Ohio Gas & Oil February 2016 by Gannett NEO

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Feb 2016 • A Free Monthly Publication

Supreme Court on Mineral Rights

Royalties Funding MWCD Improvements

IN THIS ISSUE: PRICES – HOW LOW CAN THEY GO?

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Capacity for Production,

But Industry Cautious

Thomas Doohan • Dix Communications espite lower levels of production in the gas and oil industry in Ohio, the Utica and Marcellus shale formations still have capacity for production; industry leaders say the industry is in survival mode.

“The state of Ohio makes us put in several levels of redundancy,” Chadsey said, noting all drill casings must include several levels of steel and concrete.

Chadsey told the group the industry has faced declining production lately. There are several data sets that can paint that picture, but he keyed in on how many drilling rigs are in operation. At this point, there are 15 rigs operating; last year there were 59.

Chadsey said the seismic activity is caused by injection wells. Ohio has taken this issue head on and developed a system that informs injection well operators of when their activity causes seismic activity, he said. Once the activity reaches a certain threshold, the injection must stop and an investigation is done to see what went wrong.

Wooster Rotarian Ferenc Relle Jr. asked what kind of safety measures are in place to protect against seismic activity That is according to Ohio Oil and Gas Association Director associated with hydraulic fracturing. He said he used to live in of Public Relations Mike Chadsey, who spoke to the Wooster the southern Kansas, northern Oklahoma area and has watched Rotarians in early January. as similar activity has caused multiple tremors.

There are several factors contributing to the decrease in activity, Chadsey said. They include increased operator efficiency and decreased commodity prices.

Reporter Thomas Doohan can be reached at 330-287-1635 or tdoohan@the-dailyrecord.com.

“The industry is in survival mode right now,” he said, noting the slump is not permanent. There are many developments in the region that position the Utica and Marcellus shale formations well for continued production. Pipeline developers are proposing new lines that will open production in the region to new markets thirsty for natural gas and natural gas derivatives, such as ethane, Chadsey said. Several ethane crackers, which process the substance into ethylene for use in a multitude of items, are proposed for the area. “There is certainly enough to keep the interest here,” he said.

MINERALS // LEASES

Chadsey said hydraulic fracturing has been the process facilitating oil and gas production in the state. He noted all gas and oil activities are regulated by the Ohio Department of Natural Resources and the Ohio Environmental Protection Agency. If producers do work on federal land, federal agencies regulate the operations. GasandOilMag.com

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Keeping people informed on the issues involving the oil and gas industry is important, said Critchfield, Critchfield & Johnston attorney Douglas Drushal while introducing Chadsey. There are a lot of misconceptions about the gas and oil industry, he said, calling specific attention to the issue of hydraulic fracturing. On that topic, Drushal said the incorrect understanding is that it is new technology. “It is not new at all,” he said.

OhioGas&Oil

Table of Contents FEBRUARY 2016

Capacity for Production, But Industry Cautious

Dominion East Ohio To Build Technical Training Center

Belmont County The One to Watch in 2016

Oil Keeps Falling. And Falling. How Low Can it Go?

The Current Climate of Ohio’s Oil & Gas Industry

Opinion: Landowners in SE Ohio Deserve to have Minerals Developed

Judge Rules Kinder can Survey On Schnell Farms

Direction of Gas & Oil Industry A Matter of Great Speculation

Gas & Oil Royalties Funding Improvements for MWCD

East Ohio Dominion Customers Benefit Thanks to Increased Local Production

Shale’s Running Out of Survival Tricks As OPEC Ramps Up Pressure

Gulfport Energy Fund Issues Grants

OhioGas&Oil

PUBLISHERS Andrew S. Dix ASDix@dixcom.com G.C. Dix II GCDixII@dixcom.com David Dix DEDix@dixcom.com

EXECUTIVE EDITORS Ray Booth RBooth@dixcom.com Roger DiPaolo RDipaolo@dixcom.com Rob Todor RTodor@dixcom.com Lance White LWhite@dixcom.com

RE G IO NAL E DIT O RS Judie Perkowski JPerkowski@dixcom.com Erica Peterson EPeterson@dixcom.com Cathryn Stanley CStanley@dixcom.com Niki Wolfe NWolfe@dixcom.com

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Table of Contents FEBRUARY 2016 ADVER TISING Kim Brenning Cambridge, Ohio Office KBrenning@dixcom.com 740-439-3531 Kelly Gearhart Wooster & Holmes, Ohio Offices KGearhart@the-daily-record.com 330-287-1653 Jeff Kaplan Alliance & Minerva, Ohio Offices JKaplan@the-review.com 330-821-1200 Mark Kraker Ashland, Ohio Office MKraker@times-gazette.com 419-281-0581 Jeff Pezzano VP Advertising Sales & Marketing Kent, Ohio Office JPezzano@dixcom.com 330-541-9455

Hydrogen Fuel Station To Be Built In Canton

Asset Protection: Building The Moat Around Your Oil & Gas Castle

Ohio Supreme Court Hearing Arguments on Constitutional Rights of Mineral Interest Owners

Shale Natural Gas Prices on Continual Drop Due to New Drilling & Fracturing Methods

Ohio Supreme Court Hearing Mineral Rights Case

Diane K Ringer Kent, Ohio Office DRinger@recordpub.com 330-298-2002 Janice Wyatt National Major Accounts Sales Manager JWyatt@dixcom.com 330-541-9450

DIGITAL MEDIA MANAGER Brad Tansey BTansey@dixcom.com

L AYOUT D E SIG NE R Luke West

lwest@the-daily-record.com

On The Cover: The Dover Dam

The Dover Dam, one of a series of 16 U.S. Army Corps of Engineers flood control dams in the Muskingum River basin. The only concrete dam in the system recently underwent a $60 million safety-assurance project to stabilize the 80-year-old flood-control structure. The U.S. Army Corps of Engineers operates the dam; the Muskingum Watershed Conservancy District provided the local cost share for the project; and Brayman Construction Corp. of Pennsylvania, was in charge of the project. Much of the funding for the project was due to royalties from the gas/oil industry. OhioGas&Oil

Dominion East Ohio

To Build Technical Training Center

Eric Marotta • Dix Communications ominion East Ohio announced Dec. 22 it plans to build a state-of-theart technical training center in the village of Boston Heights at 418 East Hines Hill Road. The company expects to spend a year building the facility at the 17-acre site. The 37,000-square-foot training center will bring all of Dominion East Ohio’s training resources into one location, the company said in a Dec. 22 release. The company says it chose the site because of its central location and convenient access to major highways.

The facility will bring 12 to 14 full-time employees, who will train field employees from throughout Ohio, as well as area emergency workers. The training staff will be moved from facilities in Twinsburg and Cleveland. There will be no all required training at one central location, in a state-ofthe-art facility.” layoffs, the company reported. The new center will include office space, classrooms, two As a training center for firefighters and other first responders, natural gas safety and procedures for computer training labs and a 100-seat conference room. responding to pipeline damage, reported gas leaks, and The facility will also contain a “Training Town,” gas emergencies will be taught. simulating a residential neighborhood. The area will be a place where natural gas leak detection and investigation “The combination of adequately trained employees and governmental first responders enhances public safety in the skills will be practiced. communities we serve,” Murphy said. An underground pipeline loop will be constructed to train employees on pipeline cleaning, inspection and maintenance “We believe this project will provide many benefits to tasks, as well as corrosion monitoring and training in the Village of Boston Heights,” Murphy added. “We are committed to becoming an active corporate citizen in troubleshooting. the community and to making the training facility an “Federal pipeline safety regulations and Public Utilities industry showcase.” Commission of Ohio rules require Dominion East Ohio to ensure, through training and evaluation of our employees, Boston Heights Mayor Bill Goncy said the village and that they are qualified to perform various tasks on our surrounding communities will benefit from having the pipeline system,” said Jeff Murphy, Dominion East Ohio center close enough to make training convenient for emergency workers. vice president and general manager in a press release. “One of Dominion’s core values is the safety of both customers and our employees,” Murphy said. “We currently provide employee training at several Northeast Ohio locations. This proposed training center will provide

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“Additionally, Dominion configured their training center site plan to be able to accommodate a future bike trail that will connect to the Summit Metro Park Bike and Hike Trail,” Goncy said.

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Belmont County

The One to Watch in 2016

Jackie Stewart • Energy in Depth - Ohio his past year has been amazing for the Utica Shale in Ohio, as production of oil and gas in the state has more than doubled.

At the end of 2014, Energy In Depth reported that the counties to watch in 2015 included Monroe, Belmont, and Noble Counties — and we were right. Production results for the first three quarters of 2015 showed Utica Shale development trended south to these counties, and the best producing wells, particularly natural gas wells, have been located in these counties. But as we look ahead to 2016, one of these counties, Belmont, is where the real story of promise will lie. Why does Belmont County stand out amongst similar counties with high production? Well, it’s because Belmont County is by far the most diversified story in the Utica with a combination of surging production results, new permits to drill, proximity to roads, rail, and barges, and most importantly, a new multi-billion dollar ethane cracker. With all of these elements coming together, it’s fair to say that all eyes will be on Belmont County in 2016.

the region, it will be a facility on a scale the county has yet to see from other industries. As such, Merry told EID,

The final word on if Belmont County will indeed be the home of the PTT Global ethane cracker plant will be announced next year. However, $100 million has already been pledged in initial construction.

With a site of nearly 500 acres along the Ohio River, including a 100 acre plant and a huge rail complex, it would be hard for anyone to wrap to their head around the sheer magnitude of the proposed $5.7 billion ethane cracker plant.

EID recently had an opportunity to tour the proposed site of the facility with the Belmont County Port Authority Executive Director Larry Merry. BCPA has been working hand-in-hand with Jobs Ohio, PTT Global Chemical Public Company LTd. and Marubeni Corp to secure the initial pledged investment of $100 million in engineering, which will determine the ultimate fate of the plant. If the project does indeed come to

America has a once-in-a-generation opportunity to change the trajectory of the U.S. global competitiveness in manufacturing because an ethane cracker facility provides feedstock to manufacturing of all shapes and sizes. A recent report, Made in America, Again highlights domestically produced shale as the most “significant emerging advance for U.S. manufacturing competiveness.”

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“It’s just hard to fathom and a get a grasp of this project. I’m still not sure that I have my mind wrapped around it.”

OhioGas&Oil

Oil Keeps Falling. And Falling.

How Low Can It Go?

David Koenig • AP Business Writer he price of oil and most fuels for this year and next. The keeps falling. department now expects U.S. crude to And falling. And average $38.54 a barrel in 2016. falling. It has to stop somewhere, right? But layoffs across the oil industry are mounting, and bankruptcies among Even after trending down for a year and oil companies are expected to soar. BP a half, U.S. crude has fallen another 17 announced layoffs of 4,000 workers percent since the start of the year and is on Tuesday. Fadel Gheit, an analyst at now probing depths not seen since 2003. Oppenheimer & Co, says as many as half of the independent drilling companies “All you can do is forecast direction, and working in U.S. shale fields could go the direction of price is still down,” says bankrupt before oil prices stabilize. Larry Goldstein of the Energy Policy Research Foundation, who predicted a THERE’S LOTS OF OIL decline in oil in 2014. A boom in U.S. oil production thanks to new drilling technology helped push On Tuesday the price fell another 3 global supplies higher in recent years. percent to $30.51 a barrel in morning Other major oil producers and exporters trading, its lowest level in 12 years. Oil in the Middle East and elsewhere have had sold for roughly $100 a barrel for declined to reduce their own output nearly four years before beginning to fall in an attempt to push prices back up. in the summer of 2014. Iran, trying to emerge from punishing economic sanctions, is looking to increase Many now say oil could drop into the exports in the coming months, which $20 range. could add further to global oil stockpiles. The price of crude is down because global supplies are high at a time when demand for it is not growing very fast. The price decline, already more dramatic and longlasting than most expected, deepened in recent days because economic turmoil in China is expected to cut demand for oil even further. Lower crude prices are leading to lower prices for gasoline, diesel, jet fuel and heating oil, giving drivers, shippers, and many businesses a big break on fuel costs. The national average retail price of gasoline is $1.96 a gallon.

The Energy Department said U.S. crude oil inventories “remain near levels not seen for this time of year in at least the last 80 years.” It says global supplies exceed global demand by about 1 million barrels per day on average. Economists at the Federal Reserve Bank of Dallas believe excess inventories won’t begin falling until 2017.

The higher supplies and lower prices haven’t translated into rising global demand. Most of the increase in world oil demand over the past several years has come from China, but signs are pointing to much slower economic growth there, On Tuesday the Energy Department which in turn reduces demand for fuels lowered its expectations for crude oil made from crude.

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Disappointing reports last week about China’s manufacturing University of California, Davis. And for businesses, “I can hire sector and a fall in the yuan’s value triggered a global stock sell- more people or buy new equipment because I no longer have to off and an even more dramatic decline in the price of oil and spend that money on energy.” other commodities. WHEN DOES IT END? The first five days of the year marked the worst start of a year Oil traders and Wall Street analysts expect further declines for oil in history, according to S&P Dow Jones Indices, and oil in oil prices in the coming weeks. Several have predicted that has only fallen further since. prices will fall below $30 a barrel and even approach $20 a barrel. WINNERS AND LOSERS Motorists are saving every time they fill up. The Energy There are wild cards that could result in a sudden rise in oil. Information Administration figures that the average U.S. A perennial threat is fighting in the Middle East, which has household saved about $660 on gasoline last year compared destroyed production facilities in the past. with 2014, and that the average price for gasoline this year will be $2.03 a gallon, the lowest since 2004. Just as $100 oil encouraged the new production that contributed to this plunge in prices, $30 oil is discouraging the Airlines, big users of jet fuel, have posted record profits, and big investment needed for exploration and production for the other businesses are saving too from cheaper energy. future. The number of rigs drilling for oil in the U.S. has fallen by more than two-thirds, to 516 last week from an October But workers in the oil patch have paid the price. About 17,000 2014 peak of 1,609, according to a closely-watched count by the oil and gas workers in the U.S. lost their jobs in 2015, but if drilling services company Baker Hughes. you include oilfield support jobs the number is about 87,000, according to Michael Plante, an economist at the Dallas Fed Eventually, analysts say, the supply will fall below demand and who has written about the effect of oil prices on the economy. prices will rise. Oppenheimer’s Gheit thinks oil will eventually rise and settle into a range between $50 and $70 a barrel — but Even so, economists say low oil prices are still a net benefit for not anytime soon. the U.S. economy. “The longer it remains low, the more violent the reaction to the “Consumers have more money in their pocketbooks,” says upside is going to be,” he says. Amy Myers Jaffe, an energy consultant who teaches at the

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OhioGas&Oil

The Current Climate of

Ohioâ&#x20AC;&#x2122;s Oil & Gas Industry

Atty. David J. Wigham he oil of these low prices, Ohio and gas Utica producers are idling industr y, rigs, shutting-in wells, laying both in Ohio off employees, and delaying and throughout drilling new wells. Despite the world, is currently this grim news, however, experiencing a very difficult there are very positive economic environment. As of indicators for the Ohio oil January 18, 2016, oil prices are and gas industry once prices trading around $30 per barrel rebound. As we wait for the and natural gas prices are Ohio Supreme Court to rule similarly depressed. Because on a number of Ohio Dormant

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Mineral Act cases, this article will provide an update of the news coming out of the Ohio oil and gas play and industry and underscore some opportunities available to landowners. Utica Shale in Ohio The Utica Shale play is the most profitable and most efficient shale play in the United States. The rock is very high pressure, which means natural gas is easier and less expensive to produce. Ohio has the capability to produce oil, dry natural gas, used for heating, and natural gas liquids, such as propane and ethane. Most of the current Ohio production is focused on dry natural gas because it is more cost effective to produce. In fact, as of August 2015, five out of ten of the most productive dry gas wells ever drilled in the Utica Shale formation (which includes Pennsylvania and West Virginia) were drilled in Belmont County and Monroe County, Ohio. Further, production efforts in Ohio are behind other Utica Shale states, such as Pennsylvania, which means when prices rebound, there are still many areas in Ohio ripe for

exploration. According to the U.S. Geological Survey, Utica producers must drill more than 30,000 wells in order to fully develop known Utica Shale reserves in Ohio, using current technology. To date, only 2,117 Utica Shale wells have been permitted and 1,670 wells have been drilled in Ohio, meaning that we are still in the very early stages of the Utica Shale play. Pipeline Construction in Ohio Despite the slowdown on the drilling side, the midstream services aspect of the Utica play is still booming, because Ohio currently lacks the pipeline infrastructure and capacity to support the transportation and processing of its vast shale gas reserves. There are many pipeline projects currently underway in Ohio, such as the Rover Pipeline, Nexus Pipeline, and Utopia Pipeline, just to name a few. The construction of these pipelines will not only create jobs in the areas of the state where they are being built, but they will also allow drillers to sell the natural gas they produce at higher prices. Further, these pipeline operations will generate

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millions of dollars in new annual tax revenue for the municipalities where the pipelines are located. This tax revenue can be spent on schools, police, fire departments, hospitals, etc. Landowners stand to benefit from the new pipelines through higher royalty payments from producers who will receive higher prices from the natural gas they produce and from increased tax revenues to support their local communities. However, landowners affected by any pipeline project must be careful when negotiating right of way terms and adequate compensation. It is highly recommended that any landowner involved in a pipeline project seek the assistance of an experienced oil and gas attorney and not attempt to do it alone. Proposed Ethane Cracker Plant in Belmont County, Ohio PTT Global Chemical has proposed building a $5.7 billion ethane cracker plant in Belmont County, Ohio. An ethane cracker takes ethane, a component of natural gas, and heats it up to create ethylene. Ethylene is a chemical used to produce plastics, resins, adhesives and other synthetic products. While the announcement of whether the plant will actually be constructed will not come until late this year or next year, PTT has said it will invest $100 million for the initial design work, a promising sign. If this plant is built, it will create thousands of construction

jobs and, once construction is complete, high-tech jobs in the area. The ethane cracker plant could have a hugely positive impact on the economy of Belmont County and other southeastern Ohio counties. What Does this Mean for Ohio Landowners? Unquestionably, we are in the middle of a major downturn in the oil and gas industry. However, for Ohio landowners, this may be the best time to address any issues affecting title to the minerals of your land, such as prior mineral reservations or old oil and gas leases that are not held by wells that are producing in paying quantities. The Ohio Supreme Court is poised to rule on several pending Ohio Dormant Mineral Act (“ODMA”) cases, and once they do, the “winners” and “losers” under the ODMA will be settled law. Therefore, now may be the time to bring your ODMA quiet title action, especially if your claim to

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the minerals is unclear. In addition, many landowners have shallow wells on their property drilled under old oil and gas leases which produce little to no oil and gas and generate very low royalty payments. Shallow wells must be “producing in paying quantities” to hold an oil and gas lease (which usually covers the valuable Utica Formation). Lower prices make it more difficult for operators to produce a well in paying quantities. This should make it easier for landowners to terminate an old oil and gas lease for non-production. By addressing these issues now, you will be in the best possible position to take advantage of any rebound in the oil and gas industry. David J. Wigham is a second-generation Ohio oil and gas attorney with nearly 25 years of experience in the industry. Effective January 1, 2016, Mr. Wigham joined the law firm of Roetzel & Andress, and maintains offices in Akron and Wooster, Ohio.

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A Look Ahead

Ohio’s Gas & Oil Events • March 16-18, 2016 2016 OOGA Winter Meeting, Hilton Columbus at Easton, 3900 Chagrin Dr., Columbus, Ohio • April 26-27, 2016 Ohio Valley Regional Oil & Gas Expo, St. Clairsville, Ohio • May 14, 2016 State Science Day, Ohio State. • July 29-31,2016 Oil History Symposium, Casper, West Virginia.

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Opinion: Landowners in SE Ohio

Deserve to have Minerals Developed

Cong. Bill Johnson • 6th Congressional District or more than a century and a half, Ohio has been developing our natural resources sensibly and responsibly. This approach is rooted in our culture and economy.

Despite this tradition, the federal government is hindering shale development throughout significant parts of Southeastern Ohio. Some residents, particularly in Monroe and Washington counties, have elected to lease their private mineral rights for the purpose of oil and natural gas development. But many are finding themselves in a situation where their private leases are at risk of not being developed because their private mineral leases are adjacent to, or under the surface of, the Wayne National Forest.

governments provide services there. This legislation would also require that this revenue be used to support education initiatives and road improvements within that county — at no additional cost to the taxpayer. Ohio is rebounding, and oil and gas development is playing a major role in strengthening our economy. The Wayne National Forest Supervisor stated in August 2012, and I concur, that “there is neither the need to restrict availability of federal oil and gas resources, nor the need to propose additional Forest Plan standards of guidelines.” I urge the BLM to take action on the pending leases in the Wayne National Forest.

As the federal agency with jurisdiction over these leases, the Bureau of Land Management must allow for a transparent and efficient consideration of these leases in and under the Wayne. While there are more than 1,200 active oil and gas wells on the surface of the Wayne National Forest, there has not been any shale development under the forest, despite the fact that the U.S. Forest Service has indicated that its Forest Plan would accommodate shale development.

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Recently, the BLM took a positive step forward announcing the start of the process to approve federal leasing in the Wayne National Forest. While this is progress —- a much needed step toward restoring property rights — all too often President Obama’s agencies put politics ahead of sound science when making regulatory decisions. That’s why I have been tracking this process for a few years now. In fact, I have authored legislation that would require 20 percent of the revenues from production sites on federally-owned land be returned to the counties whose

OhioGas&Oil 11

Judge Rules Kinder can Survey

On Schnell Farms T Thomas Doohan • Dix Communications

he Wayne County Court of Common Pleas ruled pipeline company Kinder Morgan has the right to conduct surveys on the land of Schnell Farms for the purpose of planning its proposed Utopia East Pipeline Project. On Tuesday Jan. 5, Judge Mark Wiest issued a judgment agreeing with company’s claim to having a legal right to survey the property, located on the 3800 block of Honeytown Road, and conduct surveys. The company cited Ohio Revised Code 163.05, which states agencies meeting certain requirements

may conduct surveys, soundings, the property to survey. Schnell Farms drillings, appraisals and examinations personnel will be required to stay away from any Kinder Morgan activity. As on any land, water or premises. a permanent injunction, he said, the In its claim filed Sept. 23, Kinder restraining order will be ongoing. The Morgan asked the court for declaratory judgement states Kinder Morgan must relief, a temporary restraining order, a post a bond of $25,000 before entering preliminary injunction and a permanent Schnell Farms. injunction. “I’m disappointed,” Scott Schnell of Andrew Lycans, an attorney at Schnell Farms said of the judgment. He Critchfield, Critchfield & Johnston, said he plans to appeal the decision in which is representing Schnell Farms, the 9th District Court of Appeals. said, pending some documents that need to be signed by the judge, the decision effectively grants Kinder Morgan its wishes and gives it access to

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Schnell said his opposition, and his rationale for not letting surveyors onto his land, is multifaceted. It begins with the landowners’ ability to control the route of the line. When surveyors examine his land, it is unlikely they will find anything meriting a change in the route, he said. As such, he has little control over where it will go. He added that as the route becomes more established, it will become increasingly hard to make adjustments. Schnell said he is concerned with a pipeline on his property because it likely will decrease its value, create new safety concerns and increase risk of environmental damage to ground water. He said once an easement is granted it cannot be taken back and landowners also have few opportunities, if any, to renegotiate the terms of the contract. Schnell said even though landowners are compensated for easements, the lump sum of cash is not adequate given the long term impact of the pipeline. “The only equitable way to settle with a landowner is to offer a percentage of the profit,” Schnell said. Schnell said the pipeline does not offer any public use. First, he said the pipeline is transporting ethane and ethane-propane mixtures, which are used for plastic manufacturing. Secondly, there will be just one customer for the pipeline, NOVA Chemical Corporation in Ontario, Canada. “No one along the route benefits in any way,” Schnell said. In an email, Kinder Morgan media relations representative Melissa Ruiz said the company does not comment on cases involving specific land owners. However, the surveys help Kinder Morgan gather information to protect cultural resources, wildlife habitat and the environment.

Ruiz said Kinder Morgan aims to understand every landowner’s concern and “work toward mutually beneficial agreements.” She noted the company has been granted permission to survey land along 98 percent of the proposed pipeline route, which stretches from Harrison County to Fulton County where it would meet up with existing Kinder Morgan infrastructure. The contents will then be transported north toward Ontario, Canada, to its customer. Reporter Thomas Doohan can be reached at 330-287-1635 or tdoohan@the-dailyrecord.com.

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“Surveying the area along the route is a critical part of the construction process, and the project involves regulatory reviews from the U.S. Army Corps of Engineers and the Ohio EPA,” she said.

OhioGas&Oil 13

Direction of Gas & Oil Industry

A Matter of Great Speculation Judie Perkowski • Dix Communications

s the gas and oil industry stumbled into 2016 hoping to see a glimmer of sunshine at the end of the proverbial tunnel, it instead took another step deeper into the downward spiral of oil prices, an industry expert said this week. “Shale plays re-vitalized gas and oil production, but no one knows where this is going,” said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, at the first Guernsey Energy Coalition meeting of the year at the Southgate Hotel in Cambridge on Jan. 7. “Some analysts say it should improve by the second half of 2016, some say it will last much longer than first anticipated. “There is no way to sugar coat this and I am not going to try,” Bennett emphatically stated. “There has been a 57 percent drop in oil prices, which as of Jan. 7 is at $33.97 a barrel, and a 67 percent drop in natural gas prices to about $1.50 per million British Thermal Units (how natural gas is priced). “But people [in the industry] are adjusting. It is not the first time this has happened, and it won’t be the last. Gas and oil companies are re-evaluating where and when to drill, and the expected outcome. Production will continue to drop off. It is difficult for them to make ends meet with those prices.”

Ohio Oil and Gas Association Executive Vice President Shawn Bennett, standing, l, was guest speaker at the Guernsey Energy Coalition meeting Thursday at the Southgate Hotel in Cambridge. Bennett was joined by Mike Chadsey, standing, director of public relations for OOGA and David Hill, seated l, president of OOGA. Jo Sexton, president of the Cambridge Area Chamber of Commerce, welcomed Stacee Stinedurf, graduate student at Kent State University and president of the school’s chapter of the American Association of Petroleum Geologists; and Jacob Bradley, a junior at Kent State University and a student in the school’s petroleum geology program.

Bennett’s PowerPoint presentation began with graphs, dated general. But, if you are working for the gas and oil industry, you from the 1980s through 2015, showing how natural gas and oil are not happy.” production has had its ups and downs since the beginning of Bennett said a major factor for current circumstances are the time, at least since the 19th century. many external factors worldwide, not controlled by the U.S., that “Since the discovery of the Marcellus and Utica shale plays, the affect the price of oil. Scenarios that could increase oil prices: The U.S. has produced more energy than ever before, and this comes Asian market is not performing as expected, China’s economy with consequences ... OPEC isn’t happy,” said Bennett. “The is in a freefall, social unrest in Venezuela (second only to the 13-member Organization of Producing and Exporting Countries Saudis in oil production), ISIS is disrupting Iraqi exports, more have not cut production in spite of the price drop. This has been social unrest in oil-dependent countries, disruptions between the longest sustained high production in decades. Oil prices have OPEC and non-OPEC countries, especially the threat of Iranian lost two thirds of their value in the past 18 months and hit an 11- oil entering the market this year, and OPEC cuts output more year low last month. OPEC’s plan is to dismantle and destroy U.S. than expected. crude production. “There are dozens of shale plays in the contiguous United States, “We are sitting on top of the world’s largest natural gas field in the with the “Super Seven” leading the way in production: the Appalachian Basin. Ohio is the dominant natural gas producer, Bakken in N. Dakota; Eagle Ford, Permian and Barnett in Texas; which is great for the consumer when you get your energy bill the Niobrara in Colorado and the newcomers, Marcellus and and it’s only $68 instead of $168. This is good for America in Utica, primarily in Ohio, Pennsylvania, West Virginia and New 14 OhioGas&Oil

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York. All combined, have contributed to an 85 percent increase in natural gas production since 2012 and an increase of 9.7 million barrels of crude oil a day,” said Bennett. “When people think of a drop or a crash they think the product, such as gas and oil, is depleted. Not so in this case, it is the over abundance of gas and oil that follows the law of supply and demand.

continue to be advocates for the industry on all the issues.

“Another problem is infrastructure, or lack of it. Pipelines, processing facilities, ethane crackers, refineries and storage are all in dire need. We need to get these projects moving. There are five major pipelines in various stages: Spectra, ATEX, Columbiana, Rover and Nexus. There are also three proposed “cracker” plants. The $6 billion Royal Dutch Shell in Pennsylvania; the $4 billion Odebrecht in West Virginia and the $5 billion PTT in Belmont County.”

For the 69th year, OOGA brings together the top industry leaders from Ohio and the nation to provide the most current state of the oil and gas industry in business sessions and the trade show. The Winter Meeting is the principle business meeting of the Association, the premier networking event of the year. This annual gathering includes: Business sessions, Trade Show, Updates on State and Federal activities and a President’s Reception. Go to oogawintermeeting.com to register.

It is not all bad news for the industry, it has made notable changes in the communities throughout eastern Ohio. A Harvard Business Study noted five key points in regards to the renaissance of the gas and oil industry. It is saving the American middle class, saving the U.S. economy and providing geopolitical strength, saving the environment, saving government budget and saving household budgets.

The Guernsey Energy Coalition was established by Jo Sexton, president of the Cambridge Area Chamber of Commerce, in 2011. Meetings are generally the first Thursday of the month at the Southgate Hotel in Cambridge. For more information, call the Chamber at (740) 439-6688, email jsexton@ cambridgeohiochamber.com, or visit www.cambridgesupersite.com.

“We are in survival mode, and we will come back,” he said. Chadsey also announced the 2016 OOGA Winter Meeting will be March 16-18, at the Hilton Columbus at Easton.

Mike Chadsey, director of public relations at the Ohio Oil and Gas Association based in Columbus, said the organization will

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A view of the temporary batch plant and field office for the maintenance project at Bolivar Dam at the Tuscarawas/Stark County line. It is like a small city. The U.S. Army Corps of Engineers is the lead agency for the $44.3 million project and the MWCD is providing 23 percent of the funding, approximately $10.2 million. The dam protects more than 50,000 lives, from potential flooding.

Gas & Oil Royalties

Funding Improvements for MWCD

Judie Perkowski • Dix Communications he Muskingum Watershed Conservancy District’s seven-year Capital Improvement Plan to renovate and improve its parks, campgrounds and public access to lakes, has a lot to do with its stewardship of revenue, especially from oil and gas leasing.

The influx of capital into MWCD coffers has allowed its leadership to focus on the Capital Improvement Plan, which could exceed $170 million. The master plan was initiated in 2015 with an estimated completion date of 2022. More good news came in an announcement by MWCD Executive Director/Secretary John Hoopingarner.

The MWCD has managed oil and gas leases on its properties for its entire 80-year history as a part of its overall natural resources ”It’s an exciting time for the Muskingum Watershed Conservancy District over the next 5 to 7 years, and is really a renaissance of stewardship program. sorts. We are in a position where we can partner with the U.S. While oil and gas royalties remained reasonably steady with Army Corps of Engineers in properly maintaining the 83-year-old income limited to a few hundred thousand dollars per year from flood control system which has been so important to the survival 2005 to 2012, until 2013 when revenue jumped to $2 million, then of many communities in the District. In addition, the new found to $109 million in 2014. There are approximately 275 wells on revenue generated from Utica gas leasing opportunities now affords the district the opportunity to modernize our public parks, Watershed property. campgrounds and marinas to a level that our customers want With improved technology that allows horizontal drilling, the and deserve. And of course, we can now augment our 18 county MWCD is in the center of the Utica Shale Play with unprecedented conservation program to coordinate and promote overall watershed oil and gas leasing opportunities. Leasing to oil and gas companies management and water quality initiatives that are so vitally by the MWCD was initiated in 2011 when the board of directors important to sustainable existence, as water is one of our most approved a deep mineral rights lease of 6,498 acres at Piedmont precious resources. As responsible stewards we foresee the future Lake and properties with Antero Resources, and 6,485 acres at of MWCD on solid ground for the next 80 years.” Clendening Lake and properties to Gulfport Energy. In 2012, 3,682 acres were leased at Leesville Lake and properties to Chesapeake Additionally, the District was able to reduce the amount of the Exploration; and 7,135 acres at Seneca Lake and properties to Antero maintenance assessment collected from more than 500,000 property owners in the watershed by 50 percent. The maintenance Resources in 2013. assessment is collected annually from property owners in the 18-county Watershed. 16 OhioGas&Oil

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The Conservancy project’s primary purpose is for flood control and water conservation, its ultimate goal is soil conservation, land utilization, reforestation, wildlife preservation and more opportunity for the public access to outdoor recreation. Programs partially funded through maintenance assessment and supplemented by oil and gas revenue are shoreline stabilization and dredging. The engineering department has identified hundreds of shoreline stabilization projects around MWCD lakes including Seneca Lake. The District has also initiated a dredging program to restore flood storage capacity of the decades old flood reduction lake system. Dredging has begun at Tappan Lake, which will take several years to remove the 400,000 cubic yards of built-up silt and sediment. Seneca Lake is the next in line for dredging.

The Conservancy has more than 1,200 cottage site leases, 2,500 available camp sites, 1,455 seasonal campers with 30,000 acres of conservation land, hosts more than three million visitors annually, and 500 yearly fishing tournaments. Other amenities throughout the parks may include new welcome centers, recreation centers, showers/restroom facilities. Trails and new activities such as zip lines, will be added in select parks. Beaches will be upgraded and overnight accommodations will include yurts, tree houses and several types of larger cabins with common areas, fireplaces, hot tubs and decks. MWCD employs more than 114 full-time

team members and approximately 300 parttime and seasonal employees during the peak outdoor recreation season. In response to the number one question: No one individual or organization owns the MWCD. In essence, it is owned by the citizens who reside within the 18 counties that comprise the Muskingum River Watershed. The District falls under the jurisdiction of a Conservancy Court of 18 common pleas court judges, one from each member county. The Conservancy Court in return appoints a board of directors who handle all decisions relative to the operation of the MWCD — flood reduction, conservation and recreation.

District-wide construction has begun with $23 million worth of capital improvements in the MWCD park system. Top priority in the capital improvement program is to upgrade and modernize campgrounds, including utilities for sanitary sewers, water, electric, communication hook-ups and enlarging RV pads to accommodate larger RVs. This is the first major upgrade to MWCD campgrounds since they were built in the 1960s and 70s. This year, construction will begin at Seneca Lake on two campground upgrades and a waste water treatment plant upgrade. MWCD’s 8,000 square miles —54,000 acres — in cooperation with the U.S. Army Corps of Engineers, operates a system of 16 reservoirs and dams built for flood reduction and water conservation benefits to property owners and residents. The federal government credited MWCD with saving $10.8 million worth of property damage from flooding. Plus, hundred of thousands of people enjoy the benefits A bank stabilization project along the Muskingum River in Washington County. The associated with camping, fishing and project incorporated state of the art technology by injecting a slurry compound of boating on MWCD waterways. polymers through an affected road and into the stream embankment. The hardened slurry compound stabilized the embankment and prevents silt and sediments from entering the waterway.

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OhioGas&Oil 17

Following Ohio’s Great Flood of 1913, leaders in the Muskingum Watershed River region initiated a study, orchestrated by then manager of the Zanesville Chamber of Commerce, Bryce Browning, to plan the construction of dams and reservoirs to reduce potential flooding and to take advantage of the flood waters for potential public use and enjoyment. The Muskingum Watershed Conservancy District, a political subdivision of the State of Ohio, was organized in 1933 under the Ohio Revised Code Chapter 6101, commonly called the Conservancy Act. Browning became the organization’s first executive director who formulated the Official Plan for construction of 16 reservoirs and dams in the Muskingum River Watershed. The MWCD, was responsible for the development of reservoirs and dams. The U.S. Army Corps of Engineers would own and operate the dams in the system and the MWCD would mange the reservoirs. Just as a city, county or state has boundaries, so does a watershed. A watershed is the area or ridge of land that separates water flowing to different rivers, basins, or seas.

The Muskingum River is the largest river lying entirely within Ohio, its watershed covers one-fifth, or 20 percent of the state. The MWCD has jurisdiction for its operations in all or portions of an 18-county area. The 18 counties wholly or partially contained in the MWCD jurisdiction are Ashland, Belmont, Carroll, Coshocton, Guernsey, Holmes, Harrison, Knox, Licking, Morgan, Muskingum, Noble, Richland, Stark, Summit, Tuscarawas, Wayne and Washington. The Muskingum Watershed Conservancy District recently received the “Friends of Community Development” Award from the Ohio State University Extension for the organization’s recent reinvestment in the community to enhance flood warning systems and provide better water quality in the Muskingum River Watershed. For more information about the Muskingum Watershed Conservancy District, call the main office at (330) 343-6647, or online at MWCD.org.

The Dover Dam, one of a series of 16 U.S. Army Corps of Engineers flood control dams in the Muskingum River basin. Construction of the Dover Dam was completed Nov. 29, 1937 at a cost of $7,755,300. The only concrete dam in the system recently underwent a $60 million safety-assurance project to stabilize the 80-year-old flood-control structure. The dam protects Dover and New Philadelphia from flooding, but also Coshocton, Zanesville and Marietta. The U.S. Army Corps of Engineers operates the dam; the Muskingum Watershed Conservancy District provided the local cost share for the project; and Brayman Construction Corp. of Pennsylvania, was in charge of the project. Much of the funding for the project was due to royalties from the gas/oil industry. 18 OhioGas&Oil

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East Ohio Dominion Customers Benefit

Thanks to Increased Local Production

ominion East Ohio expects increased energy production from the Marcellus and Utica shale formations in Ohio and nearby states to help provide ample supplies of natural gas at lower prices than a year ago. “These abundant shale energy resources have led to lower national and regional market prices and our customers are reaping the benefits,” said Jeff Murphy, vice president and general manager. Murphy noted that natural gas prices for the remainder of the winter heating season likely would be lower than those of last winter. For example, Dominion East Ohio’s current Standard Choice Offer (SCO) rate is $2.226 per thousand cubic feet (mcf), which is 53 percent lower than the December 2014 SCO rate of $4.712/mcf. Under the current rate, the average SCO residential customer’s bill for the month of December 2015 would be $66.12, almost 40 percent less than $109.92 in December 2014 and dramatically less than the average SCO residential customer’s December 2010 bill of $151. The SCO is available to eligible residential customers who have not already chosen a supplier or opted to join a governmental aggregation program under Dominion’s

has resulted in lower market prices.”

Energy Choice program. Murphy advised customers to visit www.dominiongaschoice. com or the Public Utilities Commission of Ohio Apples-to-Apples Comparison at http://energychoice.ohio.gov/ to review available supplier offers that best meet their needs. Current weather forecasts project a milder winter than the previous two years, in which colder-than-normal temperatures prevailed, Murphy added, “Dominion East Ohio has taken steps to ensure reliable natural gas deliveries to our 1.2 million customers. As in previous years, customers can set their thermostats with confidence.”

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Dominion East Ohio is a subsidiary of Dominion (NYSE: D), one of the nation’s largest producers and transporters of energy, with a portfolio of approximately 20,400 megawatts of generation and 6,455 miles of electric transmission lines. Dominion operates one of the nation’s largest natural gas storage systems with 928 billion cubic feet of storage capacity and serves utility and retail energy customers in 13 states. For more information about Dominion, visit the company’s website at www.dom.com/.

“One of the major drivers of our supply security is increasing natural gas production right here in Ohio,” Murphy said. “Even though demand continues to grow, as more natural gas is used for electric generation and our economy continues to recover, increased regional production

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Shale’s Running Out of Survival Tricks

As OPEC Ramps Up Pressure

n 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a- barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cuttingedge technology to squeeze all the oil they could out of every well. Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35. For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow.

These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston. The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s highcost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great.

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Drillers including Samson Resources Corp. and Magnum Hunter Resources Corp. have already filed for bankruptcy. About $99 billion in face value of high-yield energy bonds are trading at distressed prices, according to Bloomberg Intelligence analyst Spencer Cutter. The BofA Merrill Lynch U.S. High Yield Energy Ron Braucher, Owner Index has given up almost all of its Fleet Maintenance • Inspections outperformance Full Service • Trailer Repair since 2001, with the yield reaching Farm Equipment Repair its highest level Towing Available relative to the market in “Put Our Experience To Work For You” broader at least 10 years.

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“You are going to see a pickup in bankruptcy filings, a pickup

in distressed asset sales and a pickup in distressed debt exchanges,” said Jeff Jones, managing director at Blackhill Partners, a Dallas-based investment banking firm. “And $35 oil will clearly accelerate the distress.” Shale Rock To understand why production is about to collapse, we have to go back to how it came about. Geologists have long known about shale. It’s what they called the source rock: Oil and gas leached out of the shale into the porous dirt around it that drillers could easily pump from. The shale itself was so impermeable that wells would go dry almost immediately. A wildcatter named George Mitchell solved the problem by using directional bores to carve a long horizontal hole through the shale layer, and then blasting that tunnel with high- pressure bursts of water, chemicals and sand to create millions of tiny fissures through which oil and gas could escape. It worked, but was too expensive to implement on a wide scale. Oil prices rose as rapid global economic growth in the early 2000s boosted energy demand, making shale profitable to drill. Output leaped more than 60 percent from the end of 2010. GasandOilMag.com

“Shale is disruptive,” said Dukes. “It brought on big volumes in a short period and eclipsed demand growth, and the oil market began to look worse and worse.” Spending Cuts A return to cheaper oil was thought to be disastrous for shale, but companies figured out how to increase productivity and lower costs. Producers slashed spending, idling more than 60 percent of the rigs in the U.S. They drilled and fracked faster, meaning fewer rigs and workers could make the same number of wells. They focused on their best areas and used more sand and water in the fracking process so each well gushed with more crude. By April, when the rig count had fallen in half, output was still rising. All that effort did was push prices lower and expectations for a price recovery further out into the future. Now shale companies face a grim future, having played most of their best cards. “There is limited scope for further production cost reductions,” Mike Wittner, head of oil-market research for Societe Generale, said in a note to clients. “While technological and efficiency improvements GasandOilMag.com

may continue gradually, oil company renegotiations with contractors are essentially done, and so is the rapid shift to focus only on core areas.”

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Shale drillers aren’t the only ones hurting. OPEC’s strategy is causing pain for its members. Saudi Arabia is said to be considering selling stakes in state-owned companies to help stem a budget deficit that reached 20 percent of its economy. Venezuelan Oil Minister Eulogio Del Pino said the industry is “at the door of a catastrophe” if crude production outstrips storage capacity.

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Supply Glut Even a plunge in U.S. output may not be enough to drain a global supply glut that has almost 3 billion barrels of oil and products like gasoline in developed countries’ storage tanks, according to the International Energy Agency. The world will likely be oversupplied by about 1 million barrels a day through the first half of next year before balancing, Jefferies LLC analysts including Jason Gammel said in a Dec. 18 research note. “Most companies have gone into shrinkage mode, saying their goal is to stay flat and make it through this market,” Raoul LeBlanc, an analyst with IHS Inc. in Houston, said. “The current price is unsustainable. Unfortunately, we have to sustain it for a while longer.” To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@ bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net David Papadopoulos, Dan Stets

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Gulfport Energy Fund

Issues Grants

he Foundation for Appalachian Ohio and the Gulfport Energy Fund are pleased to announce the second round of 2015 grant recipients, including those from Guernsey County.

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The Gulfport Energy Fund at FAO supports projects that increase quality of life, create access to opportunities or identify and implement a solution for a community need in the counties where Gulfport Energy operates. Nonprofit and public organizations in Belmont, Guernsey, Harrison and Monroe counties were eligible for these

22 OhioGas&Oil

grants. Nearly $30,000 was awarded to 14 projects serving citizens in these counties during this grant round.

School, part of the Rolling Hills Local School District in Guernsey County, will experience a new aspect of art class as they incorporate Legos “Gulfport Energy is committed into their learning. A $900 grant to giving back to the local will support this STEM-based communities where we operate,” instructional program. said Gulfport Energy CEO and President Mike Moore. “Each Byesville Elementary School, of these grant recipients have also part of the Rolling Hills projects that we feel will have Local School District in Guernsey long term positive impacts in the County, received nearly $2,500 lives of the citizens living in these to support a literacy program that incorporates Legos to local communities.” inspire creativity and encourage Recent grant recipients from innovation. Students will keep journals to record their stories and Guernsey County include: Students at Brook Intermediate ideas over the course of the project.

program for area farmers and hunters to donate venison to local food pantries. The Guernsey County 4-H Club received a $2,000 grant award to launch the CARTEENS program. This educational, peer-led program focuses on first-time teen traffic offenders and their parents. Meadowbrook High School, part of the Rolling Hills Local School District in Guernsey County, received a $1,000 grant award for its Ambassadors program. The Ambassadors program is designed to teach junior and senior students leadership and soft skills necessary for college and career success. This award funds a technology tool for students to use as they facilitate volunteer projects and other programs.

Cambridge Middle School, part of the Cambridge City School District in Guernsey County, received over $1,000 in grant dollars to increase students’ technology skills. Special needs students in the school will learn to use devices as assistive Students facing speech and communication tools. language challenges will have a new tool thanks to a $2,500 Math students at Cambridge grant awarded to the Ohio Valley Middle School, part of the Educational Service Center. This Cambridge City School District will increase the tools available in Guernsey County, will benefit to teachers and students for from individualized learning speech and language therapy in opportunities to supplement Guernsey, Monroe and Noble group classroom instruction counties. through iPad technology. This opportunity was made possible The Plumbers and Pipefitters by a $5,000 grant. Local 495 JATC will offer basic life support and first aid training Residents in Guernsey and to members and local residents Harrison County will benefit thanks to a nearly $2,000 grant from a $500 grant to Farmers and award. This program will provide Hunters Feeding the Hungry. training for approximately 100 This award will support a residents in Guernsey County.

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Music students at Secrest and Byesville Elementary Schools, part of the Rolling Hills Local School District in Guernsey County, will use technology and instruments to combine music lessons with literacy skills. The program, supported by a nearly $2,000 grant award, will use music to increase fluency through rhythmic and melodic activities. COSI on Wheels will visit Secrest Elementary School because of a $1,000 grant to the Secrest Elementary Home & School Organization in Guernsey County. The “Incredible Human Machine” program will teach students about the digestive, nervous, and circulatory systems, as well as how nutrients and exercise keep their body healthy. Zane State College was awarded nearly $2,500 for the Safety Wire Skill Training program. This program will equip students from Belmont, Guernsey, Harrison, Monroe, and Muskingum counties with the safety skills needed in the oil and gas industry.

Other grant recipients include: The Harrison County Emergency Management Agency (HEMA) was awarded a $4,000 award to update its emergency radio communication system. The HEMA works with three fire departments and serves nearly 6,000 people in Harrison and Carroll counties.

Gulfport Energy recently announced a $500,000 gift to the Foundation to continue serving residents where Gulfport Energy operates through the Gulfport Energy Fund. This gift includes the expansion of the Gulfport Energy Fund to serve residents of Jefferson and Noble counties in addition to Belmont, Guernsey, Harrison, and Monroe The Harrison Soil and Water Conservation County citizens. District received a $2,500 grant award to construct an augmented reality sandbox “It is also important to celebrate that these gifts to use during demonstrations teaching the represent continued support and deepening concept of a watershed and its role in an investment in these communities,” continued ecosystem. This program will help adults Brook. “Despite this being a challenging and children in Harrison and Carroll time for their industry, Gulfport is doing counties better understand watersheds even more than before. It speaks volumes and their importance. of Gulfport’s commitment to the region, and is greatly appreciated.” “We are so excited about the difference being made through the Gulfport Energy Fund,” For more information about the Gulfport said Cara Dingus Brook, president and CEO Energy Fund and to sign up for the of the Foundation for Appalachian Ohio. “The Foundation’s e-newsletter announcing projects and programs Gulfport is funding grant opportunities, please visit www. will positively impact the lives of thousands AppalachianOhio.org or call (740) 753-1111. of people across eastern Ohio.”

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OhioGas&Oil 23

Hydrogen Fuel Station

To Be Built In Canton

By Chelsea Shar • Dix Communications ydrogen fuel is no longer a concept of the future in Canton, as SARTA broke ground on the first hydrogen fueling facility in the area, which will accommodate the largest hydrogenpowered bus fleet outside of California.

Taylor added that Ohio invests in public transit by spending over $900 million annually on transit services. “It is a fact (hydrogen fuel) is the way of the future and I’m glad to say that Ohio is participating in leading the way to that future,” Taylor said.

Lt. Gov. Mary Taylor attended the groundbreaking ceremony, The facility will be located at the Canton SARTA headquarters saying that projects like the new hydrogen fuel station “put on Gateway Boulevard. The cost for construction of the station will be $1.6 million. The Ohio Department of Transportation Ohio in the lead.” awarded a grant to SARTA for $500,000 of that. The Federal “The state is obviously very committed to this project, Transit Administration also awarded a grant that will pay committing just under $2 million to the first-of-its-kind for seven hydrogen-fueled buses to be purchased by SARTA project here in Ohio. These were federal funds that could which will operate on routes throughout Stark County. have been used elsewhere, but ODOT was determined and understood that this was a very important and worthy Hydrogen fuel is considered a clean-burning fuel that takes hydrogen, turns it into electricity and emits only water from project for our state,” she said. the tailpipe. According to the Federal Transit Administration, every fuel cell-powered bus put into service in the U.S. could reduce the carbon released into the atmosphere by 100 tons annually and eliminate the need for 9,000 gallons of fuel every year over the life of the vehicle. The U.S. Department of Transportation estimates that for buses running on diesel fuel, that translates into a savings of more than $37,000 per year per vehicle.

Practicing in the areas of Estate Planning; Family Law; Business Law; Probate and Oil & Gas.

SARTA Executive Director Kirk Conrad said that the fuel cell buses will increase fuel mileage up to 50 percent. SARTA has been working with Calstart, a national broker for clean transportation options made up of over 160 member

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companies, for years to come up with a way to fund the hydrogen fuel station.

manufacturing fueling stations.

With the incentives of the state and national governments for switching to clean fuel alternatives, 2016 was the year their planning was made possible.

Paul Dykshorn, director of Men’s Challenge, represents Alliance on the SARTA board. SARTA and Men’s Challenge work together to provide rides for men working to get a job or get job training.

and

He said having the opportunity to be at the groundbreaking ceremony for a hydrogen fuel station was a dream come true given a research paper he did back in the mid-1970s in high school. “(My paper) was titled “Hydrogen Fuel: Fuel of the Future.” The future is here. It took longer than I expected but the future is here,” he said. Eventually the station will be open to the public, allowing for people with hydrogen-powered cars to fill up there. If the station proves successful more pumps can be added in the future.

AL-10065808

“The fact is that the nation and the world is going to continue to search for clean alternatives to fossil fuels. We believe it is critically important to step forward and make Ohio the focal point of growth in this industry. It we hadn’t, people fuel transportation in the world. the investment and jobs associated with fuel cells would have gone elsewhere,” “We’ve got about 7 billion people on Conrad said in a written statement. the planet right now and about a billion of those people have vehicles and even SARTA has also collaborated with Jim now we are stewing in our own juices. Durand, research specialist for the We have got to do something different Center for Automotive Research at about how we fuel transportation and the Ohio State University, where the hydrogen is taking a step into the use of hydrogen fuel has been studied future,” he said. for several years. Durand spoke at the groundbreaking ceremony about the Durand said hydrogen fuel could importance of finding a solution to how also provide opportunity for Ohio’s

businesses

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OhioGas&Oil 25

Asset Protection:

Building The Moat Around Your Oil & Gas Castle

Atty. Frank A. McClure

said, let’s take a little time and delve into protect the assets from being attacked and taken. A hidden asset may be found, Asset Protection. but a protected asset is more secure and Technically, Asset Protection planning is will not be taken. This becomes even the process of organizing your assets and more relevant when one realizes that affairs In Advance to guard against risks the planning involves transferring assets to which the assets would otherwise be from a less protected form of ownership subject. In Advance means exactly what to a more protected form of ownership. it says. Not after the assets are attacked, Therefore, establishing a protection plan not when the assets will be attacked, after the assets have been attacked just but In Advance of any threat. Another won’t work. way of defining Asset Protection is to state what it is not. Asset protection Another way to define Asset Protection does not operate under the concept of is that it is but one component of an hiding assets, but it works in general to integrated Estate Plan. The other two

WO-10430915

ver my years of counselling clients, I have found that the topic of asset protection is not one that many people know much about. Most are truly surprised when I tell them that asset protection should always be integrated into their estate planning needs. “Why have I not heard about this in the past?” they ask. The number one answer is that their advisors did not take the time to explain asset protection enough to find out if it was an important goal of the client. That being

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components are Estate Planning and Financial Planning. Asset step further and built a moat around the stone walls? I think Protection Planning may be viewed as part of the lifetime side you get the point. You don’t need what you don’t need. of Estate Planning. As I have stressed before in these articles, it is important to One of the most feared forms of attack on one’s assets is that of find an advisor who will spend the time with you to determine a lawsuit. People believe that everyone around them is “lawsuit what you want and need and to educate you to make informed happy” and is always looking to find some reason to sue decisions about your future and the use of asset protection them and take their assets. You read in the news continually planning. Remember it is you who will have to decide what or see on TV that someone has sued someone else over what planning you need to protect your family, your assets, and your appears, in many instances, to be a frivolous matter. In fact in future from the predators of this world. The attorney will draft 2009, there were approximately 300 million Americans and the documents for you after you make the decisions. If you 103 million lawsuits filed. There are concerns that there are wish to find out more about protecting your assets, including so many malpractice suits filed against doctors that physician your oil and gas interests please go to our website at www. malpractice insurance has reached such high levels that the fmcclurelaw.com or call our office. We also have complimentary doctors are no longer able to practice. Yes, there do seem to be workshops. more and more suits filed for the right and wrong reasons. It is not only the wealthy who are affected. It affects anyone who has property they wish to protect. The only difference between the best asset protection for one individual as compared to another is not necessarily how much money they have, but how much they want to protect it and to what extent they want to do so. This is what you, as the client, must decide with the help of an attorney. When looking to what level a person wishes to use to protect their assets, it is important to always use the lowest possible level of protection capable of protecting your assets. The idea is very easy to visualize by thinking about your home. Your assets in your home are much more protected than if they were outside with no walls and roof to protect them. We could build the house out of stone instead of wood and this would increase our level of protection. What if we built a high wooden fence around the house, this would definitely increase our protection. What if the fence was made of stone? What if we even went a GasandOilMag.com

OhioGas&Oil 27

Ohio Supreme Court Hearing Arguments on

Constitutional Rights of Mineral Interest Owners

Atty. Daniel H. Plumly n Dec. 15, 2015, the Supreme Court of Ohio held oral arguments in the consolidated cases of Hupp v. Beck Energy Corp. and State ex rel. Claugus Family Farm, L.P. v. Seventh Dist. Court of Appeals. My firm and I had the privilege of representing Claugus Family Farm, L.P. in its efforts to ensure that courts respect the constitutional rights of mineral interest owners in class action lawsuits. In Hupp v. Beck Energy Corp., a handful of mineral owners filed a lawsuit arguing that the form lease used by Beck Energy should be voided because it is a “no term lease” that would allow Beck Energy to hold the mineral rights

indefinitely without drilling a well or paying royalties. Under Ohio law, such no term leases are void as against public policy. If their existing leases with Beck Energy were voided, the mineral owners who filed the lawsuit would be able to sign new leases (possibly providing for signing bonuses and higher royalties). The trial court agreed with the mineral owners, held that they should be allowed to make the same argument on behalf of other mineral owners who had signed leases with Beck Energy in a class action, and held that all such leases were invalid. The trial court, however, did not provide notice to any of these other mineral owners that it had issued a decision affecting their property and lease rights.

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Beck Energy appealed to the Seventh District Court of Appeals seeking to reverse the lower court’s decision invalidating its leases. As part of this process, Beck Energy requested that the leases of all the landowners (not just the landowners who had filed the lawsuit and had notice of what was occurring) should be “tolled,” which would extend the leases beyond the contractual expiration date for the amount of time the lawsuit was pending. The Seventh District agreed to toll the leases but failed to provide any notice of its decision to the affected mineral owners in the class action. The Court of Appeals later decided that the leases were not “no term” leases and reversed the trial court. Combined with the tolling order, this would extend the term of the leases without any notice or GasandOilMag.com

compensation to the affected mineral across the state are invalid “no term leases.” In the Claugus case, the owners. Supreme Court will decide whether The Claugus Family Farm, L.P. had a the Seventh District was required lease with Beck Energy that was set to to provide notice to Claugus and expire approximately a year after the other mineral owners of the lawsuit’s class action lawsuit was filed. When existence before issuing an order which Beck Energy failed to drill a well on negatively affected their property its property despite the impending rights. Beyond determining the rights termination of the lease, Claugus began of mineral owners who signed leases negotiating with other producers. with Beck Energy, the Court’s decision Several months after Claugus entered in Claugus will have broad implications into a lease which would take effect for the rights of “absent” members of upon the termination of its lease with class actions and when they must be Beck Energy, Claugus learned of the informed of the pending action so that tolling order which would force it to they can protect their rights. continue its contract with Beck Energy. As a result, Claugus would lose its There is no set timetable for the signing bonus with the new producer. Supreme Court to issue its decision, but a decision is expected in the coming My firm filed an action with the Ohio months. Supreme Court seeking to prohibit the Seventh District from enforcing Daniel Plumly is a member of Critchfield, Critchfield and Johnston, Ltd., a law firm with extensive the tolling order against Claugus experience in all aspects of the oil and gas industry and ordering it to vacate the tolling which has been representing landowners, producers, order. This action was based upon the drillers, service providers, and others in the industry for over 75 years. con st it ut iona l right of due process, which requires courts to provide notice of pending lawsuits to those who will be affected before issuing orders negatively impacting their property rights. Due process also requires that such affected mineral owners be given an opportunity to Attorneys and Counselors at Law Since 1964 participate in the legal proceedings in order to protect Brad L. Hillyer • James J. Ong their interests.

Connolly, Hillyer, & Ong, Inc.

In the Hupp case, the Supreme Court will decide whether hundreds of oil and gas leases

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30 OhioGas&Oil

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Shale Natural Gas Prices on Continual Drop

Due to New Drilling & Fracturing Methods Jacob Runnels • Record Publishing Co. oth shale Durbin said Dominion East production Ohio is a company that has the a n d equipment, such as pipelines, consumer retail to “help Ohio producers bring natural gas prices their natural gas to market.” He for northeast Ohio are dropping said over the past two decades, to their lowest in years due to Dominion sold its own oil wells changed methods in drilling and to other producers. production. Change in Methods Neil Durbin, senior According to the Division of communications specialist for Oil & Gas at Ohio Department Dominion East Ohio, said the of Natural Resources, natural drop in price can be attributed gas is extracted by a “two-step to new technological changes process of horizontal drilling in drilling and a new carbon and hydraulic fracturing.” With dioxide emissions proposal from this, Durbin said the change in the Environmental Protection supply greatly increased with Agency (EPA). Durbin said an the change in methods used EPA proposal in 2013 had forced to extract natural gas, as there some companies to clean up was a change from vertical to their emissions, leading to some horizontal drilling. facilities either shutting down or making the switch to natural gas. Durbin said vertical drilling involves “drilling a single “[The change was] caused shaft” into the ground to make primarily by a shift in the fuel a single well, while horizontal used to generate electricity,” he drilling allows the shaft to said. “As a result [of new EPA “curve” instead of going regulations], [companies] have straight down, allowing the been shifting from burning pipeline to go “into a horizontal coal to generate electricity to direction” and produce more burning natural gas.” opportunities for extraction.

However, Durbin said this did “Before, you could only drill not lead to a “corresponding a single well with a vertical increase” in natural gas supply. pipe down in the ground,” he said. “Now with the advent “In the last couple of years, what of horizontal drilling, you can we have seen is the development have upwards of more than 10 of shale natural gas fuels here to 12 wells coming off a single in Ohio and the neighboring shaft. The technology has helped states,” he said. “That has led to increase the supply of natural a large increase in the supply of gas to the point where the price natural gas, and that is why the has gone down even less.” prices have gone down.”

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As a natural gas delivery service, Dominion East Ohio gives energy choice program options to its customers. According to information provided by Dominion East Ohio, there are 1.1 million people who are on an energy choice program. Those who do not have a decision in a supplier or do not have governmental involvement in price negotiations are eligible for the standard choice option (SCO), which is what the price drops are affecting. Prices Drop According to information on historical shale daily natural gas prices given by natural gas news organization Natural Gas Intelligence (NGI), there were price increases for the average price for the Marcellus shale formation in 2013. However, the most significant price drop of all recorded information NGI has involves prices in 2015.

SCO prices, according to information from Dominion East Ohio’s website, have been on a similar price drop. From 2014 to 2015, the average price for SCO rates went down 43 percent. The average price for SCO rates in 2014 was $4.90 per thousand cubic feet (mcf), while the 2015 average SCO rate was $2.79 per mcf. The difference in SCO rates shows a drop in the average customer’s gas bill in December, going down from $109.92 in 2014 to $66.12 in 2015. “These abundant shale energy resources have led to lower national and regional market prices,” said Jeff Murphy, vice president and general manager, in a press release. “Even though demand continues to grow, as more natural gas is used for electric generation and our economy continues to recover, increased regional production has resulted in lower market prices.”

The average price for natural gas from these shale divisions Prices for natural gas are expected went down from $3.12 in 2014 to go back up, according to the Henry Hub Natural Gas future to $1.43 in 2015. quotes website. The website Throughout the northeast expects prices to start going back Pennsylvania Marcellus shale up to $2.12 in February and up to formation divisions, average $2.81 in January 2017. prices from 2014 to 2015 for natural gas by volume went down by Durbin said he remains 56 percent for Pennsylvania, 55 confident about the winter percent for Tennessee, 48 percent season. He said, though the for West Virginia and 57 percent season has been “milder than for “other” Marcellus divisions. normal”— requiring less natural The Utica shale formation saw a gas to heat homes—things could 55 percent price drop during this change in the two more months left in winter. time as well.

OhioGas&Oil 31

Ohio Supreme Court Hearing

Mineral Rights Case

Mark Kovac • Dix Capital Bureau rances Batman’s County affirmed ownership of the g r a n d f a t h e r mineral rights. reserved mineral rights on dozens According to documents, “The Batman of properties in Belmont Will conveyed Frances Batman’s severed County, securing ownership on some a mineral interests to her son… and those century ago. conveyances became effective upon the filing of that will of record. … The severed Shortly before Batman died more than 30 mineral interests are properly held by years ago, she filed legal documents in Nile Batman, and appellant was on notice eastern Ohio claiming those interests. of this when its interest was purchased.” But the owners of a couple of the parcels are disputing the ownership rights and are seeking claim to the mineral rights under their land.

Oral arguments Wednesday focused on whether the recording of an out-of-state will was a title transaction — an action that would show the Batmans did not abandon their ownership rights.

Legal counsel for both sides were before the Ohio Supreme Court on Jan. Richard Lancione, representing current 6, attempting to make their cases on landowners, argued that the will was not what happens next. a title transaction. Justices must decide whether Batman’s family still retains the mineral ownership and whether the oil and gas companies holding drilling rights on the parcels have any standing in the case.

“This will simply says I give everything to my son, whatever I have,” he said. “… The problem with the will in its present status is it does nothing. … It doesn’t mention mineral rights. It doesn’t mention anything. … There’s no reference to any property, any mineral rights. It has no Legal counsel for the current property affect except it gives notice to the world owners argue that the Batmans no longer [there is] something out there.” hold a mineral interest in the properties. But Scott Eickelberger, representing “The record is clear that the last person Hess Ohio Development and Hess Ohio with actual title to the severed mineral Resources, said the mineral rights claims interest in this case was J.A. Clark by were clearly spelled out in the affidavit transactions which took place in 1925 and filed with the county before Frances 1926,” they argued in court filings. “There Batman’s death. was no action evidencing ownership of this interest until 1981. Furthermore, “It listed every mineral interest that Frances there is no mention of the mineral interest Batman owned at that time,” he said. or any other property interest in her will.” Justices noted that the will and affidavit But legal counsel for the Batmans counter should have come to light in any title that a will and affidavit filed in Belmont search conducted on affected properties.

32 OhioGas&Oil

“Any title examiner that’s doing due diligence for a drilling company, an energy company, etc., is not going to let that go unnoticed and say I’m not sure what this is so I’m just going to ignore it,” said Chief Justice Maureen O’Connor, adding later, “The affidavit is your first clue, more than a clue. And then you, as title examiners do, go to probate court. You have to figure out the status of these people, are they alive, are they dead, if so where are they located. There’s notices sometimes that are published for all this.” The ruling in the case could have wider implications in Belmont County. “The issue is basically does the filing of this will have any impact on the subject property,” Lancione said. “Just a reminder: There are probably over 100 of these reservations of mineral rights in Belmont County. This decision… is actually going to affect all those cases.”

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