January 2020
A Free Monthly Publication
GROWTH IN APPALACHIAN NATURAL GAS PRODUCTION LEADS TO $1.1 TRILLION IN SAVINGS
LOCAL STUDENTS LEARN HANDS ON
ABOUT THE OIL AND GAS INDUSTRY IN THIS ISSUE: PERCEPTIONS - GUEST EDITORIAL
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Table of Contents JANUARY 2020 G ROUP PUBLISHER Bill Albrecht
EXECUTIVE EDITOR Beth Bailey bbailey@daily-jeff.com
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A Look Ahead Gas & Oil Events
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Growth in Appalachian Natural Gas Production Leads to $1.1 Trillion in Consumer Savings
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Local Students Learn Hands On about the Oil and Gas Industry
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Perceptions - Guest Editorial
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Sheriff Abdalla Partners with Ascent Resources to Purchase a Drone
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Tax Revenue flows from Pipelines to some Stark County School Districts
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REPORT: Ohio’s Shale-Related Investment Reached $78 Billion in 2018
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Ohio Supreme Court Applies 21-Year Statute of Limitations in Oil and Gas Lease Dispute
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Ohio Well Activity
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Horizontal Drilling Activity Graph
JANUARY 2020 ADVER TISING Paul Reynolds Cambridge, Ohio Office preynolds@gatehousemedia.com 740-439-3531 Aaron Bass Wooster & Holmes, and Ashland, Ohio Offices abass@gatehousemedia.com 330-264-1125 419-281-0581 Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200 Jim Williams Kent, Ohio Office jim.williams@recordpub.com 330-298-2012
On The Cover:
Natural gas costs – which have fallen 65 percent from $8.86 per thousand cubic feet in 2008 to $3.08 last year – have a direct impact on almost all goods and services. When distributing the cumulative $1.1 trillion in savings to each of America’s 125 million households, the average annual savings equate to $900 per household per year, or $9,000 in savings since 2008. “Ohio Gas & Oil” is a monthly publication. Copyright 2020.
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L AYOUT DESIG NER Phil Luks
pluks@recordpub.com
A Division of GateHouse Media Ohio 212 E. Liberty St. Wooster, OH 44691 330-264-1125 spectrum@the-daily-record.com. JANUARY 2020
A Look Ahead
Gas & Oil Events FERUARY 20, 2020
OHIO GEOLOGICAL SOCIETY LUNCH SYMPOSIUM NATURAL GAS LIQUIDS STORAGE IN OHIO’S UNDERGROUND SALT DEPOSITS Hilton Doubletree, 175 Hutchinson Ave, Columbus Ohio 43235 Lunch at 11:30, talk at 12:30 pm
JANUARY 2020
MARCH 4-6, 2020
OHIO OIL AND GAS ASSOCIATION’S 2020 ANNUAL MEETING
Hilton Columbus at Easton 3900 Chagrin Dr Columbus, Ohio 43219 Save the Date! More info regarding the event coming soon. LODGING A block of rooms has been reserved
at the Hilton Columbus at Easton for March 3, 2020 - March 6, 2020. Event attendees calling for reservations should indicate that they are attending the 2020 OOGA Annual Meeting or mention code “OOG” to receive the reduced rate.
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GROWTH IN APPALACHIAN
NATURAL GAS PRODUCTION LEADS TO $1.1 TRILLION IN CONSUMER SAVINGS DAN ALFARO | Energy In Depth American consumers are reaping the benefits of soaring natural gas production, pocketing over $1.1 trillion in savings over the past 10 years, according to a new reportreleased by Shale Crescent USA and the Ohio Oil & Gas Energy Education Program. The analysis shows growth in domestic natural gas production resulted in more than $4,000 in savings per household over the 10-year period for those who use natural gas, and billions of dollars saved by manufacturing end users in the Shale Crescent region of Ohio, Pennsylvania and West Virginia. The price of natural gas has dropped as a result of dramatically increasing production from shale, with the majority of new growth coming from the Appalachian Basin. $1.1 Trillion Saved The cost-savings have grown in tandem with increased shale development, and include substantial benefits across residential, commercial, industrial, and electric power sectors, the report found.
Natural gas costs – which have fallen 65 percent from $8.86 per thousand cubic feet in 2008 to $3.08 last year – have a direct impact on almost all goods and services. When distributing the cumulative $1.1 trillion in savings to each of America’s 125 million households, the average annual savings equate to $900 per household per year, or $9,000 in savings since 2008. The savings were even higher – $4,000 annually – in households that directly use natural gas. And for households in the lowest 20 percent of income, the realized savings equate to 2.7 percent of annual income, the data
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show. As Rhonda Reda, executive director of the Ohio Oil and Gas Energy Education Program told Oil and Gas Journal, getting a 2.7-percent boost in income is meaningful for these families:
“The savings tied to [Shale Crescent] natural gas production have been transformational for all energy consumers, particularly for low-income families who spend a disproportionate amount on energy.” Appalachia Leads Growth Texas and other natural gas producing states along the Gulf Coast have historically provided most of the growth in natural gas supply. But since 2008 – as horizontal drilling and hydraulic fracturing were utilized to develop tight formations and shale across the country –the Shale Crescent region has produced the greatest amount of production growth. Ohio, Pennsylvania and West Virginia have increased their combined production 20-fold in the past decade, representing 85 percent of total U.S. natural gas growth in that time span.
Growth continued on page 5
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Growth continued from page 4
Last year, they produced 28 billion cubic feet per day of marketed natural gas, accounting for nearly one third of all U.S. production. This trend is expected to continue into the future, as a recent IHS Markit study projects the region will supply 45 percent of U.S. natural gas production by 2040.
The volume of these natural gas resources is attracting the kinds of manufacturing and petrochemical industry investments leaders in all three states hope continues, while those who work in these sectors are already experiencing the benefits of operating in the region. Appalachia Sees Growth Consumers in the Shale Crescent states have realized benefits at a high rate, given their proximity to production, with a combined savings of more than $90 billion over the past 10 years, the report shows. For just industrial and manufacturing end users in the tri-state, the savings eclipse $25 billion. Potential for future growth in these industries has been covered in previous studies of the region by IHS, which forecasted energy intensive industries locating in the area should experience significantly higher profits than other regions of the country thanks to lower natural gas and natural gas liquids prices. This is particularly true for petrochemical companies. Joe Eddy, the former president and CEO of Eagle Manufacturing, which produces more than 750 products from its Wellsburg, W.Va. site, has recognized the benefits of low-cost natural gas in comments to West Virginia News: “The surge of affordable, reliable energy had an incredibly positive impact on our operations. The natural gas savings we realized were the driving force in reducing operating costs, which allowed Eagle to invest in new equipment, expand our workforce and grow as a company.” Conclusion The International Energy Agency projects petrochemicals will drive demand for oil and natural gas through 2040. Keeping the United States competitive and able to meet these growing demands is why the Department
of Energy and groups like Shale Crescent USA continue to promote the viability of the region as a second petrochemical hub alongside the Gulf. The Ohio River Valley’s rise as a petrochemical hub is already beginning to take shape, with Shell’s $6-billion cracker plant under construction in Beaver County, Pa.; the highly anticipated PTT Global Chemical project potentially set to be announced in Belmont County, Ohio; and a number of similar projects in various stages of discussion. This latest study adds to a growing number of those demonstrating the viability of the region, a key fact Jerry James, president of Artex Oil and Shale Crescent USA cofounder, shared with the News and Sentinel: “The strength of natural gas and natural gas liquids production in the Shale Crescent region, as this report confirms, has made this region the most profitable place to build a petrochemical plant, giving manufacturers here a critical competitive edge. Energy is the catalyst to breathing new life into American manufacturing and, after years of challenges, we are excited about the bright future in store for communities all along the Shale Crescent.”
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Local Students Learn Hands On about the Oil and Gas Industry KRISTI R. GARABRANDT | The Daily Jeffersonian - Gannett Meadowbrook Middle School students had the opportunity to engage in a hands-on learning experience that taught them the energy, technology and sciences that are involved with the oil and gas industry. Sixth-grade students in the STEM program, along with all the seventh- and eighth-grade students spent part of their day in the school’s gymnasium rotating through the six stations of the Mobile Oilfield Learning unit (MOLU). The MOLU is the Oilfield Energy Center’s (OEC) $1 million traveling exhibit that is brought into schools across the country. The MOLU has a curriculum that is geared toward fifth- through eighth-grade students and features 24 different hands-on learning activities. Don Adams, of the OEC, said the MOLU introduces the kids to the gas and oil industry and offers a better understanding of the local gas drilling work that’s going on in their community. It also teaches them drilling terminology such veracity, porosity and the fracking process. ‘Students learn what some of these processes are, how drilling takes place, how they can get involved and what’s going to be here for them in the future such as jobs,” Adams said. “It’s not just for their future but their children’s futures as well because it going to be here for a long time. It is multiple learning opportunities with hands-on involvement and falls right in with the STEM (Science, Technology, Engineering and Math) program, so it works really well and the kids really seem to enjoy it and get involved with it,” he said. “They had a little bit of fun and learned. They watched a video and did a pretest.” Meadowbrook Middle School students were given a pre-test prior to the MOLU’s arrival to see what basic knowledge they already had about the oil and gas industry. When asked, multiple students readily admitted prior to the engaging with the MOLU they didn’t really know a whole lot about oil and gas. Eighth-grade student Krista Nutter was one of the students to say she wasn’t familiar with the gas and oil industry before learning about it through the MOLU. “I took the pre-test and didn’t get a really good score
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and now I kind of know a little bit more about it,” Krista said. “I know a lot more than what I did before coming here.” According to Krista, she might be interested in learning more about a career in the industry, but she’s not sure yet. During the event students paired up in groups of two and were given a workbook to help guide their learning. Within the book were questions about oil and gas which the students found the answers to as they went through the six different stations. The students, a maximum of 48 at a time, spent 90 minutes rotating through the stations, learning about Students continued on page 7
Nora Smithberger, 11 looks through a microscope to observe ocean dwelling microorganisms while Jenna Gruder, 12, studies the chart at a Mobile Oilfield Learning Unit, MOLU, exploration station. Photo: Lewis Perkins, Daily-Jeff.com
JANUARY 2020
Students continued from page 6
topics, such as safety, becoming an engineer, the oil and gas industry timeline, if a career in oil and gas is for them, the sedimentation process, microorganism, the digital transformation of the oil and gas industry, drill bits, the process of fractional distillation, oil and gas facilities and more. The students spent two and a half to three minutes at each activity and every student gets the chance to do a little bit at each station. Some of the stations’ activities included students making microfossil rubbings, viewing how rocks can glow, figuring out which core samples contained oil, guessing whether certain items such as a Barbie doll or toothpaste contained oil and seeing how thick oil is, and other activities. Eighth-grade student Ryan Hare, said he wasn’t familiar with the industry before the learning event, but he learned a lot from the the video and pre-test prior to the event and the MOLU. When asked what he learned, Ryan replied he learned “that oil makes plastic and about off shore drilling and that scientists have to study microorganism systems to find oil.” Ryan said he is interested in learning more about and possibly pursuing a career in the industry. In their MOLU Pass (workbook), students had to answer question regarding safety such as spotting energy hazards in the home. They were challenged with building a structure following specific directions and answering whether they were successful and why they were or weren’t successful with the task. They also had to answer questions from the Oil and Gas Industry Timeline such as what year was it when the Chinese first drilled for oil using brine drilling methods, first year an oil well was completed in Pennsylvania and what year plastic, a product made from oil, was discovered. Students also listed their top personality types and, based off that information, came up with a career in the oil and gas industry that might be suitable for them. They also had to define porosity, name two places in nature where sedimentation would occur and answer what type of map is used by the oil industry to show the formations on land and beneath the sea. Students also had to learn what two types of technology are being used in the oil and gas industry to monitor and perform tasks from safe locations, study the process of and answer questions regarding fracturing and fractional distillation as well as name a variety of energy sources. Payton Rogers, a sixth-grade STEM student said she didn’t know much about the industry but has learned some since participating with MOLU. Payton said she learned “that Baribie dolls are made from oil, and crayons are made from oil, and that the columns of rocks taken when drilling are called core samples.” Eighth-grader Hayden Lasko said he knew some about the industry but that his knowledge has increased. He said he had developed more of an interest
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in it and that he would be interested in working in the oil industry. Four groups of students went through the event. ‘We have kind of made it a goal for the year to try to engage the middle school-age kids to career pathways and the kind of things that are available to them in the future and get them thinking about what their interests are and what they want to do in the future,” Scott Baughman, principal at Meadowbrook Middle School said. “Our community is so big with the oil field industry itself. Oilfield companies sponsor the Energy Fund which pays for this whole thing. They are learning a little bit about the science of the oil field industry, and the types of careers that come out of it. It could be a daily experience for many of them. A lot of them have families and stuff involved in the industry so, we are just trying to expose them to things and the opportunities that are out there for them. That is our main goal,” Baughman said.
Kash Watson, 14, uses a remote control panel to glide a robotic arm through a task. The Mobile Oilfield Learning Unit, MOLU, has six stations that each have four substations that allow students to try out, or learn about different aspects of the oilfield industry. Photo: Lewis Perkins, Daily-Jeff.com
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Perceptions Guest Editorial GREG KOZERA | Shale Crescent USA Last Sunday I was in church and rolled into the communion line on my wheelchair. One of the ushers, Tony a friend, approached to push me. I smiled, waved him off and said, “I’ve got this.” I kept up with the line and easily wheeled back to my place in back. Tony came up after church and said, “I’m just so used to doing that.” I thanked Tony and told him I prefer to wheel myself. People naturally just want to be helpful. That’s fine. Their perception may be that people need and want help. I have become like a lot of people in wheelchairs, I want to be independent. I will accept help when needed but prefer to do for myself. In rehab, we learned all of the little things to do so we can get dressed and perform other tasks to be as independent as possible. I would ask the nurses to move the wheelchair so I could get out of my bed. Then I took care of the rest. They quickly learned if they needed to find me for medications or vitals I would be out and about in therapy or in one of the day rooms. I really appreciate all of the well wishes cards and prayers. It is amazing how they lift my spirits. When my wife was in the hospital, I noticed how she perked up when a friend called or someone sent an e-card or text with a picture. If you have a sick friend or family member never assume or perceive that you are bothering them or they need their rest or they don’t want to talk to you. In my experience, it is just the opposite. They need to know that people care about them. I have also found that I need to remind people that I’m fine. My pain is low to non-existent. My only problem is I can’t walk until my knees heal and can support weight in another 3 weeks. I can do everything I could before the injury except to drive to a meeting. One of the assistant coaches drove me to our high school soccer Team’s end of season banquet on Sunday. I did everything I usually do including the closing remarks. Surprise, this year’s topic was adversity. Our Team suffered a lot of that and overcame most of it. We can’t always control what happens to us. We can always control how we choose to respond to it. Never underestimate someone we perceive as “handicapped”. You may be surprised at their capabilities. I encourage you to never put limitations on anyone by your perceptions. Especially your employees or family members. After all of the years we have been married, I thought I knew my wife’s capabilities pretty well. I always encourage her to grow. She surprised me. I have watched her blossom as a business woman and public speaker. She has gone from a supportive partner to become a full partner and integral part of our business. Sometimes we have to do things to change the percep8
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tion of others. The founders of Shale Crescent USA realized they would need to change how this Region is branded to create an accurate perception for prospects. When someone says “Appalachia” what do you picture? It probably isn’t high tech manufacturing, clean abundant energy or some of the most technically sophisticated natural gas wells in the world. One way you can help to bring jobs back to this Region is to use the term “Shale Crescent USA” in place of “Appalachia” to describe our Region. When we were in Japan last year most of the people we met had no idea where Ohio, Pennsylvania or West Virginia were. They know where New York City, Hollywood and Texas are. They perceived that most of the oil and gas in the USA came from Texas. We changed that perception. When we showed them where Shale Crescent USA is and said, “If Shale Crescent USA were a country we would be the number 3 natural gas producer in the world.” The entire Japanese petrochemical association membership in that packed room all picked up their pens in unison and started writing like crazy. The most frequent comment we heard on the trip was, “We thought all the gas was in Texas.” The other term many people use when talking about this part of the county is “the Northeast”. We are NOT the northeast. We are more closely aligned with the mid-west based on our values. When I ask people from companies around the world and even in the USA, “What do you think of when you hear the northeast USA?” They told me they think of New York City and Boston along with high costs and labor that is difficult to work with.” That does not describe our Region accurately. We are not the northeast. Be careful of your own perceptions of people, places or things. They may not always be accurate. I encourage you to look at your own personal and business brand. What do people perceive when they see and hear about you and your brand? Is it what you want them to perceive. People form impressions in less than a second today. Our prospects need to hear the Shale Crescent USA brand on a routine basis if we want to create the best possible perception. We can all help to create a new, positive and accurate perception of our Region, the Shale Crescent USA. Thoughts to ponder. © 2019 Shale Crescent USA Greg Kozera, gkozera@shalecrescentusa.com is the Director of Marketing and Sales for Shale Crescent USA. He is a professional engineer with a Masters in Environmental Engineering who has over 40 years’ experience in the energy industry. Greg is a leadership expert and the author of four books and numerous published articles. JANUARY 2020
Sheriff Abdalla Partners with
Ascent Resources to Purchase a Drone Local Active Shale Producer Ascent Resources donates $5,500 to the Jefferson County Sheriff’s Office to acquire a drone Ascent Resources - Utica, LLC (“Ascent”) has donated $5,500 to Sheriff Adballa’s office to cover the cost of acquiring a drone. These pieces of equipment are highly sophisticated and are so versatile they can be used to assist during a search for a missing person to monitoring a traffic accident. It is another tool that is available to law enforcement agencies that allows them to serve and protect their residents and businesses. The Sheriff and the team from Ascent Resources will be holding a First Flight Celebration on Monday, December 2nd at 12:00 noon at the Sheriff’s office followed by a lunch for elected officials and officers. “The oil and gas industry deploys the latest technol-
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ogy in our operations and drones are becoming more and more useful in both drilling and pipeline operations,” said Mike Chadsey, spokesman for the Ohio Oil & Gas Association. ”Thanks to Ascent Resources for being a good partner by recognizing a need and then stepping up to meet the need in their community. “We enjoy the ongoing and strong relationships we have built with various law enforcement agencies in our operating area and we are happy to provide Sheriff Abdalla and his Special Response Team with this donation,” said Ascent Resources Director of Government Relations Amanda Finn.
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Tax Revenue flows
from Pipelines to some Stark County School Districts School districts make big plans with Rover and NEXUS dollars SHANE HOOVER | The Canton Repository - Gannett When Energy Transfer started planning its Rover Pipeline across southern Stark County, officials at Fairless Local allowed themselves to dream — cautiously. If the pipeline really was built in the school district, how much would it pay in taxes and how would the district use the money? Five years later, Fairless is getting its answer. State projections show the pipeline will generate $3.9 million in additional revenue this tax year, and the district is planning to build a new $20 million high school. “It’s an awesome thing,” said Fairless Superintendent Broc Bidlack. “It’s a great windfall. It’s a benefit to our community. It doesn’t cost our community anything and, so, we’re trying to invest it in ways that will last and serve our community for many generations.” Shipping dollars Two interstate pipelines have been built across Stark County since 2017 to carry natural gas from the Utica and Marcellus shales to markets in the Midwest and Canada. The pipelines are on pace to generate almost $20 million in additional tax revenue in Stark County this year, according to state projections released by the county auditor. The taxes will be paid next year. Rover Pipeline’s twin 42-inch-diameter mainlines cross Pike, Bethlehem and Sugar Creek townships. The pipeline is poised to add $9.6 million to local government coffers. NEXUS Gas Transmission is a single 36-inch-diameter pipeline in Washington, Nimishillen, Marlboro and Lake townships. NEXUS is projected to boost tax revenue by $9.8 million. Taxing utilities The Ohio Department of Taxation calculates the property taxes owed to local jurisdictions by public utilities, including pipelines. The amount paid is
based on the value of the pipeline infrastructure and the value of the commodity flowing through it, said Stark County Auditor Alan Harold. During calendar year 2017, public utilities property tax payments totaled $1.33 billion, according to the latest report from the Department of Taxation. The public utility property tax revenue is divvied between the county, school districts, townships, library districts and any other jurisdiction with a tax levy. The influx of pipeline money impacts local governments in two ways. Because some levies are set to raise a specific amount of money, any increase in the tax base due to a pipeline means a drop in the tax rate, not an increase in revenue, Harold said. That’s good for taxpayers as a group. But general fund and permanent improvement levies aren’t capped, so that revenue increases as the tax base grows, Harold said. Who is getting what? Six Stark County school districts stand to get more than $1 million in additional revenue from the pipelines based on this tax year’s projections. Fairless is second on that list, with Rover projected to add $3.9 million. The pipeline generated $849,000 last year, of which the district spent $770,000 on artificial turf for Brideweser Stadium. The district’s next project is a new high school to replace a building constructed in the mid-1960s. The state will bear 71 percent of the project’s cost, with the district using pipeline revenue to pay the balance. The project is in the early planning stages but site preparation could begin as early as next fall, with construction underway in 2021, Bidlack said. The district’s pipeline revenue is expected to peak in 2020 and decline from there due to depreciation. Other uses for the money over the next few years could include updating buses, stadium renovations Schools continued on page 9
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Schools continued from page 8
and facility repairs, Bidlack said. Next door to Fairless, Tuscarawas Valley Local is projected to get $5.9 million in added revenue. The district straddles Stark and Tuscarawas counties, and most of its Rover funding comes from the Tuscarawas section. Tuscarawas Valley is planning to build a new $24 million school for grades 7 through 12 by 2023. The school will be co-funded by the state. The second phase of the project will see Tuscarawas Valley renovate and expand its existing middle school to hold pre-K through grade 6 students. That project, which doesn’t yet have a timeline or cost estimate, will take the district from four buildings to two. Superintendent Mark Murphy said revenue from Rover means the district could do the projects without further taxing residents. “We’re so thankful and blessed, but we want to make sure we’re capturing those dollars and maximizing them for a strategic, intentional purpose that we could never do on our own,” Murphy said. Other districts are still figuring out how to use the money. Marlington Local is projected to get nearly $3.7 million from NEXUS this year. Superintendent Joe Knoll said the school board
would have to decide how to spend the money, which was a major issue in the recent election. Two candidates who want to use the money to repair Washington and Lexington elementary schools defeated two incumbents who wanted to build a new consolidated elementary school. Staying conservative The caveat with any increase in the local tax base is that it can trigger a decrease in state funding, said Mark Phillips, treasurer for Fairless and Tuscarawas Valley. For that reason, both districts are making sure they can pay for their projects if Rover’s revenue were to drop or the state cuts funding. Lake Local Schools stands to get almost $1.3 million in additional funding from NEXUS. Lake Superintendent Kevin Tobin said the district was being guarded in its 5-year financial forecast. The amount of money the district gets from the state is set for now, but no one knows if it could drop in the next funding cycle, Tobin said. “So, we can’t really prepare to say that’s a windfall of money,” he said. “It may become a shell game.” Reach Shane at 330-580-8338 or shane.hoover@ cantonrep.com On Twitter: @shooverREP
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REPORT:
OHIO’S SHALE-RELATED INVESTMENT REACHED $78 BILLION IN 2018 DAN ALFARO | Energy In Depth Total shale-related investment in Ohio has reached nearly $78 billion since Cleveland State University first began tracking in 2011 – the year the state’s first Utica Shale wells went into production – according to the university’s latest report. Prepared for JobsOhio, the report contains investment data through the second half of 2018. Continued success in the development of the Utica and Marcellus shale formations in the closing half of the year added $3.83 billion in total investments across the industry, making 2018 another banner year for the Buckeye State. Upstream Production, Investments Continue to Climb Last year, Ohio’s natural gas production continued to surge, as the state cleared a significant benchmark by producing 2.4 trillion cubic feet of natural gas – the first time the state has produced more than 2 Tcf since shale development began. According to the CSU report, total shale-related investment in Ohio for the second half of 2018 – including upstream, midstream and downstream – was around $3.82 billion. Upstream activities, such as drilling or royalties, accounted for more than $3.5 billion of this total. While the number of wells declined in the second half of the year, total investments were up, as improved practices in these formations have yielded better production results. Upstream investments continue to be the driver of total investment in the state to date, and while the study found the second half of 2018 showed slowed growth in midstream and downstream investment, it forecasts significant increases in these segments as a number of large projects in various stages of development are not included in the report. Midstream, Downstream to Pick Up Steam Midstream investment figures included in the report include infrastructure built through 2018– “from gathering to the point of hydrocarbon distribution”; pipelines, processing, natural gas liquid storage, and intermodal transloading facilities. While the report shows slowed growth in midstream investments in 2018, JobsOhio notes an impending increase as new projects began development this year: “Ohio saw limited investment in midstream infrastructure with the total midstream investment for the second half of 2018 equaling $231.8 million. Investment consisted primarily of a gathering system build-out, with the most spent on gathering lines followed by a gathering system compression and dehydration. No new gas processing or fractionation was added during this period. However, several new pipeline projects commenced in 2019 and will be accounted for in future reports.” All in all, across the Appalachian Basin more than $32 bil12 OhioGas&Oil
lion is being invested in pipelines. As downstream projects in 2019 and beyond come online, investment in the means to transport these resources will increase. For the report, downstream investment figures are derived from projects deemed by CSU’s research team to be dependent on, or directly the result of the large amount of oil and gas being developed in the region as a result of the Marcellus and Utica shale formations. In recent years, Ohioans and their Shale Crescent neighbors in Pennsylvania and West Virginia have seen significant investment in the downstream sector, particularly as natural gas has become increasingly utilized as a source of electricity. Previous reports since 2015 showed the investment brought by 10 new natural gas-fired power plants in Ohio through the planning, construction, or newly operational stages. No investment in new natural gas generation plants was identified during the second half of 2018, however low natural gas prices saw two new combined heat and power (CHP) plants with a total known capacity of 22.5 MW installed – not including one at Ohio State University that’s still in the approval process – accounting for approximately $44 million. Looking ahead, JobsOhio points to the more than $1.5 billion worth of natural gas power plant construction occurring in 2019 at the South Field Energy facility in Columbiana County and the Long Ridge Energy center in Monroe County. JobsOhio and CSU note a “pause” in new major pipeline, processing and petrochemical project construction during the study period account for the decrease in midstream and downstream investment figures. However, the report forecasts a quick increase in midstream and downstream investments considering the billions of dollars already invested in projects already underway or in the late planning stages. Many see Ohio’s future opportunity for prosperity in the downstream investment the state is able to attract, as Matt Cybulski, Director of Energy and Chemicals at JobsOhio, states: “As the upstream and midstream sectors continue to mature, our focus is to land more downstream investment. This strategy has two focal points: helping companies already in Ohio expand to take advantage of cheap natural gas and natural gas liquids, and attracting new greenfield developments such as ethane crackers, methanol plants and other related investments. These downstream projects result in significant amounts of construction jobs, are typically very capital intensive, and create high quality, long-term permanent jobs. Communities thrive when these facilities are opened or expanded and that is our long-term goal.”
JANUARY 2020
OHIO SUPREME COURT APPLIES
21-YEAR STATUTE OF LIMITATIONS IN OIL AND GAS LEASE DISPUTE DAVID J. WIGHAM | Attorney
JANUARY 2020
sue as well. On the one hand, in the Rudolph case, the Fourth District held that the statute of limitations does not begin to run until a “justiciable controversy” exists; on the other hand, in the Browne case, the Fifth District ruled that the statute runs from the last date of cessation of production. Although the Supreme Court agreed in dicta with the landowner’s position that, in general, a limitations period does not begin to run until a “justiciable controversy arises,” the Court ruled that because the landowner did not raise the issue in the lower courts, the Supreme Court could not decide the issue for the first time on appeal. Thus, the issue of when the 21-year statute begins to Ohio continued on page 14
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In the closely-followed case of Browne v. Artex Oil Co., 2019-Ohio-4809, issued on November 26, 2019, the Supreme Court of Ohio ruled that Ohio’s 21-year statute of limitations applies to a landowner’s declaratory judgment claim that an oil and gas lease has expired by its own terms due to lack of production in paying quantities. The Browne decision resolves a hotly-contested issue over which Ohio appellate districts had been in conflict: whether a statute of limitations is applicable to limit a landowner’s lease termination claim, and if so, which statute applies? For example, in Rudolph v. Viking Intl. Res. Co., 2017-Ohio-7369, the Fourth Appellate District concluded that R.C. 2305.04, Ohio’s 21-year statute for real property disputes, applies to these cases. The Seventh District, however, applied the 15-year statute of limitations period (for written contracts accruing prior to 2012) to a similar lease termination case. See Potts v. Unglaciated Indus. Inc., 2016-Ohio-8559. And in Browne, the Fifth District Court of Appeals followed the Seventh District and also applied a 15-year statute of limitations to an action brought to declare an oil and gas lease terminated. The Supreme Court’s Browne decision reverses the Fifth District and resolves this issue, holding that “the 21-year statute of limitations in R.C. 2305.04 applies to a claim for a declaratory judgment that an oil and gas lease has expired by its own terms for lack of production.” Browne, 2019-Ohio-4809, at ¶ 46. This ruling is important because it limits the time within which a landowner can bring a claim that an oil and gas lease has expired due to lack of production, using the much longer 21-year statute of limitations for real property claims, as opposed to the 15-year statute of limitations (applicable to contract disputes arising before 2012) or the even shorter eight-year statute (applicable to contract disputes arising after 2012). Had the Court determined that the much shorter limitations period applied, Ohio landowners would have been negatively impacted, as many viable lease termination claims would have been time-barred. Significantly though, the Court left unanswered the equally important question of when the landowner’s claim accrued, or in other words, when the 21-year statute of limitations period would begin to run in a given case. Ohio’s appellate districts are in conflict on this is-
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Ohio continued from page 13
run will have to be decided again by a lower court before the Supreme Court will have the discretion to consider it, or perhaps it will come before the Court pursuant to a certified-conflict case to resolve the conflict between the appellate districts. If the Court rules that the limitations period begins to run on the last date of cessation of production, then landowners will be required to file suit before the 21st anniversary of that date, which may be difficult to determine, and moreover, is not in accord with existing case law requiring at least two years of non-production before a lease expires. If, however, it is held that the clock begins to run on the date that both sides are aware a controversy exists, then landowners would have another 21 years thereafter to file claims—certainly ample time. From the landowner’s perspective, Browne applied a more generous 21-year statute of limitations period
for landowners to bring declaratory judgment claims that an oil and gas lease has expired by its own terms for lack of production. And although the issue of when a claim accrues remains governed by the conflicting precedent of various appellate districts, it is possible that the Supreme Court could reject the last-date-ofcessation-of-production benchmark in a future case. From the producer’s standpoint, there is now a finite period within which such claims must be brought, and therefore a measure of protection from having to defend claims that are stale. In any event, litigation over valuable shale rights claimed to be held by the often-meager production of older shallow wells close to the end of their production cycles will certainly continue. The recent litigation over statute of limitations issues in the context of oil and gas leases highlights the importance of diligence when analyzing reversionary interests, the ownership
of mineral rights, and the expiration of oil and gas leases. Landowners, who would otherwise be entitled to recover, protect, and lease their mineral rights, may be barred from challenging what would be an expired oil and gas lease if they wait too long to bring lease termination claims. It is vital that landowners and mineral owners seek counsel from an experienced oil and gas attorney to advise them as to their rights under the law when seeking to challenge the validity of an oil and gas lease. It is also important to seek experienced counsel to carefully review any oil and gas lease or related document before signing them. David J. Wigham is a second-generation oil and gas attorney at the firm of Roetzel & Andress, with more than 27 years of experience in the industry. He maintains offices in Akron and Wooster, Ohio, and can be reached at 330-762-7969 or dwigham@ralaw. com
OHIO’S LEADING CHOICE IN
OIL AND GAS LAW Roetzel’s experienced Oil and Gas attorneys provide a wide array of legal services focused on landowner representation including: • Leasing and lease renewals, ratifications and amendments • Litigation, including: Lack of production, Dormant Mineral Act, Marketable Title Act • Pooling and unitization • Pipeline easements • Surface development • Mineral LLC’s • Royalty disputes
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For additional information, contact Dave Wigham at dwigham@ralaw.com or Tim Pettorini at tpettorini@ralaw.com.
GAS AND OIL TEAM MEMBERS: EMILY ANGLEWICZ, SARA FANNING, BEN FRAIFOGL, PATRICK HANLEY, JEREMY MARTIN AND BRET MCNAB • 222 SOUTH MAIN STREET I AKRON, OH 44308 I 330.376.2700 • 121 NORTH MARKET STREET, 6TH FLOOR I WOOSTER, OH 44691 I 330.376.2700
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JANUARY 2020
OHIO WELL ACTIVITY by the numbers
UTICA SHALE
MARCELLUS SHALE 23 10 9 32 1 75
Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Other Total Horizontal Permits
Data as of 12/7/19
477 161 158 2421
3217
Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Plugged Total Horizontal Permits
Source: Ohio Department of Natural Resources
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Building was a bowling alley, all equipment has been removed. Property has 9 acres. Located on the most popular roadin Guernsey Co. The building has over 22,000 SQ FT. and has a paved parking lot with room for approx 100 cars. Owner want to sell this property so don’t be afraid to look and make a reasonable offer. $1.8M.
Investment opportunity in high traffic location across from Walmart; located at dead end cul-de-sac with public utilities, property is zoned Commercial. Conveniently located within 1 mile of I 70 Cambridge Exit 178 and minutes from 70/77 Interchange. Over six acres of land available with 2000 sq ft & 5400 sq ft buildings on site. Property is level for lay down yard and/or parking. Additional acreage available. All units are occupied with lease information available upon request. $750,000.
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Commercial land & building with high traffic across from Walmart, 7.5 acres, previous businesses include: Drive thru carryout, beauty salon, tanning business, storage units, great location for oil & gas business just south of I70 & I77. 30 x 80 metal building attached to office building. Building and land can also be leased separately or together. $889,000.
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CAROL GOFF & ASSOCIATES OPERATES 13 OFFICES. COVERING 15 COUNTIES IN SOUTHEASTERN & CENTRAL OHIO We are a full service Real Estate company handling both buyers and sellers of residential, commercial, farms, acreage and investment properties. We also offer auctioneering services and appraisals. CJ-10709717 CJ-10715323
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TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY XXXXX
1. Belmont County.........679 XXXXXXX 2. Carroll County......... 530
BY NUMBER OF SITES
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3. Monroe County........ 509 4. Harrison County....... 499 5. Guernsey County...... 280 6. Jefferson County.......261 7. Noble County.......... 236 8. Columbiana County...163 9. Mahoning County....... 30 10. Washington County... 22 11. Tuscarawas County.... 20 12. Portage County........ 15 Trumbull County........ 15 13. Stark County............ 13 14. Coshocton County....... 5 15. Muskingum County...... 3 Holmes County........... 3 16. Morgan County.......... 2 Knox County.............. 2 17. Ashland County.......... 1 Astabula County......... 1 Geauga County.......... 1 Medina County........... 1 Wayne County............ 1
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I VARIOUS SSTAGES: PERMITTED DRILLING, ,D WELL SITESS IN PLETED PRODUCING, PRODUCINGPLUGGED, PLUGGED DRILLED, COMPLETED, SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF D L A 12/7/19
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