July 2015 Gas & Oil Magazine-Ohio edition

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EPA: Drinking water safe Focus on Pipelines The FUN side: Shale-abration, EnergyFest Ohio Task Force to negotiate tax Senate President Keith Faber

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Gas & Oil

Ohio Edition

July 2015

Table of Contents 4

STEADY INCREASE IN WELLS LEADS TO STEADY INCREASE IN PRODUCTION

6

EMERGENCY RESPONSE TRAINING ESSENTIAL

8

U.S. NOW LARGEST OIL & NATURAL GAS PRODUCER

9

U.S. OIL PRODUCTION REDUCE GULF COAST IMPORTS

10

OPINION: ENERGY FROM EASTERN, SOUTHEASTERN OHIO COULD HAVE IMPACT WORLDWIDE

12

OPINION: ARCTIC DRILLING WOULD BENEFIT OHIO

14

OPINION: GETTING SERIOUS ABOUT THE SEVERANCE TAX, MAYBE

17

NEW COMPANY HAS EYE TOWARDS GAS AND OIL INDUSTRY

18

ASSET PROTECTION OF OIL AND GAS INTERESTS: WHAT IT IS AND WHAT IT IS NOT!

20

NEGOTIATING PIPELINE PROJECTS

23

OOGA, DOMINION EAST NEGOTIATE AGREEMENT

24

AN EYE IN THE SKY: SKYWATCH MONITORS EXISTING GAS, ENERGY PIPELINES

27 28-31

DEVELOPMENTS FOR AREA LANDOWNERS AFFECTED BY THE ROVER PIPELINE THE FUN SIDE: SHALE-ABRATION, ENERGYFEST

28

COUNTRY ENERGY FEST OFFERS FOOD, FUN AND ENTERTAINMENT WITH A SOUTHERN DRAWL

29

RAIN DOESN’T DAMPEN ENERGY AT SHALE-ABRATION

31

VIP RECEPTION KICKS OFF SHALE-ABRATION

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REGIONAL EDITORS Cathryn Stanley CStanley@dixcom.com Niki Wolfe NWolfe@dixcom.com Judie Perkowski JPerkowski@dixcom.com Erica Peterson EPeterson@dixcom.com

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July 2015

33

WIDGET ALLOWS INTERACTIVE VISUALS FROM ERA

34

STUDY DETAILS RISK OF SEVERANCE TAX

35

DOT AND EDGEMARC TEAM UP TO REMOVE OLD RAILROAD BRIDGE

36

OHIO TASK FORCE TO NEGOTIATE SEVERANCE TAX

39

KIMBLE REDUCES CARBON FOOTPRINT THROUGH COG

41

ROVER PIPELINE TO ADD $135M IN TAX REVENUE

42

TAX BREAK FOR NATURAL GAS VEHICLES?

43

OHIO WELL ACTIVITY

44

HYDRAULIC FRACTURING WATER CYCLE

46

INDIVIDUALS OWN MINERAL RIGHTS, NOT THE STATE

48

PEA: NO WIDESPREAD HARM TO DRINKING WATER FROM FRANKING

50

CUSTOM COMPRESSION SYSTEMS OFFERS FULL PACKAGE

52

THE PIPELINE CONNECTION

54

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY

58

OIL AND GAS PROFESSIONALS OUTLINE PIPELINE PROJECTS

60

FEDERAL JUDGE WANTS DELAY EXPLAINED

62

UPCOMING EVENTS

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“Gas & Oil” is a monthly publication jointly produced by Dix Communications.

Copyright 2015.

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Gas & Oil

Ohio Edition

July 2015

s l l e w n i e s a e r c n i y d Stea leads to n o i t c u d o r p n i e s a e r c n i y d a e st Andrew Bugel Dix Communications

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1036319400

he Ohio Department of Natural Resources has continued to see a steady increase in production of gas and oil.

ODNR recently released its first quarter production numbers for oil and gas in the beginning of June.

According to the numbers, oil production increased 24 percent from the fourth quarter of production in 2014.

There are a variety of contributing factors that have lead to the increase in production. According to ODNR spokesman Eric Heis, one reason is that more people are having wells installed. With more wells being put in place, more companies are becoming involved in the process. Production numbers are submitted by a certain date by each company that is involved.

“We have seen an increase in wells,” Heis said. “The more wells you have, the better you understand the technology.

The more companies that get involved with the wells generates more technology and helps improve the understanding of the process, which makes everything easier. A lot of people thought that the lower gas prices we saw at the end of last year would hurt production because companies would shut down, but that ended up not being the case.”

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Last year, it was reported that the gas and oil productions increased 25 percent from 2013, so while the numbers are good for the first quarter of 2015, so far the ODNR is seeing about the same consistent increase year to year.

“Last year was just a big year as far as production and the increase in wells,” Heis said. “So this quarter’s increase was right around the same amount that we saw last year.

The first quarter of 2015 saw 4,401,687 barrels of oil and 183,585,256 metric cubic feet of natural gas produced. 877 of the 926 reported oil wells across the state reported production. This was a 12 percent increase in wells for the first quarter over the last quarter of 2014. According to Heis, one reason why 49 wells did not produce anything may have to do with waiting to receive their permits for use.

“In the U.S., if you own land, you own the mineral rights to that land,” Heis said. “We are one of the few countries that allow this. This means if you want a well on your property, you can have one, but there is a process to it. You need to obtain a drilling permit for one and sometimes permits come fast and sometimes they don’t. It’s a different length process depending on the situation.”

Of the 877 wells, the average amount of oil produced was 5,019 barrels. The average amount of gas produced was 209,333 metric cubic feet and the average amount of days in production was 80.

The main concern is making sure that there is no negative impact on the resources. Goals referring to specific numbers of production are not as important.

“We expect to see steady numbers consistently,” Heis said. “We don’t really have a specific goal or idea as far as numbers just as long as the resources are not impacted. The companies may have specific goals but we are just glad to see that everything is going well. We have no issues.”

Contact this reporter at 330-298-1123 or abugel@recordpub.com

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July 2015

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Gas & Oil

July 2015

Ohio Edition

Emergency response

training essential

G

RANVILLE, OH — Firefighters from across Ohio recently completed the Ohio Oil and Gas Energy Education Program’s oilfield emergency response training program. The training educates first responders how to effectively manage and address potential and rare oilfield incidents.

Forty-nine first responders from 24 departments now join more than 1,300 firefighters who have attended OOGEEP’s workshops, funded completely by Ohio’s oil and gas producers. Now in its 14th year, the program was the first of its kind in the country.

“In only two days, I had training that will last for the rest of my career,” said Lt. Alan Graham from the Perry Township Volunteer Fire Department in Muskingum County.

“Everyone can take something from this course whether you have one year of experience or 10.”

“It’s amazing the great lengths the oil and gas industry goes to in order to ensure safe conditions in the communities in which they are working,” said Perry Township VFD Lt. Josh Robinson. “This was excellent training that was informative from start to finish.”

First responders from Cassell Station VFD and Liberty Community VFD were among the ”graduates” of the training program.

“Every emergency responder should take this training,” said firefighter Dallas Waggoner from the Liberty Community Volunteer Fire Department.

“The workshop was great hands-on training,” said firefighter Melissa Bell from the Liberty Community VFD. “This is very relevant considering the growing oil and gas industry in our area.”

The accredited and certified workshops are two-day sessions that include classroom instruction and field demonstrations. First responders learn basic information regarding Ohio oil and gas activity and development; differences between emergencies and non-emergencies or common oilfield practices; common terminology and types of equipment used during oilfield activity; and hands-on techniques for responding to potential incidents, including live demonstrations.

“While our industry works tirelessly to prevent all incidents, it’s imperative that our first responders know what to

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July 2015

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Firefighters from across Ohio who recently completed the Ohio Oil and Gas Energy Education Program’s oilfield emergency response training program this month. OOGEEP holds multiple training sessions each year at a dedicated training center at the Wayne County Regional Fire and Rescue Training Facility.

do in the unusual event something does happen,” said Marty Miller, chairman, OOGEEP Board of Directors and vice president of operations, Alliance Petroleum Corporation. “Ohio’s first responders are our family, friends and neighbors and the people of the state’s oil and gas industry will continue to do everything we can to help keep them and our communities safe.”

The training curriculum was collaboratively developed by OOGEEP, the oil and gas industry, regulatory agencies, firefighters and emergency response experts and meets state and federal fire safety standards.

“This training provides vital information that keeps firefighters and Ohioans safe,” said OOGEEP Executive Director Rhonda Reda. “The men and women of Ohio’s oil and gas industry live and work in the communities where they operate, so this training protects us all. Offering this type of training is one of the most important services OOGEEP provides on behalf of the industry.”

The program is endorsed by the Ohio Fire Chief’s Association, Ohio Society of Fire Service Instructors and Ohio Fire and Emergency Services Foundation. OOGEEP holds multiple training sessions each year at a dedicated training center at the Wayne County Regional Fire and

Rescue Training Facility.

The Ohio Oil & Gas Energy Education Program is a nonprofit organization responsible for public outreach on behalf of Ohio’s natural gas and crude oil industry. The mission of OOGEEP is to facilitate educational, scholarship and safety programs, and to promote public awareness about the industry and its impact on the economy. For more information, visit www.oogeep.org.

Note: Training pictures and video are available upon request. Contact Communications Director Mark Bruce at OOGEEP (740) 587-0410 or mbruce@oogeep.org.

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Gas & Oil

Ohio Edition

July 2015

U.S. Now Largest Oil & Natural Gas Producer Joe Massaro Energy In Depth - PA

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hanks to American ingenuity, the United States is now the largest producer of natural gas and oil in the world – let that sink in for a second. Just a decade ago the U.S. was in a state on energy scarcity and imports were the highest they had been in years. Now, for the first time in years the U.S. is closer to energy independence than ever before.

Thanks to hydraulic fracturing U.S. oil & gas operators have been able to tap into shale formation miles beneath the surface and unlock huge reservoirs of oil and natural gas.

By deploying this technology in business friendly states across the country like Ohio, Pennsylvania and West Virginia the U.S. has been able to cut their imports of natural gas to levels not seen in 28 years, the level since 1987. According to the Energy Information Administration, “U.S. net imports decreased 9 percent in 2014, continuing an eight-year decline.”

The decrease in natural gas imports into the U.S. has translated into energy savings for American households across the country. Take a look at New York, as recently as 2008 the state was importing more of its natural gas from Canada at a premium. Now after the development of Pennsylvania’s Marcellus Shale, there is more natural gas flowing from New York into Canada than the amount flowing into the state from Canada. A similar story is being told for domestic oil production as well.

When the U.S. became the world’s largest producer of oil it leap-frogged over other oil producing countries like Saudi Arabia and Russia. British Petroleum’s (BP) Chief Economist, Spencer Date, recently stated, “The implications of the shale revolution for the U.S. are profound.” He went on to say, “We are truly witnessing a changing of the guard of global energy suppliers.”

According to data from BP the U.S. saw oil production go up by 1.6 million barrels per day in 2014, for a total of 11.6 million per day on average. And, for the first time in 40 years, this spike in production propelled the U.S. to become the number one producer of oil in the world.

Much like increased natural gas production, oil production also led to American consumer savings. During 2014 the price per barrel of oil went from over $100 to under $60 solely because of U.S. production. Because of the decrease in oil prices American drivers are paying less at the pumps.

For instance Columbus, Ohio had under $2 per gallon of gasoline for the first time in five years. In a recent study The American Automobile Association (AAA) found that

Americans would be paying 40 cents more per gallon of gas than they’re paying now were it not for shale development.

Continued shale development across the country is continuing to provide Americans with family sustaining jobs and lower energy costs. But most importantly we now have global bragging rights for pioneering shale development and making the United States and energy superpower again.

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July 2015

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U.S. oil production reduce Gulf Coast imports I

n recent years, higher domestic production of light, tight crude oil has led to a reduction in crude oil imports. Certain types of crude oil have been affected more than others; for example, the increased economic availability of domestic light, tight crude oil has virtually eliminated Gulf Coast imports of light crude oil. In the past year, Gulf Coast imports of medium crude oil have also fallen because of increased production from the Eagle Ford, Bakken, and Permian regions.

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measured by API gravity as established by the American Petroleum Institute. Less-dense liquids have higher API gravities. Crude oils with API gravities of 35 or above are considered light; 27 to 34 are medium; less than 27 are heavy.

From the first quarter of 2014 to the first quarter of 2015, medium-grade crude oil imports to Gulf Coast refineries decreased 45%, from 1.5 million barrels per day (b/d) to 0.8 million b/d. On the other hand, over that same period there was a 0.4 million b/d (22%) increase in imports to Gulf Coast refineries of heavy crude oil. Improved refining margins from processing additional volumes of heavy crude have resulted in a 3% increase in gross atmospheric distillation unit (ADU) throughput in the Gulf Coast region over this period, from 8.0 million b/d to 8.2 million b/d.

Almost all medium-grade crude oil imports are from Middle Eastern countries. Gulf Coast imports of medium crude oil from Saudi Arabia decreased by 52% from the first quarter of 2014 to the first quarter of 2015, from 0.9 million b/d to 0.4 million b/d. Similarly, Gulf Coast imports of medium crude oil from Kuwait decreased by 46% over this period, from 0.4 million b/d to 0.2 million b/d.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

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Gas & Oil

July 2015

Ohio Edition

Opinion: Energy from Eastern, Southeastern Ohio could have impact worldwide U.S. Rep. Bill Johnson

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recently joined a bipartisan group of members from the House Energy and Commerce Committee on a trip to Portugal, Belgium, and the Ukraine to discuss our mutual energy interests and Russia’s aggression in Eastern Europe. During the meetings it became clear that America possesses the energy resources needed to influence global energy markets and provide a reliable trading partner to our allies around the globe – many of whom are beholden to the whims of Russian President Vladimir Putin for their energy needs.

The message from our European allies I met with, overwhelmingly, is that they are looking to the United States to take the lead in providing a reliable and secure source of natural gas. In fact, the high-ranking Ukrainian officials I spoke with indicated that boosting American natural gas exports would effectively contribute to cutting off Russia’s cash flow, thus greatly reducing their influence in the region.

Additionally, officials from Spain and Portugal have said that they’re working on building the infrastructure needed to import and replace roughly 80% of Russian gas that Europe depends on.

The U.S. Energy Information Administration released new data projecting that domestic natural gas production would outpace consumption through 2040, when production is forecast to reach 35.5 trillion cubic feet (Tcf). My home state of Ohio alone produced 186,181 million cubic feet by the end of 2013, illustrating the enormous resource wealth that America possesses. With more than enough natural gas to continue meeting demand at home, we have the capability to ship our surplus natural gas to our trading partners around the world.

In addition to the significant geopolitical benefits we’d realize from exporting our excess LNG, doing so would also benefit American workers – it would create jobs here at home. The construction of new export projects is expected to put up to 45,000 unemployed Americans back to work by 2018, stimulating new investment in the energy and manufacturing industries and growing our economy here at home. At a time when many producers are slowing

production and laying down rigs because domestic energy prices are so low, opening up export markets hungry for American energy would keep American workers on the job.

I am working hard to bring this opportunity to fruition.

Although the shipment of LNG to non-free trade agreement countries is officially presumed to be in the national interest, the process takes years and costs millions of dollars. Over 30 natural gas export applications to non- free trade agreement (FTA) countries continue to languish in various stages of permitting at the Department of Energy.

The approval process has been so glacial that some argue the government’s policy actually represents a de facto ban on exports.

In order to break through the bureaucratic red tape, I introduced H.R. 315, LNG Permitting Certainty and Transparency Act. The bill would establish a firm 30-day deadline for DOE to render a decision on each project – in so doing, my bill would simply provide developers greater visibility and certainty into the regulatory process, removing much of the bureaucratic red tape and unknowns from the process.

H.R. 315 passed the House with a sizeable bipartisan majority earlier this year, and a similar bill is now making its way through the Senate. I’m hopeful that the Senate will follow the House’s lead in passing this important legislation.

While it will take some time for projects to secure financing and complete construction, the message this legislation will send to our allies and adversaries will be powerful and immediate: America is willing to lead, and influence outcomes. We have a once in a generation opportunity to create American jobs, help our allies, and put a rogue regime on its heels all at the same time. It’s time we do it.

U.S. Congressman Bill Johnson represents Eastern and Southeastern Ohio in the House of Representatives.

In his role on the U.S House of Representatives Energy and Commerce committee Congressman Johnson has become increasingly involved in efforts to facilitate the export of American LNG abroad, culminating in the introduction of legislation to that effect earlier this year (H.R. 315, LNG Permitting Certainty and Transparency Act)

Gas & Oil

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July 2015

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Gas & Oil

Ohio Edition

July 2015

Opinion:

Arctic drilling would benefit Ohio Jim Samuel Capital Integrity Group

C

OLUMBUS, OH -- Recent decisions by the federal government could lead to limited oil and gas exploration this summer in the Chukchi Sea off the coast of Alaska. Although that’s 4,000 miles from here, this is good news for Ohioans. Here’s why.

The Arctic region has vast untapped energy resources. It is estimated that 22 percent of the world’s as yet unexplored oil and gas reserves are in the Arctic. Offshore from Alaska alone, there are an estimated 127 billion barrels of oil and 132 trillion cubic feet of natural gas.

Similar to the exploration of shale in Ohio and neighboring states, exploring and recovering resources in the Arctic are also vitally important steps we can take to reduce dependence on foreign oil and increase national security.

Many of the major oil-producing nations in the world are not friendly to the U.S. Our security and our economy depend on our willingness to develop our own domestic sources of energy.

While we can visually see the positive impacts from shale right here in Ohio, Arctic oil development also can affect our state’s economy in a very direct way. Ohio is the nation’s second largest producer of raw steel, and the oil and gas industry is a huge consumer of steel products, from drilling platforms to compressors to pipelines. Nearly 18,000 Ohioans work in the steel industry, which has a payroll of $1.2 billion annually.

Arctic oil development offers the prospect of job security in the steel industry for years to come. The process of finding oil and installing the infrastructure to recover it will take ten to fifteen years. Actual oil production could be 20 years away, continuing for decades after that. Drilling in the Arctic would mean steady manufacturing demand here at home. Ohio producers of tubular products, compressors, bearings and more, who supply the shale industry now, are well-positioned to supply Arctic energy operators in the future.

Steel and steel products are not the only Ohio industries that will be impacted by Arctic oil development. Ohio is a world leader in polymer science, with research centers at

eight universities and 2,400 companies manufacturing polymer-dependent products like medical equipment, fuel cells, and food packaging. Polymers support 13,000 Ohio jobs, and because polymers are made from oil-derivatives, this industry too stands to benefit from Arctic oil exploration.

Nationally, it is estimated that American oil development in the Arctic will support 54,000 jobs for 50 years, contributing $154 billion in payroll to the U.S. economy. It is high time we moved forward on this front. Other nations with a claim to Arctic waters, including Russia, are ahead of America’s efforts.

The delay is explainable in part by the sheer volume of paperwork involved in satisfying the concerns of government agencies, environmental groups, and the general public. Fifty-four types of permits are needed to explore for oil in America’s Arctic waters. The Department of Interior’s recent announcement was actually the latest step in a decision reached eight years ago and on appeal in the courts ever since. It would allow Royal Dutch Shell to pursue a conditional drilling permit for an Arctic oil lease granted by the U.S. government in 2008. The company says it will spend $1 billion this year on the project.

There are valid reasons the U.S. government regulates Arctic oil drilling so extensively. Working in the Arctic presents unique challenges due to the harsh climate and sensitive ecosystem. Oil companies seeking permission to drill there must prove they have the necessary expertise.

They must show a commitment to preventing oil spills first and foremost, but they must also present a multi-faceted plan for responding to any accident quickly and effectively.

Extensive review of these qualifications by federal and state regulators, usually backed by an additional review in the courts, constitutes adequate due diligence. The fact is that energy reserves can be recovered in the Arctic safely.

That recovery should proceed without further delay. Our national security and our economy are pressing reasons to move forward with energy development in the Arctic as it is with our shale energy development here in the Appalachian Basin.

Gas & Oil

www.GasandOilMag.com

Jim Samuel is founder and principal of Capitol Integrity Group in Columbus, a fellow of the Levin College at Cleveland State University and a founding partner of the Ohio Shale Consortium. He has worked extensively in the economic development and public policy arenas and serves as a consultant to the energy industry.

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Gas & Oil

July 2015

Ohio Edition

OPINION: Getting serious about the severance tax, maybe Marc Kovac Dix Capital Bureau

C

OLUMBUS — Stop me if you’ve More than three years into the process, lawmakers now heard this before: say they’re getting serious about bringing the debate to a A hard issue surfaces in the legis- conclusion. lature, with many differing opinions on what Instead of placing a severance tax increase into the bienshould be done. nial budget bill that’s nearing completion, lawmakers have The administration and senators and representatives are included language forming a working group to negotiate a on different pages on the right course of action. final severance tax increase, with a solid deadline of Oct. 1 Instead of working out a compromise, the sides bicker to report back to the legislation. and offer varying plans that won’t have enough support for “Make no mistake, there’s going to be a solution to this final passage. problem,” said Senate President Keith Faber (R-Celina).

In the end, a study commission or task force or working “And lest one side think that they can drag it out ... that’s group or some other like-named panel is formed to study not an option, because there will be a solution.... The goal is the problem and offer recommendations. to negotiate and find something that works for everybody.”

Those recommendations are issued in a report that ends House Speaker Cliff Rosenberger (R-Clarksville) added, up on a shelf gathering dust until the next go-round, and the “We’re going to restart the clock. We have a goal in mind cycle repeats. that we’re going to look at. But the most important thing A cynic would say that’s the latest status of a push to in- is, instead of the House negotiating over here, the Senate crease the tax rate on oil and gas produced via horizontal negotiating over here and the administration negotiating hydraulic fracturing, or fracking. over here and the industry also trying to negotiate with all Gov. John Kasich initially proposed a severance tax in- of us, we’re saying let’s all go to the same table, get on the crease more than three years ago, saying out-of-state pro- same page.” ducers shouldn’t be allowed to take Ohio’s precious natural Oct. 1 is the deadline for a deal, but lawmakers will have resources without paying a little more for the privilege. to act on any proposal brought forth by the working group.

Lawmakers have been balking at the suggestion ever We could end up with a higher severance tax — with or since, pulling it from Kasich’s mid-biennium budget reviews without exemptions from other taxes to counter the impact and biennial budget bills, with little indication that the dif- — that moves through the legislature in short order. ferent sides were working toward a meaningful comproWe could end up with a package that doesn’t gain enough mise. support in both chambers or from the governor for enactAnd, so, the debate has continued along the same lines. ment.

Supporters say Ohio’s severance tax rate is among the Or we could end up starting the whole process over again lowest in the country, increasing won’t stifle production, and next year with Kasich’s next mid-biennium budget. absent lawmaker action some other group might push a balAgain, stop me if you’ve heard this before. lot issue calling for even higher rates.

Opponents counter that producers, faced with a higher Marc Kovac is the Dix Capital Bureau Chief. Email him tax, will take their business elsewhere, particularly given the at mkovac@dixcom.com or on Twitter at OhioCapitalBlog. current state of oil prices.

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ASAP Delivery Service Chief Operating OfďŹ cer Kate Layne.

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New company has eye towards

gas and oil industry Judie Perkowski Dix Communicatins

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AMBRIDGE, OH -- As businesses continue to grow in southeastern Ohio, so does a company’s responsibilities to its customers, who do not want to wait three days to have a package delivered, a document signed, or are scrambling to make an impromptu trip to the airport.

Help is on the way!

A welcome addition to the Cambridge business community, ASAP Express Delivery, officially launched earlier this year, is owned by local entrepreneur Jerry Cowden, chief executive officer, and operated by Kate Layne, chief operating officer.

“ASAP is a locally-owned delivery service now available in Cambridge and surrounding area,” said Layne. “We’ve established ourselves with prompt deliver service, outstanding customer service and affordable rates. We are committed to assuring our customers receive consistent, reliable and professional service. We take pride in our couriers who are always courteous and professional. They are familiar with government offices to deliver court documents, blueprints and permits. We can be counted on to handle route errands such as delivering your daily mail, banking, including delivering lunch to your weekly staff meetings.

ASAP’s valued customers are in varied industries and venues: manufacturing, gas and oil, contractors, real estate, law firms, health care, building supplies, laboratories, pharmacies, bank and loan, title and escrow, and environmental.

When businesses need to get something or someone from Point A to Point B, As Soon As Possible, customers can call ASAP Express Delivery and choose from several levels of service, depending on your needs.

• Hot Shot — Immediate dispatch with direct delivery.

• Rush service — Pickup and deliver within 2 hours.

• Standard service — Pick up and deliver with 4 hours.

• Economy service — Orders placed by 10 a.m. delivered by the end of the business day.

• Scheduled Deliveries — A custom-designed and costeffective concept.

• Corporate Transport/Airport Shuttle — Private car service and airport shuttle.

“This service is long overdue in our community,” said Cowden. “For the industrial and professional services sector in particular, time really is money.

“We are providing an efficient and cost-effective service to move our customer’s shipments from one place to another.”

“Layne added, “We consider our company an extension of your business. We are taking your clients’ deadlines, timesensitive materials and packages as seriously as you do.

Using an array of transportation modes, we offer our customers unparalleled personal service and continual communications until the job is complete.”

Stephanie Smith of Quanex Building Products in Cambridge, a recent customer, commented on ASAP’s service.

“Thank you for the notifications and prompt delivery. I appreciate all the follow-up for this shipment,” said Smith.

ASAP’s fleet vehicles include a Ford Transit Connect that can haul up to 1,500 pounds; two one-ton pickup trucks, a flat bed with a load capacity of 4,000 pounds, and several trailer options pulling up to 30,000 pounds, and a fullyequipped Jeep Grand Cherokee for private car service and corporate customers.

“Our pride is all that we do shines bright in our vehicles,” said Layne. “Our fleet is meticulously maintained at all times and always non-smoking.”

The business is insured by Grange and delivers within a 100-mile radius, safely and securely.

“We are bridging the gap between trucking companies and consumers in any economic climate,” said Layne.”We are a good example of a big city business with small town values. If it’s important to you, it’s a priority to us.”

For more information, or to schedule a delivery, call Kate Layne at (740) 801-0382. jperkowski@daily-jeff.com

18

Gas & Oil

July 2015

Ohio Edition

ASSET PROTECTION OF OIL AND GAS INTERESTS: Frank McClure

W

hen I was thinking about what I would write about this month I thought I should review and clarify what asset protection is and what it is not.

This may be concerning your bonus money, if that is where you are in the leasing process or it may be protecting your royalty interests or you’re your oil and gas real property interests. So with that in mind let’s begin with what asset protection is: Asset Protection simply is any strategy, tool or action taken or implemented to protect, preserve or enhance one’s assets or those of or for a beneficiary(s). I will use the analogy that I have used before which is that asset protection in some ways can be considered similar to building a structure around a treasure that you own. What might you do with your treasure? You might put it into a chest for safe keeping. Then you might put a lock on the chest. Then you

might put the chest into a vault. Then you might build a castle around your vault. Then you might put a moat around the castle. Hopefully this will give you a great picture in your mind as to what asset protection planning is. All we are doing is adding additional barriers and protections to protect your treasure (your assets). Each level is another obstacle which the creditor must find a way to get through or around to get to your treasure. By using proven, simple techniques and strategies you can create different levels of protection for your assets.

If that is what asset protection means, then what does it not mean? Here are some of what asset protection isn’t: 1.

Asset protection is not just for the wealthy or for high net worth earners; it is for all wage earners and individuals with any type or form or amount of assets which they may wish to protect or preserve; 2.

Asset protection is not always about elaborate tax

Gas & Oil

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July 2015

19

WHAT IT IS AND WHAT IT IS NOT! and legal structures; in fact, some of the most effective asset protection strategies are the least complicated, most fundamental and least expensive; 3.

Asset protection is not about always avoiding taxes or avoiding governmental reporting requirements; in fact many asset protection strategies are both tax neutral; and may result in increased tax reporting requirements; 4.

Asset protection is not about concealing assets from creditors or hiding assets from the U.S. government; it’s about following the proper reporting procedures that are required by U.S. law; 5.

Asset protection is not always about “going offshore to exotic tropical locations,” but, instead, it may be about reviewing which one of the 50 states offers the best case law and state statutory law for asset protection; and Ohio now as of this year has one of the best asset protection statutes;

6.

Asset protection is not about circumventing the law or doing something illegal, or being involved in secret strategies or cookie cutter asset protection promotion schemes; it’s about properly interpreting and following the law.

When reviewing asset protection and your needs concerning your oil and gas interests, it is important to remember what it is and it is not. It is also important to seek out an attorney who deals in this area of the law. Like estate planning this is a very specialized area and you need to be talking to someone who concentrates their law practice in this area. If you would like more information about asset protection and estate planning either call our offices or please go to our webpage at www.fmcclurelaw.com.

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Gas & Oil

Ohio Edition

July 2015

Negotiating pipeline projects Bobby Warren Dix Communications

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OOSTER — Some township trustees are feeling they have a little more say in what happens with proposed pipeline projects, that could potentially bisect Wayne County, after hearing from the Ohio Farm Bureau Federation’s director of energy policy.

Dale Arnold of Farm Bureau spoke with several township trustees earlier this year, at the invitation of the Wayne County commissioners, to explain what they can expect as energy development in the United States changes from a centralized system with relatively few entities to a decentralized one with many players and as more pipelines find their way through the county.

“There’s a lot of infrastructure coming through here,” Arnold said.

The Sunoco Pipeline is cutting through the northern part of Wayne County.

The ET Rover Pipeline, along with Kinder Morgan’s Utopia Pipeline, are projected to follow similar paths through the southern part of the county, though Arnold said the Utopia path continues to change. The pipelines will enter Wayne County east of Mount Eaton in Paint Township and exit west of New Pittsburg. Affected townships in Wayne are Paint, Salt Creek, East Union, Franklin, Wooster, Plain and Chester.

The NEXUS pipeline is slated to cut across northeastern Chippewa Township.

ET Rover and NEXUS are interstate lines. When it comes to interstate pipelines, they are under the jurisdiction of the Federal Energy Regulatory Commission. Each proposed project goes on the docket and is treated like a court case, Arnold said.

Because of this, it would be beneficial for the county to become a party of first record “because everything is negotiable,” Arnold said.

While the six members of FERC have the ability to allow property easements and rights of way to be taken, for a price, through eminent domain, the process only gives the pipeline company the right of access to the land.

“It’s amazing what you can negotiate for,” Arnold said.

Things to consider are road use maintenance agreements, taxes, fire protection, police protection, along with training, equipment and materials.

Eminent domain is used less than 2 percent of the time,

Arnold told the trustees. “Everything else is a private agreement. Everyone has the right to negotiate.

“There is no such thing as a group easement.”

Arnold then asked the group where farmers sign an agreement of such magnitude, and Franklin Township Trustee Dan Burkhart answered, “The kitchen table.”

“Worse,” Arnold said. “On the hood of the car.”

Arnold encouraged everyone to have representation because easement agreements are not only financial settlements, but they are also full work orders. Anything not written into the easement is not binding. “It doesn’t exist,” Arnold said.

Farmers need to be sure there is language about a number of things, including how the soils will be treated and how borings will be done. Also, the offer made by pipeline companies is a “snapshot offer,” but families need to consider the implications of the agreements 30, 40, 50 years down the road.

Farmers also should include in easements the text from the Ohio Department of Natural Resources Pipeline Standards and Construction Specifications, which addresses soils and how any problems will be remediated.

While the deadline for the county becoming a party of first record with the Rover pipeline has passed, Arnold recommended Wayne County Prosecutor Dan Lutz seek FERC’s approval. The only party that would challenge it would be ET Rover, and it doesn’t make sense for them to do so.

Arnold also said it is not too late to become a party of first record with the NEXUS project.

As many of the trustees were looking at Lutz, he said he would like to help them and will do what he can, but the reality is he would need another assistant prosecutor in his office because of work demands.

East Union Township Trustee Joe Rabatin said the meeting was very informative. “It opened my eyes as to what is available.”

Salt Creek Township Trustee Don Rhamy also said the meeting was informative, and it gave trustees an idea of what townships might gain if they sit down with pipeline representatives.

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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July 2015

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July 2015

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OOGA, Dominion East negotiate agreement

n amended Heat Content Agreement negotiated between the Ohio Oil and Gas Association and Dominion East Ohio provides local producers an opportunity to obtain value for natural gas liquids from conventional production.

Under the amendment, which took effect in November 2014, producers with conventional production on Dominion East Ohio and Blue Racer Midstream’s Guernsey/Cambridge gathering system, can generate additional revenue from natural gas liquids, depending on liquids market pricing and the gas composition.

As amended, the primary term of the HCA ends October 31, 2020, and will continue year to year unless terminated.

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Producers must enter into an agreement with Blue Racer no later than December 31, 2015. Producers not wishing to participate in the program can remain on the existing HCA and will continue to receive the benefits of the HCA for their gas.

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Gas & Oil

July 2015

An eye in the sky: Skywatch monitors existing gas, energy pipelines

Dan Kubacki Dix Communications SHLAND, OH -- For a pipeline inspection pilot, flying an aircraft low to the ground and doing several things at once comes with the job.

It’s a position that isn’t for everyone who has earned their wings, but according to Steve Bechtol, president of Skywatch, it’s a job for a pilot who can safely manually fly a small plane no higher than 500 feet from the ground all while accurately observing pipeline right of ways. Bechtol has owned the company since 2007, but Skywatch has been around locally since the 1980s, when it was owned and operated by Roger Blodgett.

“It’s a very busy cockpit,” Bechtol said. “When you’re flying low to the ground and taking down observations, you’re basically multitasking, and task management is key to learning to do pipeline patrolling well. Roger always used to say there’s pilots and then there’s pipeline patrol pilots, and there’s not very many of the latter. It’s very different flying than just taking off and going up to altitude and cruising to the next location.”

Blodgett founded Air Surveillance in 1986 and later acquired Skywatch, which was at the time based in Wadsworth. Bechtol bought the company in 2007 two years after Blodgett passed away. Since then, Skywatch’s fleet has grown to four Cessna 182 aircrafts with eight employees, including three full-time pilots and two part-time pilots. A hangar at Ashland County Airport is home to one half of Skywatch’s operations.

“When we bought it, there was one airplane and it was flying in Ohio only,” Bechtol said. “We’ve been able to grow it in the last seven years to four aircrafts and we fly in 23 states now. We have a base here in Ashland and one in Iowa.”

On a typical day, Skywatch pilots take four- to six-hour flights on each pipeline observation assignment. Bechtol said Skywatch has contracts to monitor existing pipelines for most major energy companies.

“We fall under the damage prevention for these companies, and so we’re basically protecting their resources, giving updates on vegetations, encroachments, new building going on in what they call high-consequence areas and to just document what’s close,” he said.

If the pilots spot a problem, they contact “line spotters” at ground level who can further investigate an issue on a pipeline. Most of the issues can be avoided by a property owner calling state utility protection services before starting any

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Ohio Edition

digging or new construction.

Bechtol said Skywatch’s planes are equipped with the most up-to-date safety features and prospective pilots receive months of training before their first solo flight.

“We’re very focused on safety, because the industry has a history of being a little more accident-prone, and we’re out to change that,” Bechtol said. “We do an extensive amount of training when somebody’s hired on; they usually fly with us several months before we turn them loose.”

Skywatch has pipeline patrol contracts year round, and Bechtol still gets the chance to perform relief flying these days. He has been a pilot with the Air Force Reserves in Youngstown for 12 years and recently joined the Ohio Air National Guard in Mansfield.

“The business and the military flying both complement each other quite well because the C130 is a low-level aircraft that you usually fly 300 to 500 feet, and it’s the same thing we do in pipeline patrol, we fly at 300 to 500 feet,” Bechtol said. “The training was valuable to carry over to the business. They really go hand in hand pretty well.”

With the Air Force Reserves, Bechtol flew planes for personnel and equipment airdrop missions as well as transporting medics, wounded and soldiers’ remains from combat zones. He was last deployed in Afghanistan in 2011 for several months.

“Hauling remains home was a pretty big honor,” Bechtol said. “That’s something I’ll never forget.”

With the National Guard, Bechtol will continue to do the same type of flying, except the commute to base will be much shorter. Bechtol is a native of Wayne County, graduated from Ashland University in 1995 and said he is committed to keeping Skywatch in Ashland. He recently gave a presentation at the Ashland Rotary Club about Skywatch and his small-business focus.

“It was a good location for us and we like Ashland and plan to stay here,” Bechtol said. “Something I feel pretty strongly about is supporting the local businesses that support us. I think I said in the Rotary presentation that I looked in our Quickbooks and we have 70 vendors that we use with an Ashland County address, and we’re proud of that. It’s kind of neat to see the relationship between small businesses in Ashland, how we’re not large enough to have an IT department or a marketing department, but there’s a business in town to help fill that need for us.”

Skywatch’s contracts are located primarily in the Midwest, but the company does have room to grow, according to Bechtol.

“We’re quite possibly the only one based out of this region,” he said. “Most of our competitors are based out of Texas. There’s definitely room for expansion, because for one thing, we have probably some of the best and safest airplanes in the industry.”

Dan Kubacki can be reached at 419-281-0581, ext. 237, or at dkubacki@times-gazette.com.

Gas & Oil

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July 2015

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Steve Bechtol, president of Skywatch, stands in front of two of his company’s planes housed at Ashland County Airport. Skywatch has four planes in its fleet and patrols energy pipelines in 23 states in the Midwest. Times-Gazette photo/Tom E. Puskar

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Consol increases gas production Associated Press WHEELING - The hits keep coming for Consol Energy’s Marcellus and Utica shale program, as the natural gas driller increased production by 23.2 billion cubic feet during the first three months of this year when compared to the same time in 2014.

To put that in perspective, 23.2 Bcf is enough natural gas to fuel 12,969 trips to the moon and back, according to estimates provided by Cabot Oil & Gas Corp. It would also be sufficient to power 564,108 homes for an entire year.

Formerly known mostly as a producer of coal, Consol pumped 71.6 Bcf from January through March, which is up from 48.4 Bcf over the 2014 span. In the Marcellus area specifically, Consol generated 36.3 billion cubic feet, an increase from the 20.7 Bcf during the first three months of 2014. Most of the company’s Marcellus activity is now in Greene, Washington and Allegheny counties in Pennsylvania.

In the Utica Shale, Consol’s yields increased from just 1.2 Bcf in the 2014 period to 9.5 Bcf in the first three months of this year. Most of the firm’s Utica drilling takes place in Monroe County.

Although the company spent $250.3 million worth of exploration and production funding during the first quarter to drill and frack wells, President and CEO Nicholas J. DeIuliis said Consol continues looking for ways to effectively operate in an environment with lower oil and natural gas prices.

“We continue to focus on areas within our control: driving drilling and completion efficiencies to lower capital and op-

erating costs; working with our service providers to better align terms with current market conditions; and prudently maintaining a strong balance sheet and liquidity position,” he said.

Natural gas continues becoming the dominant investment area for Consol. The firm sold five West Virginia coal mines, including the Marshall County Coal Co.’s Marshall County Mine and the Ohio County Coal Co.’s Ohio County Mine, to Murray Energy Corp. for $3.5 billion in October 2013.

According to its website, Consol still operates five mines across Appalachia that produced a total of 8.3 million tons of coal in the first three months of 2015.

DeIuliis said instead of selling coal to numerous power plants, the firm now markets the mineral to facilities it believes will remain open after the Environmental Protection Agency’s new carbon dioxide and mercury reduction measures take full effect. and Consol has embraced this changing dynamic by concentrating our footprint and strategically partnering with the power plants that will be around for many years to come,” DeIuliis said.

“Despite the prominence of shale gas growth and increasing gas demand over the years, coal’s market share may be declining, but it’s not going away. That said, the industry has clearly changed, and it has changed permanently. Consol will continue to benefit by strategically partnering with the must-run power plants that will survive and run even harder as they make up capacity that is scheduled to come off-line,” he added.

28

Gas & Oil

Ohio Edition

July 2015

The Fun Side: Country Energy Fest offers food, fun and entertainment with a southern drawl Thomas Clapper News Leader Assistant Editor

D

espite the rainy weather conditions, the annual Country Energy Fest, held May 29 and 30 at the Carroll County Fairgrounds in Carrollton, was a

success.

“Turnout was a little less than we expected due to the weather,” said Country Energy Fest Chair Wes Frew. “It rained on and off on Saturday afternoon but around concert time it cleared up and the storms were north and south of us.”

Frew estimates that over the two day event that approximately 5,000 visitors attended the event.

An ATV rodeo was held on Friday evening.

The rain did not put a damper on the always-popular Rib Burn Off that lasted throughout Friday evening and all day Saturday. Winners of the 2015 rib burn off were as follows: Rib Winners: First place, After Hours BBQ; first runnerup, The Flipside Grille; and second place, Smokin’ Joe’s Hog Wild Barbecue.

Sauce Winners: First place, The Flipside Grille; and second place, Smokin’ Joe’s Hog Wild Barbecue.

People’s Choice: First place, The Flipside Grille; and second place, After Hours BBQ. Country Energy Fest is also home to a car show, tractor show, Live power line demonstrations by Carroll Electric Cooperative, Inc., booths held under the grandstand and more.

Music bands took to the midway stage including New Wave Nation, Conestoga and the Lincoln Way band. The Carroll County Warriorettes and the Carrollton High School Showstoppers also performed.

The headline act at the grandstand was Country Music star Craig Morgan with special guest Clare Dunn who capped off the festival with a rousing performance.

“I think overall it went pretty well,” said Frew. “Everyone seemed to enjoy themselves and we hope to continue Country Energy Fest next year.”

www.GasandOilMag.com

Gas & Oil

July 2015

29

Shale-abration, Energyfest Rain doesn’t dampen energy at Shale-abration Judie Perkowski Dix Communications

O

LD WASHINGTON, OH — In spite of off and on again rain, sometimes downpours, attendance at the second annual Friends and Family Fest — A Shale-abration! was better than expected.

Jo Sexton, president of the Cambridge Area Chamber of Commerce, said she was happy with the event.

In addition to the educational presentations by the Ohio Oil and Gas Energy Education Program, such as the MeetU Trailer, which de-mystifies how gas and oil are found and extracted from miles beneath the Earth, and Rockin’ in Ohio, an exciting interactive program where children participated in the demonstration about how science, technology, engineering and math are crucial to developing gas and oil resources.

Other family-friendly events such as the Dock Dogs, Sphering, and the kids’ trout pond and “hawg trough,” were crowd-pleasers.

“All of the sponsors of the Shale-abration were here and had several representatives on hand to talk to people and answer questions relating to their direct or indirect involvement in the gas and oil industry,” said Sexton.

Zane State College personnel had their energy bike on display to demonstrate the “pedal power” needed to light up rows of three types of bulbs, incandescent, halogen, and CFL (compact fluorescent light). They also brought one of the college’s vehicles that runs on compressed natural gas.

The school’s Cambridge campus has the best two-year program of Oil and Gas Engineering Technology courses of any two-year community college.

Several organizations and agencies offered information for children and adults. The Soil and Water Conservation District had interesting and educational games related, of course, to the importance of water and soil quality. And the displays of the Sleep Inn and Comfort Inn in Cambridge and the new Microtel in Caldwell gave comfort to those wondering if accommodations were available for visiting family and friends.

The top sponsors of the Shale-abration were

Eclipse Resources, Buckeye Water Service Co. and TK Gas Services, Inc. “This event could not happen without the industry’s continued support for the economic development that delivers promise and opportunity for the future of southeastern Ohio,” said Sexton.

“We depend on the people in the gas and oil industry to help us to play our role in the educating and promoting of our country’s goal of energy independence.”

Attendance at the first Shale-abration in May 2014 — and the 2015 Shale-abration last Saturday — was hampered by rain.

It is hoped that for the 2016 Shale-abration, the third time will, in fact, be the charm.

See More Shale-Abration on page 31

30

Gas & Oil

Ohio Edition

July 2015

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July 2015

31

The Fun Side: Shale-abration, Energyfest VIP reception kicks off Shale-abration!

Judie Perkowski Dix Communications

O

ne hundred “Very Important People” were in attendance at the second annual VIP reception Friday evening at Salt Fork Lodge & Conference Center in Cambridge.

The event was a prelude to the Cambridge Area Chamber of Commerce’s premier event, Friends and Family Fest — a Shale-abration, Saturday at the Guernsey County Fairgrounds in Old Washington.

Guests at the gathering were treated to a cornucopia of hors d’oeuvres featuring shrimp, quiche tartlets, a variety of ham, chicken and tuna salad croissants, stuffed mushroom caps and a to-die-for artichoke and spinach dip on slices of a crusty french baguette, in addition to a never ending variety of fresh veggies.

Mike Chadsey, director of communications for the Ohio Oil and Gas Association, welcomed attendees and thanked Black Bear Energy, Nicolozakes Trucking and Construction, Wampum Hardware, Custom Compression Systems and Buckeye Well Site Services for sponsoring the reception.

Honored guests were Jimmy Stewart, president of the Oil Gas Association, and Congressman Bill Johnson (R-6th District). Both offered brief remarks about the Ohio’s escalating presence in the gas and oil industry.

“We have a lot to celebrate ... for what shale has brought to this area and to the entire country,” said Stewart. “Ohio is in the top 10 of natural gas consumers in the U.S. We have a glut. And because we have the lowest natural gas charges in the U.S. we have a competitive advantage over foreign

consumers. We could eventually be the largest natural gas producers in the world. All of this brings opportunities and challenges.

“We have to find new markets, because there is not enough commercial need here, for the amount of natural gas we are producing. We are now in a position to begin exporting, even a small percentage of what we produce.

Congressman Bill Johnson, who represents 18 Ohio counties in the heart of the Utica shale, said a “shale-abration” is the great word for the phenomena Ohio is experiencing.

“The Utica shale has changed the landscape of the state, the country and the world.”

Johnson said he recently returned from a trip overseas where our friends are begging us to stop Russian aggression.

“Eighty percent of our allies resources flow from across the Ukraine. They said Russia is using its energy resources as a stranglehold on many countries. [Because of the high cost of natural gas charged by Russia], many European countries are returning to a higher percentage of coal, because it is cheaper.

“Regulations here in the U.S. have killed off many coal plants. We need a leader who understands how to fuel America’s energy. After “they” have finished with coal, “they” will start coming after gas and oil. We are in the driver’s seat. We need to keep moving forward. We need Washington to stay out of it.” jperkowski@daily-jeff.com

Gas & Oil

Ohio Edition

July 2015

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www.GasandOilMag.com

July 2015

37

Widget allows interactive visuals from EIA

T

he U.S. Energy Information Administration (EIA) today released a new widget that allows internet users to display interactive visualizations of current energy data from EIA on their own websites. The widget pulls user-selected data from EIA's application programming interface (API) to create maps, line charts, pie charts, and bar graphs. The interactive visualizations are configured to always show the latest EIA data so that the embedded charts and maps never go out of date.

For example, EIA's new widget tool allows users to embed visualizations showing monthly and quarterly net electricity generation for the United States, including the map shown above, on their own websites. When a visitor clicks on the map, the visualization also retrieves and graphs how this data breaks down the generation fuel for each U.S. state, how that state's electricity supplies are generated over time by different fuel sources, and how that state compares with other states.

Thus, the effects of California's current drought can be seen with a decline in hydroelectric generation.

In another example, EIA's new widget allows users to embed U.S. petroleum production data in an interactive world map (one of several base maps offered by the tool). U.S. petroleum output can be easily compared to other countries' pro-

duction by selecting specific nations on the map, which results in a line graph showing the output of each country chosen.

A wide range of EIA customers, including policymakers and their staff, journalists working on energy articles, researchers keeping up with the latest energy trends, students gathering information, and members of the public interested in energy issues can benefit from the new EIA widget.

The energy visualization tool joins the EIA Excel add-in and EIA's data API as a part of the agency's continuing efforts to share more of its energy data in easily updated, customizable ways. This version incorporates comments received during a beta testing phase earlier this year. These tools can be found on the Open Data section of EIA's website.

The product described in this press release was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA's data, analysis, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in the product and press release therefore should not be construed as representing those of the Department of Energy or other federal agencies.

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Gas & Oil

Ohio Edition

July 2015

Study details

risk of severance tax

Shawn Bennett Ohio Oil & Gas Association

T

he Maguire Energy Institute and Cox School of Business at Southern Methodist University in Dallas, Texas, has released a study detailing the dangers of enacting a steep severance tax increase as suggested by Ohio Governor john Kasich’s administration.

As stated in the study, simply put, now is the worst time to increase oil and gas severance taxes, because the industry is at the bottom of the business cycle.

The study highlights the global factors contributing to the decline in worldwide natural gas and crude oil commodity prices, the deeply discounted price being paid to producers in the Appalachian Basin for natural gas, and the steep decline curve of wells currently being drilled in Ohio’s Utica Shale. All of these factors combined make the economics of Ohio’s Utica and Marcellus Shales more uncertain than the economics that can be achieved in other shale plays across the country. By adding additional tax burdens and cost uncertainty to oil and gas prospects, the governor could depress an already struggling industry.

The study also illuminates that the effective severance tax rate could be as high as 7.5 percent on oil and 13 percent on natural gas if the tax is based on a national “index” such as NYMEX-WTI for oil or Henry Hub for gas. This is due to a regional supply glut, lack of pipeline takeaway and

processing plant infrastructure. Natural gas in Ohio sells at up to a 50 percent “negative basis” to national prices. Because Ohio’s Utica shale is primarily a natural gas play, raising severance taxes on these producers could prove disastrous for a region that already faces unfavorable pricing and infrastructure constraints.

“Hiking Ohio’s severance taxes on oil and gas production at this time would be extremely short- sighted, said Bernard Weinstein, Ph.D. and lead author of the study. “Because of the 40 percent drop in crude oil prices over the past year, and hugely discounted prices for Utica gas due to a lack of takeaway capacity, the profitability of most Ohio producers could be seriously impaired by the huge rate increases being proposed by Governor Kasich. What’s more, higher tax burdens on Ohio producers may simply shift production and future investment to surrounding states in the Utica and Marcellus shale plays.”

The Ohio Oil and Gas Association is a trade association with more than 3,100 members involved in the exploration, production and development of crude oil and natural gas resources within the state of Ohio. For more information, visit www.ooga.org, Ohio Oil and Gas Association, 88 E. Broad St., Suite 1400, Columbus, OH 43215, www.ooga.org or call (614) 824-3901.

Gas & Oil

www.GasandOilMag.com

July 2015

39

ODOT and EdgeMarc team up to remove old railroad bridge M

ARIETTA – The Ohio Department of Transportation (ODOT) and local oil and gas company EdgeMarc Energy have teamed up to advance removal of the State Route 821 Whipple railroad bridge. EdgeMarc will fund the $180,000 project and ODOT will oversee the removal of the outdated railroad bridge.

“Removing this old structure not only improves safety on the state route, but helps open up the corridor to more oil and gas exploration,” said ODOT District 10 Deputy Director T. Steve Williams. “This is truly a win-win for the community, the state and private industry.”

By Land, Sea or Sky – Perfect Boards Every Time

Not only will ODOT construction engineers oversee removal of the bridge, but ODOT county forces will also assist by completing all slope work as well as seeding and mulching.

“EdgeMarc Energy is proud to join ODOT today in announcing the State Route 821 Whipple railroad bridge project,” said Callum Streeter, Drilling and Completions Director, EdgeMarc Energy.” Social responsibility and safety are integral to our core values, and this public-private partnership is just one example of our commitment to being good neighbors with the Washington County community.”

The project is expected to begin summer 2015.

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Gas & Oil

Ohio Edition

July 2015

Ohio task force to negotiate severance tax

Senate President Keith Faber (R-Celina), r, and House Speaker Cliff Rosenberger (R-Clarksville) announce the formation of a study group to finalize an increase in taxes on oil and gas produced via horizontal hydraulic fracturing, or fracking.

Mark Kovac Dix Capital Bureau

C

OLUMBUS — The Republican leaders of the House and Senate said June 16 that an increase in tax rates on oil and gas produced via horizontal hydraulic fracturing would not be included in the $71 billion-plus biennial budget, as sought by Gov. John Kasich.

Instead, Senate President Keith Faber (R-Celina) and House Speaker Cliff Rosenberger (R-Clarksville) said a task force of the two chambers would continue negotiations over the summer, with an eye toward a compromise package later in the year.

The move would place the severance tax before a new Ohio 2020 Tax Policy Study Commission, with a deadline of Oct. 1 for submitting its recommendations to the general assembly.

Faber had voiced optimism that a severance tax increase could be part of the biennial budget, but Rosenberger told reporters last week that his chamber would not support the inclusion in the spending plan for the next two fiscal years.

Both said Tuesday that, while the different sides of the issue were closer to agreement on the issue, there wasn’t enough time before the budget’s required enactment on July 1 to complete negotiations.

“Make no mistake, there’s going to be a solution to this problem,” Faber said. “And lest one side think that they can drag it out ... that’s not an option, because there will be a solution.... The goal is to negotiate and find something that works for everybody.”

The Kasich administration voiced disappointment with the decision Tuesday.

“Helping Ohioans preserve and expand the success we’ve created together in the past four years is the governor’s top priority,” Rob Nichols, the governor’s spokesman, said in a released statement. “Ohioans created more than 350,000 jobs because, among other reasons, we’ve cut taxes by $3 billion — and modernizing severance taxes helps fuel even more tax cuts to keep that growth going. Updating this outdated tax policy remains a priority for the administration, especially since new technologies in recent years have completely transformed this industry. We’re obviously disappointed with the delay. We need to move forward with what’s best for Ohio.”

Industry representatives are supportive of the study commission, though they continue to oppose a severance tax increase.

“While we remain opposed to an increase in the severance tax rate, especially during this extremely difficult commodity price environment, we are open to continuing discussions on this issue,” Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, said in a released statement. “... It is apparent that a more thorough and deliberative discussion is needed to examine the state’s overarching tax policies.”

And a Democratic lawmaker from eastern Ohio also is supportive of the study effort.

www.GasandOilMag.com

Gas & Oil

July 2015

41

“I think at this point it would not be the right thing to do to stick this severance tax in the budget at the last minute without any hearings or any opportunity for people at the local level to give any input,” said Sen. Lou Gentile (D-Steubenville). “... I think that the study committee is a worthwhile effort to arrive at a solution to this issue. Bottom line for me and the people that I represent is that we need a majority of this revenue to be reinvested in the communities that are producing this oil and gas. That is going to be my position to make sure that distribution comes back to the people who are responsible, the communities that are involved in the day-to-day shale play.”

The governor and other proponents of a severance tax increase say the existing rate is too low, the increase they’re proposing would keep Ohio’s rates lower than other states, and the proceeds could be used to cut income tax rates for all residents and provide funding for infrastructure and other projects in communities near eastern Ohio’s emerging shale oilfield.

Opponents fall into a couple of different camps. Some say the state should not be increasing the severance tax rate at all, given dropping commodity prices and the potential for stifling investment in Ohio by oil and gas producers. Others say the proposed increases aren’t high enough, or more of the proceeds should be directed to eastern Ohio communities affected by the growing industry.

Kasich and Republican lawmakers have been at odds over the severance tax issue for several years. The governor has proposed an increase on oil and gas produced via fracking in past budget-related bills and Republican lawmakers have stripped the language from the resulting legislation each time.

Tuesday’s announcement from Republican lawmakers signals the closest the sides have come in their negotiations.

“This is an important movement and an important moment for the unity and mutual respect, and I look forward to finishing this work towards a meaningful public policy in the weeks ahead,” Faber said.

Faber and Rosenberger did not offer specifics on rate increases being considered other policy changes that could be included.

They committed to completing the study process by Oct. 1. Lawmakers would then have to pick up any recommendations and move them as separate legislation.

“The deadline’s a hard deadline,” Faber said. “There was a lot of discussion about whether this was just a stalling tactic. ... I think a lot of progress was made. I think they have a foundational template as to where to start from. There are still some nuances that need to be negotiated, but I think that template gave us great promise.”

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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Gas & Oil

Ohio Edition

July 2015

Olde Wood Relocation Auction 25,585 SF of Buildings on 4+ Acres

Location: 6203 Alliance Rd. (SR 43 & 183) Malvern Ohio 44644. GPS Coordinates: 40.686674, -81.214334 Directions: Centrally located within half hour of Canton, Carrollton, & New Philadelphia on SR 43/183 between Waynesburg & Malvern Ohio.

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Open for Inspection: Thursday July 16th – 12:00 PM NOON An incredible commercial opportunity nestled in the heart of the Utica Shale. This property offers a multitude of uses and has over 4 acres.

The first building features 2,400 SF office and showroom area along with 7,000 SF of manufacturing and warehouse. The second building, built in 2007, is a steel framed structure and is over 10,500 SF. Both buildings are heated, 16’ ceiling clearance, loading capabilities, and more. There is also another open air building perfect for alternative storage. The land has 311’ of road frontage and the entire yard is flat & usable giving over 4 acres for parking, turn around, or storage. The property is fenced with chain link fencing. With easy accessibility to major towns and state routes, this property should be attractive to any business looking to expand or improve to a more profitable strategic location! Opportunities in commercial real estate do not come along this often offering improvements & land in this great condition and location. Don’t wait…come see all this property has to offer! Terms: 10% Buyer’s Premium. 10% nonrefundable down payment day of the auction, balance at closing in approximately 45 days, no financing or other contingencies, any required inspections must be completed prior to bidding. All information gathered from sources deemed accurate but not guaranteed. Buyers must independently investigate and confirm any information or assumptions on which any bid is based. Announcements day of sale take precedence over all previous advertising and statements. For maps, title, brochure, additional information, and complete equipment & chattel list visit www.kaufmanrealty.com or contact Curt. Legal: Parcel #30001233003 located in Brown Township of Carroll County. Taxes per half year are: $5,024.43

Auction by order of Olde Wood LTD

CURT YODER, REALTOR & AUCTIONEER (330) 204-2447 curt@kaufmanrealty.com

www.GasandOilMag.com

Gas & Oil

July 2015

43

Kimble reduces carbon footprint through CNG Jonathan Scholles Dix Communications

R

ITTMAN, OH -- When selecting a new waste removal service provider recently, Rittman City Council weighed its options long and hard.

And, ultimately, the city’s decision wasn’t entirely based on trash but fuel.

More specifically, the fact that Kimble Companies already converted 42 percent of its fleet to compressed natural gas (CNG), and is in the midst of transitioning the rest. Furthermore, Kimble uses its own natural gas fueling stations to fuel its trucks, reducing its carbon footprint while maximizing sustainability.

Rittman councilmen Steve Johnson and Lynn Beaumont applauded Kimble for it’s initiative. Beaumont, who himself recycles, said siding with Kimble was a way of protecting the environment.

In the 1970s’, Kimble Companies invested in heavily the oil and gas industry, buying up 600 conventional gas wells that it uses to supply local industry. But when the oil and gas industry in Ohio exploded in the past four years, Kimble cashed in, developing the Utica Shale, located approximately one-and-a-half-to-two-miles below the surface in southeastern Ohio, is a major source of oil, natural gas, and natural gas liquids.

“As a result of all this abundant, natural gas in southeast Ohio,” Steve Walton, Vice President at Kimble Companies, said, “not only from our conventional well but also the newer ones, gas prices fell and it opened an opportunity for companies like ours to take advantage of this low-cost fuel source ... natural gas.

“Not only is it a lower cost source of fuel, but it’s a much cleaner burning source of fuel,” he added.

Currently, Kimble has 110 CNG-powered trucks on the road, reducing its greenhouse gas emissions by 22 percent.

In all, Kimble operates 260 refuse and recycling trucks in its fleet.

“There is a real environmental benefit,” Walter said, “and, of course, it works towards our country’s goal of energy independence so we don’t have to rely on foreign oil.”

CNG-powered trucks, Walter said, are much quieter than their diesel counterparts, adding the engine produces about one-tenth the noise level in comparison to a traditional trash vehicle.

In 2013, when gas prices started to decline, Walter said, Kimble made a concerted effort to convert its fleet to CNGpowered trucks but also built its first fueling station at its Twinsburg location.

Kimble then opened a CNG fueling station in Canton. It

planning to open one in Dover, where the company is head quartered, and Cambridge.

“We were able to use natural gas from our own wells to fuel our trucks at our fueling stations,” Walter said. “... It’s pretty neat. Obviously, there are a lot of advantages for us, as well as the consumer. We’re excited to be the first refuge company in Ohio to do this.”

Weighing the reward versus initial investment of project, Walter said, Kimble is pleased with the outcome.

Walter said a CNG-powered truck can cost an additional $40,000 in comparison to its diesel counterpart. However, traditional refuse vehicles use more than 10,000 gallons per year of fuel, so converting to CNG represented a savings of more than $20,000 per truck per year.

“When you multiply that by the number of vehicles in the fleet and consider the average life of a vehicle at 12 years,” Walter said, “the savings really start to add up.”

Cost aside, Walter said, eco-conscious consumers appreciate the move.

“This investment in compressed natural gas vehicles and fueling stations is another extension of the commitment the Kimble family has made to recycling and protecting the environment,” Walter said. “Our customers recognize and appreciate that. Running compressed natural gas vehicles in their communities will do a couple things: stabilize costs long term for them, keeping their prices affordable and providing cleaner, healthier air for their neighborhoods.”

Kimble has exclusive municipal contracts in Wayne County with Shreve, Creston, Orrville, Apple Creek, Fredericksburg, Marshallville, Mount Eaton, Smithville, West Salem and Rittman. A few of Kimble’s Holmes County clients include, Baltic, Glenmont, Holmesville, Killbuck, Loudonville and Millersburg.

Reporter Jonathan Scholles can be reached at 330-2871632 or jscholles@the-daily-record.com. He is @jonschollesTDR on Twitter.

Gas & Oil

Ohio Edition

July 2015

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July 2015

45

Rover Pipeline to add

135M

$

in tax revenue

N

ORTH CANTON, OH – Rover Pipeline is expected to generate more than $135 million in ad valorem tax revenue for Ohio during its first year in operation of which an estimated $91 million will be directed to more than 36 local school districts. The Ohio section of the Rover Pipeline will traverse 570 miles through 18 counties.

“It’s no secret Ohio school districts are facing decreasing financial support from both state and local sources, while at the same time, suffering from significant increases in actual operation costs, particularly the energy costs to operate their buildings,” noted Shawn Bennett, Executive Vice President for the Ohio Oil and Gas Association. “Not only will Rover provide vital tax dollars to Ohio’s schools, but the pipeline itself will deliver clean burning low-cost natural gas that will provide affordable heat and electricity for these schools and communities alike.”

The ad valorem tax revenue generated by Rover may also provide additional funds for other local entities. Ad Valorem taxes are paid to local taxing authorities, which are then responsible for distributing the money based on the decisions of each taxing jurisdiction entities and used to support local needs such as: libraries, roads, hospitals, health departments and senior citizens’ centers. In total, the 711mile Rover natural gas pipeline will generate more than $147 million in ad valorem taxes across the entire route the first year the pipeline is in operation.

Ad valorem taxes are based on the actual value of the pipeline which is the sum total of the materials used to build the pipeline, labor costs and other aspects. These taxes are paid annually while the pipeline is in service.

The Rover Pipeline will gather gas from processing plants in West Virginia, Eastern Ohio and Western Pennsylvania, traverse Ohio and Michigan, and through an interconnection with Vector Pipeline, transport gas to the Dawn Hub, a

natural gas storage facility in Ontario, Canada, for delivery back into the U.S. and Canadian markets. The pipeline will deliver 68 percent of the transported natural gas to the Midwest Hub near Defiance, Ohio. The remaining gas will be delivered to Michigan markets and on to Ontario.

Rover’s route includes the following counties in Ohio: Ashland, Belmont, Carroll, Crawford, Defiance, Fulton, Hancock, Harrison, Henry, Jefferson, Noble, Monroe, Richland, Seneca, Stark, Tuscarawas, Wayne, and Wood.

Rover will have an impact on Ohio’s economy in a number of ways, including approximately $98 million that will be paid as direct compensation to Ohio landowners along the route. During construction, Rover will pay taxes generated from the purchase of materials and payroll taxes for the 4,500 – 6,500 construction workers needed to build the pipeline, just in Ohio. Furthermore, those workers will be supporting the local economies by dollars spent for food, housing, healthcare and other needs. It is estimated that Rover will contribute nearly $1 billion in direct spending to the U.S. economy.

Rover filed its formal application with the Federal Energy Regulatory Commission (FERC) in February of this year.

Construction is expected to begin in early first quarter of 2016. The pipeline is expected to be in-service to the Defiance hub by December 2016, and interconnected with Vector Pipeline in Livingston County, Michigan, targeted for an in-service date of June 2017, based on customer needs.

Information on the Rover Pipeline project can be found on the Rover Pipeline website, RoverPipelineFacts.com, or by calling the project’s toll-free number at 1-888-844-3718. Information about the project can also be found on the FERC website at http://www.ferc.gov/, Docket No.CP15-93-000.

Editor’s note: For detailed information on the local tax distribution of property taxes, please contact your county auditor’s office or local taxing authority.

46

Gas & Oil

Ohio Edition

July 2015

Tax break for natural gas vehicles?

Marc Kovac Dix Capital Bureau

C

OLUMBUS — The Ohio House relaunched deliberations June 2 on legislation that would provide tax breaks for consumers, businesses and public agencies that switch to natural gas-powered vehicles.

HB 176 is similar to legislation that moved through the chamber last session but ultimately stalled in the Ohio Senate without final action.

Sponsoring Reps. Sean O’Brien (D-Bazetta) and Dave Hall (R-Millersburg) reintroduced the proposed law changes earlier this year, with a few tweaks.

The ultimate goal remains unchanged, however: taking advantage of fuels from eastern Ohio’s emerging shale oilfields to reduce demand for overseas oil.

“With the discovery of major shale plays in North America combined with advancements in drilling to harvest these vast stores of natural gas and oil, Ohio and our nation are experiencing a major energy revolution,” O’Brien told the House’s Ways and Means Committee, where the legislation had its initial hearing. “Considering these shale plays have enough reserves to provide our nation’s needs for 100 years with cheap and reliable supplies, governments and the private sector must rethink their policies to capitalize on this

energy boom.”

The bill would provide thousands of dollars in tax breaks to cover new vehicle purchases or conversions from conventional fuels to compressed natural gas. Another provision would provide a $500 sales tax break for those buying electric vehicles.

The legislation also would earmark $16 million in annual grants to assist local governments and nonprofits in converting their existing vehicle fleets to compressed natural gas. Additional language would phase in, over 10 years, motor fuel taxes on compressed natural gas. And a sunset provision would end the incentive and grant programs after five years.

Numerous other states have already implemented incentives for compressed natural gas vehicles, including Pennsylvania, West Virginia and Indiana.

“HB 176 is based on successes we have found in other states that are pushing for alternative fuel policies,” O’Brien said. “Several states are aggressively adopting methods to promote alternative fuels and if Ohio does not adopt legislation like HB 176 we will be left behind.”

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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OHIO WELL ACTIVITY

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MARCELLUS SHALE

15 1 11 0 17 0 0 44

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

428 199 401 0 9 04 0 0 1932

UTICA SHALE

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July 2015

Hydraulic fracturing

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STAGE

1

STAGE

3

STAGE

4

STAGE

5

WATER ACQUISITION Volumes of water are withdrawn from ground water and surface water. Three resources to be used in the hydraulic fracturing process.

STAGE

2

CHEMICAL MIXING Once delivered to the well site, the acquired water is combined with chemical additives and proppant to make the hydraulic fracturing fluid.

WELL INJECTION Pressurized hydraulic fracturing fluid is injected into the well, creating cracks in the geological formation that allow oil or gas to escape through the well to be collected at the surface.

FLOWBACK AND PRODUCED WATER When pressure in the well is released, hydraulic fracturing fluid, formation water, and natural gas begin to flow back up the well. This combination of fluids, containing hydraulic fracturing chemical additives and naturally occurring substances, must be stored on-sit — typically in tanks or pits — before treatment, recycling, or disposal.

WASTEWATER TREATMENT AND WASTE DISPOSAL Wastewater is dealt with in one of several ways, including but not limited to: disposal by underground injection, treatment followed by disposal to surface water bodies, or recycling (with or without treatment) for use in future hydraulic fracturing operations.

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Gas & Oil

Ohio Edition

July 2015

Individuals not the state

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David Hill President, Ohio Oil & Gas Association

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Landowners in eastern Ohio are blessed with abundant natural gas and oil reserves beneath their feet, and many have entered lease agreements with oil and gas producers to explore the viability of their property. These lease agreements typically include a generous signing bonus to the property owner and can result in royalty payments for the life of the well if crude oil or natural gas is produced from the site.

The wealth and economic opportunity generated from oil and gas activity has a ripple effect well beyond the well site.

In eastern Ohio, communities that have struggled for decades have in recent years seen an increase in jobs and a dramatic rise in tax revenue thanks to oil and gas development.

Those tax revenues can be realized through increases in sales tax collections, bed taxes, ad valorem taxes and income tax collections in municipalities. For counties experiencing oil and gas production, ad valorem taxes are a real property tax paid by the oil and gas industry which benefits communities based on how their property taxes are distributed.

While all Ohioans may not have valuable oil and gas reserves below their property, all Ohioans, even those far from oil and gas production areas, do benefit through lower energy costs, job opportunities within or servicing the oil and gas industry and from increased state tax revenue.

I am very proud to live in a country that protects and respects private ownership and the right for property owners to exercise and profit from their mineral rights. I strongly believe that every Bill and Betty Buckeye deserves the right and the opportunity to reap the rewards of their land and to live the American dream.

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n argument often made by proponents for increasing taxes on oil and gas production is that the crude oil and natural gas reserves beneath the state are natural resources owned by all Ohioans and that they should benefit from their development. But this is simply not true.

In the United States, individual landowners own the mineral rights associated with their property, not the state. The private ownership of mineral rights is practically nonexistent outside of America, because in most countries the government owns all the natural resources, including oil and gas.

So, to say that Ohio is giving away its mineral resources to oil and gas producers is disingenuous.

Mineral rights ownership means that the property owner is free to explore and produce the rocks, minerals, oil and gas found at or below the surface of their property. They also have the right to sell, lease, gift or bequest them to others.

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52

Gas & Oil

Ohio Edition

July 2015

EPA:

No widespread harm

W

ASHINGTON — A draft report by the Environmental Protection Agency (EPA) confirms that hydraulic fracturing has not led to widespread, systemic impacts on drinking water resources thanks to the safety and effectiveness of state and federal regulations and current industry practices.

The assessment, done at the request of Congress, shows that while hydraulic fracturing activities in the U.S. are carried out in a way that have not led to widespread, systemic impacts on drinking water resources, there are potential vulnerabilities in the water lifecycle that could impact drinking water. The assessment follows the water used for hydraulic fracturing from water acquisition, chemical mixing at the well pad site, well injection of fracking fluids, the collection of hydraulic fracturing wastewater (including flowback and produced water), and wastewater treatment and disposal.

“EPA’s draft assessment will give state regulators, tribes and local communities and industry around the country a critical resource to identify how best to protect public health and their drinking water resources,” said Dr. Thomas A. Burke, EPA’s Science Advisor and Deputy Assistant Administrator of EPA’s Office of Research and Development.

“It is the most complete compilation of scientific data to date, including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports.”

EPA’s review of data sources available to the agency found specific instances where well integrity and waste water management related to hydraulic fracturing activities impacted

drinking water resources, but they were small compared to the large number of hydraulically fractured wells across the country. The report provides valuable information about potential vulnerabilities, some of which are not unique to hydraulic fracturing, to drinking water resources, but was not designed to be a list of documented impacts.

“Today, the U.S. EPA released their long anticipated draft assessment on the potential impacts of hydraulic fracturing to ground water resources,” said U.S. Rep. Robert E. Latta (Ohio 5th District). “The study confirms what years of research and sound science have told us: hydraulic fracturing is a proven technique being utilized safely and effectively across the country, and its use as a well stimulation technique has effectively turned the United States into the world’s leading energy producer.

“The continued development of our natural resources in various formations across the country has been a driving force in our economy, and moved America towards the energy security that has been the goal of every administration since President Nixon. This study further mitigates any concerns about hydraulic fracturing’s potential impacts to ground water, and will allow us to continue development under the robust regulatory oversight of the developing states.”

Erik Milito, director of the American Petroleum Institute’s Upstream Group, said, “After more than five years and millions of dollars, the evidence gathered by EPA confirms what the agency has already acknowledged and what the oil and gas industry has known. Hydraulic fracturing is

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to drinking water from fracking being done safely under the strong environmental steward- investments, wages, and new jobs. ship of state regulators and industry best prac“Surging production of natural gas is a major tices.” reason U.S. carbon emissions are near 20API officials said that from 2009 year lows. Remaining questions cited to 2013, while the EPA was conby EPA have all been addressed by ducting this study, state agena wide array of strong state regcies finalized an estimated 82 ulations, industry standards, groundwater-related rules and federal laws.” for oil and gas production, Hydraulic fracturing including hundreds of supports more than two discrete rule changes, acmillion U.S. jobs, has incording to the Ground creased supplies of oil Water Protection and natural gas, and has Council. helped to put down“Continuous safety ward pressure on enimprovements have ergy prices. It also has been an ongoing part of strengthened America’s hydraulic fracturing for energy security and geo65 years,” added Milito. political position.

“That process will continAPI represents all segue, with our support, under ments of America’s oil and the oversight of state regunatural gas industry. Its more lators who are most familiar than 625 members produce, with their own area’s unique geprocess, and distribute most of ology, hydrology, and other physithe nation’s energy. The industry cal characteristics. also supports 9.8 million U.S. jobs and “Hydraulic fracturing has been used 8 percent of the U.S. economy. safely in over a million wells, resulting in America’s rise as a global energy superpower, growth in energy

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Gas & Oil

July 2015

Ohio Edition

Custom Compression Systems offers full package

Joe Greco, CCS business manager for Custom Compression Systems for the northeast U.S.

C

ustom Compression Systems is a full service gas comAs of June 2015, CCS has brought Joe Greco as its northeast pressor company offering engineered gas compres- U.S. business manager,in addition to a field service representasion packages to both domestic and international tion agreement with Black Bear Energy Services in the northmarkets. ern U.S. With roots dating back to 1996, Custom Compression SysJoe has 35 years of experience performing business developtems is now recognized as one of the most versatile design and ment and sales duties in the equipment manufacturing industry. manufacturing companies in the industry. At CCS, our experiSince 2008, Greco has been building an energy related netence, locations and state of the art facility combine to give us work almost from the start and surge of drilling activity in the the resources to design, manufacture, and deliver your equip- Utica and Marcellus Shale plays. Colleagues know Joe as a ment needs on time and on budget. Our team of engineers work highly motivated and creative business manager who can alclosely with each of our clients to meet their desired specifica- ways be depended on to manage a client’s interests. tions on every job.

Greco is a member of the National STEPS (Service, TransCCS has the experience and resources to design and fabri- mission, Exploration and Production Safety) Network Advisocate customized compression equipment to exact specifications. ry Board. He is the current Northeast United States CoordinaAt Custom Compression Systems, we take total responsibility tor for National STEPS and current president of the Buckeye from design to fabrication to delivery — which gives us the Steps Network of Ohio. He is also an executive board member ability to commit to your total satisfaction. of Twin Tiers STEPS of western New York and northwestern At CCS, the proof is in the work. With a large scale manufac- Pennsylvania. He is the past vice president of Appalachian turing facilities totaling more than100,000 square feet, our two Basin STEPS of West Virginia, past president of the western 80-ton overhead cranes in the assembly shop, with a 70-foot Pennsylvania American Society of Highway Engineers, past heave height, or our Port of Iberia location that provides direct president of the International Referral Network and Wacker deep-water access with over 1,100 feet of bulkhead and Ap- Top Gun Award recipient three years in a row, covering the last palachian base in the Appalachian region, we can deliver what years working the small equipment industry. few others can — complete solutions from start to finish.

Greco has performed new business development and sales Custom Compression Systems has the facility, locations and duties for such companies as Knickerbocker Equipment of experience to engineer and manufacture compressor packages Erie, Pa., Anderson Equipment Co. of Pittsburgh, Pa., Clean ranging from 50 to 8,200 horsepower, as well as a full range Harbors of Norwell, Mass. and Black Bear Energy Services. In of process equipment. In addition, CCS can also accept engi- these sales and representation roles he has promoted equipneered projects to fabricate custom packages to any specifica- ment from the following manufacturers: Komatsu, Ingersoll tion.

Rand, Dresser North America, Volvo, Blaw Knox, Wacker CorCustom Compression Systems takes on full responsibility, poration, Gorman Rupp, Genie Industries and Moxy Engineerranging from all codes, standards and services listed through ing to name a few. any additional specifications. These are incorporated into the manufacturing process using the latest fabrication equipment Joe Greco can be reached at (724) 681-4414, or jgreco@custhat ensures the most cost-efficient and highest quality product. tomcompressionsystems.com.

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Gas & Oil

July 2015

10370206

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Gas & Oil

July 2015

Ohio Edition

The Pipeline Connection Judie Perkowski Dix Communications

D

rillers are not the only people getting antsy waiting for pipelines to be, in the very least, on the “waiting for approval” list.

While producers are pumping out billions of cubic feet of natural gas every day, the combination of low natural gas prices and a lack of pipelines to move gas out of the region, has ancillary businesses taking a step back.

Ohio businesses that have enjoyed phenomenal growth in sales and services to the industry for the past couple of years, are beginning to feel the pinch.

Less work, less money, less workers.

But, there is a light at the end of the pipeline.

Recent approval of a 20-mile $40 million intrastate pipeline that will carry natural gas from rural Lorain County to a power plant in Avon Lake, was announced earlier this month. By the time this news has spread through the lakefront area, construction by Dominion East will be in full swing.. Smaller pipelines within the state’s boundaries are approved by the Ohio Power Siting Board and the Public Utilities Commission of Ohio. The OPSB has siting jurisdiction, PUCO has safety jurisdiction.

Interstate pipeline projects are approved by the Federal Energy Regulatory Commission. FERC is an independent agency that regulates interstate transmission of electricity, natural gas and oil. FERC also reviews proposals to build liquefied natural gas terminals and interstate natural gas pipelines as well as licensing hydropower projects.

Length of the pipeline is not the deciding factor if the project must be approved by FERC. Twenty miles or twohundred miles, if it crosses a state line, it has to be approved

by FERC, which has siting jurisdiction. The Pipeline and Hazardous Materials Safety Administration has safety jurisdiction for interstate pipelines.

The PHMSA’s objective is to protect people and the environment from the risks of hazardous materials transportation by establishing establish national policy; set and enforce standards; educate and conduct research to prevent incidents; and prepare the public and first responders to reduce consequences if an incident does occur.

One of the largest pipelines to fall under FERC and PHMSA was the Rockies Express Pipeline LLC, also known as the REX pipeline. At the time, it was one of the biggest pipelines ever built in North America, a 1,698-mile, 42-inch pipeline system estimated to cost $3 billion The pipeline began operations in 2009. Five years later it was considered obsolete. But in 2013, “the Phoenix” was rising

from its ashes. FERC ruled in favor of a proposal by the pipeline owners to run dual pipelines, allowing REX to ship west to east and from east to west within Zone 3, which covers Missouri, Illinois, Indiana and Ohio, without violating the any previous agreements.

Since the FERC ruling, REX has signed its first agreement to ship Utica gas to the Mid-continent. The first step in the pipeline becoming a bidirectional system.

Between June of 2013 and June 2015, requests for more than 2,623 miles of pipeline with an Ohio connection, representing multiple companies have been submitted to FERC for approval.

Companies with sole or multiple partnerships for the projects are Rockies Express Pipeline LLC, Panhandle Eastern, East Tennessee Natural Gas LLC, Texas Eastern Transmission, LP, ˇTennessee Gas pipeline Co., LLC, Dominion Transmission, Inc. Two of the longest pipelines waiting for approval are the Rover Pipeline LLC, a subsidiary of Energy Transfer Partners and the Leach Express Pipeline, owned by Texas-based Columbia Pipeline Group.

The Leach Express application is seeking federal approval to build the pipeline, in addition to three compression stations in southeast Ohio and northern West Virginia. The pipeline would carry natural gas from the Utica and Marcellus shale formations in Ohio, West Virginia and Pennsylvania to Columbia markets in he mid-Atlantic and Gulf Coast states.

The Rover Pipeline, as of June 2015, is more than halfway through the approval process.

“The Rover group submitted its final application in June of 2014,” said Vicki Granado, media representative for the Rover Pipeline. “We expect approval by November of 2015.”

Since the last conversation with Granado in April, the company has redesigned the pipeline’s northern route in Michigan, cutting 93 miles and $1 million off its original budget of $4.3 billion. The revised $4.2 billion budget means the 711-mile Rover will cost approximately $6 million a mile. Updated maps detailing the proposed route of the pipeline are available at local libraries and government offices. Granado said it important to note that adjustments to the route continue to be made as the surveys are completed.

The pipeline includes three original lateral lines connecting to processing facilities in West Virginia, Ohio and Penn-

www.GasandOilMag.com

Gas & Oil

July 2015

57

The 42-inch pipeline that will be used for the Ohio section of the dual Rover Pipeline route.

sylvania and to the Rover’s distribution or main line. The “main” is the middle step between high pressure transmission lines and low pressure service lines. Service pipelines connect to a meter that delivers natural gas to individual customers.

Granada said the project is running smoothly with some tweaking, but no major problems. Rover will primarily serve domestic consumers from the Marcellus and Utica areas to U.S. markets in the Midwest, Great Lakes and Gulf Coast regions. The pipeline is expected to be in service from the production areas to the Midwest Hub near Defiance, by the end of 2016, and from the Midwest Hub to markets in Michigan and the Union Dawn Hub in Canada by mid-2017.

“As part of the FERC filing process, an integral component of the plan includes the contract services of Ohio-based Land Stewards, based in Columbus. The majority of land the pipeline traverses is under agricultural properties. Each county the pipeline travels with have a crew that follows the construction sites for reclamation. The group is composed to agricultural engineers, drainage contractors, agronomists and conservation planners. The company is providing consultation, assessment and design support to landowners affected by pipeline development,” said Granada. “The firm will work with landowners and Rover to develop individual plans designed to minimize the impact of the project and to ultimately restore the full productivity of the landowners property and surrounding natural habitat. Land Stewards will provide consulting services and will serve as agricul-

ture inspectors during construction. Once construction and restoration is completed, the company will remain for an additional two years.”

• Other pipelines in the pre-filing process with FERC include the Nexus Pipeline, which elected officials say is still in “draft form.” The proposed route will travel through northeast Ohio, then on to Michigan to hook up with an established pipeline. Developers are hoping to file a permit with FERC in November and begin construction in 2017.

The proposed Utopia East Pipeline by Houston-based Kinder Morgan is a $500 million, 210-mile, 10-inch pipeline from Harrison County, Ohio to Michigan and from there connecting with another pipeline heading into Windsor, Ontario. Since the new pipeline will only be in Ohio, the U.S. Army Corps of Engineers will be lead agency, in addition to oversight by the Ohio Department of Natural Resources, the Ohio Environmental Protection Agency and the U.S. Fish and Wildlife Service.

In January 2016 Kinder Morgan will file a full application and target November 2016 to begin construction. All new pipeline that will be constructed for the project will happen within Ohio. No new pipeline is needed in Michigan or indeed into Ontario. Why is that important? Because newly constructed pipeline doesn’t cross state lines and connects with existing pipelines, FERC will not be involved with approving or overseeing construction for the project.

So there is something to smile about. jperkowski@daily-jeff.com

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Gas & Oil

Ohio Edition

July 2015

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY

BY NUMBER OF SITES

1. Carroll County 484 2. Harrison County 353 3. Belmont County 249 4. Monroe County 222 5. Guernsey County 183 6. Noble County 166 7. Columbiana County 130 8. Jefferson County 57 9. Mahoning County 30 10. Tuscarawas County 20 11. Washington County 18 12. Portage County 15 Trumbull County 15 13. Stark County 13 14. Coshocton County 5 15. Holmes County 3 Morgan County 3 Muskingum County 3 16. Knox County 2 17. Ashland County 1 Astabula County 1 Geauga County 1 Medina County 1 Wayne County 1 WELL SITES IN VARIOUS STAGES: PERMITTED, DRILLING, DRILLED, COMPLETED, PRODUCING, PLUGGED SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF 06/13/15

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Gas & Oil

July 2015

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Gas & Oil

Ohio Edition

July 2015

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Gas & Oil

July 2015

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62

Gas & Oil

July 2015

Ohio Edition

Oil and gas professionals outline pipeline projects Chelsea Shar

N

ow that the oil and gas potential of eastern Ohio has been tapped into, companies are jumping on board to create pipelines that can transport it.

Four companies were represented at the Utica Midstream seminar hosted by the Canton Regional Chamber of Commerce Wednesday.

Pipeline projects by Marathon, Williams, Spectra Energy and EnLink were presented to an audience of gas and oil professionals or business people who are interested in taking advantage of the gas and oil boom in Ohio.

According to the Ohio Department of Natural Resource’s calculations, 23 rigs have been built, 1,505 wells have been drilled and 1,929 permits have been granted in Ohio since 2010.

That influx of oil has shot Ohio up on the list of natural resource providers and oil and gas transportation companies are flocking to the area, anticipating a need for that gas and oil to get to Canada and other parts of the U.S. Nick Homan, commercial development manager for Marathon Pipe Line LLC, a subsidiary of Marathon Petroleum, discussed the details for the Cornerstone Pipeline that will start in Harrison County and end at Canton’s Marathon refinery.

The project is anticipated to cost $250 million.

The 50-mile-long pipe will have a capacity of 180,000 barrels per day. Currently, the company is working on securing right of ways on properties. Homan said the construction on the pipeline will start in early 2016 and be operational in the third quarter of 2016.

“This is a 60-inch pipeline, it’s large enough, it’s built for the future. If we are going to lay line we are going to do it once and do it right,” Homan said.

Marathon’s goal over the next two to five years is to expand the oil and gas market west.

“What we want to do is fill out the local Ohio market and continue to provide opportunities for producers to improve their net max by getting to a regional refinery market,” Homan said.

Homan identified a few expansions that not only serve the Canton refinery market but also the refineries to the west.

Marathon has refineries all the way to Detroit and plans to build new pipelines throughout Ohio to its various refineries.

The total of Marathon’s investment in projects across Ohio is close to $1 billion.

Over the last several months the price of crude oil has

dropped to $60 per barrel, making it unprofitable for companies to continue to flood the market with new product.

The industry question that needs answered is when the market will turn around, prices increase and drilling begin again.

Homan said Marathon continues to invest in the industry while some other companies don’t because they want to be ready when the market does turn around.

“We believe in Marathon that if the resource is there it will continue to be developed. At what rate? We don’t have the answer to that, but we believe we need to put ourselves in the position to take advantage of the resource as the market changes,” Homan said. “We intend on not missing our opportunity in this region.”

Kris Evanto manager of development for Williams Partners, which owns and operates more than 33,000 miles of pipeline across North America, spoke at the seminar.

Since 2011 the Utica supply hub has been the focus of the majority of the company’s development.

“In a little over three years we have put about 418 miles of pipe in the ground and over 140,000 horsepower worth of compression. We have basically gone from zero to a BCF of power a day,” Evanto said.

Williams’ subsidiary, Utica Gas Services, acquired Utica East Ohio Midstream LLC from a subsidiary of EV Energy Partners LP for approximately $357 million. The company closed the acquisition Wednesday — one of several acquisitions Williams has made over the past year.

Four major franchises will be formed out of the acquisitions as a result of the shale regions each services.

The majority of the improvements Williams plans to make in the next few yeas are in the Utica dry wells that are under Columbiana, Jefferson, Belmont, Monroe and Washington counties.

Anne Moore is director of business development at Spectra Energy, the company constructing the Nexus pipeline. She spoke about the progress of the pipeline, which will run further north than other pipeline laid throughout Ohio.

The pipeline will be in use by the end of 2017 if all goes as planned, she said.

Moore said Nexus has entered into contracts with distribution companies throughout Ohio, but the names of those companies have not yet been released.

The company will release the names of those companies when they release a study they have conducted on Friday.

Gas & Oil

www.GasandOilMag.com

63

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“Nexus is positioned to be a backbone for growth for years to come,” she said.

Over 5,000 jobs will be created throughout the project in Ohio. Long-term compressor stations will be staffed with new jobs as well, she said.

The pipeline is expected to generate $2 billion in taxes in the next 60 years in Ohio. The 250-mile-long pipeline will stretch from Kensington to Michigan.

Kelly Tipton of EnLink said the company is waiting for the market to turn around with plans for a Condensate Pipeline in the works.

“It’s not if but when, depending on when producers need the takeaway,” he said.

“When producers say they need it we need to have it ready.

In the short-term our truck fleet can service producers.”

The pipeline will be located in southern Ohio and will be small compared to other pipelines being proposed, at 8 inches in diameter and 45 miles long.

EnLink transports gas mostly by rail and road. EnLink trucks traveled over 7 million miles throughout Ohio last year.

While the company has traditionally used train and trucks to transport product in Ohio, they are now shifting to pipeline because of the demand.

Tipton said the company had to decide to go to a pipeline based on what producers wanted.

“At what point will a producer pay a higher cost to get the more dependable flow? Our company as a whole is a pipeline company.

“To put these on pipe we believe is the right thing because of the volume,” he said.

Sponsors of the event, Agile Networks and DaWood Engineering, had representatives speak about their services and how they have tapped into the local industry needs in the Utica and Marcellus regions.

Frank Nieto, senior editor of Midstream Business, also spoke and wrapped up what he has seen in the industry with a simple phrase, “Perpetual growth.”

He said Ohio has the potential to be the second largest oil producer outside of Texas.

The speakers represented a portion of the pipelines being planned for Ohio in the coming years. One audience member, Cythia Paschke, is a principal environmental scientist for BL Companies, an environmental consultant for pipeline companies.

She said she is working with Kinder Morgan on a pipeline project that will travel through Ohio but has not yet been announced. She said she attended to learn about what all was going on in the industry.

“It’s interesting to know how many companies in Ohio are investing back into Ohio,” she said about the seminar.

The next Canton Regional Chamber of Commerce Utica event is the Utica Summit III on Oct. 13. @CShar_AR on Twitter | cshar@the-review.com

July 2015

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Gas & Oil

July 2015

Ohio Edition

Federal judge

Matthew Brown Associated Press

B

ILLINGS, Mont. (AP) — A federal judge is pressing U.S. officials to explain why it’s taken three decades to decide on a proposal to drill for natural gas just outside Glacier National Park in an area considered sacred by some Indian tribes in Montana and Canada.

A frustrated U.S. District Judge Richard Leon called the delay “troubling” and a “nightmare” during a court hearing earlier this year. He ordered the Interior and Agriculture departments to report back to him with any other example of where they have “dragged their feet” for so long.

“This is no way to run a government. No way to run a government,” Leon told government attorney Ruth Ann Storey, according to a transcript of the June 10 hearing in Washington, D.C. At issue in the case is a 6,200-acre energy lease in northwest Montana’s Badger-Two Medicine area immediately south of Glacier. Owned by Solenex LLC of Baton Rouge, Louisiana, the lease has been suspended since the 1990s.

Solenex sued in 2013 to overturn the suspension and wants to begin drilling for gas this summer. It’s represented by the Mountain States Legal Foundation, a conservative Colorado law firm that handles property rights cases and has numerous representatives of the oil and gas industry on its board of directors.

U.S. Justice Department spokesman Wyn Hornbuckle said Wednesday the government will submit a response to the judge’s concerns next week. He declined to elaborate.

The Badger-Two Medicine area is the home of the creation story of the four Blackfoot tribes in Canada and Montana and the Sun Dance that is central to their religion. The land is part of the Lewis and Clark National Forest, but it is not on Montana’s Blackfeet Reservation.

Dozens of oil and gas leases were originally sold in the area, but over the years most have been retired or surrendered. Only 18 suspended leases remain, including Solenex’s.

Gas & Oil

www.GasandOilMag.com

July 2015

65

wants delay explained In this Nov. 7, 2013 photo, a train hauls oil into Glacier National Park near the Badger-Two Medicine National Forest in northwest Montana. During a June 10 hearing in U.S. District Court in Washington, D.C., U.S. District Judge Richard Leon pressed U.S. officials to explain why it’s taken three decades to decide on a proposal to drill for natural gas just outside Glacier in an area of the Badger-Two Medicine that is considered sacred by some Indian tribes in Montana and Canada. At issue in the case is a 6,200-acre energy lease in northwest Montana’s Badger-Two Medicine National Forest, immediately south of Glacier.

(AP Photo/Matthew Brown)

Blackfoot leaders have asked Interior Secretary Sally Jewell to cancel the leases.

The Interior Department issued the energy lease to Solenex in 1982, and the Forest Service in 1996 asked for it to be suspended so the agency could perform a historic preservation survey of the site. That was completed in 2012, but there’s been no final decision on whether the lease should remain in place.

Mountain States Legal Foundation president William Perry Pendley noted the boundaries of the traditional cultural area for the tribes were studied and expanded several times since the leases were issued.

“The feds have thrown money at the tribes and these consultants to do these additional studies,” he said. “The bottom line is, this is national forest land.”

But Blackfeet Tribal Historic Preservation Officer John Murray rejected any suggestion that the studies were a ploy to block Solenex. He said the Montana tribe opposed the

leases from the time they were issued and considered the original cultural studies of the area inadequate.

“It’s paramount that it’s protected. Bad research does not negate the importance of the area to the Blackfeet,” Murray said.

Storey defended the government’s handling of the Solenex case in her appearance before Judge Leon. She said it took many years to conduct the necessary site studies, and working with the tribes meant the process wasn’t entirely within the agencies’ control.

The Forest Service in December determined drilling would adversely affect the sacred site and reduce its spiritual power for the Blackfeet.

The Advisory Council on Historic Preservation agreed with that finding in January. Its recommendations on how to proceed are pending.

Forest Service spokesman Dave Cunningham said he was not aware of a timeline for a decision.

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Gas & Oil

Ohio Edition

July 2015

Upcoming Events July JULY

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2015 Ohio Fire & Rescue Officer Development Conference, Hilton Columbus at Easton, Columbus

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OOGEEP STEM Teacher Workshop, Youngstown State University

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OOGA Summer Meeting, Zanesville Country Club. 1300 Country Club Dr., Zanesville. Go to http://www.ooga.org/events/ event_details.asp?id=630046&group= for more information.

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July Cont.

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28-29 JULY

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PIOGA Annual Pig Roast, Equipment Show & Seminar, Seven Springs Mountain Resort, Seven Springs, Pa.

Desk & Derrick Industry Appreciation Dinner, Marietta

July 2015

August AUGUST

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IOGAWV Summer Meeting, The Greenbriar, White Sulphur Springs, West Virginia. Call 304-344-9867 for more information.

SOOGA Summer Golf Outing, Oxbow Golf Course, Beverly

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