Ohio Gas & Oil October 2018

October 2018

A Free Monthly Publication

FRACKING BEGINS AT CABOT OIL’S ASHLAND COUNTY SITE

IN THIS ISSUE: USDA GRANT ANOTHER STEP FOR CRACKER PLANT IN BELMONT COUNTY

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OhioGas&Oil

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Table of Contents OCTOBER 2018

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A Look Ahead Gas & Oil Events

G ROUP PUBLISHER

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Fracking Begins at Cabot Oil’s Ashland County Site

Bill Albrecht

5

U.S. Congressman Bill Johnson Tours Well Site

EXECUTIVE EDITORS

6

Rich Wright Named Director of the Utica Shale Academy

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USDA Grant Another Step for Cracker Plant in Belmont County

Ray Booth rbooth@daily-jeff.com Ted Daniels tdaniels@the-daily-record.com

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Shale InsightTM 2018 – Pre-Conference Workshops Announced

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Oil, Gas Official Emphasizing ‘Demand Opportunities’

13

Ohio Court Issues Favorable Landowner Ruling in Important Unitization Case

15

EPA Proposes Oil and Gas Targeted Improvements to Advance President Trump’s Energy Dominance Agenda

17

Ansco Meets Challenges with ESPRIT®

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Ohio Well Activity

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Horizontal Drilling Activity Graph

On The Cover:

“Ohio Gas & Oil” is a monthly publication.

Copyright 2018.

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Drilling on Cabot Oil and Gas’ third well pad site in northeastern Ohio is beginning just as fracking has commenced on the company’s first site, in Ashland County’s Green Township.

OCTOBER 2018 ADVER TISING John Kridelbaugh Cambridge, Ohio Office jkridelbaugh@daily-jeff.com 740-439-3531 Kelly Gearhart Wooster & Holmes, and Ashland, Ohio Offices kgearhart@the-daily-record.com 330-287-1653 419-281-0581 Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200 Kim Brenning Kent, Ohio Office kbrenning@recordpub.com 330-298-2012

L AYOUT DESIG NER Phil Luks

pluks@recordpub.com

A Division of GateHouse Media Ohio 212 E. Liberty St. Wooster, OH 44691 330-264-1125 editor@spectrumpubs.com.

OCTOBER 2018

A Look Ahead

Gas & Oil Events October 6-7, 2018

OGEEP FIREFIGHTER TRAINING

2018 Responding to Oilfield Emergencies Training. Additional dates are November 3-4, 2018.

Register online or contact Catherine Watkins at (740) 587-0410 or cwatkins@oogeep.org. More info and specifics details on training at: h t t p : //w w w.o o g e e p .o rg /eve n t / oogeep-firefighter-training/

October 23-25, 2018

Oil and Gas Association (OOGA) and West Virginia Oil and Natural Gas Association (WVONGA).

New for 2018, SHALE INSIGHT™ will integrate all exhibit hall activities with the general session main stage and breakout session presentations. As the nations leading industry forum, SHALE INSIGHT™ 2018 will return to Pittsburgh’s David L. Lawrence Convention Center.

Register today at www.ShaleInsight.com

REGISTER NOW FOR SHALE INSIGHT™ 2018

Celebrating its 8th year, SHALE INSIGHT™ 2018 continues the strategic partnership between the Marcellus Shale Coalition (MSC), Ohio

OCTOBER 2018

OhioGas&Oil

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Fracking Begins

at Cabot Oil’s Ashland County Site Dylan Sams | The Wooster Daily Record, GateHouse Media Ohio

Drilling on Cabot Oil and Gas’ third well pad site in northeastern Ohio is beginning just as fracking has commenced on the company’s first site, in Ashland County’s Green Township.

Cabot has said it plans eventually to have five exploratory wells built in the Ashland, Richland, Wayne Holmes and Knox County region.

Locations for two additional well-pad sites in addition to the pads in Green, Mohican and Vermillion townships in Ashland County have not yet been nailed down, according to George Stark, director of public affairs for the Houston-based company.

Stark said two possible sites for well pads are south of Loudonville off County Road 529, or in Richland County’s Monroe Township, near Malabar Farm.

“After (the site on state Rt.) 511, we don’t have a place,” he said. “There’s a few locations off of (state Rt.) 39 and we’re just working the permits.

“There’s a lot (of locations) on the drawing board, some farther along than others. Soon we need to pull the trigger. Construction season is something we will be mindful of.” Stark said the company is working with landowners to get leases signed so they can apply for the necessary permits from the state.

While the company is planning its next steps, the first three wells are in various points in the production process.

A drilling rig was placed at the Vermillion well pad on Rt. 511 at the beginning of last week. The rig previously had been at the first well pad site on Green Township off Township Road 2375 and, over the last month at the Mohican Township site on Township Road 257.

The well at Township Road 2375, identified as Kamenik Pad 1 by Cabot, was first drilled toward the end of June. Once the rig moved to the Mohican Township pad, containers for water were placed in Green Township to prepare for horizontal hydraulic fracturing, or fracking. Hydraulic fracturing is the process of forcing a mixture of water, sand and chemicals at a layer of rock to break it and allow a resource, either natural gas or oil, back to the surface.

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Stark said the well in Green Township was hydraulically fractured over the last week extending horizontally about 1,000 feet and is the first of the three constructed well pads to be in production.

“Now they are in the process of evaluating what they have found,” Stark said. “When we flow it back the water and the sand come back also. In the initial flow back, you are getting all the water and all of the sand ... After awhile, you will get 90 percent water

“Now they are in the process of evaluating what they have found,” and 10 percent product. Over time, we will get 10 percent water and 90 percent product.”

The waste-water from the fracking process is being hauled to storage wells elsewhere, Stark said.

Once the fracking waste-water is removed, then Cabot will have a better idea what they think may be under the ground and whether conditions are right for the oil or gas to be harvested and produced, Stark explained.

The second pad, in Mohican Township, is being prepared for the hydraulic-fracturing phrase. A container to hold water used to frack the well has been constructed. Stark said it takes about three weeks to prepare the well for fracking after drilling vertically.

The third pad, in Vermillion Township, will be drilled for about a month, and the process then repeats.

Stark said the company still plans to have the five planned exploratory wells built by the end of 2018.

“It should be a busy September and October,” Stark said.

OCTOBER 2018

U.S. Congressman Bill Johnson

Tours Well Site Submitted story

Representatives of Ascent Resources and the Ohio Oil and Gas Association hosted U.S. Congressman Bill Johnson on a tour of a Utica shale drilling rig in Guernsey County. Ascent Resources is located in Cambridge, with headquarters in Oklahoma.

After proceeding through security and watching a safety video, the tour commenced with a walk around the well pad to see the various pieces of equipment on site and how the pad is laid out to ensure safety and efficiency. Next the group checked in with the crew in what is known in the industry as the “doghouse” for a visit. It was there that the Congressman first commented on the impressive technology in place to protect Ohio’s precious water resources.

Here, the driller showed the congressman how they take the pipe downhole, what precautions they use during the process and how intricate the equipment used really is.

While everyone was watching and listening to the crew explain what was happening the gentleman at the controls offered up he was from Ohio and he pointed to the group on the rig floor and shared that they were all from the tristate region. Hiring local is part of an industry wide effort in Ohio to ensure that qualified workers for the tristate area find meaningful employment in the industry that is working in their towns. According to the latest state data, over 200,000 are employed in shale related jobs in Ohio.

After a tour around the drilling floor it was back down to check out the various pumps, machines and equipment used to drill a horizontal well. All along the tour, it was pointed out the various measures in place to protect safety the workers, watershed and our shared environment.

According to Amanda Finn, Government Affairs Manager at Ascent Resources, “We host these kind of tours to ensure our elected officials at all levels understand what it is we do, how we do it and the incredible economic activity we create when we set up in a given area.”

At the conclusion of the official tour, the entire group gathered to answer questions that were posed by the Congressman about various aspects of the industry, the state of Ohio’s oil and gas industry and how things have been since coming out of the downturn.

OCTOBER 2018

Mike Chadsey, Director of Public Relations for the Ohio Oil and Gas Association shared that, “OOGA is grateful for the Congressman taking time out of his busy travel schedule to stop by an active well pad in Guernsey County to take a tour and ask intelligent questions about the industry and discuss current production from Ohio’s producers.”

Ascent owns nine of the top 10 producing natural gas wells in Ohio per the latest report from the Ohio Department of Natural Resources and they are a growing company with over 200 employees in Oklahoma City and over 100 here in Cambridge. They, like other producers, while coming out of a long downturn are reinvesting in Ohio by purchasing assets from other companies such as their recent acquisition of the Hess and CNX joint venture acreage. They are still a single play operator only drilling in the Utica in Ohio.

OhioGas&Oil

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Rich Wright

Named Director of the Utica Shale Academy Dr. Chuck Kokiko | Utica Shale Academy

Rich Wright is taking his administrative and coaching talents to another level as the newest director of the Utica Shale Academy.

Wright, who has been head football coach at Southern Local High School for four years and was its assistant principal for the past three years, assumed his newest duties on Aug. 1. He replaces Eric Sampson, who was director of the community school since its inception in 2014 but departed for another role in education. Wright said he was eager to guide high school students towards success in the growing energy field.

“You wear a lot of hats and there are plenty of ad-

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ministrative duties with attendance, testing, graduation points and career opportunities,” he said. “We have welding with the New Castle School of Trades and courses involved with the gas and oil industry.

There are a lot of opportunities in the industry and you can get a lot of verifications here.”

He has been working with the USA Board of Directors and sponsor Jefferson County Educational Service Center to implement ideas and strategies and expand the program even further.

“We’d like to expand by increasing our student options and one of those areas includes a stronger connection with NCST,” he said. “Doug Velasquez [director at USA’s Columbiana High School satellite location] has ideas and we’re looking at entrepreneurships and a technology-based partnership with Youngstown State University.”

Future plans are to increase enrollment in the NCST welding program, and Wright noted that classes begin at the East Liverpool site on Aug. 31. Students began attending NCST last September and currently study for 2 1/2 hours a day, three days a week to earn 250 hours of welding credit.

Site visits are also on the agenda during the 201819 school year to various oil and gas sites to gain an understanding in how they work.

Furthermore, he is looking at ways to increase student enrollment at USA, which currently stands at 45 participants between the main location at SLHS and the Columbiana branch. Flyers have been distributed throughout the area while he touted the program at the school district’s annual Back to School Bash on Aug. 14. About 50 students have graduated from USA since it began--with the largest class being in 2018 at 22 people—and Wright says that’s indicative of the growing demand for a workforce in the energy field.

When it comes to his new role, Wright said he liked the one-on-one interaction with students.

“There is comfort of serving kids face-to-face and

Learn more at www.reacpa.com/ohio-oil-gas

OhioGas&Oil

OCTOBER 2018

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OCTOBER 2018

Southern Local High School administrator and football coach Rich Wright made a move to serve as director of the Utica Shale Academy. The former assistant principal is transitioning into his new role and eyeing new ways to build enrollment and prepare current high school students for success in the energy field. USA presently has 45 students at the main location at SLHS and the satellite site at Columbiana High School.)

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it’s kind of like being the head coach of the program. I like the interaction and it’s nice to help kids decide their career path in life, especially if they are juniors and seniors,” he said. “It’s just a great program and I like being part of it.”

Dr. Chuck Kokiko, superintendent of JCESC, thanked Sampson for his service and welcomed Wright into the fold.

“Eric spent four years at Utica Shale Academy and he was dedicated to the school,” Dr. Kokiko commented. “We wish him luck with his future endeavors in education.”

He added that Wright was the right choice to succeed Sampson and was providing many ideas to build the program.

“Rich Wright was part of Southern Local and is familiar with the Utica Shale Academy, so we’re excited to see him move to the role of director. His educational and coaching experience will lend itself well to the students in the shale academy and he’s brought new ideas for student enrollment as well as increasing attendance. He’s also reaching out to communities and the oil and gas industry for the creation of additional opportunities for students.”

Registration is open and the academy is offered to students in grades 9-12. USA provides curricula required by the Ohio Department of Education and includes a customizable digital curriculum allowing for acceleration or remediation along with flexible scheduling, plus certification courses in SafeLand, OSHA10, First Aid and CPR, hydrogen sulfide (H2S) awareness and confined space certifications. Academy graduates receive a high school diploma, certificates and college credit options offered through Eastern Gateway Community College.

For more information about USA’s programs, contact Wright at (330) 420-5353 or visit the website at uticashaleschool.com.

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OhioGas&Oil

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USDA Grant

Another step for Cracker Plant in Belmont County Robert DeFrank | The Wheeling Intelligencer

The federal government has announced a $60.5 million investment to modernize and improve Belmont County’s water system.

According to the U.S. Department of Agriculture, the investment represents the single-largest monetary obligation in Ohio Rural Development History.

County, state and federal officials made the announcement in the county courthouse. Anne Hazlett, assistant to Secretary for Rural Development, said the USDA is providing a $45.5 million direct loan combined with a nearly $15 million grant through the Water and Waste Disposal Loan and Grant Program.

“We know that infrastructure is a foundation for rural prosperity,” she said. “Not just for quality of life, for public health and safety, but also for economic opportunity.”

After the announcement, Belmont County commissioner Josh Meyer said the upgrades will affect rural areas that do not have their own water treatment facilities. The commissioners raised water and sewer rates last June in preparation for the possibility of the loan, so no further increases are expected.

Hazlett commented on the potential the new water system could mean for the county.

“We know that this will be a platform for future growth in this region,” she said. “Our core mission at Rural Development and at USDA is really to come

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Anne Hazlett, assistant to Secretary for Rural Development, said the USDA is providing a $45.5 million direct loan combined with a nearly $15 million grant through the Water and Waste Disposal Loan and Grant Program.

alongside local community leaders and build rural prosperity. Here in Belmont County, we have seen an opportunity. A community that has needs and strong local leadership that have a vision for addressing the needs of the reason … Water infrastructure will create that foundation for future growth.”

U.S. Rep. Bill Johnson, R-Ohio, said this comes as a culmination of planning and work from officials at all levels. He also said this announcement comes on the heels of a recent announcement of $16 million in funding for rail infrastructure.

“This is a huge, huge announcement for Belmont County,” he said.

Johnson said the system will encompass 500 miles of water lines that serve 9,700 rural residents directly.

“And another 23,000 residents when you look at the villages and townships around,” he said.

Johnson said the system is a sign of even more growth to come.

“When you look at the potential for the ethane cracker plant, PTT Global Chemical, which continues every day to move in the right direction, this is a big shot in the arm for that,” he said. “We’re heading in USDA continued on page 11 OCTOBER 2018

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SHALE INSIGHT

TM

2018

Pre-Conference Workshops Announced Submitted story

SHALE INSIGHTTM 2018 will offer pre-conference workshops on Tuesday, October 23 from 3:30 p.m.

- 5:30 p.m., subject matter experts will provide indepth, two-hour interactive demonstrations and presentations that will delve into complex technical topics within the oil and gas industry. Opportunities for participation and Q&A will be facilitated during each session to enhance the growth and learning experience.

Separate registration is required for pre-conference workshops at a nominal fee. If you have already registered for the Conference, please revisit your registration account to add a pre-conference workshop; otherwise, please visit http://shaleinsight. com/register/ to begin the full registration process.

Energy Transactions in the Marcellus and Utica Shales: Where have we been? Where are we going?

Sponsored by Steptoe & Johnson The evolution of the Marcellus and Utica shales has occurred in several phases. Industry insiders in the energy, business and legal worlds will discuss strategies necessary for the completion of successful energy transactions in today’s market as well as what future opportunities and challenges they see for the region. This interactive workshop will allow participants the opportunity to apply the strategies discussed to real-world situations.

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Reducing Methane Emissions: How State and Federal Agencies are Regulating Methane Emissions Sponsored by Woodard and Curran State and federal agencies have recently implemented changes in regulations on the natural gas industry for reducing methane emissions. This workshop will include a discussion of the changes; how the industry will navigate the new regulations and permits, such as the Pennsylvania GP-5/5a permit, and how to implement new Leak Detection and Repair (LDAR) technologies to monitor and report compliance.

Technology Showcase The annual Technology Showcase provides suppliers of emerging technologies an opportunity to introduce their innovations to the natural gas producer, midstream/pipeline, downstream and service communities. The MSC Research Collaborative solicits applications for these technologies and awards top applicants with an opportunity to present.

SHALE INSIGHTTM 2018 guarantees a front row seat for the most important discussion on shale development, featuring some of the most prominent industry and government leaders. Become a sponsor, host an exhibit, or register for the conference today by visiting www.ShaleInsight.com and capitalize on this unique opportunity to gain unprecedented industry access. We look forward to seeing you in Pittsburgh!

OCTOBER 2018

USDA continued from page 8

the right direction.�

Representatives from Sen. Sherrod Brown, R-Ohio, and Sen. Rob Portman, R-Ohio, also were present.

The county commissioners commended them and Johnson for their work, along with the active support of USDA officials. “It’s unbelievable how exciting it is to get to this stage,� Commissioner J.P. Dutton said.

He commented on last year’s visit to the White House, where the Belmont commissioners joined commissioners from across the state to present their local issues to U.S. Secretary of Agriculture Sonny Perdue.

Dutton said the learned last fall that the county would receive $9 million in loans and $3 million in grants for sewerage improvements. “We’re talking about $72 million, 25 percent of that will be grant funds, which was not expected but much-appreciated,� said Dutton, who was referring to the water and sewerage projects. “This is the kind of thing that honestly moves our community forward. “I think they felt comfortable with where we were at as a community,� he said of the USDA. Commissioner Mark Thomas said planning for extensive infrastructure improvements began 2016 with the creation of a county-wide water/wastewater study. The study showed the need to seek improvements to those systems. He commended prior commissioners Ginny Favede and Matt Coffland for helping to originate the plan, and commissioners Dutton and Meyer for enthusiastically taking up the cause. “That was the start of getting us here today, two years later,� he said. “This is probably the greatest announcement that we’ve had from an infrastructure standpoint in Belmont County. We hope to have more great announcements in the future, and those great announcements will take place because of today.�

Thomas also said the project represents an investment in the future, in particular the area’s youth when it comes to finding jobs and staying in the area. “This will allow us to upgrade and maintain a water system that was in dire need of revamping to say the least,� said Meyer. “It will allow us to upgrade the current system. It will allow for future growth and development. This is going to put us in the forefront of how things should be done.�

He also thanked Kelly Porter, director of the Belmont County Sanitary Sewer District, and Mark Esposito, former director, for their work maintaining the system.

The projects include replacing the water metering reading system, the 1965 water treatment plant, the Ohio 9 water booster station and the Homeside 12-inch water transmission main, as well as a water distribution system supervisory control and data acquisition upgrade.

After the announcement, Porter said residents will see multiple simultaneous projects during the next 36 to 48 months. Those include line and pump station replacements, as well as a new water plant along the Ohio River that replaces the one that dates to about 1965. Porter said the new tank likely will be erected in the Bellaire area, because the county’s wells are there.

Porter said paperwork and selecting consultants and engineers will take the next 12 to 18 months before designing and bidding the system. “We could hopefully be bidding the project within two years,� he said. Funds will allow the construction of a new, 6-million-gallon-per-day water treatment plant and a new administrative building with a laboratory. “We have a lot of work to do,� he said. “This is just the first part.�

Connect and showcase at the leading conference on American shale energy, industries and jobs New for 2018, SHALE INSIGHT™ will integrate all conference exhibitors, general session keynotes and panels as well as breakout session presentations into one dynamic hall with ďŹ ve program stages to enhance every participant's experience. For a greater return on investment, everyone will receive full access to conference activities, sessions and luncheons; in addition to a unique and valuable networking opportunity to showcase capabilities, innovative technologies and products directly to decision makers from the industry’s largest shale developers and supply chain companies.

Additionally, preconference two-hour workshops have been added for a nominal charge.

visit www.shaleinsight.com for more info and to register

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OCTOBER 2018

OhioGas&Oil 11

Oil, Gas Official Emphasizing

‘Demand Opportunities’ Ray Booth | GateHouse Media Ohio

Matt Hammond, the new leader of the Ohio Oil and Gas Association knows the organization is heading in the right direction. He just wants to make sure members and others in the industry know that, also.

In a visit to Cambridge recently, Hammond used the term “demand opportunities” several times.

That’s because, despite his recent time in his role as the group’s executive vice president, he’s not a newcomer to the industry and knows that’s the next step for the region.

“We have a really great collective of knowledge among this Association and it is truly what makes OOGA so great.”

“We need a message more about the oil and gas product,” Hammond said. “We all have to understand how the ripple effect is playing out in Ohio. In Dayton, Cincinnati, they don’t make the connection about how the cost of living has dropped because of the gas and oil industry. Even in those areas,

12 OhioGas&Oil

there are construction jobs being created and other industry jobs being created.”

“This increase in natural gas creates jobs, whether it’s construction in the initial phase or later in the development phase,” Hammond said.

Hammond also touched on regulations, saying the industry Matt Hammond needs “strong, reasonable, regulations.”

The challenge, according to Hammond, points to “commodity prices.

Whether conventional or unconventional, pricing plays a crucial effect on the industry.”

He also reviewed progress on the Belmont County cracker plant, saying that if it does come to pass, it would be an enormous economic plus for the Eastern Ohio region.

What he never wants to hear is, “that’s the way we’ve always done it.” He strongly feels this is not the direction of the organization.

“That’s not acceptable,” Hammond said. “I must have heard that all the time in the beginning. We have to find new ways to show values to members of the Ohio Oil & Gas Association.”

Hammond has a penchant for finding a balance spot for conventional operators’ and non-conventional operators’ common interest. “We have a really great collective of knowledge among this Association and it is truly what makes OOGA so great.”

OCTOBER 2018

OHIO COURT ISSUES FAVORABLE LANDOWNER RULING

IN IMPORTANT UNITIZATION CASE David J. Wigham | Attorney

On August 13, 2018, the Ohio Court of Appeals for the Fifth Appellate District issued a ruling addressing important unanswered questions surrounding the conflict between an existing oil and gas lease that does not permit unitization and Ohio’s forced unitization statute found at R.C. Chapter 1509. A producer’s ability to “force unitize” leased acreage without the landowner’s consent when there is an existing oil and gas lease that does not permit unitization has been the subject of much debate in recent years.

In Am. Energy-Utica, L.L.C. v.

Fuller, 2018-Ohio-3250, the court of appeals held that when an oil and gas lease does not allow for unitization, a producer who applies for a forced unitization order, without the landowner’s consent, is in breach of the lease agreement. At issue in the Fuller case was an oil and gas lease signed by the Fullers, as lessors, in 1981. The lease contained a hand-written provision where the unitization clause was crossed out and in its place was written: “UNITIZATION BY WRITTEN AGREEMENT ONLY!” Ascent Resources, formerly American Energy-Utica, the owner of the deep rights in the lease, sought a lease amendment from Mr. Fuller to allow Ascent to unitize Mr. Fuller’s property with other lands to form

OCTOBER 2018

a drilling unit called the “Henry Unit.” However, Ascent was unable to obtain Mr. Fuller’s consent to a unitization clause.

Having failed to secure Mr. Fuller’s consent, Ascent applied for a mandatory unitization order from the Chief of the Division of Oil and Gas under R.C. 1509.28, Ohio’s forced unitization statute, to force a portion of Mr. Fuller’s property into the Henry Unit without his consent. A mandatory unitization order would have seemingly cleared the way for Ascent to develop in the Henry Unit using Mr. Fuller’s property without his permission.

When Ascent filed a lawsuit seeking an injunction to gain entrance on to Mr. Fuller’s property to conduct seismic testing, Mr. Fuller filed a counterclaim against Ascent for breach of contract based on the lease provision that permitted “UNITIZATION BY WRITTEN AGREEMENT ONLY!” The trial court eventually granted judgment in favor of Ascent, finding that “R.C. 1509.28 permitted unitization of the lease.” Mr. Fuller appealed.

On appeal, the court of appeals reversed the trial court’s judgment. In doing so, the court acknowledged the authority of the Chief of the Division of Oil and Gas “to make orders for unit operations to promote the recovery of oil and gas.” However, the court also noted that the oil and

gas lease in question was signed in 1981, which pre-dated the enactment of the current version of R.C. Chapter 1509. The court held that R.C. 1509.28 could not be “used retroactively to impair the obligation of the contract,” without violating the Ohio Constitution. For this reason, the court of appeals found Ascent breached the lease when it applied to force unitize Mr. Fuller’s property and remanded the case back to the trial court “to make a determination of the appropriate remedy.”

In reviewing this decision, several important observations are clear. First, producers routinely threaten to force unitize a landowner’s property, when a landowner refuses to agree to amend his lease to permit unitization.

Producers frequently offer inadequate compensation to landowners for these all-important unitization clauses.

Producers often argue that oil and gas development alone will benefit landowners, and that since the property can be force unitized anyway, the landowners might as well sign the amendment. With the Fuller case, landowners may now demand fair compensation for unitization clauses or, in the alternative, pursue breach of contract claims against producers who attempt to unitize their acreage in violation of the lease. Additionally, producers who attempt Favorable continued on page 14

OhioGas&Oil 13

Favorable continued from page 13

to force unitize acreage now risk liability to the landowners with leases that do not contain unitization clauses or specifically prohibit unitization.

Second, the Fuller case leaves open the question about the “appropriate remedy” against Ascent for obtaining a unitization order in violation of the lease. Obviously, an award of money damages is one remedy available under Ohio law for breach of contract claims, but the more difficult question is how to determine the amount of damages. One possible measure of damages would be to place the landowner in the same position that he would be in had he signed a typical Utica Shale lease. These leases often pay lucrative signing bonuses and higher royalties, so landowners will likely be able to

argue that they would be entitled to damages based on this lost lease revenue.

Third, the Fuller case only applies to situations where there is an existing oil and gas lease that 1) is held by production or otherwise remains valid; 2) that does not allow for unitization; and 3) that pre-dates Ohio’s forced unitization statute, R.C. 1509.28. This statute was recently amended in 2011, 2012, and again in 2015, to update it in response to the Shale boom.

The legal issues before Ohio courts concerning leasing and development rights are far from over. Landowners are confronted with a wide array of legal hurdles over their valuable oil and gas rights and royalties, even after their property is leased, as the

Fuller decision shows. Now, in light of the Fuller case, landowners have a powerful tool to thwart producers from force-unitizing their leased land without their consent and without just compensation. The Fuller case illustrates the complexity of the legal issues and highlights the importance of retaining experienced oil and gas counsel to advise clients as to the leasing and development of their oil and gas interests.

David J. Wigham is a secondgeneration Ohio oil and gas attorney with more than 25 years of experience in the industry. He practices at the law firm of Roetzel & Andress and maintains offices in Akron and Wooster, Ohio.

He can be reached at 330-7627969, or dwigham@ralaw.com.

OHIO’S LEADING CHOICE IN OIL AND GAS LAW 222 South Main Street Akron, OH 44308 330.376.2700 121 North Market Street, 6th Floor Wooster, OH 44691 330.376.2700

Roetzel’s experienced Oil and Gas attorneys provide a wide array of legal services focused on landowner representation including: • Leasing and lease renewals, ratifications and amendments • Litigation, including: { Lack of production { Dormant Mineral Act { Marketable Title Act

• Pooling and unitization • Pipeline easements • Surface development • Mineral LLC’s • Royalty disputes

For additional information, contact Dave Wigham at dwigham@ralaw.com, Randy Moore at rmoore@ralaw.com, or Tim Pettorini at tpettorini@ralaw.com.

RALAW.COM ROETZEL & ANDRESS, A LEGAL PROFESSIONAL ASSOCIATION

Gas & Oil Team Members Luke Palmer, Sara Fanning, Ben Fraifogl, Bret McNab and Pat Hanley

WO-10640922

14 OhioGas&Oil

OCTOBER 2018

EPA Proposes Oil and Gas Targeted Improvements

to Advance President Trump’s Energy Dominance Agenda Proposal to save $484 million in regulatory costs EPA Press Office

The U.S. Environmental Protection Agency (EPA) proposed targeted improvements to the 2016 New Source Performance Standards for the oil and gas industry that streamline implementation, reduce duplicative EPA and state requirements, and significantly decrease unnecessary burdens on domestic energy producers. This oil and gas targeted improvements package is expected to save up to approximately $484 million in regulatory costs from 2019 – 2025 or $75 million annually.

“These common-sense reforms will alleviate unnecessary and duplicative red tape and give the energy sector the regulatory certainty it needs to continue providing affordable and reliable energy to the American people,” said EPA Acting Administrator Andrew Wheeler. “Removing these excessive regulatory burdens will generate roughly $484 million in cost savings and support increased domestic energy production – a top priority of President Trump.”

The proposed improvements include: aligning requirements between EPA’s rule and existing state programs; modifying the frequency for monitoring leaks (also known as “fugitive emissions”) at well sites and compressor stations; and making it easier for owners and operators to use emerging measurement technologies in their leaks monitoring surveys.

“Today’s technical amendments recognize successful infrastructure already in place in states like Ohio to protect public health and the environment,” said Ohio EPA Director Craig Butler. “EPA’s commonsense proposal supports state leadership through cooperative federalism and removes unnecessary red tape and burdensome duplication that only serve as roadblocks to responsible energy development in Ohio.”

“America’s oil and natural gas producers under-

stand the importance of fair, commonsense regulations. But, for too long, the federal bureaucracy has buried our industry in unnecessary and often duplicative red-tape,” said Independent Petroleum Association of America President and CEO Barry Russell.

EPA continued on page 16

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“Today’s EPA proposal reverses the growing mistakes of the past. This proposal not only reassures America’s continued path toward global energy leadership, but also continues to protect the environment and communities where energy production is located. It is important for the states to play an important role in decisions that affect their citizens, industries and natural resources. This proposal does just that: it empowers the states to work with the federal government on the best regulatory approaches. IPAA welcomes these proposed changes and is encouraged by these reasonable actions.”

“Western Energy Alliance is pleased that EPA is fixing a rule that was purposefully designed by the Obama Administration to tie up the American oil and natural gas industry in red tape,” said Western Energy Alliance President Kathleen Sgamma. “By fixing the numerous technical problems with the original rule, EPA will enable industry to continue its four-decade success record of reducing methane emissions. This new rule encapsulates the energy dominance agenda that is leading to huge increases in American energy production and jobs with dramatically lower levels of imports from overseas, all while delivering environmental protection.”

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OCTOBER 2018

Ansco Meets Challenges

with ESPRIT

®

Steve Glad | Structured Information

Ansco Machine Company (Cuyahoga Falls, Ohio) is a family-owned job shop specializing in milling and turning. Since 1991, Ansco has machined parts for customers in the liquid natural gas (LNG), oil and gas, offshore drilling, and other industries.

After beginning with two Bridgeports and a handful of manual lathes and vertical turret lathes (VTLs), Ansco soon acquired its first CNC machine, a 1979 Warner and Swasey 2SC — and entered the world of CAD/CAM software. Ansco initially used a 2D lathe package. Despite its simplicity, the software served the company well until it began to expand and its needs became more complex: Ansco now has a 38,000-square-foot facility, 50 employees, 14 CNC lathes, seven horizontal machining centers, five VTLs and four vertical machining centers (VMCs).

As projects grew larger and more complicated, Ansco needed a better way to program its large mill-turn VTL machines. “We were having to do manual code edits on every feature we made,” says applications engineer Dave Sterling. “I used to write main and sub programs by hand in order to use the machines’ polar interpolation feature. This was okay for straightforward parts, but creating an individual program with hand edits for more complicated parts consumed an excessive amount of time.”

Ansco searched for a CAM system that would allow its applications engineers to be more flexible

A fan-type inducer produced by Ansco for a liquid natural gas client. Ansco used ESPRIT to program the part on a DMG MORI DMU 65 monoBLOCK. OCTOBER 2018

Ansco applications engineer Dave Sterling stands next to a suction manifold and the company’s DMG MORI DMU 65 monoBLOCK.

and efficient. Sterling and his colleagues met with a team from ESPRIT® to discuss the mill-turn issues that Ansco’s software couldn’t handle. In the end, it was the software’s ability to program complex millturn parts using sub-programs that turned Ansco into an ESPRIT® customer.

Ansco received an emergency inquiry for an order of fan-type inducers from a customer in the LNG industry. Ansco had made similar parts in the past, using a horizontal machining center, but the process was painstaking. Sterling would machine one side of the part, make a nest for it, then cut the back.

The new inducers could be programmed on a horizontal machine, but the parts’ complexity required knowledge of 5-axis machining, which Sterling didn’t have. ESPRIT® provided one-on-one training that enabled him to do 5-axis programming on Ansco’s 4-axis Makino machine. Ansco successfully completed the order in time and used the same method for other parts.

That is, until Ansco needed to undercut a more complex inducer and realized that a 4-axis machine wouldn’t suffice. The company invested in a DMG Ansco continued on page 19

OhioGas&Oil 17

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OCTOBER 2018

OHIO WELL ACTIVITY by the numbers

UTICA SHALE

MARCELLUS SHALE 16 6 7 23

52

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

Data as of 9/1/18

477 119 276 2009

2881

Source: Ohio Department of Natural Resources

Ansco continued from page 17

MORI DMU 65 monoBLOCK. “ESPRIT® was key in my success at 5-axis milling,” Sterling says. “Right out of the box, I had a solid model of the machine, a pre-defined template, and a factory-tested post processor.

“With so many variables in programming a new machine, a reliable post processor is important.

The last 5-axis program I ran had 5.5 million lines of code; I couldn’t make sense of it. Having a reliable simulation and post let me focus on workholding, tooling and the actual machining of the part. If it happens on the screen in simulation, it happens on the machine. That’s huge.”

Ansco has had such excellent results with the DMG Mori and ESPRIT® collaboration that they recently ordered their third 5-axis machining center, allowing them to move into larger and more complex parts. Sterling also uses ESPRIT® to program Ansco’s five Hankook VTLs in house, as well as its vertical machining centers.

Having a reliable post processor, accurate simulations, attentive customer service — and the ability to easily write millions of lines of code — lowers Sterling’s stress level, as well as Ansco’s engineering costs and project time. Ansco passes these savings

OCTOBER 2018

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

along to customers and has the competitive edge, even when quoting for the most complex projects.

For more information about ESPRIT, contact: (In North America): -- DP Technology Corp., 1150 Avenida Acaso, Camarillo, California 93012, USA. Telephone: +1-(800) 627-8479, Fax: +1-805-388-3085. E-mail: esprit@ dptechnology.com, Website: http://www.espritcam. com/

James MacKensie, a 5-axis machinist at Ansco, works at the company’s DMG MORI DMU 65 monoBLOCK milling machine.

OhioGas&Oil 19

TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY

BY NUMBER OF SITES

1. Belmont County.........594 2. Carroll County......... 526 3. Monroe County........ 447 4. Harrison County....... 425 5. Guernsey County...... 233 6. Noble County.......... 223 7. Jefferson County........190 8. Columbiana County...159 9. Mahoning County....... 30 10. Washington County... 22 11. Tuscarawas County.... 20 12. Portage County........ 15 Trumbull County........ 15 13. Stark County............ 13 14. Coshocton County....... 5 15. Morgan County.......... 3 Muskingum County...... 3 Holmes County........... 3 16. Knox County.............. 2 17. Ashland County.......... 1 Astabula County......... 1 Geauga County.......... 1 Medina County........... 1 Wayne County............ 1 I VARIOUS SSTAGES: PERMITTED DRILLING, ,D WELL SITESS IN PLETED PRODUCING, PRODUCINGPLUGGED, PLUGGED DRILLED, COMPLETED, SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF D L A 9/1/18

20 OhioGas&Oil

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The nation’s premier source of energy information

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