May 2014 Ohio Gas & Oil Magazine - Northern Edition by Gannett NEO

Ohio MAY 2014 • www.ohiogo.com

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PUBLISHERS Andrew S. Dix

G.C. Dix II

David Dix

EXECUTIVE EDITORS Lance White

Roger DiPaolo

Ray Booth

Rob Todor

REGIONAL EDITORS Kimberly Lewis

Erica Peterson

Cathryn Stanley

Niki Wolfe

Judie Perkowski

Table of Contents

ADVERTISING DIRECTORS Rhonda Geer

Harry Newman

Kim Brenning

Peggy Murgatroyd

Jeff Kaplan

Janice Wyatt

Jeff Pezzano

ART DIRECTOR

Feel the Power

Race to the Courthouse

Gas and Oil Safety Training

French Connection

Landmark Ruling

Shale–Abration

Steve Grose Contributes

S&H Oilfield Services

Look to Skycasters for New Service

Shale Creating More Water

Energy Briefs

Voters Support Investments

Regulations for Drilling Near Faults

Quick Action for Economic Benefit

Abby Armbruster / Dix Communications

Bill Dannley / Leasemap Ohio Marc Kovac / Dix Capital Bureau

Jeff Saunders / Dix Communications David Wigham / Attorney

Rachel Sluss / Dix Communications Steve Huszai / Dix Communications Parker Perry / Dix Communications

Laurie Huffman / Dix Communications

Pete Kiko

RD FO AW

MARION

ARE UNION DELAWARE GN

KNOX

MADISON

FRANKLIN LIN

FAIRFIELD

PIKE

VINTON

MONROE

WASHINGTON ATHENS

MEIGS JACKSON

HARRISON

MORGAN

HOCKING ROSS HLAND

CARROLL

BELMONT

NOBLE PERRY

PICKAWAY AY

MAHONING COLUMBIANA

GUERNSEY

PORTAGE

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LICKING

FAYETTE

SUMMIT

WAYNE YNE

HOLMES

MORROW ORROW

MEDINA

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WYANDOT DIN

HURON

SENECA

Coverage Area:

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LORAIN

TUSCARAWAS

COCK

CUYAHOGA

ERIE

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ASHLAND

Brad Tansey

OTTAWA

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DIGITAL CONTENT MNGR

Carroll, Harrison, Columbiana, Guernsey, Monroe, Noble, Belmont, Mahoning, Portage, Stark, Summit, Tuscarawas, Coshocton, Trumbull, Holmes, Muskingum, Medina, Wayne, and Washington.

Yoder Hydraulics works to meet the demand Abby Armbruster Dix Communications

PPLE CREEK — Local hydraulics company Yoder Hydraulics has been a source of power for nearly 16 years. Yoder Hydraulics in Apple Creek was started in 1998 by Andrew Yoder. His aim was to meet local Amish people’s demand for power in the growing woodworking industry. It was a natural fit for Yoder, who has always enjoyed working with mechanical things, and anything involving building, designing or engineering. He has been involved with manufacturing all of his life. After almost 16 years in the field, Yoder said he works with many processing plants such as Gerber Poultry and construction companies like Weaver Custom Homes. “There are probably very few businesses locally that I don’t deal with,” Yoder said. In 2001, the business moved into its 6,400 square foot facility located on Dover Road between Apple Creek and Mount Eaton. The business then began fabricating its own power units and equipment. This quickly expanded into machining and building custom hydraulics cylinders, which eventually led to testing and servicing the equipment. The business customizes every power unit and hydraulic cylinder it builds. It has partnered with manufacturers in order to bring its customers certain brands, such as Ingersoll-Rand Compressors, Vickers Pumps and Motors, Kawasaki Pumps and Motors, Funk Modular Pump Drives, S&H Series CharLynn Hydraulic Motos and Parker Hoses & Fittings. Now, with a staff of over 12 people, including some of his children, Yoder Hydraulics serves the sawmill and oil and gas industries, as well as agricultural and industrial mobile equipment and wet lines. “We work for anybody,” Yoder said, noting the business makes an effort to give good service. “We’re fortunate we’re always busy.” While about 80 percent of their clientele is local, Yoder Hydraulics also serves customers in about eight states, plus Canada, with customers being both commercial and residential.

The business will repair and test valving, hydraulic cylinders, pumps and motors and can test and repair most brands of hydraulic cylinders in-house. Yoder Hydraulics also accepts walk-ins. It carries a large stock of replacement parts for a variety of makes of pumps and motors, as well as seals and packing. It also sells and installs generators and electrical controls. aarmbruster@the-daily-record.com.

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courthouse

Bill Dannley Landman, Leasemap Ohio

OOSTER -- Over the last several months I have waxed extensively -and possibly ad nauseum -- about recorder’s offices and the public record. However, there is one basic question I have not addressed: Why do oil and gas companies bother to record at all? An oil and gas lease is a contract, binding on both Lessor and Lessee. It’s enforceable; violations of its provisions can land either party in court. Legal remedies can force the party in breach to perform as required, pay damages, forfeit their rights, etc. So why record? Because of a legal nicety know as “constructive notice.” In simple English, recording a document notifies the world of your interest in a property. Whether it be deed, mortgage, lien, easement or oil and gas lease, when you record, you are posting the legal equivalent of a “No Trespassing” sign. It’s public notice as to your legal interest. If there are any conflicting claims out there, you’ve just told them to stay off your property. However, what happens when two documents, say two oil and gas leases, show up in the public record in the same recorder’s office on the same property. Which one is valid? That result depends on where you’re at. State laws on constructive notice broadly fall into three categories: notice, racenotice and race. Without going too deeply into irrelevant details, Ohio is a race-notice state -- with a serious twist. To give you some idea as to how this works, take this example: Farmer Brown owns 100 acres in any of the 50 states. He is approached by ABC Drilling and signs an oil and gas lease on April 1. One week later, Farmer Brown is approached by XXX Oil and Gas. XXX offers him twice as much money. Farmer Brown signs a lease with XXX on April 8. ABC Drilling, not being aware of the subsequent XXX Oil and Gas lease, takes its sweet time and records on April 9. XXX, for whatever reason, bolts to the courthouse and records on April 8. Who has the valid lease?

In notice and race-notice states, XXX Oil and Gas would have the valid lease because, regardless of the earlier ABC Drilling lease, XXX got to the courthouse first. However, if Farmer Brown told XXX Oil and Gas about the existing ABC lease, ABC Drilling would have the good lease because XXX was not a “bona fide” party; XXX had not acted in good faith. In a race state, XXX Oil and Gas would have the valid lease. Good faith be damned. So in Ohio, being a race-notice state, ABC Drilling would be sitting pretty, yes? No. That is because of a Ohio statute, R.C. 5301.09, which states, “[No] such lease or license shall be valid until it is filed for record, except as between the parties thereto, unless the person claiming thereunder is in actual and open possession.” Under this statute, as regards oil and gas leases, Ohio is a race state. So in Ohio, being a “race” state under R.C. 5301.09, XXX Oil and Gas has the valid lease. Farmer Brown may be in hot water with ABC Drilling -- especially if he accepts the delay rental payment -- but that doesn’t change the respective legal status of ABC and XXX. Until it’s recorded, it isn’t a valid lease. In other words, as regards oil and gas leases, he (or she) who gets to the courthouse first, wins in Ohio. So any sensible oil and gas company will literally race to the courthouse once the lease is signed and notarized. Right? Probably not. And the explanation of that will be the subject of my next column. So, dear reader, I again leave you in suspense. Just remember, constructive notice and race notice do matter. And, if you’re an Ohio landowner, it ain’t a lease ‘til it hits the courthouse. Bill Dannley has worked in the oil and gas business for over 35 years as both a title abstractor and petroleum landman. He is a partner in Leasmap Ohio, which specializes in lease takeoff research and has over 400 Ohio townships on file. Bill can be reached at 330-262-0588. For more information visit www.leasemapohio.com.

OHIO WELL ACTIVITY

by the numbers

MARCELLUS SHALE

11 6 9 0 13 0 0 39

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

UTICA SHALE 3 8 9 Wells Permitted 143 Wells Drilling 297 Wells Drilled 0 Not Drilled 389 Wells Producing 0 Inactive 0 Plugged 1218 Total Horizontal Permits

Data as of 4/19/14 Source: Ohio Department of Natural Resources

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Marc Kovac Dix Capital Bureau

OLUMBUS — A couple of projects included in Gov. John Kasich’s $2.4 billion two-year capital budget proposal spotlight eastern Ohio’s emerging shale oilfields. Funding is included in the plan for a new training initiative for oilfield workers and others in Trumbull County and for new equipment to train firefighters in responding to natural gas emergencies. A total of $250,000 was included in the capital budget for a proposed Technology Belt Oil and Gas Learning Center, an effort of Eastern Gateway Community College, local developers and others. The group had sought about $1.5 million for the project. Marc Ciccarelli, director of work force and community outreach at the college, said the proposed capital outlay isn’t enough to guarantee the project will come to fruition. But plans call for the conversion of a former military site in Lordstown into an educational campus to provide classes and job training for area residents. Ciccarelli said the parcel is well suited for training oil and gas workers and others in welding and other industrial arts. “It would be ideal for some type of industrial training center, along with traditional-type college classes,” he said. Ciccarelli said backers would meet in coming weeks to discuss the future of the project, with plans to seek out other funding sources to complete renovations and purchase equipment and furnishings. “We have a really good idea, and we have a really good place, but for it to come to fruition, we need like six or seven times

more than we have,” he said. “We’re going to try to reach out to these other sources and see if they can contribute.” The capital budget also includes $250,000 for an expanded natural gas fire training area at the Ohio Fire Academy in suburban Columbus. The funds would pay for a new natural gas line, control tower and multiple training aids that simulate different emergencies. The grounds already have a natural gas area, said Michael Duchesne, a spokesman for the state fire marshal, but the capital funding will provide additional training opportunities for emergency crews working in eastern Ohio. “As the industry grows, we want to grow with it in the fields of training,” he said in a released statement. Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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UNROE FALLS — The city’s oil and natural gas drilling case that has gone before the Ohio Supreme Court has garnered some international attention. Mayor Frank Larson, City Council President Jim Iona and Community and Economic Development Coordinator Anne DiCola met for nearly two hours at Lehner Community Center April 14 with Simon Babre, a French Republic sub-prefect from Istres, a city in southern France, about the issue. The meeting was arranged through Akron International Friendship, an organization dedicated to fostering international relations. Akron International Friendship Board member Susan Colville-Hall also attended the meeting. “They contacted me because I’ve done some things for the program,” Iona told City Council April 15, adding that he then contacted Larson to take part. Iona said Babre impressed him as smart and “inquisitive.” “The guy had a million questions,” he said. Babre, who speaks some English, and interpreter Gerard Lob said that they are on a fact-finding mission for the French government regarding gas drilling, particularly fracking, the controversial process by which water, sand and often chemicals are pumped underground at high pressure to crack shale and extract natural gas. It has been blamed for earthquakes, including in the Youngstown area, and concerns have been raised that chemicals could contaminate ground water. “It’s a big issue in France, too,” said Babre. “Fracking is forbidden, even for tests.” He said his government wants to gather as much information as it can about the issue in the United States. He and Lob said they have or are planning on speaking with a variety of people with different points of view, including industry and government officials, environmentalists and property owners. Lob said that to date, they had heard primarily from people on the pro-drilling and fracking side. “Up until now, we have heard everything is hunky dory, and everybody is going to make money,” he said. The city’s state high court case concerns local control versus state control of drilling in general. It began in March 2011 when Ravenna-based Beck Energy began preparing private residential property on Munroe Falls Avenue for drilling. City officials have said that drilling should not be allowed in residential areas, but should be confined to industrial areas

and that municipalities should have home-rule rights in zoning matters. Beck Energy, however, said it had a drilling permit from the Ohio Department of Natural Resources, which has maintained that under state law, it has exclusive authority over drilling in the state. The high court heard oral arguments Feb. 26, and a decision is pending. In addressing the fracking issue, Larson said he has environmental concerns. “To be comfortable, I would have to see some very strong independent studies that would say it would not contaminate our water supplies,” he said, adding “and air.” “We don’t know what chemicals are going in there,” said Iona. Both he and Larson said they are not opposed to the industry operating in the state, but believe that it should operate in some kind of middle ground. “I like my cars,” said Larson. “I like gasoline that’s reasonably priced. I like heating my house in the winter. But let’s use some common sense.” Larson said he has heard little comment either way on the drilling issue from city residents. “We’ve had some citizens express some interest in the issue,” he said. Colville-Hall said she believes Americans are often less interested in many issues and that there is an economic factor in drilling that can take precedent over other concerns. “Money talks here,” she said. “In France, we have demonstrations,” said Babre, referring to fracking in particular. He said his government feels it is important to gather as much information as possible. “And decide what to do” he said. History of Munroe Falls drilling case A case filed by the city of Munroe Falls concerning local control versus state control of drilling is pending before the Ohio Supreme Court. The city’s state high court case began in March 2011 when Ravenna-based Beck Energy began preparing private residential property on Munroe Falls Avenue for drilling. The city immediately issued a stop-work order because it had not issued a zoning permit allowing the drilling. The Summit County Court of Common Pleas sided with the city on the matter, but Beck Energy appealed to the Ninth

District Court of Appeals. The appellate court partially overturned the Common Pleas decision, saying that city ordinances directed at developers in general could apply to drillers, but the city could not regulate drillers in particular. The city then filed an appeal with the Supreme Court in March 2013 and the court agreed to accept the case in June. The high court heard oral arguments Feb. 26 from both sides. City officials have said that drilling should not be allowed in residential areas, but should be confined to industrial areas and that municipalities should have home-rule rights in zoning matters. Beck Energy, however, said it had a drilling permit from the Ohio Department of Natural Resources, which has maintained that under state law, it has exclusive authority over drilling in the state. Company President Dave Beck said in February 2013 that it would be too onerous for drillers to have to follow a patchwork of local regulations and that the industry needs consistency provided under state law. “Our argument is that cities have the right to zone different areas of the municipality,” Larson told Babre. Larson also said he believes there should be local control since local safety forces would be the first responders in an emergency, such as an explosion at a drilling operation in Geauga County. “My problem is what if the technology isn’t good enough,” he said.

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OOSTER -- Ohio’s Seventh District Court of Appeals hears appeals from most of the counties that are experiencing rapid Utica development, including Mahoning, Columbiana, Jefferson, Carroll, Belmont, Harrison, Monroe and Noble Counties. On April 3, 2014, the Seventh District issued its much anticipated ruling in Walker v. Noon, 2014-Ohio-1499. In the appeal, the Court was asked to resolve conflicting lower court rulings regarding the interpretation of Ohio’s Dormant Mineral Act, found at R.C. § 5301.56 (“DMA”). The DMA was originally enacted in 1989 and amended in 2006. Its purpose is to eliminate “dormant” mineral interests, which have not been used in many years and impede oil and gas development. The 1989 DMA provides that, where the severed mineral interest owner (who has no claim to anything other than the minerals under a property) has not acted in one of five specified ways to use the minerals and has not filed a claim expressing a continued interest in the mineral in the preceding 20 years, the severed mineral interest will be deemed abandoned, and return to the current surface owner. The 1989 DMA is self-executing, meaning that the severed minerals in question will be automatically deemed abandoned, without any action on the part of the surface owner, if no activity related to the minerals has occurred. In 2006, the DMA was amended, and a notice requirement was added. Under the 2006 DMA, surface owners must first file and serve a notice of abandonment upon the severed mineral owner. Although the DMA was originally enacted in 1989, the act was largely ignored until Utica producers began paying lucrative bonuses and royalties. At that point, many people claimed ownership of minerals that had originally been severed by their grandparents or even great-grandparents, even where no apparent interest had been displayed in those minerals over the ensuing decades. Accordingly, the DMA has become central to the disposition of literally hundreds of oil and gas lawsuits between such severed mineral owners and surface owners. Many of trial court rulings interpreting the DMA have been inconsistent and contradictory. Thus, this Walker decision helps to clarify some of the significant unresolved DMA issues. The primary issue to be decided in Walker v. Noon was whether the 1989 DMA remains relevant in lawsuits filed after the amendment to the 2006 amendment. In doing so, the Court had to decide whether the 1989 was self-executing (meaning that the surface owners need not take any action in

order to claim mineral abandoned under the act) and whether the 2006 amendment was retroactive, which would require surface owners to take certain steps in order to claim abandoned minerals. The Court of Appeals held that the 1989 Act was indeed self-executing, meaning that, where nothing had been done with the minerals in the previous 20 years, the mineral automatically returned to the surface owner. (Taking into account a three year grace period designed to protect the rights of severed mineral interest owners under the 1989 act, many of severed mineral interests vested in the surface owner as of March 22, 1992.) The Court went on to hold that the 2006 amendment could not be applied retroactively, and did not affect abandonments which occurred prior to June 30, 2006, the effective date of the amendment. For procedural reasons, the Court refused to decide whether the self-executing nature of the 1989 could create constitutional issues, but several cases now pending before the Court raise that same issue. The Walker ruling is a major victory for surface owners attempting to recover ownership of mineral rights that were abandoned and therefore vested in the surface owner prior to the amendment of the DMA in 2006. It gives surface owners a sword to use against alleged severed mineral interest owners and may swing the balance in many pending cases. More importantly, this ruling provides clarity to Utica producers seeking to lease acreage; producers will now know who likely owns the minerals and who does not. 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 experience in the industry. He is also the current chairman of the Natural Resources Committee of the Ohio State Bar Association.

AMBRIDGE -- Everyone is welcome to celebrate eastern Ohio’s natural resources at the Cambridge Area Chamber of Commerce premier event of the year, the Friends and Family Fest — A Shale-abration — at the Guernsey Çounty Fairgrounds, from 9 a.m. to 7 p.m. Saturday, May 10. FREE admission, food vendors and fun, games and entertainment for all ages. The first major event in Guernsey County where the public will be able to get first-hand information from major players in the gas and oil industry such as EQT Corp., Eclipse Resources, Union of Operating Engineers International, American Energy Partners, OKKI Energy, Carrizo, Buckeye Water Service and Albert’s Spray Solutions. Food vendors are encouraged to line up a spot for this huge one-day event. All food vendors will have access to water and electric hook-ups. The entire family can visit the Ohio Oil and Gas Energy Education Program’s MEET-U (Mobile Education Training Unit) to learn more about Ohio’s energy history, development and modern uses of energy. OOGEEP is a non-profit statewide education and public outreach program created in 1998 to provide insight and information through a variety of programs about gas and oil, the most exciting phenomena to happen in Appalachia in decades. In addition to OOGEEP, Energy in Depth Ohio, Ohio Oil & Gas Association and the Southeastern Ohio Oil and Gas Association will be there to help celebrate and explain oil and gas development and dispel myths and rumors. Exhibitors will be on hand with informational handouts and company representatives to answer your questions. Local, regional and national sponsors include Buckeye Well Site Services, Muskingum Watershed Conservancy District, Salt Fork State Park, Century National Bank, Cambridge Guernsey County Visitors and Convention Bureau, Wampum Hardware Co. and Business Technical Services. Platinum, Gold, Silver and Bronze sponsorships still available.

Media partners, who are working hard to promote the event, include Ohio GAS&OIL magazine, The Daily & Sunday Jeffersonian, WWKC105 Kickin’ Country radio, Shaledirectories.com. AVC Communications, For more information, call the Chamber office at (740) 4396688 or visit infocambridgeohiochamber.com or www.cambridgeohiochamber.com. The Cambridge Area Chamber of Commerce is at 607 Wheeling Ave., Cambridge.

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NIONTOWN -- “The oil and gas association is probably one of the key reasons why we have such a wonderful and successful industry in the state of Ohio,” said Steve Grose, a partner at the Uniontown-based Concord Park Energy. “I can’t say more about that organization in their huge efforts to do what is right for the state of Ohio.” The Ohio Oil and Gas Association (OOGA) named Grose a Hall of Fame inductee March 6, 2014, in Columbus. The association honored its class of 2014 Hall of Fame Inductees at its annual Winter Meeting. Industry peers nominate inductees, and OOGA’s executive committee selects them every four years. Those inducted have made positive contributions to the advancement of the industry. Grose has witnessed revolutionary advancements in the industry and has helped build upon these positive changes. Grose pursued his interest in working on drilling rigs and scavenging for oil and gas when he took a Petroleum Engineering course at Marietta College in the 1970’s. He said there were few colleges that offered the course and he felt it was a great opportunity. Over the span of 30 years in the industry, Grose held a number of positions in the industry such as technical committee chairperson and he ran through a number of executive committee chairs. Eventually, he became president of the Ohio Oil and Gas Association in 1999 and 2000. Through all his contributions and volunteer work, Grose won the 2011 Oilfield Patriot Award. “The reason I did all those things was for my own benefit and for my companies benefit because they would have a front row seat to any things that would impact our company from a political standpoint or a technical standpoint or whatever standpoint there might be,” Grose said. Grose started a small company in Uniontown in 2010 called Concord Park Energy. The company participates in wells that are put together by a third party operator. Grose said the company also consults on some oil and gas activities and is involved in lease acquisition and resale.

Prior to starting his own company at Concord Park Energy, Grose was Senior Vice President at Range Resources Corporation for the Appalachian Division. The company operated about 10,000 wells in the states of Pa., Ohio, W. Va., N.Y., and Mich. “We grew that company to what it was based on our ability to do acquisitions and to drill oil and gas wells and to exploit the acreage and opportunities that we had,” Grose said. Range Resources Corporation was the first company to ever frack oil and gas wells in Marcellus Shale resulting in thousands of wells today, Grose said. He explained George Mitchell, founder of Mitchell Energy & Development Corporation, was the first to discover that oil and gas could be extracted from Barnett Shale in the Fort Worth Basin. “And then what we did is, at range, we applied the same concepts to the Marcellus Shale, and then we had actually spent close to $200 million as a corporation before we actually figured it out to where we knew how to do it,” Grose said. In finding new ways to frack shale, Grose said the industry has extended the possibility of obtaining cheaper energy. However, he said every time drilling occurs, production declines greatly within a year or two years. “You’re not going to go out and find a new Sad Arabia every year, but you’re going to have to find a whole bunch of little ones that sort of make up for Saudi Arabia,” Grose said. “The Appalachian Basin Marcellus shale is probably considered to be one of those opportunities.” He said there is interest in finding renewable energy resources; however, those opportunities are often economically inefficient. The industry estimates there is 100-year supply, he said. “The individuals selected for the Hall of Fame are passionate about and committed to Ohio’s oil and gas industry,” said David R. Hill, OOGA president. “We thank them for their unwavering support and congratulate them for achieving the industry’s highest honor in Ohio.”

Steve Huszai Dix Communications

OOSTER — Even though the shale gas boom has never quite got off the ground in Wayne County, the oil and gas industry has an established group of locally-based companies to cater to the area’s producers. Gary Staggs and his Wooster-based business, S&H Oilfield Services, is one such company. Staggs, who said he did some work for the companies speculating in the region, has a dedicated customer base with local Wayne County producers. And will still be around when he predicts those companies in eastern and southern Ohio come back in a generation or so. Staggs did do some work for Devon Energy when there was speculation in the area for shale drilling. But Staggs said the county didn’t produce to that company’s expectations. Generally east of Interstate 77, Staggs said, is where the big shale play has been. But he predicted once those areas run their course, Wayne and other counties may see those companies return. According to statistics from the Ohio Department of Natural Resources, the top three counties for horizontal drilling activity (based on sites) are Carroll, Columbiana, and Harrison counties, all near the Pennsylvania border. “Eventually, they will play out the easy money,” he said, “and I think they’ll work their way back… once we have better technology to remove the oil and gas from the shale formation here in this area.” But that doesn’t really matter to Staggs as he will still keep his focus on Wayne and the five-county area around him. He added the local oil and gas companies here not will continue to be here for the next 50-70 years. And he plans to stay with them too. Roughly 35 years ago when Staggs was fresh out of school and looking for a job, the oil and gas industry in Wayne County provided him a good job. That was until 1989 when he formed his own company with his partner (who he has since bought out). “The business has grown,” Staggs said of S&H Oilfield Services. “I started as a single truck by myself… as the business grew, I had to too.”

Today, S&H Oilfield Services boasts roughly 25 trucks and 10 full-time employees who provide everything from excavating services at drilling pads to servicing equipment after sites are up and running. Most of what S&H does these days, Staggs admitted, is provide service to equipment at established sites for long-time customers. When Staggs first formed his business, he said he worked with several local producers and with a water and brine truck. “I guess they liked the levee of service we gave,” Staggs said. And his company then kept adding equipment until it “grew what it is today.” Today, S&H does work with mostly the big-time local producers, such as Ken Miller Oil, J.R. Smail, Franklin Gas and Oil, and others throughout Wayne County and northeast Ohio. “I’m very fortunate to have loyal customers of me and my company,” Staggs said. “I’m not going to turn my back on them to work with the big companies… I see (S&H Oilfield) maintaining our current level to provide the services we do.” And he didn’t predict much would change for his business until those companies come back to Wayne County, if they ever do. Reporter Steve Huszai can be reached at 330-287-1645 or shuszai@the-daily-record.com. He is @GeneralSmithie on Twitter.

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KRON -- “Over the last couple years, our biggest growth market has been oil and gas,” James ‘Skip’ Anderson, director of sales and marketing, said about Skycasters, a satellite Internet service provider in Akron. Skycasters has recently turned its eye to the gas and oil industry in Ohio. Because of the remoteness that some oil rigs find themselves working in, Anderson said that his company can offer important solutions. “The current setup of the oil and gas industry, with the way it has expanded exponentially in the last several years, we are able to put these rigs up above their new drilling techniques and at the rate of where they are finding these new plants they are building their structures in locations with little to no infrastructure with no power or phone. There is no cable. They are building rapidly and utilities can’t catch up,” Anderson said. “These sites need Internet access for email and other things like as they are drilling they are sending real time data back to their headquarters. That information needs to be able to flow back and forth,” Skycasters provides customize solutions for customers who can not get a signal for internet. Anderson said his company focuses on four major markets: disaster recovery, business continuity, remote businesses and gas and oil. Because of the recent boom, gas and oil is rapidly becoming the main consumer. Anderson said that it is exciting because he feels that the company has more potential in the industry. “We just scratched the surface. There are so many different aspects in the service area in the oil and gas industry that as we grow we are learning. We are trying to learn as much about their business as we can so we can find way to help our business. If it means Internet access to the rigs or for the employees, giving them the options they need to make their business successful is important to us,” he said. Anderson said that breaking into the industry was not necessarily hard, but recognized early that it was important to gain trust. He says that the company’s retention rate is high when it comes to oil and gas customers because they are loyal to people who get the job done. Anderson feels that Skycasters has done that. “I think it was a little challenging initially because you have to earn their business. These guys are coming out here and they are moving so quickly and they have systems that they

are used to from back home … They are not familiar with us as a company. We have to work pretty hard to earn their business. But once we earn it they very rarely leave. Our oil and gas customers rarely leave because we do what we say we are going to do,” Anderson said. Skycasters sells both goods and services. Along with providing the equipment so that a rig can receive internet, it also provides the internet service. The company can go and install the equipment too, but Anderson said that most of his business that relates to gas and oil send people to Akron to take classes. Skycasters offers training to become certified by the FCC to point their own antennas. The antennas that are used are complicated because they are both receiving and transmitting signals. Anderson said that if the antenna is pointed an inch off where it should be, it could mean the difference between hundreds of miles. Skycasters is another example of an company that is not in the gas and oil industry by nature but is profiting from it. To ensure they keep their place inside the industry, they are attending trade shows across the country. Not only do they want to promote their business, Anderson said that Skycasters employees are trying to learn everything they can about the business so they can provide solutions. “It gives us an exposure to their market. So we take the time to talk to them to learn their business. We don’t just try to sell them ours. We need to understand what they are doing and how they are doing it to make sure we have a method and our systems will interact properly and give them what they need when they need it most,” Anderson said.

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great deal of concern has been expressed about the volumes of water being used in hydraulic fracturing (fracing) treatments being employed on horizontal wells in the Utica Shale in Ohio. It is a fact that companies use an average of 5 million gallons of water in a typical frac treatment that might utilize as many as 40 stages of perforating and fracturing along a horizontal well extending 5,000 to 7,000 feet into the shale. The fact of the matter is that such a treatment generates far more water than is utilized in the process. How so, one might ask? One simply has to look at the volume of natural gas that is expected to be produced from a typical Utica Shale well and ultimately consumed in the processes of heat or electricity generation. When pipeline quality natural gas (primarily methane) is burned, there is a basic chemical reaction that occurs according to the equation below. CH4 + 2O2 --> CO2 + 2H2O In laymenâ&#x20AC;&#x2122;s terms, this says that one molecule of methane reacts with 2 molecules of oxygen to generate one molecule of carbon dioxide and 2 molecules of water. This combustion reaction can be translated into volumes of gas burned and volumes of water generated. People who use natural gas for home heating know that the standard unit by which they buy natural gas is the â&#x20AC;&#x153;Mcfâ&#x20AC;? which stands for 1,000 cubic feet of gas at standard conditions of 60oF and 14.7 psia. Without going through the tedious unit conversions and mathematics, suffice it to say that burning 1 Mcf of natural gas or methane will result in the generation of 11.1 gallons of water. This water leaves our furnaces in the form of steam that can be seen clearly on a cold winter day as it exits vent pipes and chimneys on our homes. It is even more evident on power plants that use huge cooling towers in the process of burning much larger volumes of natural gas in the process of generating electricity. A typical horizontal Utica Shale well completed with a multi-stage hydraulic fracturing treatment utilizing an average of 5 million gallons of water is expected to produce around 10 billion cubic feet of natural gas over its lifetime. Ten billion

cubic feet of gas is the equivalent of 10 million Mcf of gas. Since each Mcf of gas burned generates 11.1 gallons of water, burning 10 million Mcf of gas will ultimately release approximately 111 million gallons of water into the hydrologic cycle of the planet. This represents over a ten-fold increase over the amount of water used in the fracing process. So while a Utica Shale well will use an average of 5 million gallons of water to produce the natural gas coming from the Utica Shale formation, in the end there will be net gain of over 100 million gallons of water returned to the hydraulic cycle throughout the life of the well. Hopefully this will provide some insight to those who are concerned that oil and gas development is depleting water from hydrologic cycle.

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OKLAHOMA GIVING ASSISTANCE TO FORMER SANDRIDGE CEO KLAHOMA CITY (AP) - The Oklahoma City Economic Development Trust is considering $1.45 million in incentives for Tapstone Energy as the company plans to establish a new headquarters in Bricktown. The company now employs 35 people. The new headquarters would create 150 new jobs over the next five years. According to The Oklahoman newspaper, the new jobs would pay an average annual salary of more than $146,000. An application for the funds estimates that the new headquarters would have a total economic impact of more than $100 million. The oil and natural gas company was founded by Tom Ward, former SandRidge Energy Inc. CEO and co-founder of Chesapeake Energy Corp.

CHESAPEAKE TO SPIN OFF SUBSIDIARY KLAHOMA CITY – Chesapeake Energy Corporation (NYSE:CHK) has announced plans to spin off its wholly owned subsidiary, Chesapeake Oilfield Operating, L.L.C. (COO), to Chesapeake Energy Corporation shareholders. COO currently conducts the operations of Chesapeake’s oilfield services division, Chesapeake Oilfield Services (COS). Immediately before completion of the possible spin-off, COO will convert into a corporation and change its name to Seventy Seven Energy Inc. The plan is available at sec.gov and cosus.com. Shareholders who want more complete information regarding the possible spin-off of COO, including the potential benefits and risks associated with the transaction, should consult the Form 10, which may be revised or updated in the future. Chesapeake intends for the spin-off to be tax-free to its shareholders for U.S. federal income tax purposes, other than with respect to any cash received in lieu of fractional shares. To that end, Chesapeake has obtained a private letter ruling from the Internal Revenue Service and expects to obtain an opinion of tax counsel regarding the tax treatment of the spinoff.

PICKENS TEAMS WITH ENGINE MAKER ASPER, Wyo. (AP) - T. Boone Pickens is teaming up with a family-run Wyoming business hoping to become the nation’s largest maker of natural gas engines for drilling rigs. The Texas millionaire’s energy hedge fund, BP Capital, is partnering with Casper-based Moser Energy Systems to create a new company - Mesa Natural Gas Solutions. The Casper Star-Tribune reports that Moser will continue making the engines and Pickens’ fund will promote them. Pickens joined Moser executives in announcing the joint venture Wednesday at its new building in Evansville. He says 95 percent of drilling rigs are powered by diesel engines but Moser’s engines are a cheaper and cleaner domestic alternative. Moser’s engines convert raw natural gas from oil drilling sites into fuel for the engines, eliminating the need to haul diesel to the sites.

FORMER EPA OFFICIAL: FRACKING TRANSPARENCY VITAL IDDLETON, Wis. (AP) - Controversies over the fracking process may be inevitable, a former administrator with the U.S. Environmental Protection Agency acknowledged recently, but Wisconsin can protect its place as the leading supplier of sand for the nation’s fracking boom as long as the state has strong regulations, maintains maximum transparency and responds quickly to neighbors’ concerns. J. Winston Porter, an energy consultant and fracking proponent, held the No. 2 spot at the EPA under presidents Ronald Reagan and George Bush from 1985 to 1989. He spoke at a business convention in Middleton last week, where he said that even if fracking controversies are inevitable, they can be minimized. “I don’t think sand, per se, is terribly dangerous,” Porter said. “But it’s still mining. If you go to my backyard acreage and you dig giant holes and just leave them there, it’s not good. So it’s going to need to be looked at.” Sand mining has expanded in western Wisconsin along with the boom in hydraulic fracturing, or fracking. The process involves extracting oil and natural gas by using a high-pressure slurry of sand, water and chemicals. Wisconsin’s sand grains are prized for their hardness and spherical shape. Winston said the best way to keep the peace is for state regulators and fracking companies to maintain a policy of maximum openness, the Wisconsin State Journal reported (http:// bit.ly/1i7cjzT). Sand-mining operations also need to respond quickly to nuisance issues, he said. That could include avoiding neighbor complaints by keeping noise, dust and traffic levels under control.

OLUMBUS – Strong bipartisan majorities of registered Ohio voters support increased investment in energy infrastructure, according to a new poll that APIOhio is unveiling as part of a campaign highlighting the voices of Americans. “Today’s poll shows strong majorities of Ohio voters support more domestic oil and natural gas development, regardless of party affiliation,” said Christian Zeigler, executive director of API-Ohio, “Forward-looking policies that allow the United States to capitalize on its bright energy future are imperative for this nation to realize its job creation and economic potential. “The people of Ohio get it; America’s economic future, the availability of affordable and reliable energy, depends on the policies created today.” The American Petroleum Institute (API) and API-Ohio will use social media, advertising and API’s grassroots resources of more than 24 million Americans to communicate the importance of America’s energy future to members of Congress, the administration and elected officials at every level of government. The state-wide telephone poll, conducted for API by Harris Poll among 600 registered Ohio voters also found that: 90 percent of registered Ohio voters agree that increased production of domestic oil and natural gas resources could lead to more jobs in the U.S. 89 percent say that increased development of the country’s energy infrastructure is good for American consumers. 87 percent say increased production of domestic oil and natural gas resources could help stimulate the economy. 79 percent say that producing more domestic oil and natural gas could benefit federal and state budgets through lease payments, royalty fees and other sources of revenue. API-Ohio is a division of API, which represents all segments of America’s oil and natural gas industry. Its more than 600 members produce, process, and distribute most of the nation’s energy. The industry also supports 9.8 million U.S. jobs and 8 percent of the U.S. economy.

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OLUMBUS — Ohio Department of Natural Resources (ODNR) Director James Zehringer announced in April new, stronger permit conditions for drilling near faults or areas of past seismic activity. The new policies are in response to recent seismic events in Poland Township (Mahoning County) that show a probable connection to hydraulic fracturing near a previously unknown microfault. New permits issued by ODNR for horizontal drilling within 3 miles of a known fault or area of seismic activity greater than a 2.0 magnitude would require companies to install sensitive seismic monitors. If those monitors detect a seismic event in excess of 1.0 magnitude, activities would pause while the cause is investigated. If the investigation reveals a probable connection to the hydraulic fracturing process, all well completion operations will be suspended. ODNR will develop new criteria and permit conditions for new applications in light of this change in policy. The department will also review previously issued permits that have not been drilled. “While we can never be 100 percent sure that drilling activities are connected to a seismic event, caution dictates that we take these new steps to protect human health, safety and the environment,” said Zehringer. “Not only will this reasonable course of action help to ensure public health and safety but it will also help us to expand our underground maps and provide more information about all types of seismicity in Ohio.” “ODNR’s directives are a sensible response to a serious issue that regulators across the country are closely examining,” said Gerry Baker, Associate Executive Director of the Interstate Oil and Gas Compact Commission. “IOGCC is pleased to work with Ohio and other states to share scientific data to better understand the nature of these occurrences.” “These additional standards add even more strength to Ohio’s already comprehensive regulatory program,” said Mike Paque, Executive Director of the Groundwater Protec-

tion Council. “State regulators are taking an aggressive lead in tackling tough and complicated oil and gas issues and ODNR is no exception.” More than 800 wells have been drilled in Ohio’s Utica and Marcellus shale play, including as many as 16,000 hydraulic fracturing stages from those wells. Regarding the seismic events in Poland Township, Mahoning County, ODNR geologists believe the sand and water injected into the well during the hydraulic fracturing process may have increased pressure on an unknown microfault in the area. Further hydraulic fracturing at the site is suspended but the company will be permitted to recover resources from five of the previously drilled wells located on the pad. This is also expected to have the beneficial effect of reducing underground pressure and decreasing the likelihood of another seismic event. Under ODNR’s lead, Ohio has joined a consortium of state regulators dedicated to learning more about seismic activity, especially as it relates to oil and gas activity. The members of this consortium are currently working with the Interstate Oil and Gas Compact Commission and Groundwater Protection Council to share information and knowledge. The working group also hopes to draw upon current and future research to develop common procedures for how to monitor for seismic activity and respond if activity occurs. The Ohio Seismic Network, coordinated by ODNR and operated by various partners, began recording seismic events in 1999. Before that time, the recording of seismic events varied from distant machines and felt reports. Ohio has a history of seismic activity, and since the network has established, Ohio has experienced 109 events greater than 2.0 magnitude. Data from the Ohio Seismic Network will be used as part of our new application review process. A map of underground seismic faults and past seismic events is available at oilandgas.ohiodnr.gov.

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES

1. Carroll County 397 2. Harrison County 213 3. Belmont County 106 4.Columbiana County 102 5. Monroe County 96 6. Noble County 92 7. Guernsey County 90 8. Jefferson County 41 9. Mahoning County 30 10. Tuscarawas County 16 11. Portage County 15 Trumbull County 15 12. Stark County 13 13. Washington County 10 14. Coshocton County 5 15. Morgan County 3 Muskingum County 3 Holmes County 3 16. Knox County 2 17. Ashland County 1 Astabula County 1 Geauga County 1 Medina County 1 Wayne County 1 WELL SITES IN VARIOUS STAGES: PERMITTED, DRILLING, DRILLED, COMPLETED, PRODUCING, PLUGGED SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF 4/19/14

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TARK CO. -- The Columbus law firm of Bricker and Eckler recently identified $19 billion invested in this region during the last couple of years, according to information presented by Paul Boulier, vice president of business attraction for Team NEO, which focuses on bringing jobs and manufacturing into Northeast Ohio. Boulier gave a talk at Glenmoor Country Club, in Stark County, during a recent event sponsored by the Regional Chamber of Commerce. He said the information will, hopefully, spark dialogue and generate ideas for economic development. Boulier discussed the many products shale gas yields, including economical electrical power; fuels; and wet gas chemicals used in manufacturing and by plastics companies. “The value that is being unlocked from chemical and plastics derived from shale gas has transformed our global competitive position,” said Boulier. “But, we do have competition, because shale deposits can be found in countries around the world, including China.” Boulier said the U.S. has an advantage over China because it has been drilling for gas and oil for so long there is already good infrastructure, making us an “early mover” of these products. Other advantages in Ohio include the fact that it already ranks 1st, 2nd, or 3rd in almost all categories of manufacturSpace for Lease: Hannibal Professional Center, 52634 Main St. (SR536) Hannibal,OH 43931 Located within a hot spot of the Utica and Marcellus Shale Formations, the Hannibal Professional Center is located at 52634 Main St., Hannibal,OH 43931 on SR536 just 1/2 mile from SR7on the Ohio River in Monroe County, Ohio, less than 1 mile from the New Martinsville, WV Bridge. This location is 3 miles from the Hannibal Industrial Park which offers rail service and barge services. Approximately 5,800 SF available. Flexible space for office, retail or light manufacturing uses. Ample parking is available. Five large open rooms that could be built to suit. One Office suite consisting of 2 private offices (option for 3rd private office), reception area, restroom and walk-in fireproof wall safe ready to move-in. Outparcels available. High speed internet available. Beautiful views of the Ohio River. Banquet facilities available for conferences, training, etc., 24 hrs fitness center to open May-June 2014 on site. Lease Rates & terms are negotiable. Contract (740)213-3568

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ing, it is well-positioned to leverage resources from shale gas, and 50 percent of the U.S. consumers are within a 500 mile radius of here. Ohio is also seeing the cost of power dropping. What can this mean? Nova, a Canadian company that is the world’s largest supplier of methanol, recently shut down its two plants that were located in Chili and is moving them to Louisianna. In addition, between 1999 and 2006, 40 percent of the ammonia production in this country was shut down; but, now, projects are in the works to start some of them back up in Indiana. But, Ohio is also not being left out. Of the new chemical industry’s capital investment from shale, which as of February, consisted of 148 projects and $100 billion in potential capital investment between 2010 and 2020, 78 percent will be in the gulf coast, which has been a hub for chemical plants; but, 8 percent will be in the Midwest and 13 percent in the Ohio Valley. Fifty five percent will be in bulk petrochemicals, 22 percent in plastic resins, 14 percent in fertilizers, 4 percent in inorganic chemicals, and 5 percent in other products. How will the $100 billion be spent? Thirty eight percent will go into the construction of equipment and piping; 28 percent will be spent in major process equipment, such as pumps, heat exchangers, pressure vessels, etc.; 10 percent will go into building construction; 9 percent into engineering services; 8 percent into process instrumentation; 5 percent into piping and valves; and 4 percent into electrical. This investment is up from 97 projects planned in March of 2013, and $72 billion planned in investment, and 53 percent of the investment is by firms outside of the U.S. “By 2023, additional output from $100 billion in capital investment will generate $81 billion in new chemical industry shipments. This is an ongoing, permanent upward shift in shipments,” said Boulier. “The magnitude of some of these changes is mind boggling. “But, we must be act, Boulier stressed. “What it’s going to take is people like you all — understanding and helping to get some things going,” he said. “The fact that it’s complicated makes it easy to just sit and wait. But, the sad thing is, if we do not get involved these companies will go elsewhere.”

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