June 2015 Gas & Oil Magazine-Pennsylvania edition

JUNE 2015 • A FREE MONTHLY PUBLICATION

Marcellus Development Lifting Communities Study: Emissions Low at Well Sites

Cooking

with Gas

Latta Launches

Propane Caucus

*National Propane Gas Association president op-ed

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June 2015

Table of Contents

PUBLISHER Andrew S. Dix ASDix@dixcom.com

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CONGRESSIONAL PROPANE CAUCUS CREATED

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WHAT ARE THEY SAYING ABOUT CONGRESSIONAL PROPANE CAUCUS

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OPINION: FOCUS ON PROPANE

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ABUNDANCE BENEATH OUR FEET

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GAS & OIL DEVELOPMENT: LIFTING PENNSYLVANIA COMMUNITIES

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STUDY: EMISSIONS LOW AT MARCELLUS SITES

EXECUTIVE EDITOR

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STUDY: OIL AND NATURAL GAS STOCKS OUTPERFORM OTHER ASSETS IN STATE PENSION FUNDS

Ray Booth RBooth@dixcom.com

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STATE OFFICIAL REACTS TO FEDERAL FRACKING REGULATIONS

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EQUIPMENT AND CONTROLS, INC TO HOST FIRST USERS EXCHANGE CONFERENCE

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CARRIZO OIL BEING ‘PATIENT’ WITH OIL PRICING

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CHEAP OIL MAY HURT U.S. ECONOMY

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ENERGY RICH U.S. STATES MOVE TO QUASH LOCAL LIMITS ON DRILLING

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PIPELINE CONSTRUCTION MAY RESULT IN QUESTIONS

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TAXPAYERS BEWARE! COSTLY BALLOT INITIATIVES ON THE WAY

ADVERTISING Ed Archibald Account Executive EArchibald@dixcom.com 740-439-3531

DIGITAL CONTENT MNGR Brad Tansey BTansey@dixcom.com

LAYOUT DESIGNER Emily Kuhn Ekuhn@the-daily-record.com

“Gas & Oil” is a monthly publication jointly produced by Dix Communication newspapers across Ohio & PA. Copyright 2015.

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Gas & Oil

June 2015

Pennsylvania Edition

Congressional Propane Caucus created C

ongressman Robert E. Latta (R-OH) and Congressman Tim Walz (D-MN) have announced the founding of the Congressional Propane Caucus.

The caucus has been formed in order to provide a bipartisan forum to engage Members of Congress, their staff, and the public on issues of importance to propane consumers and the propane industry.

“I am pleased to join my colleague Congressman Walz in leading this effort in the House. Thanks to an increase in domestic production and the development of shale formations across the country – including the Utica/Point Pleasant formation in my home state of Ohio - Americans are blessed with an abundance of this essential resource,” said Propane Caucus Co-Chairman Rep. Latta. “Propane is vital to our every day lives; it heats our homes, aids in the production of our farms, and is increasingly being used as an alternative, clean burning fuel for transportation. I am pleased to start this caucus in order to educate fellow Members of Congress on the many uses of propane, its importance to the constituents we serve, and the issues both the industry and its consumers face.”

“I’m proud to lead this caucus with Rep. Latta. Propane is essential for hundreds of thousands of Minnesota families, not only to heat their homes during the long, cold winter, but also for cooking, laundry, and farming,” Rep. Walz, co-chair of the Propane Caucus, said. “It is imperative that we do everything in our power to protect families and local businesses from facing the price shocks we witnessed in the winter of 2014 when a lack of supply put people’s lives and livelihoods at risk.”

Propane is an abundant, clean-burning, domestic fuel that is a key component in America’s energy portfolio. Propane contributes $38.7 billion to America’s GDP and provides nearly 50,000 domestic jobs. Furthermore, over 50 million Americans choose propane as their energy source in a wide array of applications, including: •Residential and commercial space heating (furnaces, boilers, and gas logs), water heating, cooking, and clothes drying •Farm use for irrigation pumps, grain dryers, standby generators and other agricultural equipment •As an alternative transportation fuel in school buses, delivery vans, pickup trucks, law enforcement vehicles, and forklifts

•Industrial space heating and process applications Recent developments in the energy sector have generated a strong domestic propane supply that is projected to remain plentiful for the foreseeable future. However, many challenges exist to ensure that Americans have an adequate supply of propane when they need it.

The Congressional Propane Caucus was designed to focus on these challenges, so that Congress can ensure that propane continues to serve American consumers in a consistent, reliable, and affordable manner.

Congressional Propane Caucus Founding Members Co-Chair, Rep. Robert E. Latta (R-OH) Co-Chair, Rep. Tim Walz (D-MN) Rep. Chris Collins (R-NY) Rep. Sean Duffy (R-WI) Rep. Mike Kelly (R-PA) Rep. Ron Kind (D-WI) Rep. Dave Loebsck (D-IA) Rep. Rick Nolan (D-MN) Rep. Tom Reed (R-NY) Rep. Peter Welch (D-VT) Follow on Twitter: @PropaneCaucus

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June 2015

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What They Are Saying About the Congressional Propane Caucus

Ohio Oil and Gas Association (OOGA)

I am very excited to join the House Propane Caucus and thank my colleague Rep. Latta for organizing this important group. In honor of today’s launch, this week I will be re-introducing the Powering American Jobs Act, a bipartisan bill to make the excise tax provision for propane permanent. This will bring much-needed certainty to energy providers important to Western Pennsylvania and our entire country, which in turn will help them create more jobs for more Americans. When it comes to strengthening our nation’s energy potential by supporting and spreading the benefits of propane, this is not a Republican issue or Democrat issue—it’s an American issue.

U.S Rep. Mike Kelly, Pennsylvania 3rd District

Shale plays across the United States continue to shape our nation’s energy supply structure. In Ohio, the Utica shale play is a perfect example of the associated benefits of this supply shift - revitalizing eastern Ohio through the production of natural gas and natural gas liquids. Propane has been an integral part of this change. It continues to be a great fuel source for Ohio’s citizens, especially farmers and consumers in areas without access to natural gas pipelines to heat their homes. We applaud the leadership that Congressman Robert E. Latta (R-OH) has shown in announcing the foundation of the Congressional Propane Caucus. Natural gas and the products derived from it are integral parts to Ohio’s economy, including the success of Ohio’s Utica shale play, and the everyday lives of its citizens.

Shawn Bennett, Executive Vice President, OOGA

Marcellus Shale Coalition Thanks to the responsible development of our abundant shale resources, America has rapidly transformed into an energy superpower. As a result, consumers, farmers, transportation providers and industrial energy users both here at home and abroad are benefitting from a robust supply of reliable and affordable propane. With millions of Americans dependent on propane and ever increasing volumes being produced in the Appalachian Basin, we welcome the formation of the Congressional Propane Caucus and look forward to working with its members in the future.

Dave Spigelmyer, President, Marcellus Shale Coalition

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Gas & Oil

Pennsylvania Edition

June 2015

Opinion: Focus on Propane

Rick Roldan – President & CEO National Propane Gas Association ropane users are in almost every congressional district in the United States. In Ohio, more than 240,000 homes are heated with propane and more than 295 million gallons of propane are consumed in the state. This fuel is an important part of Ohio’s energy landscape, and that is why Congressman Bob Latta has taken a leadership role in the creation of the Congressional Propane Caucus. This dedicated group of legislators is committed to addressing the infrastructure challenges facing America’s propane customers and ensuring that they can continue to rely on propane for their energy needs.

This time of year propane is widely associated with backyard barbecues. However, its usage and value extend far beyond the backyard. Propane contributes $38.7 billion to America’s GDP and provides nearly 50,000 domestic jobs. More than 50 million Americans choose propane for a variety of applications. Globally, propane is the third most prevalent vehicle fuel, and there are approximately 150,000 propane-powered vehicles in the United States.

Nationally, Americans consume about half of their propane residentially, including home heating, water heating, and clothes drying. The rest is used in commercial, industrial, and agricultural applications, and as an alternative fuel in vehicles, forklifts, and lawnmowers. In Ohio, 60 percent of the propane consumed is for residential use, 12 percent is consumed in commercial applications, and the balance is used for industrial, agricultural, and engine fuel uses.

The benefits of using propane can be seen across the state.

Ohioans are realizing that propane is an environmentallyfriendly tool to maximize performance, increase cost savings and achieve greater efficiency. The Recreation and Parks Department in Columbus, Ohio recognized the need to implement new, emission-reducing technology to meet tightening

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environmental regulations. After considering several options, the city adopted 14 propane-powered lawn mowers as part of their Green Fleet Action Plan. The results speak for themselves. Propane-powered mowers reduce greenhouse gas emissions by more than 15 percent and carbon monoxide emissions by more than 40 percent compared with gasolinefueled mowers. Propane also reduces the unpleasant gasoline fumes, making visiting the park even more enjoyable.

By creating, organizing, and Co-Chairing the newly formed Congressional Propane Caucus, Congressman Latta continues his hard work addressing the issues affecting propane consumers. Both during and since the difficult winter of 2013-2014, Congressman Latta has led the Congressional response to the challenges facing the propane gas industry. He authored a bipartisan letter calling for more propane storage, introduced a bill to formalize the federal response to propane shortages, and successfully passed a bill that allows the propane industry to better meet consumers’ needs.

In doing so much, Congressman Latta recognized the importance of having Members of Congress and their staffs connect with the propane industry to share information and ideas.

The next logical step was to create an official Congressional Propane Caucus. Through this caucus, Members and staff will have the opportunity to have a dialogue with industry experts, attend briefings, and receive the latest information. This will all help build a better understanding of the propane gas industry’s impact in their states.

Congressman Latta joined with Congressman Tim Walz (MN) to establish the Caucus and enlist a bipartisan group of geographically diverse Members to join. The Congressional Propane Caucus was announced on May 21 with ten original members-five Republican and five Democratic. NPGA looks forward to working with Congressmen Latta, building support for the caucus, and expanding its membership this year.

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Gas & Oil

June 2015

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Abundance Beneath Our Feet Congressman Bob Latta – Ohio’s 5th District he benefits of Ohio’s geological gifts reach far beyond its developing areas.

Today, in spite of geopolitical adversities and a seemingly unfavorable marketplace, our energy producers continue to develop our natural resources and produce natural gas and oil at rates not seen in generations.

Increasing production numbers have had positive impacts that span and exceed our borders, and we can see the benefits in our everyday lives. From the oil fields of eastern Ohio and engineering firms in Dayton, to the steel tubing manufacturers, truck drivers and welders across the state – the industry is bringing well paying jobs to our communities.

Energy is also driving immense investment in our state’s economy. This past month, Bricker and Eckler released their Shale Economic Development Overview identifying over $28 billion dollars in direct investments into the state as a result of the continuing development of the Utica/Point Pleasant shale formation.

As the study notes, these incredible numbers do not take into account either the downstream and infrastructure investments currently pending, or the potential billions of dollars that could be entering the state with the recently announced ethane cracker plant.

What we have found since we first started tapping into the deep shale formations in eastern Ohio and across Appalachia is a viable, productive and vast resource of energy.

With a proper business and regulatory climate in place, these formations will continue to draw investment, its development will continue to create jobs, and the returns will continue to both benefit energy consumers, and drive America towards energy security.

As a region producing headline-drawing rates of natural gas and natural gas liquids, propane is a commodity in high supply. Nationally, propane contributes $38.7 billion to America’s GDP, provides nearly 50,000 domestic jobs, and over 50 million Americans choose propane as their energy source in a wide array of applications.

It is an abundant, clean-burning, domestic fuel that is a key component in America’s energy portfolio.

In recognizing this vital energy source, and in an effort to help further educate fellow Members of Congress on its many uses and importance, I am pleased to have recently announced the formation Congressional Propane Caucus. As a Co-Chair with my fellow colleague Congressman Tim Walz (D-MN), I

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hope to grow this bipartisan caucus of ten founding members – five Republicans, five Democrats – in order to accomplish this goal.

Propane is essential to our every day lives; it heats our homes, aids in the production of our farms, and is increasingly being used as an alternative, clean burning fuel for transportation.

While the recent developments in the energy sector have generated a strong domestic propane supply that is projected to remain plentiful for the foreseeable future, many challenges exist to ensure that Americans have an adequate supply of propane when they need it.

The Congressional Propane Caucus was designed to focus on these challenges, so that Congress can ensure that propane continues to serve American consumers in a consistent, reliable, and affordable manner.

As a member of the Energy and Commerce Committee, and a representative of one of the nation’s leading energy producing states, I look forward to continue working to support an “all-of-the –above” approach to America’s energy policy, one that guarantees we may fully take advantage what our natural resources have to offer.

This goal can be accomplished through the House Energy & Commerce Committee’s “Architecture of Abundance”, which has created the guidelines to achieve all we can hope to accomplish in light of America’s new energy revolution.

These guidelines are clear, with what Committee Chairman Fred Upton (R-MI) identified as five pillars of focus: modernizing infrastructure, maintaining a diverse electricity portfolio, permitting a manufacturing renaissance, harnessing energy efficiency and innovation, and unleashing new energy diplomacy.

The United States has emerged as the world’s leading energy producer, and this comprehensive legislative plan is demonstrative of a commitment to America’s energy future.

In following this vision, Ohioans and families across the country can continue to enjoy low cost energy and petroleum by-products, the return of manufacturing, and a new generation of energy workers.

I look forward to continuing this American Energy Renaissance with the efforts of my colleagues in the House and Senate in providing an educated, commonsense approach to our energy policy.

U.S. Representative Robert E. Latta Represents Ohio’s Fifth Congressional District and serves on the U.S. House Energy and Commerce Committee.

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Gas & Oil

Pennsylvania Edition

June 2015

Gas & Oil development: Lifting Pennsylvania Communities

Joe Massaro – Energy in Depth esearchers from Clark University recently released a study claiming that economically depressed communities tend to host shale development more often than richer communities – but, for some strange reason, only in Pennsylvania. From the report: “Our analysis shows that environmental injustice was observed only in Pennsylvania, particularly with respect to poverty: in seven out of nine analyses, potentially exposed tracts had significantly higher percent of people below poverty level than non-exposed tracts.”

While this report tries makes a clear effort to malign the oil and gas industry, it fails to provide context as to why well sites are typically located in these communities.

DEP setback regulations According to the Department of Environmental Protection: “Act 13 extends the setback distance for unconventional wells from 200 feet to 500 feet from existing buildings or water wells, unless consented to by the owner of the building or water well. This Act establishes a 1,000-foot setback for an unconventional well from a water supply extraction point used by a water purveyor, unless written consent is obtained from the water purveyor.

Act 13 also extends the setback distance for unconventional wells from 100 feet to 300 feet from any solid blue lined stream, spring, or body of water or wetland greater than one acre in size as identified on the most recent 7 ½ minute topographic quadrangle map of the United States Geological Survey. Unconventional well site pads must also maintain a setback of 100 feet between the edge of disturbance and any stream, spring, body of water or wetland greater than one acre in size.”

Because of these setback requirements, rural areas of Pennsylvania have become ideal places to develop our shale resources.

Rural Pennsylvania economy Typically, rural parts of Pennsylvania tend to be home to generational farming families. These hardworking farmers have to struggle with commodity prices to make ends meet.

For example, back in 2009 the price of milk crashed 35 percent, forcing some U.S. dairy farmers out of business. This puts

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an economic strain on these households especially when the farmers in Pennsylvania make an average of $22,930, according to the Bureau of Labor Statistics.

With such low average wages farming families can fall below the poverty line depending on how big their family is.

Oil & Gas Industry Helps economically depressed rural Pennsylvania With the expansion of Pennsylvania’s oil and gas industry, benefits have come to economically depressed communities that residents never thought they would see. Oil and gas lease bonuses and royalty payments to farmers have allowed them to invest in new equipment and pay off old debts so they have the ability to keep their farms for generations to come.

This new revenue from oil and gas companies has equated to more than $680 million since its inception in 2012 and is being used to fund projects that would have normally been a burden on taxpayers in these communities. These savings can now help Pennsylvania farmers continue farming and make their lives just a little easier.

Conclusion This Clark University study tried to assert that oil and gas development only takes place in economically depressed communities. But the facts show that the oil and gas industry has helped strengthen communities across the Commonwealth and the United States. That’s true environmental justice.

Joe Massaro is a spokesman for Energy in Depth.

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June 2015

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Study: Emissions Low at Marcellus Sites R

esearchers at Drexel University recently studied air pollution at Marcellus shale well sites around Pennsylvania and concluded, that pollutants were much lower than expected.

To conduct the study, the researchers took real-time measurements in August of 2012 in Bradford and Sullivan counties and in September of 2012 in several counties in Southwestern Pennsylvania. The two locations allowed them to have comparisons between typically dry gas shale in Northeastern Pa. and wet gas—or gas that that contains hydrocarbons such as butane, ethane, etc.—in the Southwestern part of the state.

Regarding the study, lead researcher and assistant professor at Drexel University, Peter DeCarlo said, “So we went in expecting to see similar things in the Marcellus. The geology in the region is different in that [it produces] a lot of natural gas but we didn’t see a lot of the air quality pollutants that we expected.”

This latest study also supports recent data out of the Marcellus. Just last month the Pa. Department of Environmental Protection (DEP) released its annual natural gas air emissions inventory that found total aggregate emissions to be down despite significant increases in the types and number of facilities reporting for the inventory and increased production. As Dave Spigelmyer, president of the Marcellus Shale Coalition, said in a recent article: “The sharp decline in methane emissions, despite increased activity, is particularly encouraging and reinforces the fact that our strong state-based regulations and innovative technologies are delivering meaningful environmental results.”

While this report does add to the already large body of research about air quality and shale development, researchers did state, “The sample size of this study is too small to make statistical conclusions about different emission source types.”

As the natural gas industry continues to implement state

of the art technology for emissions control, state regulators are seeing air quality improve in states that are developing their resources. And because of increased natural gas, neighboring states like New York, New Jersey and Maryland have also been able to improve their air quality. That’s great news for everyone involved.

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Gas & Oil

June 2015

Pennsylvania Edition

Oil and natural gas stocks outperform other assets in state pension funds

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OLUMBUS, OH — Returns on state pension funds in Ohio from investments in oil and natural gas companies continue to provide strong earnings for public pension retirees, including teachers, firefighters and police officers, according to a Sonecon study released by API. On average, $1 invested in oil and natural gas stocks in 2005 was worth $2.28 in 2013. By contrast, $1 invested in all other assets over the same period was worth $1.75.

“During good economic times – or challenging ones – oil and natural gas investments far outperformed other public pension holdings in Ohio,” said Chris Zeigler, executive director of API-Ohio. “We already know that a healthy domestic oil and natural gas industry is good news for jobs and government revenue, and we now know that it also provides stability to the nest eggs that millions of Americans are counting on for a secure retirement. A thriving Ohio oil and natural gas industry directly benefits Ohio workers and retirees.”

Nationwide, oil and natural gas stocks also outperform other assets, according to the report. While oil and natural gas stocks make up, on average, 4 percent of holdings in the top public pension funds, they accounted for 8 percent of the returns in these funds from 2005 to 2013. The owners of

June 2015

America’s oil and natural gas companies are largely retirees and middle class Americans saving for retirement, according to a separate report by Sonecon, Who Owns America’s Oil and Natural Gas Companies.

“Millions of Americans with a 401k, mutual fund, or pension also rely on the income and capital growth these companies provide for their retirement,” Zeigler said. America’s oil and natural gas companies are owned by tens of millions of Americans, according to a previous Sonecon study.

The report examines the top two public pension funds in 17 states, which collectively cover nearly half (49 percent) of all workers in the United States who participate in state and local government pension plans.

States analyzed in today’s report are: California, Florida, Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Ohio, Pennsylvania, South Carolina, and West Virginia.

API-Ohio is a division of API, which represents all segments of America’s oil and natural gas industry. Its more than 625 members produce, process, and distribute most of the nation’s energy. The industry also supports 9.8 million U.S. jobs and is backed by a growing grassroots movement of more than 25 million Americans.

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Pennsylvania Edition

June 2015

State official reacts to federal fracking regulations Sophie Kruse – Dix Communications eleased earlier this year, the Obama administration has created the first major regulations involving fracking on federal lands. The regulations take effect in June.

In the works for four years, the new regulations allow governmental workers to validate and inspect the safety of the concrete barriers that line fracking wells. Companies are required to submit information to the Bureau of Land Management on well geography, and the regulations set standards for how these companies can store used chemicals around well sites.

The final regulation requires companies to publicly disclose what chemicals were used in the fracking process within 30 days of completing operations on FracFocus, an industry-run website that also allows anyone to log on and see where sites have been drilled and what chemicals were used.

These regulations only apply to production on federal lands, which was 23 percent of all production in 2013.

The impact from these regulations for Ohio is still unknown.

“In Ohio, the discussion is largely focused around the Wayne National Forest,” said Jackie Stewart, the state director at Energy in Depth. “While there are well over 1,000 surface conventional wells in the Wayne National Forest, to date, there are no unconventional wells.”

Since the announcement, various members of House and Senate have been challenging the regulations, as well as the Independent Petroleum Association of America — which has filed a lawsuit to challenge the regulations, calling them “a reaction to unsubstantiated concerns.” The Association claims that fracking is a vital part of the recovering economy in America and these

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regulations will negatively affect the growth.

“While Ohio producers have not quantified the impact of this new rule by the Obama Administration, IPAA has weighed in on the matter and have responded legally,” Stewart said.

Colorado’s Attorney General has joined this effort and Ohio’s has yet to weigh in.

While there’s expected to be an additional $11,400 factored into the cost to frack each well with the new regulations, Stewart said that isn’t the only cost to think about.

“When discussing federal lands, the conversation needs to include not only the cost to operate as result of the new federal rules, but also the cost of delays in permitting and other onerous metrics used to stymie oil and natural gas production on federal lands.”

Stewart said that, while there haven’t been regulations like this before, operators have struggled with dealing with the federal government in terms of getting permits.

“There is certainly a cost to operators who’s acreage is adjacent to the Wayne National Forest, from the perspective of the competitive lease sale process that is required to gain access to those federal parcels of lands from a development perspective.

Given the unique dynamic of dealing with the varying bureaucratic layers of a federal agency in charge of leasing subsurface mineral rights, coupled with the fact that it’s currently a relatively low political priority, both regionally and within the administration, creates for a slow-moving process.

“This matter is entirely different than the federal rule on hydraulic fracturing on federal lands, but is certainly part of a greater discussion that needs to be brought forward.”

Gas & Oil

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June 2015

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Equipment and Controls, Inc. to host first users exchange conference W

Kristen Spicker – Dix Communications ASHINGTON, PA. — Equipment and Controls, Inc. The free, day-and-a-half conference focuses on new technology and the best practices available to improve plant reliability.

The conference includes presenters sharing up-to-date trends in process control, as well as a product trade show for hands-on reviews.

Discussions will also cover the following four categories: • Reliability Solutions and Support Includes the leading technologies, consulting services and solutions to provide any level of plant reliability businesses aim to achieve.

• Measure and Analyze Covers the broadcast range of measurement and analytical technologies for process clarity and insight.

• Operate and Manage Discusses the systems and tools that provide the decision in-

tegrity to run an operation at its full potential.

• Final Control and Regulate Includes the highly reliable final control technologies to help workers regulate and isolate their processes with certainty.

The conference is open to everyone, but is specifically recommended for safety and environmental managers, maintenance managers, operations managers, plant and project managers, process engineers, automation personnel, instrument technicians and engineers and supervisors.

The conference is Wednesday, June 17 from 7:30 a.m. to 6 p.m. and Thursday, June 18 from 8 a.m. to 1 p.m. at the Doubletree Hotel in Washington, Pa. Although the conference is free, reservations are due by Friday, June 12.

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Pennsylvania Edition

June 2015

Carrizo Oil being ‘patient’ with oil pricing Judie Perkowski – Dix Communications OUSTON — Carrizo Oil & Gas, Inc. has reduced its budget for all drilling activity in 2015 by 40 percent, said Richard “Dick” Smith, Carrizo’s vice president of land, during a recent phone interview at Carrizo’s headquarters is in Houston, Texas. The 40 percent Richard reduction amounts to approximately $500 million.

Smith A tidy sum by any standards, but a lot less than the $858 million Carrizo spent in 2014.

The company has substantial prospective acreage in the Delaware Basin and Eagle Ford Plays in Texas, Niobrara in Colorado, the Marcellus in Pennsylvania and the Utica Play in Ohio.

Carrizo has been successful because of “significant expertise in drilling and completion of complex horizontal wells in addition to advanced three-D seismic techniques to identify potential oil and gas reserves,” said Smith.

The drop in the commodity price (for a barrel of oil) is not the only reason Carrizo laid down its rigs in the Utica Play in Ohio.

“Carrizo did not have a midstream arrangement in place, but we are anticipating a midstream agreement in the near future.”

He also said Carrizo’s leases in the Utica are fairly new ... “there is a lot of time left on those leases. We are very patient ... We are well positioned to capitalize on opportunities.

“There is a lot of competition for the Utica shale, even though most of it is gas. We divested most of the company from dry gas assets in 2013. We are after liquids, primarily oil and condensate.”

But, fear not eastern Ohioans, Smith said Carrizo is not leaving the area.

“We are not going anywhere,” said Smith. “We have 28,000 net acres in the Utica. We will restart operations in the Utica when we can get a respectable rate of return.”

Smith said he is confident the company will be drilling again in 2016.

Carrizo has occupied office space in Cambridge since 2011,

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when the company began acquiring land in the Utica Play.

“We have several wells ready to drill where we have drilled top holes, and we have four drilled, three of these completed and producing. Carrizo has one well in Richland Township, one in Washington Township and two in Londonderry Township.

“So far we are happy with the [condensate] results,” he said.

Carrizo Oil & Gas was co-founded in 1993 by current President and Chief Executive Officer S.P. “Chip” Johnson.

Quotes from Johnson in a recent press release address the company’s success in the Utica formation: “We believe our combination of high-return assets, operational flexibility, and strong balance sheet have us well positioned to manage the current environment and quickly ramp up production once we get an appropriate commodity price signal. We continue to be pleased with the operational performance across all of our areas. We’re also happy with the early results from our most recent two Utica wells, which are the initial tests of our northeast Guernsey County acreage.

“We remain focused on cost savings in the current environment, and continue to make good progress on this front. Currently, we have achieved drilling cost reductions of more than 10 percent and completion cost reductions of nearly 25 percent from late 2014 levels.”

From 1993 to 2000, Carrizo operated along the Texas and Louisiana coast until Johnson learned about the Barnett Play near the Dallas-Fort Worth area and invested a minimal amount for access to the data about the play. Success came quickly, and the rest, as they say, is history. The company went public in 1997, gained access to the Eagle Ford in 2009, and today employs more than 250 people.

Dick Smith has served as vice president of land for Carrizo Oil & Gas, Inc. since 2006. He is a certified professional landman with a Bachelor of Business Administration in Petroleum Land Management from the University of Texas in Austin.

Gas & Oil

www.GasandOilMag.com

June 2015

15

Cheap oil may hurt U.S. economy

Christopher S. Rugaber– AP Economics Writer ASHINGTON (AP) — If there was one thing most economists agreed on at the start of the year, it was this: Plunging oil prices would boost the U.S. economy.

It hasn’t worked out that way.

The economy is thought to have shrunk in the January-March quarter and may barely grow for the first half of 2015 — thanks in part to sharp cuts in energy drilling. And despite their savings at the gas pump, consumers have slowed rather than increased their spending.

At $2.71 a gallon, the average price of gas nationwide is nearly $1 lower than it was a year ago. In January, the average briefly reached $2.03, the lowest in five years.

Cheaper oil and gas had been expected to turbocharge spending and drive growth, more than making up for any economic damage caused by cutbacks in the U.S. oil patch.

Consider what Federal Reserve Chair Janet Yellen said in December: Lower gas prices, Yellen declared, are “certainly good for families. ... It’s like a tax cut that boosts their spending power.”

Other experts were more direct: “Lower oil prices are an unambiguous plus for the U.S. economy,” Chris Lafakis, an economist at Moody’s Analytics, wrote in January.

So what did they get wrong?

It turns out that the economic effects of lower energy prices have evolved since the Great Recession. Corporate spending on drill rigs, steel piping for wells and railcars to transport oil has become an increasingly vital driver of economic growth.

So when oil prices fall and energy companies retrench, the economy suffers.

The drilling boom that erupted in 2008 has boosted U.S. oil production nearly 75 percent and natural gas 30 percent and made the United States the world’s largest combined producer of oil and natural gas. Energy production contributes about 2 percent to economic output, up from less than 1 percent in 2000.

Yet in recent months, industry activity has dropped more sharply than predicted.

“So far, it is fair to say that we have been hurt more than helped,” Lafakis acknowledges now.

During their policy meeting last month, Fed officials grappled with the changing impact of cheaper oil, according to minutes of the meeting released Wednesday. Several policymakers said the economic drag from drilling cutbacks could be “larger and longer-lasting than previously anticipated.”

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They also worried that the weakness in consumer spending, despite cheaper gas, suggested that Americans might generally be more reluctant to spend than assumed.

Some economists are reconsidering assumptions they use to forecast the economy.

“The benefit of lower oil prices is less pronounced than, say, 10 years ago,” says Jim Burkhard, a researcher at IHS Energy.

“You’re taking a big engine of economic activity and cutting it sharply.”

Lafakis and many others still expect consumers to spend much of their savings from cheaper gas, powering faster growth in the second half of the year. Economists say it can take up to six months for people to spend unexpected windfalls. But any gains won’t likely be enough to counter the anemic start to the year.

Moody’s Analytics expects the economy to expand just 2.6 percent this year, down from an earlier forecast of 3.3 percent.

(The downgrade is also due in part to a stronger U.S. dollar, which has depressed exports.)

For families, the drop in gas prices was an unexpected gift.

The government has estimated that cheaper gas will save a typical household $675 this year.

Yet still scarred by the recession, many remain reluctant to spend freely. Analysts also note that Americans are less likely to spend extra money if they think the gain is temporary.

“Consumers have been very reluctant to spend (savings from cheaper gas), because they view that as fleeting,” says Greg McBride, chief financial analyst at Bankrate.com.

Consumer spending rose at an annual rate of just 1.9 percent in the first quarter, compared with the previous quarter’s 4.4 percent. Much of the cash saved at the gas pump was put away: The U.S. savings rate reached its highest point in more than two years. Wal-Mart and Target have confirmed that their sales aren’t getting much lift from cheaper gas.

For Vince Cimilluca, a 28-year-old video editor in Edison, New Jersey, lower gas prices haven’t changed his finances much. He’s struggling to pay $800 a month in student debt while saving for a home. He’s seen gas prices gyrate and doesn’t trust they’ll stay low.

“The extra money that I have, I save,” Cimilluca says.

For the economy, the technological breakthroughs that allowed the energy industry to power growth now help explain the slowdown. As the 2008-09 recession ended, companies used hydraulic fracturing, or fracking, to unlock underground reserves. Oil, at $100 a barrel or more, made such efforts profitable.

Story Continued on Page 17

16

Gas & Oil

June 2015

Pennsylvania Edition

Energy rich U.S. states move to quash local limits on drilling EMILY SCHMALL– Associated Press WILL WEISSERT– Associated Press ANSFIELD, Texas (AP) — Lawmakers in Texas and energy producing states across the nation are rushing to stop local communities from imposing limits on oil and gas drilling despite growing public concern about the health and environmental toll of such activities in urban areas.

The slump in oil prices that has led to job losses in the oil patch has only added to the urgency of squelching local drilling bans and other restrictions the industry views as onerous. The number of jobs nationwide in the sector that includes energy production has fallen 3.5 percent since December, and Texas alone lost about 25,000 jobs in March, according to federal data.

A half dozen states — Texas, Oklahoma, Ohio, Pennsylvania, Colorado and New Mexico — have imposed or grappled with the issue of putting limits on local municipalities’ ability to regulate drilling or hydraulic fracturing, a practice of blasting huge volumes of water and chemicals underground to release tight deposits of oil and gas. And two of the biggest energy producers in the nation, Texas and Oklahoma, are poised to ban cities and towns enacting any ordinances considered unreasonable to energy exploration, including limits on fracking, water disposal, well maintenance and other activities.

The backlash against local bans represents the third phase of the U.S. shale boom. In the last decade, fracking spawned a massive expansion in drilling that pushed the United States to the number one oil and gas producer in the world. Cities responded to environmental and health concerns by passing restrictions. Now, state lawmakers are stepping in to shut down the groundswell of local activism in order to keep the energy expansion rolling.

“It had gotten to the point where various municipalities have been writing extremely detailed and onerous ordinances, making it difficult for companies to operate,” said Ed Ireland, head of the

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Barnett Shale Energy Education Council, which advocates for developing the rich deposit in Texas.

About 60 municipalities in Texas — the nation’s biggest oil and gas producing state — have some form of ordinance on the books limiting drilling or fracking, according to the Texas Municipal League. Dallas does not permit drilling closer than 1,500 feet of homes, schools or churches. Suburban Southlake bans drilling during the dry summer months. Mansfield doesn’t allow drilling on Sundays or holidays.

In Mansfield, a wealthy suburb about 30 miles southeast of Dallas, Tamara Bounds said the loud whir of fracking a few hundred feet from her backyard kept her awake at night for nine months.

“I couldn’t sleep. I had to barricade my windows with mattresses,” said Bounds, who is running for the city council on a platform that includes tighter control of oil and gas activities.

Hundreds of natural gas wells dot the hilly landscape, and pipelines snake behind housing cul-de-sacs. A 16-well pad site and

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compressor station hums behind the city’s performing arts center.

Mayor David Cook is an example of the fine line some public officials try to walk in Texas between protecting their communities and supporting the oil and gas industry. He backs the natural gas drilling in the area but opposes efforts by the state Legislature to prohibit communities from setting some rules.

“Instead of a balancing act, it’s a Texas two-step. Health and safety come first. After that, you do everything you can do to develop the economy of the state of Texas,” Cook said.

Drilling is forging ahead in energy rich states despite growing evidence that the practices are effecting the environment. In Oklahoma, the state’s geological survey conceded last month it was “very likely” that recent seismic activity was caused by the injection of wastewater from drilling into disposal wells.

Earthquake activity in 2013 was 70 times greater than it was before 2008, Oklahoma geologists reported.

Even so, the Oklahoma House approved a wide-reaching bill last month that prohibits cities and towns from banning oil and natural gas drilling, or implementing restrictions that are not “reasonable.”

When a single Texas community, the university town of Denton near Dallas, voted last fall to impose a ban on fracking within its boundaries, lawmakers in the Republican-controlled Texas Legislature sprang into action to ensure others wouldn’t follow suit.

There are no fewer than 11 Texas bills designed to ban future

June 2015

17

local limits on energy production.

The state’s energy industry lobbied heavily to ensure passage of the Texas legislation, which allows communities to have a say in things above the surface of the ground such as noise, lighting and traffic. But the bill says any local limits have to be “commercially reasonable,” a test that critics contend will allow drillers to do pretty much what they want. The bill sailed through the Texas Legislature and is now headed to Republican Gov. Greg Abbott, who is expected to sign it into law.

In Mansfield, the looming law is throwing into doubt an ordinance passed in March that includes notifying potential home buyers if a gas well has been permitted within 300 feet of their property.

“It could be months of work down the tube,” said Cook, the mayor.

Texas politics have for decades been awash in oil money. Drilling operations contributed more than $12 billion to state coffers in 2013, accounting for about 4.5 percent of the budget. Oil and gas industry donors contributed about $400 million to 2014 campaigns.

“Our government in Texas is owned by the oil and gas industry,” said Sharon Wilson, a Gulf regional organizer for the environmental group Earthworks. The 11 bills in the Legislature “are meant to show Texans who’s in charge,” she said.

Cheap oil may hurt U.S. economy continued from page 15.

Jim Burkhard of IHS Energy estimates that U.S. and Canadian energy companies increased investment in production from $98 billion in 2005 to $363 billion last year. U.S. oil and gas jobs nearly doubled to 537,000. In addition, jobs were added at steel mills, at sand pits to process sand for fracking and at restaurants and service companies in areas with new-found oil and gas fields, like North Dakota and Pennsylvania.

But the industry’s breakneck growth was thrown into reverse by a 50 percent drop in oil prices from June through January. CEO Doug Suttles of Encana Corp., a Canadian-based driller that operates in the United States, says the pullback in drilling “happened more rapidly than I’ve seen in 32 years.”

As recently as December, Suttles says, experts had forecast that the number of rigs would drop by a third in the spring from a year earlier. Instead, it’s plunged by more than half, according to Baker Hughes, an oilfield services firm.

That’s led companies like U.S. Steel to temporarily close factories that make the steel pipe used in oil wells. Texas-based Superior Silica Sands, which makes fracking sand, has canceled the building of a factory and has slashed capital spending plans.

Investment in wells and production facilities collapsed nearly 50 percent last quarter, the government says, and cut the

quarter’s annual economic growth by three-quarters of a percentage point. Goldman Sachs estimates that three jobs will be lost in other industries for every position shed by energy companies as laid-off workers spend less.

That trend is painfully evident in Texas, which lost 25,400 jobs in March, the most since 2009. Many were in mining, which includes oil and gas. But most of the losses were indirect: As laid-off workers cut spending, retailers cut 6,600 jobs.

Cheaper gas has hardly been a comfort to Orlando Garza, 34, who lives near Corpus Christi, Texas, and was laid off from his job in February as a well site leader.

“I’ve had to cut back tremendously,” Garza says. “I tell my kids, ‘I don’t have a job, so I can’t buy it.’” ___ AP Writers Emily Schmall in Fort Worth, Texas and Jon Fahey and Anne D’Innocenzio in New York contributed to this report. ___ Contact Chris Rugaber on Twitter at http://Twitter.com/ ChrisRugaber .

18

Gas & Oil

Pennsylvania Edition

June 2015

Pipeline construction may result in questions Thomas Doohan– Dix Communications OOSTER, Ohio -- Easement contracts with pipeline developers should be thoroughly researched before signing on the dotted line; everything is negotiable.

That is what Ohio Farm Bureau Director of Energy, Utility and Local Government Policy Dale Arnold and Logee, Hostetler, Stutzman & Lehman attorney Chris Finney said during a pipeline informational in April at the Ohio Agricultural Research and Development Center’s Shisler Center.

Providing a history of pipelines in Ohio and tips for things to watch for in easement contracts, the men drilled the importance of research into the audience.

Arnold said research begins with understanding what kind of pipeline is going in, as they vary.

Interstate, intrastate and utility service pipelines are coming

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through Ohio, he said, as well as infrastructure renewal lines and collection lines.

There are different sizes and uses for pipelines, Arnold said.

Eminent domain, which only grants a pipeline developer access to a property, is a possibility with interstate pipelines, he said, but not for intrastate pipelines.

“Get those down,” Arnold said, explaining how asking questions in the beginning about pipeline type can go a long way in negotiating contracts.

Each type of line has a different set of rules, he said; some are governed by the Federal Energy Regulatory Commission and others are ruled by Ohio authorities.

Also impacting easement agreements, Finney said, are the characteristics of each parcel crossed by a pipeline. Each parcel is

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impacted differently, he said, and the costs need to be reflected in easement contracts.

In negotiations with landowners, he said, make sure things are explicitly stated. If there is an area of a property that is off limits, have it specified. Make sure the contracts note how the developer should return the land following construction, Finney said.

It is important to detail the number of pipelines that are allowed on the property as well as pipeline diameter, depth and even the content of the material being transported, he said.

“How wide will the area be,” he asked the group, explaining how landowners need to know easement specification.

They should be in writing, Finney said, as well as the duration of the easement, the terms of termination and even the restoration of the land.

All of this helps with increasing compensation, Finney said. For instance, pipeline developers will need to sign a new contract with a landowner if they change the material transported by the pipeline if only one material was previously approved.

While most farm contracts are signed on the hood of a pickup truck, he said this contract requires research. Having an attorney helps, Arnold said.

“Don’t sign anything without having it reviewed,” Finney said.

“Take it to a lawyer.”

When the research has been done, Arnold said, negotiate with the developers. When the developers ask why extra compensa-

June 2015

19

tion is deserved, he said, “on the hood of their pick-up truck -show them.”

Franklin Township farmer Greg Sautter said the ET Rover pipeline was right at the edge of his property. He said this was his second pipeline meeting and he said he always learns more information. While he is arming himself with information, he still feels somewhat powerless.

“We didn’t ask for this pipeline,” Sautter said. But “we have to deal with it.”

Salt Creek Township farmers Lynn and Linda Orr said the ET Rover pipeline is going across four parcels they rent and farm.

While some felt encouraged by the fluidity of some pipelines at this point, he said he would prefer the pipeline routes be etched in stone, adding it would help for planning purposes.

“How do we predict the future?” Linda Orr asked.

Chester Township farmer Art Stoller said the Utopia East likely will go through his family farm. He said he also feels powerless, though the information at the meeting helped to curb that.

“It’s all new,” he said, explaining the pipeline representatives come to negotiations with years of research behind them. “They know what they are doing. We’ve got to scramble to catch up.”

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

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June 2015

Taxpayers Beware!

Costly ballot initiatives on the way Jackie Stewart – Energy in Depth, Ohio OLUMBUS, OH -- A tip from Energy in Depth, Ohio taxpayers beware: Costly ballot initiatives coming your way, courtesy of the national ban fracking group, the Community for Environmental Legal Defense Fund, is targeting Ohio with campaigns to initiative local fracking bans in Medina and Athens Counties.

This group has already led efforts in eight communities in Ohio, which include county petition drives in Medina, Athens, Meigs, Portage and Fulton counties, and city petition actions in Columbus, Youngstown and Akron. This string of ballot initiatives is being done under the CELDF umbrella of the Ohio Community Rights Network.

Of course, what the CELDF is not telling these communities is that lawsuits regarding local fracking bans could cost municipalities millions of dollars and could even lead to bankruptcy.

These ballot attempts have been challenged several times.

Most recently in Cuyahoga County where a judge ruled that a drilling ban clearly conflicts with Ohio’s oil and gas law. Under the law, the regulation of the oil and gas development exclusively belongs to the Ohio Department of Natural Resources.

In fact, the city of Broadview Heights ban, which was the catalyst behind Cuyahoga County’s decision, just decided they

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Pennsylvania Edition

will not appeal the ruling. Broadview Height Law Director Vince Ruffa recently stated, “There was no basis for an appeal, honestly. They (Cuyahoga County) gave us the opinion that appealing would be pointless and frivolous.”

Judge Micheal K. Astrab said state code prohibits local governments from exercising authority that “discriminates against, unfairly impedes or obstructs oil and gas activities and operations.”

Additionally, the pivotal Ohio Supreme Court decision, which provided a final ruling to the Munroe Falls vs. Beck Energy case earlier this year, concluded that the state has primacy over oil and gas regulation. More importantly, it established that what the “state has allowed, the local government cannot prohibit.”

However, all of these actions by various courts have not dismayed the CELDF, which currently identifies Ohio as one of six states under their radar. Ohio joins New Mexico, Washington State, New Hampshire, Oregon and Colorado as targets for their campaigns.

Ohio should take a hard look at CELDF’s latest victim, New Mexico, where special interest groups cost Mora County big bucks after a federal judge overturned a 2013 ordinance that was passed, which was authored with considerable input from an “ environmental group based in Pennsylvania .”

Also noteworthy is Mora County has the second highest unemployment rate and is one of the poorest counties in the state. Folks there are now having buyer’s remorse after learning that they county may be faced with municipal bankruptcy: “We have heard estimates ranging from tens of thousands to hundreds of thousands of dollars,” Michael Aragon, an attorney for Mora County. County resident Frank Splendoria said, “It was totally foolish to begin with, to even try this. How do you pass an ordinance that’s going to override the state and the federal constitution? I don’t know if they were playing us [in Mora County] as suckers, or they were sincere in their beliefs. I would probably tend to the former rather than the latter, given that Mora County was the first county to try this and failed miserably at it. I don’t know where we would find the money. If you look at the county’s budget, they barely have enough money to provide the bare essential services ...

(The ban) hasn’t made any sense to anyone with any sense to begin with.”

This cautionary tale was backed by a recent article in Energywire, warning these ballot measures can be costly to local government. But the CELDF doesn’t seem too concerned on that point.

A representative of Frack Free Mahoning Valley reported to Energywire that the CELDF agreed on the payment of $1 to represent them if they became embroiled in a suit; however, she also noted that “a possible lawsuit never entered the picture.” This is interesting, since the CELDF flew the coop when Mora County was on the hook to pick up their tab.

Luckily the voters of Youngstown have not put their city government in the same position.

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