way or another, meaning construction of the pipeline wouldn’t necessarily affect emissions. The Environmental Protection Agency earlier this month called for that analysis to be revisited, arguing that a drop in oil prices may have altered the equation. Associated Press writer Donna Cassata contributed to this report.

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The move sends the politically charged issue back to Congress, where Republicans haven’t shown they can muster the two-thirds majority in both chambers needed to override Obama’s veto. North Dakota Sen. John Hoeven, the bill’s chief GOP sponsor, said Republicans are about four votes short in the Senate and need about 11 more in the House. Although the veto is Obama’s first since Republicans took control on Capitol Hill, it was not likely to be the last. GOP lawmakers are lining up legislation rolling back Obama’s actions on health care, immigration and financial regulation that Obama has promised to similarly reject. “He’s looking at this as showing he still can be king of the hill, because we don’t have the votes to override,” Republican Sen. Jim Inhofe of Oklahoma, a vocal opponent of Obama’s climate change agenda, said in an interview. “If he vetoed this, he’s going to veto many others that are out there.” First proposed more than six years ago, the Keystone XL pipeline project has sat in limbo ever since, awaiting a permit required by the federal government because it would cross an international boundary. The pipeline would connect Canada’s tar sands with refineries on the Texas Gulf Coast that specialize in processing heavy crude oil. Republicans and the energy industry say the $8 billion project would create jobs, spur growth and increase America’s independence from Mideast energy sources. Democrats and environmental groups have sought to make the pipeline a poster child for the type of dirty energy sources they say are exacerbating global warming. For his part, Obama says his administration is still weighing the pipeline’s merits, and he has repeatedly threatened to veto any attempts by lawmakers to make the decision for him. Environmental groups said they were confident Obama’s veto was a prelude to a full rejection of the pipeline. But TransCanada, the company proposing the pipeline, said it “remains fully committed” to building. And the Canadian government said it was not a matter of if, but when. The GOP-controlled House passed the bill earlier in February on a 270-152 vote, following weeks of debate and tweaks in the Senate to insert language stating that climate change is real and not a hoax. Republican leaders in Congress delayed sending the bill to the White House until they returned from a weeklong recess, ensuring they would be on hand to denounce the president when he vetoed the bill. The veto forced Republicans, still reveling in their dramatic gains in the midterm elections, to confront the limitations of being unable to turn their ideas into law without the president’s consent — despite the fact they now control both chambers of Congress. Senate Majority Leader Mitch McConnell, R-Ky., said the Senate would start the process to try to override Obama’s

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VETO Associated Press

n Fb. 24, President Obama vetoed the bill Congress passed this month forcing approval of the proposed Keystone XL Pipeline. But the project isn’t dead yet, and the U.S. State Department’s long approval process for the Keystone XL continues. The bill, an effort by Congress to override the State Department’s protracted environmental review of the pipeline, would have authorized TransCanada to build the $8 billion Keystone XL along 875 miles of U.S. soil from the Canadian border in Montana to Steele City, Neb., where the oil would have been piped to refineries in Texas. Climate change is front-and-center in the debate over whether the pipeline should be built because of the high energy intensity of extracting the Canadian tar sands and the carbon dioxide emissions that result from mining, processing and burning them. The U.S. Environmental Protection Agency estimates that that the energy required to process tar sands oil is so great that oil piped through the Keystone XL will emit 1.3 billion more tons of greenhouse gas emissions over the pipeline’s 50-year lifespan than if it were carrying conventional crude oil. There’s a big difference between conventional crude oil and the type of oil called bitumen that the Keystone XL would carry. Bitumen is a heavy form of crude oil that is so thick that it can’t flow through pipelines until it’s diluted with liquid chemicals to create a substance called diluted bitumen, or “dilbit,” which would be refined into motor fuel in Texas. Despite the possible climate impacts of the pipeline, it is not certain that the Obama administration will deny TransCanada’s permit application to build the Keystone XL Pipeline. Obama’s veto is seen more as a political move than a scientific one, rejecting Congress’ desire to usurp the State Department’s authority to authorize an international oil pipeline.

After postponing a final decision on the Keystone XL indefinitely, the State Department has hinted that its decision could be forthcoming sometime this year but its review of TransCanada’s permit application is ongoing. “Once we have analyzed all of the information needed for completion of the review, and prepared the final documents, then a determination will be made,” a State Dept. statement issued to Climate Central Tuesday said, adding that the department is following no specific timeline. If the State Department approves TransCanada’s permit, construction may be able to move ahead. If the permit is denied, the Keystone XL Pipeline cannot be built into the U.S. and effectively dies, though the tar sands oil may have other routes to refineries anyway. Even if the federal government approves the pipeline, the Keystone XL faces legal hurdles in Nebraska and South Dakota. TransCanada is fighting with property owners over its use of eminent domain for the pipeline’s route through Nebraska, and in South Dakota, the company is awaiting the state’s Public Utilities Commission’s approval before being allowed to move ahead with construction there.

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OOSTER, OH — Ohio property owners in the path of the proposed ET Rover Pipeline will have an advocate working on their behalf, though some people have expressed skepticism. The cause for the skepticism arose because ET Rover is footing the bill for Columbus-based Land Stewards, a multidisciplinary consulting group with a team of certified soil scientists, agricultural engineers, agronomists and conservation planners. President Mark Wilson spoke during a Federal Energy Regulatory Commission meeting in Navarre in December. He said the process will be fair, drainage tile will be replaced and conservation practices restored so, over time, the land will return to its level of productivity. When Wilson informed FERC staff Rover would be paying for the service, several in the audience at Fairless High School voiced their displeasure. “ We will do it right,” Wilson said. When an ET Rover representative approached Land Stewards, the consultants were a bit hesitant, Wilson said. They understood there would be criticism of the group and people would be skeptical. “We stepped back, and asked, ‘If not us, who? Who knows this area better than we do? Nobody. Who can do the job better than us? Nobody. So, if not us, who?’ “This is our home. We are not going away when the pipeline leaves. We have to look these farmers in the eye. Our reputations are at stake.” Duane Wood, program administrator for the Wayne Soil & Water Conservation District, has some concerns about the project.

If approved, and when completed, the pipeline will be about 830 miles long. The origination of the pipeline is scattered with no single point of pick up. Laterals from Ohio, Pennsylvania and West Virginia will feed natural gas into the pipeline. The main line will begin near Cadiz, and dual 42-inch lines will run all the way into Defiance, cutting through Wayne and Ashland counties. From Defiance, the line will go northward into Michigan and ultimately into Canada. The line is designed to transport 3.25 billion cubic feet of natural gas daily. Sixty percent of the volume will be delivered to the Midwest hub in Defiance, with the remaining 40 percent going into Michigan and Canada. In order to accommodate those dual, 42-inch lines, a lot of topsoil and subsoils will be ripped out. “They will likely have to over-dig it,” Wood said. Additionally, as trucks deliver pipe, they will be compacting the soil along the trenches. Joey Mahmoud, vice president of engineering for Energy Transfer, said previously the hope is after a year, the land will return to its normal yields. The company will pay landowners for three years of crop loss “for the swatch we touch.” While Mahmoud might be optimistic in how quickly the land will bounce back to previous levels of productivity, John Fitzpatrick, organizational director for the Ohio Farm Bureau Federation in Wayne, Holmes, Ashland and Medina counties, is not as confident. “No doubt the oversight of putting the land back the way it was will be done with every good intention, but way too many studies show cropland takes 10 years to return to productivity,” Fitzpatrick said. “The other thing is you don’t know what will happen in the future if they have to repair or maintain the line.”

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He said it is uncertain when work will commence at the property since the company’s lease agreement with the property owners is about to expire and has to first be renewed. “That’s the plan and that’s the hope,” he said. Stow Mayor Sara Drew said that the most recent well drilled in Stow was at Church of New Hope off Darrow Road about two years ago. “We don’t have anything currently planned,” she said. “I would say it does impact all communities with home rule,” Drew added. “I dare say cities will be looking at it and at the ramifications.” The dispute began in March 2011 when Beck brought in a bulldozer on the Munroe Falls Avenue property to begin construction of a driveway to service a planned well when the city issued a stop-work order. City officials have argued that it is a matter of home rule, while Beck said it had permits from ODNR and that it would be too onerous if drillers had to follow a hodgepodge of local rules statewide. The Summit County Court of Common Pleas sided with the city. Beck appealed, and the Ninth District Court of Appeals ruled that the city’s zoning rules were in conflict with state law. The city requested that the state’s high court hear the case, which it agreed to do in June 2013. Oral arguments were heard in February 2014. A number of friend of the court briefs were filed with the court in support of both sides, including by the Ohio Oil and Gas Association and some communities. French wrote, “it explicitly reserves for the state, to the exclusion of local governments, the right to regulate ‘all aspects’ of the location, drilling and operation of oil ad gas wells, including ‘permitting relating to those activities.’” O’Donell concurred on the judgment only, writing separately that the decision focuses on the five Munroe Falls ordinances in the case and not broader questions about local land-use ordinances. Justices Paul Pfeifer, Judith Ann Lanzinger and Bill O’Neill dissented. Lanzinger wrote that she wasn’t sure zoning ordinances in Munroe Falls conflicted with state law. “There is no need for the state to act as the thousand-pound gorilla, gobbling up exclusive authority over the oil and gas industry, leaving not even a banana peel of home rule for municipalities,” she wrote. O’Neill added, “The Ohio General Assembly has created a zookeeper to feed the elephant in the living room. What the drilling industry has bought and paid for in campaign contributions they shall receive. The oil and gas industry has gotten its way, and local control of drilling-location decisions has been unceremoniously taken away from the citizens of Ohio.”

UNROE FALLS, OH -- After four years of battles between an area oil and natural gas driller and the city of Munroe Falls, a decision by the Ohio Supreme Court puts the “sole and exclusive authority” to regulate oil and gas well locations in the hands of the state. The Ohio Supreme Court ruled Feb. 17 in a case that pitted the city of Munroe Falls against the Ohio Department of Natural Resources and Ravenna-based Beck Energy Corp. In the case, Beck Energy obtained permits from the Ohio Department of Natural Resources to drill in an area zoned for residential uses along Munroe Falls Avenue. The city challenged the location at 224 Munroe Falls Ave., saying local zoning rules prohibited drilling in the area; in stead, drilling should be focused in industrial areas. In a 4-3 decision, justices noted that home rule provisions in the state constitution do “not allow a municipality to discriminate against, unfairly impede or obstruct oil and gas activities and production operations that the state has permitted” under state law. Justice Judith L. French wrote the majority opinion and was joined by Chief Justice Maureen O’Connor, Sharon L. Kennedy and Terrence O’Donnell. “We’re obviously pleased and excited about the decision,” Beck President David Beck told the Stow Sentry Feb. 17, adding that he had not yet read the decision. “I know two things. The law worked from day one. It worked for 10 years,” said Beck. Mayor Frank Larson told the Stow Sentry he was “disappointed” by the court’s ruling. “I think that it’s time that the citizens of Ohio take notice of what’s going on. Our home rule is decaying,” he said. City Law Director Jack Morrison Jr. told City Council Feb. 17 that he would discuss with Council at a later date what changes need to be made in city ordinances to comply with the decision. “I don’t want to venture out and give my opinion of the decision just yet,” said Morrison. Beck noted his company had full permission and cooperaEditor’s note: Marc Kovac, the Dix Capital Bureau Chief, tion from the property owners to drill. “It wasn’t like this was a forced issue,” he said. “That’s some- contributed to this report. jsaunders@recordpub.com thing that got lost along the way.”

Ohio Oil and Gas Association — “We commend Ohio’s Supreme Court for its decision in Morrison V. Beck Energy today, which upholds state law concerning local government control over oil and gas activities,” said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, in a Feb. 17 press release. “The court’s ruling affirmed that municipalities are prohibited from instituting rules and regulations that would discriminate against, unfairly impede or obstruct oil and gas activities that the state has permitted. “We strongly believe that oil and gas development is a matter of statewide interest and should be managed by professionals with the expertise to adequately regulate and oversee the industry.” Ohio Community Rights Network — “The ruling by the state Supreme Court adds to the mounting evidence that the people of Ohio do not live in a democracy, and are pre-empted from regulating the activities of the oil and gas industry to protect their own health, safety, and welfare. The justices laid yet another brick in the money-paved road to turn Ohio communities into resource colonies for the oil and gas industry’s profit. “Our inalienable rights — to local community self-government, to clean air and water, and to protect our own health, safety and welfare — are higher law than state preemptions and ODNR administrative edicts. Our indefeasible rights and their protection by the state are the basis for the legitimacy of state law and government.”

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his month I would like to try and tackle an 2. FAILING TO REALIZE THAT WILLS CAN ALarea that I see quite often in my practice WAYS BE CHANGED BY THE MAKER which are problem areas which people fall into when doing their asset protection and estate EXAMPLE: Jeff and Sara had been married for over 25 planning. years. Each of them had two children by a prior marriage. They wanted to provide for each other first, and then leave 1. TRYING TO “DO IT YOURSELF” the assets equally to all four children. They wanted also to Trying to “Do It Yourself” is one of the biggest problems make sure that their real estate (oil and gas interests) were I see. There are many, many horror stories but here is one given to all their children equally. example: The problem is that even though their wills stated their present intention, the survivor of the two can always EXAMPLE: John and Mary didn’t want to pay an attor- change his or her will to leave everything to his or her own ney to draft their asset protection and estate plan, so they children therefore, disinheriting the other spouse’s chilbought a revocable living trust (RLT) kit on the internet. dren. Or if the survivor’s will cannot be found (perhaps They fill in the options and they modified the documents to destroyed by one of the survivor’s children), then all of the meet their personal situation. They decided to change the assets would pass to the survivor’s children. The use of language in the Family Trust which allowed distributions trusts can help protect children by a prior marriage. to the surviving spouse for her “health, education, mainSecond marriage planning is often complex and doesn’t tenance, and support” by adding the words “comfort and get the attention it deserves, even from many attorneys. It welfare”. The use of the RLT and the changes they made is important especially for a “Brady Bunch” family that seemed harmless enough to them. time is spent with an attorney helping you design these But this created two problems: 1) the IRS regulations sections correctly, so that the above does not happen to make it very clear that the changes they made result in you and your loved ones. the Family Trust being included in the survivor’s taxable estate, which was exactly what they were trying to avoid; 2) 3. RELYING ON BENEFICIARY DESIGNATIONS by using the RLT there is no asset protection during their lifetimes, which was one of the purposes for them creating EXAMPLE: A beneficiary designation is a very simple a trust. form of estate planning which does not handle contingenYour estate, even if it is small, still represents big bucks cies very well. For instance, if you name your son and your to you, your spouse and your children. Use a competent daughter as the beneficiary on your life insurance policy, asset protection and estate planning attorney to make sure and your daughter predeceases you, do you think the inthat your plan and any changes are written correctly. surance company will pay the proceeds all to your son, or

do you think the insurance company will pay your daughter’s half of the proceeds to your daughter’s children? Most of us would like to think the latter, but most of the beneficiary forms I have seen say just the opposite: The forms usually say “Unless otherwise indicated, we, the insurance company, will pay to the surviving named beneficiaries.” By naming your Living Trust as the beneficiary of your life insurance, your Living Trust can control exactly how the proceeds will be distributed, including such contingencies. The trust can also name who will manage and distribute the money for minor children or grandchildren. 4. THE DISINHERITED CHILD EXAMPLE: Ken’s will, left his estate to his two children. But his will never mentioned Ken’s child by a prior marriage and whom Ken had not seen in years. Although you can disinherit your children by specific reference in your estate planning documents, because there was no reference to Ken’s first child in the will, that child could be entitled to a portion of Ken’s estate under state law. Moreover, if the disinherited child contests the will, he may force the other children to settle for a significant portion of the estate to avoid tying up the estate in probate for potentially a year or more. This would not protect your oil

and gas interest that you obviously wish to go to the two children. Some people will leave a disinherited child one dollar. That at least shows an acknowledgement of the child and an intent not to leave them anything substantial. It may be better to acknowledge their existence, and then state “that for reasons personal to me, I have not left my son, Joseph, anything in this will.” Better yet Ken could have used a Living Trust Estate Plan, rather than relying on a will to pass his assets. With a will, Ken’s executor is required to notify all heirs, including persons (such as Joseph) who would inherit property if there were no will. But with a Living Trust, there is no such requirement. In this article I have not attempted to exhaust all the problems which can arise from not knowing what you are doing when planning your estate. I merely present these to you so that you are able to see that problems do exist. The good news is that with counselling from your asset protection and estate planning attorney, you can avoid these problems and others. Ask questions of your attorney, make sure what you wish to do is the best thing for you and your loved ones. If you have any questions and would like more information please go to www.fmcclurelaw.com

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ast year, for the first time ever, CONSOL Energy Inc. produced more natural gas from its Marcellus and Utica wells than the company produced from its coal seam reserves – which for years has been their main source for natural gas production. According to a release, the company produced 54 percent of it’s natural gas from the Marcellus and Utica shale formations. Meanwhile, coal seam production accounted for 34 percent. According to CONSOL spokeswomen Kate O’Donovan, “Marcellus continues to be the growth engine of the company, and the Utica is now becoming a bigger part of the mix and is exceeding our expectations.” During 2014, CONSOL Energy Inc. brought 53 Marcellus Shale wells online with an average lateral length of approximately 7,600 feet, which attributed to production rising 93 percent over 2013. The company expects to see its Marcellus Shale assets increase production from more than 100 billion equivalent cubic feet to more than 150 billion equivalent cubic feet, this year. Due to their increase in production and ability to successfully tap into shale formations thousands of feet below the surface, CONSOL Energy Inc. has been able to up its estimate for the amount of recoverable natural gas. “As of December 31, 2014, the Marcellus Shale consisted of 4,235 billion cubic feet (Bcfe) of proved reserves, or a 26% increase from the 3,373 Bcfe when compared to yearend 2013. Marcellus Shale proved developed reserves were 1,367 Bcfe, or an increase of 89% from 725 Bcfe, over the same period,” the company said in a statement.

A majority of operators across the Appalachian region have increased their proved reserves and this past year Marcellus operators produced a record breaking 4 trillion cubic feet of natural gas, a 30 percent increase over the previous year. The Marcellus Shale alone now provides 16 percent of what the entire United States consumes on an annual basis. With more natural gas and oil production here at home than ever before, imports have fallen to their lowest level in 20 years all while supplying consumers with affordable and abundant energy. It’s exciting to see where the Appalachian region will be in the next few years. Joe Massaro is a spokesman for Energy In Depth – Marcellus.

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he Ohio Supreme Court has granted jurisdiction and agreed to hear a number of appeals addressing the proper interpretation of Ohio’s Dormant Mineral Act (“ODMA”). Given the number of ODMA cases and issues presented to Ohio’s highest court, many lower courts have stayed their ODMA cases until the Ohio Supreme Court sorts through the conflicting arguments pending before it. The rationale is that, since Ohio Supreme Court decisions are binding on all other state courts and the high court will soon definitively answer many of the questions as to how the ODMA should be interpreted, it makes sense to wait. Otherwise, the lower courts risk possibly entering decisions that would be inconsistent with Ohio Supreme Court precedent and would be reversed on appeal. To briefly summarize the ODMA, the statute was originally enacted on March 22, 1989, and, after a three year grace period, became effective on March 22, 1992. The ODMA was amended on June 30, 2006. Its purpose is to eliminate “dormant” or unused mineral interests in favor of the current surface owner. The 1989 ODMA provides that, where the severed mineral interest owner has not utilized the minerals as specified in the statute during the preceding 20 years, the mineral interests are deemed abandoned and the title vests back to the current surface owner. Importantly, several lower courts have held that the 1989 ODMA is self-executing, meaning that the severed minerals in question will be automatically abandoned if no activity related to the minerals has occurred. A severed mineral owner’s only defense to a later lawsuit seeking a court order declaring the minerals to be abandoned and returned to the surface owner is to prove the minerals were in fact used in a way set forth in the ODMA. Under the 2006 ODMA, surface owners must first file and serve a Notice of Abandonment on the severed mineral owners before proceeding with the lawsuit seeking abandonment. Although ODMA issues were rarely litigated prior to the shale drilling boom, the statute has become key to the disposition of hundreds of lawsuits between surface owners and severed mineral interests vying for lucrative bonus payments and royalties related to Utica Shale development.

Here is a summary of the pending ODMA cases before the Ohio Supreme Court in which jurisdiction has been accepted and the status of each case: Dodd v. Croskey, Case Number 2013-1730. The Court is considering two propositions of law relating to the 1989 version of the ODMA: 1) does a notice of preservation filed by a severed mineral interest owner after a notice of abandonment is received from the surface ownercure a severed mineral interest holder’s past non-use of minerals or simply give the holder a right to contest the abandonment in future court proceedings, and, 2) does a transfer of the surface that specifically references the severed mineral interest qualify as a “title transaction” when the title to the minerals is not affected? Chesapeake v. Buell, Case Number 2014-0067. The Court is considering two questions of law: 1) is a lease of the mineral rights (which has been recorded) a title transaction under the ODMA, and, 2) is the expiration of a recorded lease and the reversion of the rights granted under that lease a title transaction, even though the reversion itself is not recorded? Corban v. Chesapeake, Case Number 2014-0804. The Court is considering two questions of law: 1) Does the 2006 version or the 1989 version of the ODMA apply to claims asserted after 2006 alleging that the rights to oil, gas and other minerals automatically vested in the surface land prior to the 2006 amendments as a result of abandonment, and, 2) is the payment of a delay rental during the primary term of an oil and gas lease a title transaction and “savings event” under the ODMA? Walker v. Shondrick-Nau, (formerly Walker v. Noon), Case Number 2014-0803. The Court is considering six propositions of law: 1) is the 2006 version of the ODMA the only version of the ODMA to be applied after June 30, 2006, 2) was a surface owner required to take some action to establish abandonment of minerals under the 1989 version of the ODMA prior to June 30, 2006, in order to for the minerals under their property to be “deemed abandoned” under the 1989 version, 3) to the extent the 1989 version of the ODMA remains applicable, should the 20-year look back period be calculated starting on the date a complaint

is filed which first raises a claim under the 1989 version of the ODMA, 4) does a transfer of the surface that specifically references the severed mineral interest, including the recorded document creating that interest, qualify as a “title transaction” 5) can a statute of limitations, irrespective of the savings events in the ODMA, bar a claim under the ODMA, and 6) does the 2006 version of the ODMA apply retroactively to severed mineral interests created prior to the effective date of the statute (June 30, 2006). Until the Ohio Supreme Court issues merit decisions in many of these cases, it is unlikely that the lower court will proceed, thus creating a logjam of ODMA cases in the lower courts. However, once the Ohio Supreme Court rules, the ODMA will be more clear and cases can be properly decided based on Ohio Supreme Court authority. Given the anticipated clarity of the ODMA, it should be easier for lawyers to analyze ODMA issues and evaluate ODMA cases, making it easier and quicker to clear acreage for lease. David J. Wigham is a second generation oil and gas attorney at the law firm of Critchfield, Critchfield & Johnston, in Wooster, Ohio, with more than 20 years of industry experience. He is also the current chair of the Natural Resources Committee of the Ohio State Bar Association. 10222649

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ORTH CANTON — All business owners want the same thing, to protect their business from theft of their tangible and intangible assets. They rely on experts in the technology field to design and develop a security system that scan the company’s premises for intruders in and out of the office, in addition to monitoring equipment, employees logging their identities or company product at remote areas, and how the right person is alerted to any discrepancies in any part of the businesses’ operation. In 2005, a small group of entrepreneurs, led by a former chief information officer for the medical industry, developed an advanced video surveillance system for business and government facilities. Jeff Doak, president and CEO of i2c Technologies, said he was one of eight partners in a medical equipment service company founded in 1998. “We started with the eight of us and grew the business to 200 employees with revenues in excess of $30 million in sales. We were purchased by a competitor, and I had to sign a noncompetition agreement in the medical field. So, as I was always very interested in the video surveillance/security space, I used much of my proceeds from the sale of Genesis Technology Partners to start i2c in 2005,” said Doak. “After 9/11, security was on everyone’s mind and there was a need for better technology.” Doak said he got the idea for the name of the business — i2c — from a Bible verse referring to having “eyes to see,” which in turn relates to the cameras used for video surveillance.

Although i2c has been in existence barely 10 years, the company has been providing advanced video surveillance solutions for more than 200 customers nationwide, including the City of Akron, Timken Co., all of the State of Ohio office towers in Columbus, Akron, Cleveland and Toledo, POET Energy and Eclipse Resources, an independent oil and gas company. “We have been working with Eclipse for the past two years, providing surveillance and access control solutions for the company’s remote sites as well as their corporate office,” he said. Eclipse Security Manager Brendan Joliet added an endorsement of the company: “i2c Technologies has been a superb partner in increasing our corporate security posture. Their top of the line equipment combined with experts who understand our needs in the field and our office environment, make i2c an invaluable partner as we improve our security systems.” Doak said that working in the field on pad sites is always more challenging with sites so spread out. “Our gas and oil solutions are all about getting control over these sites using i2c’s cameras and access control solutions. “Access control keypads allow employees to swipe in using their badge. Contractors are given badges or assigned key codes for entry, and access is controlled at the corporate office. Access control tracks everyone coming and going from a remote site. Billing for labor and materials can be compared to access control records to ensure accurate charges, which can save the company money and can quickly pay for the system.” Video surveillance is provided by two types of cameras: A pan, tilt, zoom (PTZ) high definition camera provides clarity and control; and a thermal imaging camera views the area by

seeing the difference in heat. The thermal camera “sees” in total darkness and is not affected by bright lights that would normally interfere with image quality. The camera can also detect movement anywhere in the field of view of the image, from up to 200 yards away. The thermal camera alerts intrusions and the PTZ camera will zoom in on the area. Pictures can immediately be sent to the company or monitoring personnel. Thermal cameras can also “see” leaks. Temperature differences can help identify problems remotely. They can also be used to monitor temperatures of various items on site. Alerts can be sent if temperature thresholds are exceeded. Cellular data or two-way satellite is used to connect remote sites which can be viewed from the corporate office or from the field. Solar energy can power the system if AC power is not available. This allows for a fully “off grid” solution that powers the system and gate controller 24/7. “We use a variety of products from several vendors to create our solutions ... We integrate all of these products together along with our software to manufacture our solutions,” he said. “We can install a full system in about two days.”

By using i2c’s technology, gas and oil companies can get control of their remote sites. Significant cost savings can be realized by allowing management to “see” what is happening at all of their sites. This can catch problems before the create cost over runs. i2c offers video and access control solutions from drilling through production. Every aspect of site security and operational monitoring is covered. On a personal note, Doak said he has been married to his wife, Carrie, for 25 years. They have two children, a son, 15, and a daughter, 13 and reside in Senecaville. “Carrie has been a great partner supporting me through two startup businesses, and is also the ‘Voice of i2c.’ We use her for all voice recording for video presentations and radio commercials. She is a professional voice talent as well as being integral in i2c marketing and sales.” For more information about i2c, call 888,422.7749, email jdoak@i23ctech.com or visit www.i2ctech.com. The office is at 7300 Whipple Ave., NW, Unit 6, North Canton. JPerkowski@dixcom.com

Dan Garcia Attorney

irst, let me start this by telling you the sky is not falling. Oil and gas prices are down, there is no denying the pain this is causing, however, these low prices could potentially create opportunities further down the energy supply chain. You just have to know where to look. Thanks to the recent OPEC temper tantrum, there is a fear that domestic shale development will be a casualty of economic war. Many in the oil and gas industry remember the good old days but they also remember how painful things became in the 1980s. There is no question that this precipitous drop in oil and gas prices has created a series of challenges to our domestic oil and gas industry. Crude inventories were expected to be in the 880,000 barrel range but were down 3.1 million barrels. Ordinarily, we would rejoice, however, gasoline inventories were expected to be up 3.4 million barrels but were actually up 8.1 million barrels while distillates were expected at 1.9 million barrels yet registered up 11.2 million barrels. Needless to say, we have a glut in the supply chain and prices are reflecting this. As a result, the rig count for domestic oil and gas production is down more than 350 rigs in 9 weeks. These low oil and gas prices are temporary dip in the market. By my count, every OPEC country is running massive deficits, which are unsustainable. By contrast, here in the U.S. our GDP is projected to receive a nice little bump thanks in large part to the abundance of cheaper energy. Furthermore, shale plays like the Marcellus and Utica have created an economic ripple effect that will touch every person in the northeast for the next several generations. Despite this bleak picture, I remain bullish on natural gas and shale gas production. Letâ&#x20AC;&#x2122;s read the tea leaves: Natural gas, thankfully, trades on regional rather than global markets. Domestic natural gas prices are low for reasons other than an OPEC tantrum. In the Marcellus and Utica region we have an abundance of natural gas supply in storage and our pipelines are operating at capacity. There simply is not enough infrastructure to handle the volume of gas being produced and the demand for this gas has not increased. Until the recent FERC-approved pipelines become operational (2015-2017), this supply glut will persist. Not too far on the horizon, there are a number of domestic demand drivers developing which will help decrease our natural gas supply. Areas where I am more optimistic are in the midstream (pipelines, processing facilities, natural gas storage), distribution lines (our Local Distribution Companies), and demand-driven industries like manufacturing, chemicals, and power generation/distribution. Users of natural gas as a

feedstock will all seek to purchase and store gas at much lower rates, thus increasing the demand for pipelines and storage facilities. As existing transmission lines begin reaching their maximum capacity for natural gas, exploration and production efforts may slow down to allow infrastructure development to catch up with production. For many in Southwestern Pennsylvania, this slowdown in production causes many in the region to worry that Marcellus and Utica may be a flash in the pan. Instead, this slowdown in production is temporary as more gathering and transmission lines are design, permitted, and built. Keep in mind, however, exploration and production companies with legacy land (leases with low per-acre bonus payment) have a much lower breakeven point and will likely continue development unaffected. Finally, and often overlooked, is the massive natural gas distribution network in Southwestern Pennsylvania with its own needs and opportunities. In Pennsylvania there are thousands of miles of older bare steel and cast iron pipelines delivering high pressure natural gas to homes and businesses. All of these assets need to be replaced by newer, corrosionprotected, pipelines. Gas utility companies across the Commonwealth are taking advantage of the Distribution System Improvement Charge (DSIC), a Pennsylvania Public Utility Commission-approved charge that allows certain utilities to use a surcharge on customersâ&#x20AC;&#x2122; bills to accelerate the replacement of existing aging facilities that will otherwise occur if the utility must wait until the completion of a rate case to begin receiving a return on its investment. This authorization is critical in high density residential areas where high pressure gas lines are prevalent. Because of DSIC and the abundance of aging infrastructure, there are a number of opportunities to provide a number of services to the gas distribution industry. While this industry is highly regulated (smaller margins for vendors), there are significant opportunities to create a long term relationship with the handful of utility companies in Western Pennsylvania. There is no doubt that many of us in the industry are taking a beating but I have reasons to believe this downturn is temporary. While the upstream sector of the market has a greater tendency to ebb and flow, the midstream and downstream sectors offer a bit more stability for long-term strategic planning. This is just another bump in the road to energy independence. Dan Garcia is an Oil and Gas Attorney at Leech Tishman Fuscaldo and Lampl in Pittsburgh, PA. He received his undergraduate of Texas A&M University and his law degree from the University of Pittsburgh. Please feel free to email Dan at dgarcia@leechtishman.com if you have any questions.

Judie Perkowski Dix Communications

AMBRIDGE, OH -- It takes an interesting person to make an act of Congress interesting, but Marie-Joëlle C. Khouzam, partner with the Columbus-based Bricker&Eckler law firm, glided her way through more than 70 pages of a PowerPoint presentation about the Fair Labor Standards Act that actually held the audience’s attention. Khouzam said the FLSA is one of the most historically important pieces of legislation that affects nearly every business in the country. In 1938, President Franklin Roosevelt signed a landmark law that refers to the nation’s social and economic development, the Fair Labor Standards Act of 1938. The act applied to industries whose combined employment represented only about one-fifth of the labor force. In these industries, oppressive child labor was banned and the minimum hourly wage was 25 cents. It also established the maximum work week at 44 hours. Khouzam said the FLSA is the granddaddy of, not only the wages and hours legislation and the federal law which sets minimum wage, it includes provisions regarding overtime, record keeping and youth employment standards. The law applies to the vast majority of businesses in the U.S. She noted that the minimum wage for Ohio is now $8.10/ hour, effective Jan. 1, 2015, although other states offer between $7.25 and $9.47 per hour. San Francisco’s minimum wage is the highest in the country at $10.74. But, when you consider San Francisco is one of the top three most expensive places in America to live, $10.74 an hour doesn’t sound so extravagant. According to labor statistics, Khouzam said one of the most violated conditions of the FLSA is when employers do not correctly differentiate between non-exempt and exempt employees. Jobs or professions that require advanced education can be exempt: A position in a company where he or she can hire or fire. Calling someone an administrative assistant does not automatically give them exempt status if they do not have the authority to make decisions that affect other positions or policies in the company. Exempt includes learned and creative professions, or those earning at least $100,000 per year. “Remember, duties matter, titles don’t,” she said. “And, it applies to all industries. “Who is non-exempt and who is exempt has been the catalyst for hundreds of class action lawsuits, primarily brought against one of the biggest employers in the country for giving employees titles that have nothing to do with their responsibilities,” said Khouzam. “Exempt employees are exempted

from the coverage of the act, in regards to overtime. Nonexempt employees are entitled to overtime after a 40 hours week. Calling someone an assistant manager is not an exempt position unless that person can assume the same responsibility and authority as the manager, when the manager is not on the premises. And it doesn’t help by calling people ‘salaried’ or ‘hourly,’ it just leads to confusion and counter-productiveness. The prime reason some employers label employees “management” is that employees are often called upon to work extensive overtime without additional compensation. Exempt employees must have a salary of at least $455 per week and the job requires advanced knowledge in a field of science or learning and customarily acquired by a prolonged course of specialized intellectual instruction. Lesser known exemptions also include those who work on the family farm. White collar exemptions are usually learned and creative professions. White collar exemptions will also apply to a number of management-related positions, such as computer analysts, engineers and some technical specialists. Another rule within the FLSA is the one-day out-of-town assignment. An employee who regularly works at a fixed location in one city is given a one-day assignment in another city and returned home the same day. The time spent traveling to and returning from the other city is time worked, except that the employer may deduct/not count time the employee would normally spend commuting from the employee’s home to the regular work site. And, no industry is without violation. One of the common problems in the oil and gas industry seems to be not paying for travel between sites, not paying for attendance at mandatory safety meetings or for time spent cleaning tools and/or equipment. “The second issue is that the Department of Labor is apparently pursuing a multi-year enforcement initiative for its misclassification of workers as ‘contractors,’ rather then ‘employees.’ It would behoove companies to really consider when a service provider really is an independent contractor,” she said. For some positions, the Motor Carrier Act may contain overtime exemptions for drivers involved in interstate commerce. The act has some very specific requirements about what types of vehicles bring the driver and the company under its coverage. The MCA would not apply to short-haul drivers paid by the load. Khouzam said employees who work for businesses with at least two employees and an annual dollar sales of at least $500,000, or are hospitals or businesses providing medical or

nursing care for residents, schools, preschools and government agencies, are covered enter “enterprise coverage.” If there is no enterprise coverage, employees are protected by the Fair Labor Standards Act, if their work regularly involves them in interstate commerce, they are engaged in commerce, or in the production of goods for commerce. The HR Roundtable meeting, sponsored by the Cambridge Area Chamber of Commerce was hosted by the Human Resources Department of Southeastern Ohio Regional Medical Center. Sexton said that any company or business can sponsor a program by providing the meeting place and a light lunch. Call the Chamber at 740.430.6688 for details. Marie-Joëlle C. Khouzam represents employers and management in labor and employment matters, workers compensation and municipal law. She was appointed city attorney for Grandivew heights in 2006. Additionally, she serves as an appointed mediator for U.S. Equal Employment Opportunity Commission cases. The Fair Labor Standards Act is a federal statute. The Act is administered by the Employment Standards Administration’s Wage and Hour Division within the U.S. Department of Labor. jperkowski@daily-jeff.com

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ELSONVILLE, OH — Following on the heels of its inaugural round of grants in Guernsey County, the Gulfport Energy Fund has opened applications for its second round of grant awards. All organizations creating educational opportunities in the four counties where Gulfport operates are encouraged to apply. This round of the Gulfport Energy Fund’s grants are focused on education because of the vital role it plays in quality of life. Tax-exempt organizations, including schools and nonprofits, serving Guernsey County as well as Belmont, Harrison and Monroe counties, are invited to apply by visiting the Gulfport Energy Fund webpage at www.AppalachianOhio.org/Gulfport. “We were very impressed by the first round of grantees from the Gulfport Energy Fund,” said Mike Moore, CEO and president of Gulfport Energy. “Gulfport remains devoted to supporting the communities where we operate and the impact these organizations make by providing educational opportunities that will leave a powerful and lasting influence in these counties of Appalachian Ohio.” The Gulfport Energy Fund was established to support the communities where Gulfport operates. With the Foundation for Appalachian Ohio’s support, they release funding cycles on a bi-annual basis to address specific areas of investment essential to ensuring and sustaining a high quality of life. Past programs funded by the Gulfport Energy Fund include a Lego Robotics Club set up by the St. Clairesville Public Library in Belmont County; a public service program teaching about teen suicide, drinking, and driving in Guernsey County; vision screenings of school-aged children in Harrison County schools; and a higher education career expo and ACT program in Monroe County. The second funding cycle has approximately $34,000 available for grant awards. While requests for up to $10,000 in funding can be made, typical grant awards will range in size from $500 to $2,500. Applications will be accepted from now to April 13 and grant awards will be announced no later than May 21.

About the Foundation for Appalachian Ohio The Foundation for Appalachian Ohio (FAO) is a regional community foundation serving the 32 counties of Appalachian Ohio. A 501(c)(3) public charity, the Foundation creates opportunities for Appalachian Ohio’s citizens and communities by inspiring and supporting philanthropy. For more information about FAO, visit www.AppalachianOhio.org. About Gulfport Energy Gulfport Energy Corp. is an Oklahoma City-based independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of Eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizeable acreage position in the Alberta Oil Sands in Canada through its 25 percent interest in Grizzly Oil Sands ULC and has an equity interest in Diamondback Energy, Inc., a NASDAQ Global Select Market listed company.

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major pipeline project is expected to bring some major money to Noble County. The Leach Xpress Pipeline is estimated make the county an estimated $6.2 million per year in tax revenue alone once the project is completed. “We feel that it’s definitely a positive thing for the county,” said Gary Rossiter, Noble County commissioner. “...As far as bringing money to our community, we think it’s wonderful.” The project would install more than 150 miles of pipeline starting in Marshall County, W.Va., and travelling toward Lancaster before going south to Wayne County, W.Va. Approximately 22 miles of that pipeline is routed to travel through Noble County. It also includes the construction of a new compressor station in Summerfield and will affect approximately 80 Noble County landowners. While the tax refund is definitely a benefit, commissioners are especially looking forward to the refund giving local schools a huge boost. “The schools would get 63 percent of that $6.2 million, so their income would be tremendous off of it,” Rossiter explained. “It’s unreal.” Though the project is still in its planning stages, Columbia Pipeline Group is taking time to reach out to locals and gauge their reaction to the pipeline. Zane Daniels, Manager, Community Relations and Stakeholder Outreach for the company met with Noble commissioners and attended a local scoping meeting to explain the project to the community and address any questions. “The project has been well received in Noble County by both the commissioners and the landowners and residents who have attended the open houses and scoping meetings,” he said via email. Daniels explained that the company is continuing to work with landowners and local officials, as well as preparing to file for FERC approval in June.

Although the Leach Xpress Pipeline received a generally positive reception, Daniels stressed that anyone with questions should reach out to the company. “We consider landowners our partners on projects and we work very closely with them to address any concerns and resolve any issues they might have,” he stated. “If a landowner or someone in the community has a question or concern, we encourage them to give us a call to discuss it. Open, transparent communication is very important to us.” While Rossiter views the pipeline as a positive for the county, he acknowledged that there would be some drawbacks. “The problem is you know not every landowner will benefit from it,” he said. “[Columbia Pipeline Group] already [has] like 51 percent of the right of ways, so some of the landowners will get their land torn up and they won’t get a lot of money out of it because they already have a lease through them with present pipelines.” But for the most part, Rossiter and the other local commissioners are looking forward to the benefits of the pipeline, and even sent FERC a letter expressing their support. Construction on the Leach Xpress Pipeline is scheduled to begin late next year and is expected to be producing in 2018.

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OLUMBUS — A local business leader and supporter Former Cambridge Chamber Chairman Keith Cook, who of eastern Ohio’s shale drilling boom was recognized nominated Sexton for the award, said he has always been “imby a state commerce organization on Feb. 12. pressed that she always looks forward to get ahead of the next Jo Sexton, president of the Cambridge-Area Chamber of opportunity.” Commerce, was given the Michael A. Schultz Professional of the Year Award by the Chamber of Commerce Executives of Ohio at a dinner in Columbus. Incoming CCEO Chair Libby Gierach said that, in Sexton’s five years with the Cambridge Your local Chamber, she has spearheaded a 44 percent increase in memWacker Neuson bership and 66 percent increase in revenues. Through her credealer ation of the Guernsey County Energy Coalition, Sexton has also been on the forefront of connecting business professionals with the oil and gas exploration boom. Sexton said she was humbled by the award, and by all the support that made it possible “It really represents how we all work together in Guernsey County,” Sexton said. “So, I don’t feel like it’s for me, I feel like it’s for all of us working together. You don’t accomplish this without a lot of other people. It’s not something you do Visit Our New Location on your own.”

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AMBRIDGE, OH -- GoFrac was one of the first gas and oil companies to set up shop in Guernsey County. Now it’s the first to take a break from its origi-

nal plans. The handwriting was on the wall since Feb. 5 when several GoFrac employees went to the OhioMeansJobs office in Cambridge and asked for help finding work. “It seemed like it happened overnight, totally unexpected,” said Sue Sikora, manager at OMJ here. “Most of the people laid off are local, but many of them have already found jobs with other gas and oil companies. We want people who have been laid off, in addition to GoFrac employees, to contact our office. We can help. We have training programs for a variety of job classifications. And, you can still collect unemployment benefits and take part in a training program. Call the OhioMeans Jobs office at 740.432.2381.” Norm Blanchard, executive director of the Community Improvement Corporation and Port Authority in Guernsey

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County, said he was shocked by GoFrac’s exit from its $5 million expansion and renovation of the property the company purchased in 2011. “When a company makes that kind of investment in the community, you just assume it makes a statement about their commitment that they will be here for a very long time,” he said. “We understand that the drop in oil prices has a lot to do with the slowdown in drilling activity, but we didn’t see this coming. “I am hoping top management will make a statement regarding GoFrac’s future in Guernsey County, so all the rumors and misinformation don’t go viral,” said Blanchard. Founded in 2011, GoFrac serves natural gas and oil companies who need hydraulic stimulation for fracturing shale plays. GoFrac utilizes fracturing techniques that help maximize output with state-of-the-art equipment, cutting edge technology and a highly trained staff. GoFrac’s fracturing techniques help to ensure maximum output and profits. The company’s main office and three district offices are all in Texas. jperkowski@daily-jeff.com

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OHIO WELL ACTIVITY

by the numbers

MARCELLUS SHALE

15 1 15 0 13 0 0 44

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

UTICA SHALE

4 54 Wells Permitted 256 Wells Drilling 298 Wells Drilled 0 Not Drilled 816 Wells Producing 0 Inactive 0 Plugged 1824 Total Horizontal Permits

Data as of 02/21/15 Source: Ohio Department of Natural Resources

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OLUMBUS — The state would have to issue decisions more quickly on proposals by property owners who want to join together to tap oil and gas reserves, under legislation being considered in the Ohio House. HB 8, sponsored by Reps. Christina Hagan (R-Alliance) and Tim Ginter (R-Salem), would require the Ohio Department of Natural Resources to hold hearings on such agreements within 45 days of receiving applications, then issue final decisions 30 days thereafter. “As a state, we should prioritize landowner’s rights and partner with those wanting to invest in our great state,” Hagan told the House’s Energy and Natural Resources Committee on Feb. 17, where the legislation had its initial hearing. “To do so, we must respond swiftly to the need for orderly oil and gas development in Ohio. ... HB 8 creates a path for us to move Ohio forward and respond quickly to improve the way we do business.” The legislation focuses on “unitization,” a means by which landowners can combine acreage into units to allow oil and gas production. There’s already a unitization process outlined in state law, complete with an application process and $10,000 fee. But Ohio Revised Code does not stipulate a timeframe for ODNR to review and decide on such applications. “This has led to extremely long delays in the approval process,” Ginter said. “Some applications have been waiting over one year without a decision or an explanation for the delay. Such delays represent wasted economic opportunity, preventing new wells from being drilled, good-paying jobs being created and landowners being able to exercise their right to benefit from the resources contained in their land.” HB 8 also includes provisions for the inclusion of stateowned lands in unitization applications and requirements for uniform assessments of taxes on mineral resources. The proposed law changes have the support of at least one oil and gas industry group. “The bill is simple in the fact that it would provide for timely consideration of unitization requests submitted by our operators as well as urge county auditors to simply follow the law

when establishing Ad Valorem valuation on minerals in their respective county,” Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, said in testimony to the lawmaker panel Tuesday. “... By establishing a disciplined process, orderly development of Ohio’s oil and gas resources will help provide jobs, increase taxes received by the state and give landowners a greater opportunity to monetize the natural resources that lie underneath their property.” Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES

1. Carroll County 467 2. Harrison County 328 3. Belmont County 230 4. Monroe County 192 5. Guernsey County 176 6. Noble County 161 7. Columbiana County 129 8. Jefferson County 54 9. Mahoning County 30 10. Tuscarawas County 20 11. Washington County 17 12. Portage County 15 Trumbull County 15 13. Stark County 13 14. Coshocton County 5 15. Holmes County 3 Morgan County 3 Muskingum County 3 16. Knox County 2 17. Ashland County 1 Astabula County 1 Geauga County 1 Medina County 1 Wayne County 1 WELL SITES IN VARIOUS STAGES: PERMITTED, DRILLING, DRILLED, COMPLETED, PRODUCING, PLUGGED SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF 2/21/15

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MARCH 2015 • A FREE MONTHLY PUBLICATION

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