Ohio Gas & Oil Magazine May 2017

GasandOilMag.com

May 2017 • A Free Monthly Publication

Protecting Wayne County Roads

Gas & Oil Industry

Opposes Tax Rate Proposals New Report Examines Costs of ‘Paris Pledge’ IN THIS ISSUE: UTICA SHALE GAS SEES INCREASE IN PRODUCTION

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Table of Contents MAY 2017

4

A Look Ahead Gas & Oil Events

5

Utica Shale Gas Production up 43%

G ROUP PUBLISHER Bill Albrecht

EXECUTIVE EDITORS

7 10

Forum Focuses on Energy Issues

Registration for Shale Insight™ 2017 Is Now Open!

Ray Booth RBooth@dixcom.com Rob Todor RTodor@dixcom.com Lance White LWhite@dixcom.com

11

Engineer Wants to Make Sure Local Roads Are Protected

13

Three Reasons for Investments In Gas-Fired Power

RE G IO NAL E DIT O RS Scott Shriner sshriner@recordpub.com Cathryn Stanley CStanley@dixcom.com

WE KNOW

THE DRILL

Target the sweet spots of the local gas & oil industry by advertising in the Ohio Gas & Oil Magazine.

CO NTE NT CO O RDINAT O R Emily Rumes

erumes@the-daily-record.com

GasandOilMag.com

MAGAZINE

OHIO’S GAS & OIL INDUSTRY NEWS. BUSINESS. TECHNOLOGY.

CALL YOUR LOCAL OHIO GAS & OIL SALES REP. TODAY SEE PAGE 3 FOR MORE INFO 2

OhioGas&Oil

GasandOilMag.com

Table of Contents MAY 2017 ADVER TISING

16

New Report Examines Costs of ‘Paris Pledge’

Kim Brenning Cambridge, Ohio Office kim@daily-jeff.com 740-439-3531

18

Horizontal Drilling Activity Graph

Kelly Gearhart Wooster & Holmes, Ohio Offices KGearhart@the-daily-record.com 330-287-1653

19

Gas & Oil Industry Opposes Tax Rate Proposals

Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200

22

Five Pipeline Projects in the Mix in Southeast Ohio

Mark Kraker Ashland, Ohio Office MKraker@times-gazette.com 419-281-0581

24

Legal Battles Continue in Ohio Over Oil & Gas Rights

Diane K Ringer Kent, Ohio Office DRinger@recordpub.com 330-298-2002

26

Utica Upstream Conference: Workers Needed

Janice Wyatt National Major Accounts Sales Manager jwyatt@recordpub.com 330-541-9450

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Protecting Wayne County Roads

Gas & Oil Industry

Opposes Tax Rate Proposals New Repor t Examines Costs of ‘Paris

Days

Fredricksburg, Ohio 44627

“Gas & Oil” is a monthly publication.

Copyright 2017.

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May 2017 • A Free Monthly Publication

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IN THIS ISSUE: UTICA SHALE GAS

Pledge’

SEES INCREASE IN PRODUC

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“With an operation this large, we have very expensive assets,” Wayne County Engineer Scott Miller said, in reference to the county’s roads and bridges being estthe Rover Pipeline used as , M part arkWof on will be seeing work i s thonTravelers n project. a a p r x ye E Ma Elike sites the one featured on the cover, along the roads and bridges over the coming months as the pipeline project moves forward.

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A Look Ahead

Gas & Oil Events • May 6-7, 2017 To learn more or register, go to www.pioga.org, OOGEEP May 2017 Firefighter Workshop News/Events, PIOGA Events Responding To Oilfield Emergencies at Wayne County Fire & Rescue Training Facility in Apple • June 16, 2017 Creek, Ohio. For full details and info visit SOOGA Spring Clay Shoot at the Lakeside Golf www.oogeep.org/event/oogeep-may-2017Course in Beverly, Ohio. To register, contact firefighter-workshop SOOGA directly at: (740) 374-3203 or mail@ sooga.org. Visit http://sooga.org/ for more info.

• May 26, 2017 SOOGA Spring Golf Outing at the Oxbow Golf • June 28, 2017 Course in Belpre, Ohio. To register, contact PIOGA Pig Roast, Product & Equipment SOOGA directly (740)374-3203 or mail@sooga. Roundup and Technical Conference at the 7 org. Visit http://sooga.org/ for more info.

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Utica Shale Gas

Production up 43%

T

Jackie Stewart • Energy In Depth-Ohio he Ohio Department of Natural Resources (ODNR) has just released much-anticipated Utica Shale well data for the fourth quarter of 2016. And even in a year in which drilling slowed to almost a grinding halt, Ohio Utica Shale natural gas production continued to soar, rising by 43 billion cubic feet (bcf) to 345 billion cubic feet in the fourth quarter, which represents a gain of 14 percent over the previous year’s quarterly result.

The ODNR quarterly report lists 1,561 wells, 1,511 of which reported production. Of the 1,511 wells reporting production: • The average amount of oil produced was 2,392 barrels.

• The average amount of gas produced was 228,664 Mcf. • The average number of fourth quarter days in production was 88.

Even more notably, production rose by over 43 percent from A closer look at the production reports also provides insight 2015 to 2016, rising from 956 bcf to 1.4 trillion cubic feet year- into how each county is doing and, as EID accurately predicted, Belmont County continues to soar in natural over-year! gas production. However, we were pleasantly surprised to Although the fourth quarter clearly showed declines from see Jefferson County making a debut in the fourth quarter, the previous quarter’s results, no doubt due to a lack of topping the charts as hosting the best natural gas well of the drilling, the production data was positive when looking at quarter. Guernsey County and Harrison County showed top the big picture.

Oil production was not as fruitful for Ohio in the fourth quarter and the year as a whole, however. Oil production fell to 3.6 million barrels in the fourth quarter, down 2.8 million barrels, as compared to the prior-year quarter.

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ODNR reported the following natural gas and oil production figures:

Barrels of Oil Mcf of Natural Gas

2015 Quarter 4 (Shale)

2016 Percentage Quarter 4 Change (Shale)

6,380,122

3,577,533

302,431,181 345,241,751

(-43.93%)

Percentage Change

Barrels of Oil

23,054,428

17,949,097

(-22.14%)

Mcf of Natural Gas

955,610,695

1,370,220,834

43.39%

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numbers for oil wells in Ohio, although oil production at large was decidedly low, as compared to 2015.

Finally, kudos to Ascent Resources for having nine of the 10 top natural gas wells this past quarter. Eclipse

Resources and PDC Energy also nabbed top spots in the oil window of the Utica Shale play.

Top 10 Natural Gas Wells RANK

OWNER NAME

COUNTY

TOWNSHIP

WELL NAME

WELL NUMBER

OIL

GAS

1

ASCENT RESOURCES UTICA LLC

JEFFERSON

SMITHFIELD

SMITHFIELD S SMF JF

4H

0

1,635,148

JEFFERSON

SMITHFIELD

SMITHFIELD A

2H

0

1,620,840

2

ASCENT RESOURCES UTICA LLC

3

ASCENT RESOURCES UTICA LLC

BELMONT

RICHLAND

EMERSYN E RCH BL

3H

0

1,619,684

4

ASCENT RESOURCES UTICA LLC

BELMONT

RICHLAND

EMERSYN W RCH BL

1H

0

1,619,632

5

ASCENT RESOURCES UTICA LLC

JEFFERSON

SMITHFIELD

SMITHFIELD N SMF JF

7H

0

1,618,468

6

GULFPORT ENERGY CORPORATION

BELMONT

WAYNE

WARRICK 210463

4A

0

1,598,247

7

ASCENT RESOURCES UTICA LLC

BELMONT

RICHLAND

ROSS SE RCH BL

11H

0

1,595,125

8

ASCENT RESOURCES UTICA LLC

BELMONT

WHEELING

CRAVAT N WHL BL

3H-A

0

1,593,361

9

ASCENT RESOURCES UTICA LLC

BELMONT

RICHLAND

COLEMAN RCH BL

1H

0

1,591,631

10

ASCENT RESOURCES UTICA LLC

JEFFERSON

SMITHFIELD

DALRYMPLE SMF JF

3H

0

1,590,184

Top 10 Oil Wells RANK

OWNER NAME

COUNTY

TOWNSHIP

WELL NAME

WELL NUMBER

OIL

GAS

1

ECLIPSE RESOURCES I LP

GUERNSEY

MILLWOOD

PURPLE HAYES

1H

75,795

558,221

2

PDC ENERGY INC

GUERNSEY

WILLS

NEFF

3H

45,243

206,145

3

ASCENT RESOURCES UTICA LLC

HARRISON

NOTTINGHAM

CORDER W NTG HR

2H

37,607

241,803

4

R E GAS DEVELOPMENT LLC

CARROLL

HARRISON

PERRY UNIT

1H

35,159

199,908

5

ASCENT RESOURCES UTICA LLC

HARRISON

NOTTINGHAM

CORDER W NTG HR

4H

33,920

224,709

6

ASCENT RESOURCES UTICA LLC

GUERNSEY

WILLS

EGGLESTON WLS GR

2H

33,579

142,487

7

ASCENT RESOURCES UTICA LLC

HARRISON

NOTTINGHAM

CORDER E NTG HR

6H-A

31,136

185,959

8

ASCENT RESOURCES UTICA LLC

GUERNSEY

WILLS

EGGLESTON WLS GR

4H

29,422

132,955

9

R E GAS DEVELOPMENT LLC

CARROLL

HARRISON

GOEBELER UNIT

3H

28,369

255,966

10

ASCENT RESOURCES UTICA LLC

GUERNSEY

LONDONDERRY

LAWSON LND GR

6H

27,970

142,452

6

OhioGas&Oil

GasandOilMag.com

Forum Focuses on

Energy Issues

T

he importance of energy production and infrastructure to the Ohio Valley was the main focus at a discussion about energy issues, manufacturing and workforce development at Consumer Energy Alliance’s (CEA) 2017 Ohio Valley Energy and Manufacturing Forum, in Marietta.

The event is the first in a series of energy and manufacturing events this year that have brought together public officials, business and labor leaders and stakeholders to share their perspectives on energy policy in the context of jobs, the economy and U.S. competitiveness and their visions for the future of the Ohio Valley.

Speakers at the Ohio Valley forum included: • Jonathan Hupp, Safety-Service Director, Marietta • Andy Thompson, State Representative • Frank Hoagland, Ohio State Senator • Jay Edwards, Ohio State Representative

• Brittany Thomas Ramos, External Affairs, Cabot Oil and Gas • Mike Archer, President & CEO, Pioneer Group/Pioneer Pipe • Karen L. Facemyer, President, Polymer Alliance Zone • Jeff Dimick, Executive Vice President, Ohio Valley University • Rob Dorans, Legal Counsel, ACT Ohio • Bill Hutchinson, Business Manager, Parkersburg-Marietta Building Trades Council • Troy Ferrell, Business Manager, IBEW Local #972 • Chris Ventura, Midwest Director, CEA Chris Ventura, Midwest Director of CEA, stressed the importance of energy production and infrastructure to the region and the benefits they provide to families and small businesses across the Ohio Valley.

“We thank everyone who took the time to participate and hope we can keep these topics at the forefront of the discussion throughout the region,” Ventura said. “Now, more than ever

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before, energy issues are critical to our region’s future, and we look forward to working together to increase access to more affordable, reliable energy across the Ohio Valley and the U.S. to help lower energy costs for our communities and small businesses and to provide more opportunity for manufacturers and businesses.”

In regards to the importance of energy production and infrastructure, as well as opportunities for progress in the Ohio Valley, Ohio State Representative Jay Edwards stated that energy is the best hope for the region.

“Today’s event was a great way to pull together many interests to the table to talk about facts. Cheap energy and natural gas in the Ohio Valley is our biggest hope for good-paying jobs in the area,” said Edwards.

Building on the discussion about jobs, Archer recognized how Pioneer’s employment has doubled from the start of the shale boom to now.

“We were happy to share our company’s story at the forum today, the development of the energy resources in this region has truly been a ‘game changer’ for Pioneer. We provide construction and fabrication services to the midstream and

downstream companies involved with this development, and this has resulted in good paying jobs for our employees who make their home in the Ohio Valley,” said Archer.

“Ohio, West Virginia and Pennsylvania have already felt a tremendous economic benefit from the Marcellus and Utica shale development. But what we have seen so far is really just the beginning of the potential benefits and growth,” said Ramos.

“Today’s event brought together a diverse group of businesses, labor leaders, elected officials and community leaders as they chart a path forward for the region. We know the abundant resources are here and the continued coordinated effort among these groups will position the Ohio Valley to tap into that potential for its businesses, communities and for its future.”

Tuesday’s forum, Dorans said, was a great place for this discussion.

“The energy sector is multifaceted, thus its often difficult to cover all viewpoints on this important issue. The Forum today did just that, as it brought together key leaders from government, industry, and labor to share our prospective on the issues facing the energy future of Southeastern Ohio and Western West Virginia,” said Dorans. “Events like today’s forum provide the Building Trades an opportunity to better explain how our skilled local workforce can be a vital asset in the region’s economic development future.”

About Consumer Energy Alliance Consumer Energy Alliance (CEA) brings together families, farmers, small businesses, distributors, producers and manufacturers to support America’s energy future. With more than 450,000 members nationwide, our mission is to help ensure stable prices and energy security for households across the country. We believe energy development is something that touches everyone in our nation, and thus it is necessary for all of us to actively engage in the conversation about how we develop our diverse energy resources and energy’s importance to the economy. Learn more at ConsumerEnergyAlliance.org.

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Registration for Shale Insight™

2017 Is Now Open!

C

elebrating its seventh year, the Shale Insight™ 2017 Conference and Exhibit is returning to the epicenter of the Marcellus and Utica Shale plays Sept. 27-28 at the David L. Lawrence Convention Center in Pittsburgh.

This year’s conference once again solidifies the partnership between the Marcellus Shale Coalition (MSC), the Ohio Oil and Gas Association (OOGA) and the West Virginia Oil and Natural Gas Association (WVONGA).

“The successful partnership last year with key regional trade groups in three of the top energy - producing states in

the country is proof positive that Shale Insight™ 2017 will once again be the nation’s leading forum for public-private dialogue on shale development,” said MSC president David Spigelmyer.

Shale Insight™ 2017 will provide participants a front-row seat for the most important discussion on shale development, featuring some of the most prominent industry and government leaders. Attendees will network with the most influential industry executives and innovative thought leaders throughout the two days of technical and public affairs insight sessions, major keynote addresses, and dynamic exhibit hall featuring all the major shale players.

Connolly, Hillyer, & Ong, Inc.

“Shale Insight™ is a tremendous opportunity to showcase our region, and we’re excited to be collaborating once again with the MSC and WVONGA. Building on last year’s success, we will further enhance the conference’s

programming by highlighting the challenges and opportunities in the Appalachian Basin, presenting greater value to attendees,” said OOGA Executive Vice President Shawn Bennett.

The conference will also feature daily educational sessions that explore various technical and public affairsrelated topics.

“This combined effort absolutely poses a unique networking opportunity for attendees. A number of energy producers as well as suppliers and vendors across Appalachia are active in more than one state,” added WVONGA Executive Director Anne Blankenship.

Become a sponsor, host an exhibit, or register for the conference today by visiting www.ShaleInsight.com and capitalize on this unique opportunity to gain unprecedented industry access.

Register now to take advantage of the early rates.

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The 2016 Shale Insight event drew hundreds of industry executives.

GasandOilMag.com

Engineer Wants to

Make Sure Local Roads Are Protected

W

Bobby Warren • GateHouse Media ayne County’s engineer does not want to stop the process for the Rover Pipeline project, but he is slowing it down just a little.

Precision Pipeline’s Jim Cunningham, a supervisor; and Steven Grice, who handles finances in the field and other responsibilities; Craig Newcomb, a third-party chief inspector; and Susan King, who handles outreach for Rover, explained the process and answered questions.

Some of the key personnel who will be working on the project in Wayne County met with a number of elected and local officials Miller said he was pleased to finally have a face-to-face meeting; in early March, including Engineer Scott Miller. however, he said requests for an open permit for overweight trucks will have to be discussed. He is open to the idea, but it will

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take further discussions and most likely a second bond.

There were also requests to haul pipe and equipment on roads that were not part of the previously agreed upon road-use maintenance agreement. Those additional haul roads will need to be evaluated, too.

Cunningham and Grice apologized for the requests. They had sent a worker to the Engineer’s Office to seek the approvals.

They understand the need for an additional bond, which has been done on other projects.

“I’m not trying to stop the process,” Miller said, but he does want proper protections for county and township roads in place.

“We need to pull the horses back and have a pre-construction meeting with the township trustees.”

Some of the overweight vehicles will be hauling more than 80,000 pounds, and it would be unwise for the county to open up roadways to the company’s trucks without a plan in place to address any type of maintenance issues.

“With an operation this large, we have very expensive assets,” Miller said, referring to the county’s roads and bridges.

Signs like this one marked the Rover Pipeline route along local roads just outside of Apple Creek.

Cunningham assured Miller they were on the same page.

Because Precision Pipeline will have workers on site every day, if they notice any type of road or bridge issues, then they will make Miller’s office aware of them.

“Our people can serve as your eyes and get maintenance done as needed,” Cunningham said.

Following the meet-and-greet, Cunningham, Grice and Newcomb spoke further with Miller and Larry Conn, Engineering Services Manager. Conn will be the point person for the Rover project in the Engineer’s Office.

Reporter Bobby Warren can be reached at 330-287-1639 or bwarren@ the-daily-record.com. He is @BobbyWarrenTDR on Twitter.

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GasandOilMag.com

Three Reasons for Investments

In Gas-Fired Power

W

Jackie Stewart • Energy In Depth-Ohio ithin the past few years, there has been a flurry of natural gas-fired power plants sprouting up all over Ohio by non-utility companies. To date, there are 11 projects under construction, announced, approved or completed, with investors eyeing the potential for several more. Together, these 11 projects will add 11,217 megawatts (MW) of electricity, powering over 9.2 million homes while creating an estimated 6,365 new construction jobs. Obviously, this surge of private investment and economic activity is great news, but it does beg the question — why are these gas-fired power plants sprinting to Ohio? Here are three reasons why.

created an environment where it is extremely attractive and cost competitive for private sector companies, like Independent Power Producers (IPPs) to build new natural gas-fired power plants.

Reason #2: Ohio Has An Open Free-Market System

The fact that Ohio is a deregulated state, meaning that Ohio competes for low-cost electricity generation with 13 other states, is another reason IPPs of natural gas-fired power plants plan to invest $9.5 billion in Ohio in order to provide electricity customers in Ohio the best prices made available through an open market system. Ohio “deregulated” and became part of this 13-state open market system, called PJM, in 1999, allowing customer choice in Reason #1: Electricity Production Is Needed their electricity generation while saving consumers an estimated $3 billion per year, according to a recent report by the Ohio State Ohio has lost 10,003 MW of electricity produced from coal-fired University. A recent survey showed that Ohioans are pleased with plants and retired 56 boilers over the past few years. This reality, the consumer savings as well, and favor customer choice by a coupled with the development of Marcellus and Utica shales, has margin of 5 to 1.

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Today, Ohio generates electricity from coal (approximately 59 percent), natural gas (approximately 23 percent), nuclear and a mix of renewables (together approximately 18 percent) through this free-market based system, according to the U.S. Energy Information Administration (EIA). However, given all these gasfired power plants coming to Ohio, this outlook of electricity generation by source will certainly be changing due to the fact that an environment has been created in the Appalachian region (Ohio, Pennsylvania, West Virginia) that has led to the lowest natural gas prices in the developed world.

Reason #3: Cheap, Local, and Abundant Baseload From Natural Gas The core contributor to this natural gas-fired power trend is the fact that natural gas production in the Appalachian region has increased at a rapid pace in recent years due to hydraulic fracturing.

The EIA’s 2015 Drilling Productivity Report shows that from January 2012 to July 2015, natural gas production in the Marcellus and Utica shale regions accounted for 85 percent of the increase in natural gas production in the U.S. And as the EIA’s recent Annual Energy Outlook and Drilling Productivity Reportshows, the agency expects the Marcellus and Utica to continue driving U.S. shale gas production growth going forward.

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Considering this prolific production has reduced natural gas prices at a similar rate, it should come as no surprise that non-utility investors are racing to Ohio to build modern natural gas-fired power plants.

A 1,000MW gas-fired plant requires 145,000 million British Thermal Units (MMBtu) a day and 6.5 million MMBTu/year to operate. In Ohio, the 11 projects under construction, announced, approved or completed will require over 340 million MMBTu/year to operate.

As EID recently reported, Ohio’s natural gas production jumped 852 percent from 2013 to 2015, and in the first three quarters of 2016, production has continued to soar higher. As a recent Forbes article rightly pointed out, “Utica And Marcellus Natural Gas Production Defying The Skeptics”. As the author of the article stated, “And we know that increasing demand induces increasing supply, perhaps the most important fact regularly omitted by the anti-shale industry. In short, there will be plenty of opportunities to produce lots more natural gas because, as a nation, we will be using lots more gas.” (Emphasis Added) In short, Ohio is in a uniquely positive situation to take advantage of a game-changing event, resulting from abundant, local and lowcost natural gas. At the end of the day, it’s important to remember that we currently have $9.5 billion in investment announced from Independent Power Producers and these new gas-fired power plants would not be possible without the prolific natural gas produced from the Utica Shale and fracking.

Not only are these plants providing a much-needed source of end use for Ohio’s natural gas producers, they are improving the environment as well. The EIA recently released a report highlighting the fact that sulfur dioxide (SO2) emissions produced from U.S. power plants have declined 73 percent from 2003 to 2015, thanks in large part to the increased use of natural gas for electricity generation. Indiana, Kentucky and Ohio were once states with the highest rates of SO2 emissions, but thanks to an increased usage of natural gas, each state still significantly reduced its emissions in 2015. Of course as these 11 natural gas power plants go online, we can expect the environment in Ohio to continue to improve as well, considering natural gas emits virtually no SO2. Increased natural gas use has also driven U.S. greenhouse gas emissions to 25-year lows. In fact, EIA has recently noted that the current shift of electrical generation fuels to natural gas has accounted for 68 percent of the 14 percent total reduction in U.S. energy-related CO2 emissions during the last decade.

How many more of these plants will be announced in the Buckeye State? Time will tell. With an open, free-market system where natural gas, coal and renewables are all competing for market share, and with the lowest natural gas priced in the developed world, it’s really not surprising that Independent Power Producers are calling the electricity generation market in Ohio “ground zero.”

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OhioGas&Oil 15

New Report Examines

Costs of ‘Paris Pledge’

M

eeting the commitments President Obama made as part of the Paris climate accord could cost the U.S. economy $3 trillion and 6.5 million industrial sector jobs by 2040, according to a comprehensive new study prepared by NERA Economic Consulting.

“This study does the analysis that the Obama administration should have done in the first place, and it finds that it is next to impossible to meet the Paris pledge gap without major new restrictions on the manufacturing and industrial sectors – restrictions that could reverse the manufacturing renaissance we are currently experiencing, pushing jobs back overseas,” said Karen Harbert, president and CEO of the U.S. The study was commissioned by the American Council for Chamber’s Institute for 21st Century Energy.

Capital Formation with support from the U.S. Chamber of Commerce Institute for 21st Century Energy.

The report, “Impacts of Greenhouse Gas Regulations on the Industrial Sector,” explores several potential scenarios under which the United States could meet the Obama administration’s international emissions pledge as part of the 2015 Paris Agreement. Existing regulations fall well short of achieving former-President Obama’s goal of a 26 percent to 28 percent reduction in net emissions from the 2005 level by 2025, and an 80 percent reduction by 2040.

The study provides the first detailed analysis of the costs and impacts associated with the additional measures that would be needed to close this “gap.”

“This groundbreaking study is the first of its kind to showcase the economic pain and job loss that would result from imposing ever-tightening climate policy regulations on the U.S. industrial sector,” said Margo Thorning, senior economic policy advisor to the American Council for Capital Formation Center for Policy Research. “What’s more, the regulatory approach is unlikely to succeed in reducing global emissions as our industrial and manufacturing activity will seek a more-friendly regulatory environment, thereby undermining U.S. climate goals.”

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The report’s central scenario projects that additional regulatory actions necessary to meet the Paris target would by 2025 reduce U.S. GDP by $250 billion, reduce economy-wide employment by 2.7 million jobs, and lower household income by $160.

Industrial sector jobs would fall by 1.1 million, with the cement, iron and steel, and petroleum refining sectors suffering the largest production losses. Under the study’s core scenario, the industrial 2025 output declines by about 21 percent, 20 percent, and 11 percent, respectively. Higher energy costs also hurt domestic demand and the international competitiveness of U.S. industry, leading to a greater share of industrial demand being met by imports.

The study also examines the potential longer-term impacts of placing U.S. emissions on a trajectory to achieve the Obama administration’s long-term emissions goal of an 80 percent reduction by 2050. It found that in 2040, the last year of the model run, GDP would be reduced by nearly $3 trillion, industrial employment would fall by 6.5 million jobs, and average household income would decrease by $7,000.

Another finding is that emissions “leakage” to other countries is a significant factor, and ultimately renders the U.S. regulatory approach ineffective at reducing global carbon emissions. In 2025, 33 percent of industrial sector emissions reductions are transferred to other countries as production shifts from the United State to other parts of the world. The GasandOilMag.com

industrial products produced in these plants would then be imported back into the United States.

The study includes specific state impacts for four key manufacturing states—Michigan, Missouri, Pennsylvania, and Ohio.

And finally, in Pennsylvania, state GDP would decline by 1.8 percent in 2025, household income by $1,000, and employment by 140,000 jobs — including 26,000 manufacturing and industrial jobs. The hardest hit sectors would be iron and steel and cement production, with output declining by 16 percent and 15 percent, respectively.

In Michigan, state GDP would decline by 0.8 percent in 2025, household income by $180, and employment by 74,000 jobs — including 13,000 manufacturing and industrial jobs. The hardest hit sectors would be iron and steel, and refining, with output declining by 14 percent and 9 percent, respectively.

The American Council for Capital Formation Center for Policy Research is a nonprofit, nonpartisan economic policy organization dedicated to the advocacy of pro-growth tax, energy, environmental, regulatory, trade and economic policies that encourage saving and investment.

In Missouri, state GDP would decline by 1 percent in 2025, household income by $190, and employment by 53,000 jobs — including 7,000 manufacturing and industrial jobs. The hardest hit sectors would be iron and steel and cement, with output declining by 20 percent and 18 percent, respectively.

The mission of the U.S. Chamber of Commerce’s Institute for 21st Century Energy is to unify policymakers, regulators, business leaders, and the American public behind a common sense energy strategy to help keep America secure, prosperous, and clean. Through policy development, education, and advocacy, the Institute is building support for meaningful action at the local, state, national, and international levels.

In Ohio, state GDP would decline by 1.2 percent in 2025, household income by $390, and employment by 110,000 jobs — including 24,000 manufacturing and industrial jobs. The hardest hit sectors would be cement and iron and steel, with output declining by 16 percent and 13 percent, respectively.

The full report can be found at nera.com/publications.html under keywords “greenhouse gas”.

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GasandOilMag.com

Gas & Oil Industry

Opposes Tax Rate Proposals

I

Mark Kovac • GateHouse Media ndustry groups continue to rail against a proposal by Gov. John Kasich to raise tax rates on oil and gas produced via horizontal hydraulic fracturing.

During testimony before the Ohio House’s Ways and Means Committee, representatives of the American Petroleum Institute’s Ohio office and the Ohio Oil and Gas Association told lawmakers tax hike would cost the state jobs and investment.

“The fact is that Ohio drillers have been operating at a competitive disadvantage to other oil and natural gas producing states with our current severance tax,” Chris Zeigler, executive director of API Ohio, said in his submitted testimony. “An increased severance tax is simply illogical for encouraging continued development of shale resources in our state.”

Shawn Bennett, executive vice president of the OOGA, added in separate submitted testimony, “I want to be clear.

The Utica is a shale play, not the only shale play around. We are lucky that Ohio is part of the shale revolution. However, when you look or try to compare the Utica play in Ohio to other states, we have to understand that not all shale is created equal. If you look at recent investments, companies are tripping over themselves to gain a larger position in plays like the Permian Basin in Texas. What you don’t see is the same happening in Ohio… The state of Ohio, by implementing this tax, would add itself to a list of deterring parties, and in doing so, risks standing in opposition to those who would suffer the most as a consequence of its passage — Ohio’s working families.”

Zeigler and Bennett likely were preaching to the choir, as Republican legislative leaders, as they have in past years when the governor has proposed a severance tax increase,

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OhioGas&Oil 19

aren’t supporting the proposal this time around.

“I don’t anticipate severance tax happening,” House Speaker Cliff Rosenberger (R-Clarksville) told reporters. “I’m going to definitely make sure… that comes out of the budget.”

the income tax, that provides for a much better economy,” he said, adding, “We’re saying that it makes sense for people who smoke cigarettes or drink alcohol or take our resources out of the ground to pay more so that we can have a lower income tax.”

Kasich continues to defend the proposal, however, saying Ohio’s rates are lower than other oil- and gas-producing states. The governor’s executive budget includes a small income tax cut, paid for through the severance tax increase, hikes to rates on alcohol, cigarettes and other tobacco and vaping products and a broadening of sales tax, among other policy changes.

He called opposition to his severance tax proposal a “lobbyist’s dream” — “… The governor proposes that some taxes go up so others go down but we don’t care about the ones that are going down, we only care about the ones that are going up, so I can get hired as a lobbyist and go in the legislature and block it. It’s a full employment for lobbyists bill.”

Kasich said the tax shift is appropriate to help bring down Ohio’s income tax rates.

But Zeigler and Bennett said in testimony that the current severance tax setup in the state is working as it should, and upping rates at a time when energy prices are down will further hamper the industry.

“If we tax a company that’s pulling our resources out of Ohio and moves to Texas where they have no income tax, where we’re essentially subsidizing their no income tax, to be able to tax them and still be able to have one of the lowest severance tax rates and take that revenue to reduce

“Ohio’s current severance tax system works perfectly for its intended purpose, which is to fund the regulatory program” —Chris Zeigler “Increased oil and natural gas production equates to increased funds for Ohio’s oil and natural gas regulatory program. Under today’s system, every producer, from the state’s conventional operators to the recent development by unconventional operators, funds Ohio’s robust regulatory program. … The severance tax should not be used to fund a wide-scale reduction in some other tax of general application or for any other purpose outside current law.”

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Bennett added in his testimony, “The reality is that we have a severance tax that works for Ohio. Our volumetric tax is applied to all extractive industries for the sole purpose of funding our regulatory bodies… This current proposal is attempting to pick winners and losers. The oil and gas industry is the only extractive industry being singled out.

The coal, salt and aggregate industries all retain their volumetric status while oil and gas is now singled out and given a gross receipts tax and singled out for the sole purpose of generating perceived additional income for the state’s general revenue fund.”

Marc Kovac covers the Ohio Statehouse for GateHouse Media.

Contact him at mkovac@recordpub.com or on Twitter at OhioCapitalBlog.

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OhioGas&Oil 21

Five Pipeline Projects in the Mix in Southeast Ohio

G

Dan Davis • GateHouse Ohio Media uernsey County and three neighboring counties rank in Ohio’s top 10 for Utica shale gas and oil production.

Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, shared these statistics with attendees of the Cambridge Area Chamber of Commerce’s April 6 Coffee & Commerce informational meeting.

“We have the lowest cost natural gas in the industrialized world,” he said. “If you put the Appalachian basin as its own country, we would be the third largest natural gas producer in the world.”

As of April 1, Guernsey County ranks sixth with 193 wells permitted. Noble County slots in as fifth, with 209 permitted

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Ohio Oil and Gas Association Director of Public Relations Mike Chadsey, left, updated attendees at the Cambridge Area Chamber of Commerce’s April 6 Coffee & Commerce informational meeting on the latest area gas and oil developments. The Eastern Ohio Development Alliance sponsored the event, represented at the meeting by Executive Director James R. Schoch. wells. Harrison and Belmont counties occupy the third and second spots with 385 and 403 permitted wells, respectively.

Wearing the crown is Carroll County. In the county are 509 permitted wells.

The top 10 producing counties — which also includes Monroe (fourth) and Columbiana, Jefferson, Mahoning and Washington counties (seventh through 10th, respectively) — account for 2,393 permitted wells combined. The area has 1,911 drilled wells, with 1,525 producing.

Chadsey discussed five pipeline projects in the region, either pending, approved, under construction or operating.

Collectively they will span 1,272 miles and represent an $8.168 billion investment capable of delivering 6.75 billion cubic feet per day of natural gas.

The gas will, among other things, fuel a dozen new natural gas power plants, including the Guernsey Power Station in Guernsey County. The project was recently announced. A $1 billion investment, the plant will produce 1,650 megawatts and serve 1,000,000 households, creating 525 construction jobs.

GasandOilMag.com

Collectively, the dozen power plants represent a $10.02 billion investment in the Buckeye State. Output will be 11,702 megawatts, able to serve 9.8 million households. The projects will require 6,765 construction-related jobs.

Some of the natural gas will make its way to new ethane cracker plants. A trio are in the works: one is approved in Beaver County, Pa.; a Wood County, W.Va., plant is stalled; approval of the Belmont County plant is pending, Chadsey said.

Collectively, the three plants represent a $15 billion investment.

and Guernsey counties locally — $43.7 million has been paid, all paid to local governments and school districts.

Between 2016 and 2026, as much as $250 million is expected to be paid in taxes in the top six counties.

Property taxes paid per local county are as follows: • Guernsey County — 2010: $218959.00; 2011: $204,000.00; 2012: $279,382.00; 2013: $379,962.00; 2014: $1,105,735.00; 2015: $2,711,412.00

• Harrison County — 2010: $45,875.00; 2011: $42,005.00; 2012: $181,697.00; 2013: $796,460.00; 2014: $2,036,462.00; 2015: $7,931,754.00.

To further understand the impact of the gas and oil industry locally, consider the $2 million “pre-shale” budget of the East Guernsey Local School District more than doubled “post-shale” to $4.1 million, Chadsey said.

The Eastern Ohio Development Alliance sponsored the event. Executive Director James R. Schoch was on hand.

Combined, the pipelines, power plants and cracker plants represent more than $33 billion in investments.

• Noble County — 2010: $113,139.00; 2011: $172,945.00; 2012: $99,443.00; 2013: $154,947.00; 2014: $369,989.00; 2015: $3,153,112.00

The Southgate Hotel hosted the Coffee & Commerce. The next event is slated to be held May 4 with presented Norm Shade of ACI Services.

Chadsey also discussed the “ad valorem” tax revenues generated by the gas and oil industry. In the top six producing counties — Belmont, Harrison, Noble

• Belmont County — 2010: $3,239.73; 2011: $5,889.65; 2012: $5,948.06; 2013: $25,862.85; 2014: $758,915.83; 2015: $3,834,014.31

Dan Davis can be reached at ddavis@dailyjeff.com.

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OhioGas&Oil 23

Legal Battles Continue in Ohio

Over Oil & Gas Rights

M

David J. Wigham • Attorney any Ohio lawsuits b e t w e e n surface owners and mineral owners over ownership of valuable oil and gas rights are being filed, and many others remain active, even after the Supreme Court of Ohio issued its sweeping decision on September 15, 2016 in Corban v. Chesapeake Exploration, LLC, 2016-Ohio-5796. Corban held that the 1989 version of the Ohio Dormant Minerals Act (“1989 DMA”) could only be relied upon by surface owners in cases brought before June 30, 2006. The Court also held that the 1989 DMA was nothing more than an evidentiary mechanism that assisted in proving a claim for abandonment of minerals and did not automatically abandon and vest ownership of severed mineral rights in the surface owners at that time. As a result, surface owners must first follow the mandatory statutory notice procedure set forth in the 2006 version of the Ohio Dormant Minerals Act (“2006 DMA”) before an abandonment case can be filed.

In a prior ruling regarding the 2006 DMA, Dodd v. Croskey, 2015-Ohio-2362, the Ohio Supreme Court held that even if there is no savings event in the chain of title, a mineral owner’s claim to preserve a mineral interest filed in compliance with R.C. 5301.56(H) is sufficient to prevent the mineral interest from being deemed abandoned to the surface owner. Now, if a surface owner follows the notice provisions of the 2006 DMA and any mineral owner files a Notice of Preservation, that Notice “preserves the rights of all holders of a mineral interest” from being deemed abandoned.

The Corban ruling (coupled with prior the Dodd decision) dealt a fatal blow to many surface owners attempting to reclaim ownership of mineral rights and royalty interests severed from their property, many occurring more than 100 years ago.

24 OhioGas&Oil

However, the legal issues in Ohio courts abandoned – and can be preserved -- under over valuable mineral rights are far from the 2006 DMA. The ruling is potentially a over. double-edged sword for surface owners, because royalty owners would be able Surface owners still have an array of to preserve their interests under the 2006 potential quiet title and declaratory DMA as well. In the case of a severed judgment claims to assert when seeking royalty interest, the surface owner would to reclaim ownership of oil and gas rights. still own the executive rights to their In case of severed royalty interests, surface property, meaning that they still have the owners first must carefully review the deed right to sign an oil and gas lease and receive language. If the royalty interest was severed a signing bonus. prior to 1925 and does not contain words of inheritance, then the surface owner may Moreover, surface owners are still able assert a “lack of words of inheritance” claim. to assert claims under the 2006 DMA, the Prior to the enactment of G.C. 8510-1 in Marketable Title Act and for common law 1925 (now R.C. 5301.02), Ohio law required abandonment. In the case of older oil and the use of words of inheritance to create gas reservations, there is a much greater a fee simple estate in the reserving party. the likelihood that the heirs are numerous, The words of inheritance or perpetuity many do not know or possible like each were required to show that an owner’s other or are not in contact, many are living interest was not limited to his life alone, but out of state, many are dead, and many own passed to his heirs or beneficiaries. If the too small of an interest to justify the legal royalty reservation did not contain words expense, many are unable to document of inheritance (such as “heirs and assigns” heirship, and many are simply not language), it could be held that the royalty interested in getting involved. These factors interest was owned as a life estate, thereby could open the door for surface owners to allowing the surface owner to bring a claim bring claims against the heirs of the original that the reserved royalty interest expired reservists seeking to abandon the mineral upon the death of the reserving party. interests held by distant heirs. Even if a few [Note that this very issue is pending before heirs appear, chances are that many will the Seventh District Court of Appeals in a not, meaning that the surface owner should case known as Headley v. Ackerman, Case be able to regain at least a portion of the oil No. 2016-MO-0010, which has been fully and gas rights. briefed and is awaiting oral argument.]

Another consequence of the Corban ruling Also, if reserved mineral interest was in the is beginning to impact surface owners who nature of a royalty interest – as opposed to are already leased, drilled and receiving an oil and gas interest – surface owners also royalties. Utica producers are now have possible 2006 DMA claims and may beginning to suspend royalty payments to follow the abandonment procedures in the certain surface owners who have mineral 2006 DMA. This based on a recent decision severances covering their property that from the Seventh Appellate District known were assumed to be abandoned. Producers as Devitis v. Draper, 2017-Ohio-1136. In are understandably reluctant to pay Devitis, an Ohio Court of Appeals held for royalties based on mineral interests that the first time that a royalty interest in an oil may be subject to a dispute and then run and gas estate is subject to the provisions of the risk of paying royalties twice. Some R.C. 5301.56 (the 2006 DMA). This holding producers are requiring a court order makes clarifies that royalty interests can be entered in a declaratory judgment lawsuit GasandOilMag.com

to quiet title to disputed mineral rights before payment for royalties can commence or resume. This situation has resulted in significant confusion and frustration for surface owners and mineral owners alike.

Many producers are also reviewing surface owners’ compliance with the mandatory 2006 DMA abandonment procedure with heightened scrutiny. The 2006 DMA abandonment procedure is often difficult for surface owners to accomplish and is easier for mineral interest holders to defeat. Under the 2006 DMA, a surface owner must locate the current “holders” or owners of a severed mineral interest and attempt to notify those holders by certified mail, return receipt requested, at their last known address. Once service of the abandonment notice cannot be completed by certified mail, the surface owners may then publish the abandonment notice in a newspaper of general circulation in which the property is located. If even one mineral interest owner comes forward

and files an Affidavit of Preservation, the surface owner’s abandonment fails as to all mineral interest owners.

Prior to Corban, many surface owners were skipping the mandatory step in the 2006 DMA abandonment procedure that requires attempted certified mail service upon mineral holders or their “successors and assignees,” and were proceeding directly to publication. One of the legal issues likely to arise in the next wave of DMA litigation (now that the 1989 DMA is no longer available) will be: whether a surface owner’s failure to attempt certified mail service prior to publishing an abandonment notice will render the surface owner’s 2006 DMA abandonment procedure invalid as to the mineral interest at issue.

In short, even after Corban, surface owners and mineral interest owners in Ohio continue to face significant legal hurdles over the ownership of valuable oil and

gas rights and royalties. The additional hurdles brought about by Corban are not insurmountable and in many instances, surface owners may be able to gain ownership of at least of portion of oil and gas rights beneath their property. In other cases, the mineral owner will be able to avoid abandonment and retain ownership.

This conflict highlights the importance of retaining experienced oil and gas counsel to advise clients as to title to severed royalty and oil and gas interests. Until and unless these title issues are resolved

by Court order, many surface owners and mineral interest owners are finding that, after Corban, producers are unwilling to recognize disputed mineral interests and release bonus and royalty payments.

David J. Wigham is a second-generation Ohio oil and gas attorney with more than 25 years of experience in the industry. He practices at the law firm of Roetzel & Andress and maintains offices in Akron and Wooster, Ohio. He can be reached at 330-762-7969.

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Utica Upstream Conference:

Workers Needed

T

Sara Klein • GateHouse Media he natural gas is available, pipelines to move it are in the works, and big plans are afoot for electrical and petrochemical plants that will use it – but the North American shale industry could face setbacks because of a shortage that only humans can fill.

That was the sobering news at the April 5 Utica Upstream conference held in North Canton, Ohio, when Dan Schweitzer, director of Stark State College’s ShaleNET and oil and gas technologies programs, presented about the scarcity of well-trained workers for the shale industry’s future.

Schweitzer said projects such as PTT Global’s multimillion-dollar ethane cracker plant, slated for construction in Dilles Bottom, Ohio, have remained on the drawing board while companies figure out how to find the Agricultural & Industrial Service & Repair Hoses

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workforce needed to operate and maintain those facilities.

According to data Schweitzer presented from the Underground Contractors Workforce Alliance, 5,750 additional crews for U.S. pipeline construction projects will be needed by 2020, and 11,000 will be needed by 2030.

While labor crews in 2008 were staffed with workers who had more than five years of experience, current crews are diluted with workers who have less than a year of training, a situation he pointed out is important when safety on the job is a prime concern.

“All pipeline projects have abnormal incidents. If you have someone who doesn’t have experience, they might not recognize them or respond to them properly,” he explained.

Schweitzer explained that technical colleges have provided a pipeline of students to colleges, universities and unions, which have in the past been major providers of the energy industry’s workforce.

Unions with utility companies have provided a particularly large number of workers. However, Schweitzer said 5,000 independent contractors are currently responsible for most of Ohio’s pipeline construction versus only about 300 utility companies.

The workforce shortage has led some contractors to take on workers who have little training, which compounds the shortage of students that technical colleges are seeing, said Schweitzer.

Technical colleges like Stark State have worked with industry partners to develop hands-on training for students that aligns with the industry’s needs.

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Schweitzer said Stark State’s oil and gas program is designed to teach a core set of broadly applicable industrial skills that include safety; general labor and power equipment operation; skilled trades, such as pipefitting, welding, and HVAC work; instrumentation and electronics; qualifications for pipeline utility operation; work with pumps and mechanical drive components; hydraulics and pneumatics; and predictive maintenance.

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The college’s ShaleNET model includes a one-year certificate program as well as a two-year associate of applied science degree that Schweitzer said results in graduates who have been screened and are prepared with hands-on experience and peer management experience for job realities. Graduates can be promoted in a shorter time and are therefore easier for a company to keep on its workforce, an element that attracts companies like Chesapeake Energy, which Schweitzer said sends employees through the program’s courses.

message is getting out,” he stated.

In 2016 Stark State implemented a social media campaign to advertise tuition costs of less than $500 per student for high school students who had a 3.0 grade point average and declared a college major in oil and gas or environmental studies. The campaign did not attract a single recruit, said Schweitzer.

However, program coordinators are focusing their efforts on attracting more high school students, rather than adults, because adults often come from challenging backgrounds that raise concerns among employers. Although the college’s program offers these adult students essential hands-on training for the shale industry, companies are hesitant to hire them.

The ShaleNET program continues to offer several scholarships, including funds from industry partners Marathon and Chevron, to help high school graduates and older adults pay for tuition whether they become fullor part-time students. One scholarship from Marathon is especially targeted for minorities and women, a group that Schweitzer agreed is an untapped resource of workers.

Jean Barbato, the program’s student case manager, noted that it’s also difficult to convince parents that their kids can find good jobs after graduating from the program.

Schweitzer admitted that adults who have been laid off from other jobs and are seeking a career transition represent an increasing source of students for the shale program.

“Here’s where I would implore the industry. It’s very difficult...to find a job for someone who has a DUI or drug offense,” said Schweitzer. “Given that we have an increase in those people who come to us...it’s very difficult to find those people a job. It’s hard to find them scholarships.

They have no options,” he added.

“ShaleNET maxed at 90. We started at about 100,” Schweitzer said, adding that the program had fewer than 60 students by January of this year.

Reasons for the shortage Secondary-school STEM initiatives could, ironically, be failing technical colleges. Schweitzer said STEM education tends to steer more students towards wanting advanced degrees, adding to the effects of the last decade’s emphasis on the four-year college degree.

The result is students who would rather become engineers or scientists than the technicians who help them.

Getting the message out to prospective students about the financial viability of jobs they can access with a twoyear degree from the ShaleNET program has been another challenge, said Schweitzer.

“Twenty dollars an hour is an average of what our students will get. They’re good jobs. And I just don’t think that

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To date, 100 percent of the ShaleNET program’s graduates have found employment in the oil and gas industry, and the jobs they have filled pay high wages. But Schweitzer said high school students still don’t realize how well they could do with an associate’s degree.

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