Ohio Gas and Oil November 2020

November 2020

A Free Monthly Publication

SHALE HAS BEEN A GAME-CHANGER IN THE APPALACHIAN BASIN

IN THIS ISSUE: NATHAN LORD NAMED PRESIDENT OF SHALE CRESCENT USA ORGANIZATION

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NEWS. BUSINESS. TECHNOLOGY. ALLIANCE Bill Albrecht 330.669.3782

CAMBRIDGE Heather Kritter 614.583.5793

OHIO’S GAS & OIL INDUSTRY RAVENNA Elie Stephan 330.996.3093

WOOSTER Aaron Bass 330.264.1125

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Table of Contents NOVEMBER 2020 G ROUP PUBLISHER

2

A Look Ahead Gas & Oil Events

3

Dear Presidential Candidates: Shale has been A Game-Changer in The Appalachian Basin

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Fracking - Guest Editorial

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Nathan Lord Named President of Shale Crescent USA Organization

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EIA: Natural Gas is the Affordable Option for Winter Heating Needs

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Four Important Facts to keep in Mind on Latest Abandoned Wells Report

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Fossil Fuels Account for the Largest Share of U.S. Energy Production and Consumption

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Ohio Well Activity

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Horizontal Drilling Activity Graph

Bill Albrecht

EXECUTIVE EDITOR Beth Bailey bbailey@daily-jeff.com

On The Cover:

The Shale Revolution has been a game-changer for the region where the first presidential debate will take place. If the Appalachian Basin – Ohio, Pennsylvania and West Virginia – were a country, it would be the third largest natural gas producing country in the world. Not only has this prolific development been a boon for these states’ economies over the last decade in the form of family-sustaining jobs, investments and tax revenue, but it has also helped expand accessibility to natural gas in the region, deliver energy savings and cleaner, healthier air.

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NOVEMBER 2020 ADVER TISING Elie Stephan Akron & Kent, Ohio Offices estephan@localiq.com 330-996-3093 Bill Albrecht Alliance & Minerva, Ohio Offices balbrecht@localiq.com 330-669-3782 Aaron Bass Ashland, Ohio Office abass@localiq.com 419-281-0581 Heather Kritter Cambridge, Ohio Office hkritter@localiq.com 614-583-5793 Aaron Bass Wooster & Holmes County, Ohio Offices abass@localiq.com 330-264-1125

L AYOUT DESIG NER Phil Luks

pluks@recordpub.com

212 E. Liberty St. Wooster, OH 44691 330-264-1125 “Ohio Gas & Oil” is a monthly publication. © GANNETT Co. Inc. 2020

OhioGas&Oil

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A Look Ahead

Gas & Oil Events DUE TO THE COVID-19 PANDEMIC, MANY EVENTS HAVE BEEN CANCELED OR POSTPONED. PLEASE CHECK WITH THE EVENT COORDINATOR(S) FOR NEW DATES AND TIMES.

NOVEMBER 7-8, 2020 RESPONDING TO OILFIELD EMERGENCIES TRAINING

Wayne County Fire & Rescue Regional Training Facility 2311 South Millborne Road, Apple Creek, OH 44606

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via BWC Microsoft Teams

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11/17/2020 to 11/18/2020 TBD

DECEMBER 17, 2020 OOGA NETWORKING/ HOLIDAY RECEPTION

Zanesville Country Club, Zanesville OH

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DEAR PRESIDENTIAL CANDIDATES:

SHALE HAS BEEN A GAME-CHANGER IN THE APPALACHIAN BASIN NICOLE JACOBS | EnergyInDepth.com While President Trump and former Vice President Biden have visited the Appalachian Basin numerous times this election cycle, the debate in Cleveland, OH did mark the first time the pair shares the stage to talk about the biggest issues facing our country today.

The Shale Revolution has been a game-changer for the region where the first presidential debate will take place. If the Appalachian Basin – Ohio, Pennsylvania and West Virginia – were a country, it would be the third largest natural gas producing country in the world. Not only has this prolific development been a boon for these states’ economies over the last decade in the form of family-sustaining jobs, investments and tax revenue, but it has also helped expand accessibility to natural gas in the region, deliver energy savings and cleaner, healthier air.

The Basics • The Appalachian Basin comprises the Marcellus and Utica/Point Pleasant shales.

• Led by production in Pennsylvania (19.1 billion cubic feet per day), the Appalachian Basin produced 1 bcf/d in 2019 – or 11.7 trillion cubic feet of natural gas. That’s about 29 percent of total U.S. natural gas production in 2019, and more than every natural gas producing country in the world except the United States and Russia.

• That’s enough natural gas produced in the Appalachian Basin – every, single day – to power 780,511 houses – or two homes for every person living in Cleveland – for a year.

• While there is steady oil production in the region – combined production for the three states was about 136,000 barrels per day in June 2020 – it is predominantly a natural gas play.

• The Appalachian Basin was responsible for 85 percent of total U.S. natural gas production growth from 2008 to 2018.

Economic Prosperity • Shale development has brought good-paying jobs to the region, and these jobs go far beyond the well head. In Ohio, for instance, the upstream, midstream, and downstream sectors of the natural gas and oil industry supports more than 200,000 jobs, which have an average annual salary of $83,000 ($32,000+ higher than aver-

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age U.S. salaries across all industries), according to a recent Ohio Department of Jobs and Family Services analysis.

• Shale development has also brought significant investments to the region. Direct upstream, midstream and downstream investment in Ohio is estimated to be around $83 billion since 2011.

• An abundance of natural gas is fueling new and continued manufacturing investments, as well Shale continued on page 4

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as attracting a growing petrochemical industry. Royal Dutch Shell’s $6 billion petrochemical complex currently supports approximately 6,000 construction jobs, and will permanently employ about 600 full-time workers at its location in Beaver County, Pa. And Belmont County, Ohio’s proposed PTT Global ethane cracker plant is expected to be a roughly $10 billion investment, that willemploy hundreds of skilled labor positions, and generate millions in added tax revenue and school funding annually.

• Natural gas-fired power plants are being built across the Appalachian Basin, bringing significant jobs and revenue. More than $25 billion is being invested in building these new facilities to replace aging plants, which is helping to lower both energy bills and emissions.

• Shale development is also bringing needed tax revenue to local communities. Eight of Ohio’s top Utica Shale development counties collected more than $141.9 million in real estate property taxes on oil and natural gas production from 2010 to 2017. In Pennsylvania, the state’s impact tax – which benefits all 67 counties, especially communities with shale development – has generated $2 billion since 2011.

Game continued on page 5

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Game continued from page 4

Affordable Energy • Consumers are benefiting from shale development, as an abundance of natural gas has helped lower natural gas and electricity costs. Ohio, Pennsylvania and West Virginia’s natural gas consumers saved more than $80 billion from 2006 to 2016. Pennsylvania’s residential natural gas prices are 56 to 76 percent lower than 2008, with families realizing average annual savings of $1,100 to 2,200 per household.

• Nationally, the growth in U.S. natural gas production, driven by the Appalachian Basin, has saved natural gas consumers $1.1 trillion over the last decade and is estimated to save electricity consumers approximately $203 billion annually.

Improving the Environment • Water intensity for power generation – the average amount of water withdrawn per unit of total net electricity generated – decreased nearly 14 percent from 2014 to 2018 thanks to natural gas power plants replacing aging facilities.

• Natural gas-fired power plants are also helping lower emissions. Since 2005, Ohio has reduced its emissions by more metric tons of C02 than any other state in the country – state emissions declined by 67 million metric tons between 2005 and 2017.

• Pennsylvania was able to achieve its Clean Power Plant goals years ahead of schedule, which the state’s top environmental regulator attributes is “primarily because of the shift toward cleaner natural gas.” The state’s CO2 emissions from power generation have declined 36 percent since 2010 and other critical air pollutants (SOx, NOx, PM2.5 and VOCs) have also seen significant decreases, as natural gas became the state’s second largest electricity generation source.

As elected officials in the Appalachian Basin have recognized time and again, the availability of affordable, reliable energy is not a partisan issue – and here in Appalachia, shale is delivering just that. Check out EID’s latest infographic to learn more at https://www. energyindepth.org/wp-content/uploads/2020/09/ WATS-Appalachian-Basin-Natural-Gas.pdf.

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Fracking Guest Editorial GREG KOZERA | Shale Crescent USA If you have been following the Presidential race you are aware the topic of “fracking” has come up. My career started as an engineer with Halliburton. I designed frack jobs and was on the well site when they were pumped into the well. I gained a lot of experience in the oil and gas industry by the time I retired from Halliburton in 2007 after 33 years. I was going to be a motivational speaker and leadership trainer.

In 2007 the USA was in the “energy crisis”. We were running out of oil and gas. OPEC determined world oil prices. Gasoline sold for around $3 a gallon. LNG terminals were being built around the USA so we could import liquified natural gas from our “friends”, Russia and OPEC. Manufacturing jobs were leaving the USA for Asia. The USA had lost its energy advantage and Asia had cheap labor.

In 2007 the U.S. oil and gas industry understood the potential of shale gas. The technology was developing to extract it. I began to rethink my retirement.

Energy was the biggest problem our country had.

People had hope for wind and solar. Thirteen years later wind and solar account for just 10% of electric power generation. I realized I left the one industry that could have a positive impact on my family and our country’s future. I didn’t tell anyone I planned to come out of retirement. The next day a friend called looking for a sales manager for his drilling company. I was back in the industry until I retired for real in 2016.

Now I work with Shale Crescent USA to bring high wage jobs to the region.

What is fracking? Hydraulic fracturing or “fracking” as the antis call it, is a process that happens to almost every oil or gas well after it is drilled and the casing is cemented. It requires pumping a fluid like water or a gas like nitrogen to create a small crack in reservoir rock deep underground containing oil or natural gas.

The crack becomes a channel allowing oil, natural gas or natural gas liquids to flow to the well bore and eventually to the surface.

Fracking is NOT new. Halliburton started it in 1947.

The process has been performed millions of times.

The antis are still looking for one well where fracturing has contaminated ground water. Water always takes the path of least resistance and that is not up where our drinking water is. The natural stresses (pressures) underground keep fracks from going into ground water. We know this from seeing fracks in coal mines.

For 60 years no one cared about fracking. Any environmental issues would have been easy to see. Fracking was a non-issue until the USA became a threat to Russia and OPEC in 2009. We were one of their largest customers. Suddenly we were a competitor.

US oil on the world market dropped oil prices hurting Russia and OPEC costing them billions of dollars.

Fracking is to an oil and gas well like tires are to a car. Almost every well no matter where it is requires hydraulic fracturing to produce economically. During my Halliburton days I had friends all over the world involved in hydraulic fracturing. The fracking process

“Many people have no idea what fracking is and how important it is to the USA.” hasn’t changed much. Large frack jobs were common in the 1970s. What changed was horizontal drilling technology allowing wells to be drilled 20,000 feet horizontally staying in the reservoir rock. These wells are fracked multiple times becoming world class wells.

Many people have no idea what fracking is and how important it is to the USA. This includes ALL of the major media and many politicians including our presidential candidates. People in oil and gas areas are the most knowledgeable. We know millions of oil and gas jobs will go away if fracking was banned. That is true. It is also just the tip of the iceberg.

Oil and gas are dependable transportation and heating fuels. They work 24/7 no matter what the Fracking continued on page 7

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weather. They are also feedstock for most of the products we use every day. The Green New Deal designers want to eliminate fossil fuels and rely on wind and solar for 95% of our energy. That won’t happen.

Fracking is needed to produce feedstock required to manufacture solar panels and windmills. Over 70% of an electric car is made from petrochemicals. Most of the green jobs in the renewable industry are in manufacturing. Without fracking these jobs go overseas most likely to China where CO2 emissions went up 2.9% in 2019. U.S. CO2 emissions were down 2.6% in 2019.

Our work at Shale Crescent USA shows a direct correlation between American manufacturing jobs and American oil and gas production. Elimination of fossil fuels sends these jobs overseas. That means losses of millions of manufacturing jobs all over the country. Each manufacturing jobs creates 5 other jobs. They go away too without fracking. Tourism is dead. We can’t manufacture electric cars. Gasoline, if we can get it, would become very expensive. People couldn’t afford vacations.

Wind and solar make electricity not feedstock.

We will need to import ALL of our healthcare PPE, medical equipment and medications. China will love

it. Fracking is also required to make batteries. 24hour electricity is gone because wind and solar need a back- up especially at night. The Green New Deal didn’t take night into account. Every state depends on fracking for fuel and everyday products. Our military needs fracking for fuel and feedstock to make military equipment. Imagine depending on Russia, China or OPEC for our military equipment and fuel.

If we are educated we can make the best decisions possible when we vote. Basic engineering principals tell us a fracking ban in the U.S. will send more jobs overseas. Make us dependent on Russia, China and OPEC for energy, feedstock and critical items increasing our cost for energy and all products. Planetary CO2 and other global emissions will increase.

We are smart enough not to let that happen. © 2020 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.

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Nathan Lord

Named President of Shale Crescent USA Organization TOM CROOKS | Shale Crescent USA Shale Crescent USA, a leading economic development James, had this to say about Nathan’s taking on the organization serving Ohio, West Virginia and Pennsyl- role of President, “Nathan has become well-respectvania, announced that Nathan Lord has been named ed as a leader among those organizations working to as President. The Announcement bring jobs and prosperity to the Shale was made by Mark Schwendeman, Crescent USA region. This is well-deChairman of the non-profit organiserved promotion and we look forzation whose mission is to encourward to his continued leadership.” age business growth along the Ohio Shale Crescent USA is dedicated to River Valley. marketing the region based upon the “Nathan has been with the orabundance of low cost natural gas ganization for the past four years, and NGLs from the Marcellus and Utiproviding leadership in building ca Shale plays that allow high-enerstrategic partnerships, in promotgy intensive manufacturers to opering the region’s economic advanate more efficiently while producing tages, in outreach marketing, and products more economically with acin supporting the executive comcess to 70% of U.S. polyethylene and mittee on a number of important 77% of U.S. polypropylene demand. initiatives,” said Mark SchwendeThe non-profit organization is run man, Chairman of Shale Crescent by a Board of Directors consisting of USA. According to Schwendeman, thirty business and civic leaders from Lord will be overseeing the operathroughout Ohio, West Virginia and tions of Shale Crescent USA and Pennsylvania.

Nathan Lord will continue to encourage busiLord, a Marietta native, assumes President of Shale Crescent USA ness development with the goal to the role of President immediately. strengthen local communities by attracting new investments that result in good-paying About Shale Cresent USA. jobs, enhanced infrastructures and improved qualityShale Crescent USA is a non-profit organization. Our of-life for residents. foundation for success is centered on the goal to de“I am honored to have the opportunity to serve as liver targeted messaging to high energy intensive inPresident of Shale Crescent USA,” said Lord. He add- dustry decision makers of repeatable and validated ed, “The organization is poised to take advantage of technical analysis which demonstrate significant Shale our global business assets that are creating a once in a Crescent USA economic and strategic advantages for lifetime opportunity to attract new industry and good their businesses. Embedded in the success formula is paying jobs to the region. I am particularly grateful the goal to advance synergies with local, regional, and and appreciative to have the opportunity to learn un- state economic development organizations. der the tutelage of two knowledgeable, highly respectShale Crescent USA’s mission is to encourage busied and innovative business leaders in Shale Crescent ness growth along the Ohio River Valley based upon USA co-founders Jerry James, President of Artex Oil, low natural gas prices that allow manufacturers to opand Wally Kandel, Senior Vice President, Marietta Site erate more efficiently while producing products more Manager, Solvay Specialty Chemicals USA. economically with access to water, half the population According to Wally Kandel, “Nathan joined Shale of the United States and Canada, and 70% of US. PolyCrescent USA very early on and worked as the Busi- ethylene and 77% Polypropylene demand. ness Manager performing everything from office organizer to conference presenter. He has learned a great deal and has earned a very high level of credibility with all those we work with. I am quite confident he will do an excellent job leading the organization.” Jerry

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EIA: Natural Gas is the Affordable Option for Winter Heating Needs WILLIAM ALLISON | EnergyInDepth.com

As the country begins to hunker down for the winter and an expected COVID-19 caseload spike, government data shows that natural gas is overwhelmingly the most affordable fuel for home heating.

The report from the Energy Information Administration is a sharp rebuttal to the growing push by elected officials across the country to transition homes to electric heating, which will cost residents more than twice as much as natural gas to stay warm for the winter.

EIA states that the price for heating fuels will be high this year because “NOAA’s forecast for this winter indicates temperatures could be colder than last year” and will increase because “more people And EIA’s own chart shows that natural gas has are working and attending school from home this been more affordable than electricity for winter year,” due to the pandemic.

This unique scenario underscores the value of heating for years: natural gas, which EIA reports will cost significantly less than electricity: “Nearly half of all U.S. households heat primarily with natural gas. EIA expects households that use natural gas as their primary space heating fuel will spend $572 this winter, up 6% from the amount they spent last winter.”

In a sharp contrast, electricity will be a much more expensive option: “EIA forecasts that households heating primarily with electricity will spend an average of $1,209 this winter on their electricity bills, which is 7% higher than the typical bill last winter.”

The EIA’s data runs counter to the message Axios covered the report showing the clear af- pushed by anti-natural gas groups and government officials who have said that electricity will save fordability of natural gas. consumers money.

The Rocky Mountain Institute, a nonprofit pushEIA continued on page 10

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EIA continued from page 9

ing to ban natural gas use in buildings, acknowledges that electrification will be “more expensive for most existing natural gas customers,” but still claims that their data somehow shows “electrification of space and water heating and air conditioning reduces the homeowner’s costs over the lifetime of the appliances when compared with performing the same functions with fossil fuels.”

Even with the data showing that natural gas is the more affordable fuel, a number of cities have pushed natural gas bans. Last year, the city council in Berkeley, Calif. voted to ban natural gas hookups in new buildings – a move that’s been followed by several other cities in California along with Brookline, Mass. Seattle considered its own natural gas ban, but backed off after opposition from business leaders and labor unions.

Natural gas bans might be popular in a few cities with higher-income households, but the policy would have a devastating effect on low-income communities who bear a disproportionate burden for energy costs. It’s why progressive leader Jesse Jackson has pushed for a new natural gas pipeline

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to be built that would service a community in Illinois. Axios reported: “However, he said, the people of this community — called Pembroke — have no gas at all and are paying exorbitantly high prices to heat their homes with propane. … ‘When we move to another form of energy, that’s fine by me, I support that,’ Jackson said. “But in the meantime, you cannot put the black farmers on hold until that day comes.’”

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FOUR IMPORTANT FACTS

TO KEEP IN MIND ON LATEST ABANDONED WELLS REPORT DYLAN LACROIX | EnergyInDepth.com It’s true that the ongoing global pandemic and oil price drop earlier this year resulted in challenging times for the U.S. oil and natural gas industry. But the industry has also shown its resilience time and again – and is doing so now as it continues to meet global demand.

And yet a new report from climate investment group the Carbon Tracker Initiative (CTI) claims the United States is on the precipice of an orphan well crisis due to the potential insolvency of hundreds of companies across the country. And like similar previous claims, this report features findings based on faulty assumptions and exaggerated data, including downplaying the existing regulations and funding for managing plugging and abandonment.

Here are four important facts to keep in mind when reading the report.

Fact #1: CTI exaggerated the number of wells drilled.

CTI claims there will be approximately 3.8 million wells orphaned in the future: “We estimate that plugging 2.6 million documented onshore wells in the U.S. alone will cost $280 billion. This estimate excludes costs to plug an additional estimated 1.2 million undocumented onshore wells.”

But in order to get such a high estimate of numbers, CTI acknowledges it used a database with estimates for drilled wels that is far higher than statereported data. From the report: “Enverus’ unplugged onshore well counts may be significantly higher or lower than the figures listed on state databases…For example, the Railroad Commission of Texas reported a total of 439,695 oil and gas wells in the state, as of July 30, 2020.

By comparison, Enverus lists 444,000 wells classified as either “oil” or “gas”. Enverus also lists 32,000 wells classified as “oil & gas”, in addition to another 130,000 nonproduction wells (e.g., injection, disposal, and water wells), and 187,000 wells of unknown production type. In total, Enverus counts 783,000 unplugged wells in the Texas onshore oilfields.

In another example, Enverus counts 73,000 unplugged wells in New Mexico, whereas the State of New Mexico reports only 66,000 wells.”

CTI assumes that every U.S. well will be orphaned

or abandoned, and also uses a sweeping, broad definition of wells that includes not only oil, gas, oil and gas, and coalbed methane, but also injection, disposal, dry hole, monitor, storage, unknown, and water wells which are very different and as such, would have varying costs to properly plug.

Fact #2: CTI assumes that peak oil and natural gas demand has already occurred.

The reality is that demand is rising following declines related to the global pandemic, despite what the CTI report insinuates. Earlier this year McKinsey & Company released a telling report on the future of natural gas in North America, finding that demand for the resource is set to grow for years to come.

From the McKinsey report: “Demand will continue to grow from 95 billion cubic feet per day (bcfd) to 125 bcfd by 2035 then plateau. More than 70 percent of the demand growth is driven by gas exports (both LNG and also piped exports to Mexico).”

Carbon Tracker’s report frames the future of the oil and natural gas industry in a way that undermines the current and future role of natural gas in the global economy. As the International Energy Agency’s Gas 2020 report explained earlier this year, demand growth is expected to be slower than projections made prior to Covid-19, but growth is still on the horizon starting in 2021: “We have adjusted this year’s forecast to account for Covid‑19 resulting in expected global natural gas demand reaching over 4 370 bcm annually in 2025, or an average annual growth rate of 1.5 percent per year for the 2019-25 period, compared to initial forecast which assumed an average growth rate of 1.8 percent per year over the same period.”

IEA continues: “After a 4 percent drop in 2020, natural gas demand is expected to progressively recover in 2021 as consumption returns close to its pre-crisis level in mature markets, while emerging markets benefit from economic rebound and lower natural gas prices… The Asia Pacific region accounts for over half of incremental global gas consumption in the coming years, driven principally by the development of gas in China and India.”

And IEA explains the U.S. will have a role to play Abandoned continued on page 12

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Abandoned continued from page 11

in the increased production needed to meet demand growth: “If almost all regions are expected to contribute to the growth in natural gas production in the next five years, half of the net increase in supply comes from North America and the Middle East.”

Fact #3: CTI’s cost estimate has “significant” uncertainty.

As CTI explains: “Our cost estimates are subject to significant estimation uncertainty. Actual well closure costs may be higher or lower.”

Part of that uncertainty is from the high estimates of the database of well activity that CTI uses compared to state records. But costs can also vary from state to state and depending on what type of land (federal, state, private), how old and how deep a well is.

For instance, the Government Accountability Office estimates costs to properly plug a well on federal lands, where not as many wells have been drilled as on private property, can run anywhere from $20,000 to $145,000. CTI’s $30,000 ‘flat rate’ is based on two sources which place average costs between $20,000-$40,000. The Interstate Oil & Gas Compact Commission (IOGCC) meanwhile found that the average cost to plug a well in 2018 ranged from $3,700 to $97,626 – an average of $18,940. And environmental think tank Resources For the Future estimates a $24,000 per well price tag.

Typically cost analyses give estimates for already idled or orphaned wells, so these figures are able to use real time dollars. But CTI’s report is a projection of what’s to come – with no date for when that will happen. Will the wells currently drilled in the United States someday stop producing – probably. But that could be decades down the road. Improvements to technology could allow for previously declining wells to produce at higher levels again or lower the costs for plugging and abandonment.

CTI’s premise that this $280 billion cost also ignores both potential and existing funding mechanisms at the federal- and state-level which support the costs for plugging wells.

Lawmakers, both at the state and federal level have put forth initiatives to adequately respond to orphan wells – idled wells where the owner or operator is unknown, most of which are legacy wells from the 1800s through the mid-1900s. For example in 2015, the Texas Railroad Commission (RRC) implemented a new Oil Field Cleanup Fund from oilfield regulatory fees and bonds alone which generated more than $15.7 million in its first year alone. In fact, Texas has maintained a well plugging fund to cover the costs associated with well plugging and recovery since 1965.

At the federal level, Congress is evaluating possible legislation to provide additional funding as part of 12 OhioGas&Oil

the COVID-19 response to have funding for federal well-plugging.

Fact #4: Operators adhere to strict regulations to properly plug and abandon wells.

There are many rules set in place to circle all liability and a majority of the costs back onto the industry. Current federal regulations mandate that oil and natural gas well operators be held liable for the full cost associated with plugging and abandoning wells, as well as reclaiming wells. The Bureau of Land Management, which oversees all well operations on federal lands, has the final say in terms of when a well operator is no longer liable. In instances where wells are unclaimed and no operator has ownership, which is an extremely rare occurrence today, BLM has the agency to hold previous operators of a specific well liable.

Many states also have funding mechanisms dedicated to covering the costs of plugging orphaned wells—most of which is supported by the oil and natural gas industry through taxes and fees. Failure to follow plugging and abandonment regulations can have significant consequences, including in some states future permit denials, foreclosure of equipment and daily fines.

Conclusion It is clear from projections by respected institutions like IEA that the industry’s fundamental driver – the need for oil and natural gas – has not waned and will continue long into the future while advancing environmental progress. Existing federal and state regulations already govern this process and the industry is fully committed to operating under the highest standards, including once it’s time to properly plug and abandon a well.

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SEE PAGE 1 FOR MORE INFO OCTOBER 2020

IMPORTANT RULINGS

FROM OHIO SUPREME COURT IN KEY MINERAL RIGHTS CASES EXPECTED SOON David J. Wigham | Attorney The Ohio Supreme Court will soon issue opinions in two oil and gas cases currently pending before it: West v. Bode, Case No. 2019-1494 and Gerrity v. Chervenak, Case No. 2019-1123. Rulings in these cases could potentially alter the legal landscape in Ohio in the ongoing legal battles between surface owners and severed mineral owners over valuable oil and gas shale rights.

These cases deal with two Ohio statutes that govern the preservation and termination of severed mineral rights: The Marketable Title Act (“MTA”) and the Dormant Mineral Act (“DMA”). In general, the MTA calls for an automatic extinguishment of property interests created prior to a surface owner’s chain of title to property, if the surface owner has an unbroken chain of title

for more than 40 years after the prior property interest was created and there are no specific references to the prior interest in the surface owner’s chain of title. On the other hand, under the DMA, if no “savings events” apply to the mineral interest, a surface owner who follows the mandatory notice procedure and other requirements in the DMA may have dormant mineral interests deemed abandoned. The DMA also allows mineral holder to preserve their interest from being abandoned, and, significantly, allows for one mineral owner to preserve as to all mineral owners.

In West v. Bode, the Ohio Supreme Court will decide a single question: Whether a surface owner may utilize the MTA to quiet title severed mineral interests or whether the DMA provides the exclusive remedy.

Rulings continued on page 14

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, 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

OCTOBER 2020

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Rulings continued from page 13

The primary issue before the Court in West v. Bode is whether the MTA irreconcilably conflicts with the DMA. Under Ohio law, when two statutes are in conflict and if the conflict is irreconcilable, the more specific statute controls over the general statute.

If the Supreme Court rules that the MTA irreconcilably conflicts with the DMA, and therefore cannot be used to extinguish severed mineral interests, surface owners will be left with few remedies to terminate severed mineral interests, primarily because, as stated above, the DMA allows mineral owners to perpetually preserve their mineral interests, thereby defeating surface owner abandonment attempts. Conversely, if the Court rules in favor of the surface owner that the two statutes are not in conflict, surface owners may continue to utilize the MTA to attempt to extinguish severed mineral interests. Therefore, the impact of the ruling in West v. Bode will either result in a dramatic shift in law that would favor severed mineral interest owners or a preservation of the status quo and a continuation of the MTA tug of war.

A second key oil and gas case before the Ohio Supreme Court is Gerrity v. Chervenak, 2019-Ohio-2687.

Gerrity is a DMA case in which the Court is being asked to decide what standard applies to surface owners’ attempts to comply with the abandonment notice requirements of the DMA. This is an area of frequent dispute between surface owners and mineral owners in that the DMA requires that surface owners must attempt certified mail service before they can publish an abandonment notice in the county where the minerals are located in order to abandon minerals. Surface owners who cannot locate minerals owners often skip the required step of attempting certified mail service and

proceed directly to publication. Mineral owners frequently challenge this process and the issue becomes what level of “reasonable diligence” was exercised by the surface owners to attempt to locate the severed mineral owners. Thus, the question at issue in Gerrity is just how much diligence surface owners need to exercise in locating heirs of severed mineral owners in order to comply with the notice requirements of the DMA. If the Court holds in favor of the surface owner, the diligence standard will likely be narrower—possibly limited to a public-records search in the county where the minerals are located—and it will be more difficult for mineral owners to challenge a surface owner’s compliance with the DMA in court. However, a ruling in favor of the severed mineral owner could potentially lead to hundreds of abandonment notices previously filed across eastern Ohio held to be invalid for failure to comply with the DMA. In sum, the Supreme Court of Ohio will be issuing rulings in West v. Bode and Gerrity v. Chervenak during this term of the Court, which concludes at the end of 2020. These cases highlight the continued uncertainties in Ohio in the area of mineral title litigation. This uncertainty, coupled with the need for litigation to clear title to minerals, highlights the importance of retaining an experienced oil and gas attorney who can advise clients with respect to the rights of surface owners and mineral owners as to severed mineral interests in Ohio.

David J. Wigham is a second-generation oil and gas attorney at the firm of Roetzel & Andress, with more than 28 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.

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OCTOBER 2020

OHIO WELL ACTIVITY by the numbers

UTICA SHALE

MARCELLUS SHALE 24 8 5 40

77

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

Data as of 10/17/20

490 99 119 2592

3300

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

Source: Ohio Department of Natural Resources

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TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY

BY NUMBER OF SITES

1. Belmont County........ 705 2. Harrison County....... 533 3. Carroll County..........531 4. Monroe County........ 507 5. Jefferson County...... 295 6. Guernsey County...... 280.

7. Noble County.......... 230 8. Columbiana County...163 9. Mahoning County....... 29 10. Washington County... 21 11. Tuscarawas County.... 20 12. Portage County........ 15 Trumbull County........ 15 13. Stark County............ 12 14. Coshocton County....... 5 15. Muskingum County...... 4 16. Holmes County........... 3 17. Morgan County........... 2 Knox County.............. 2 18. 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, , D SI S SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF 10/17/20 PLETED PRODUCING PLUGGED

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OCTOBER 2020

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