Oil and Gas Lawyer Blog

Recent news of interest:

The new Texas law requiring reporting of chemicals in frac fluids becomes effective February 1. The law also requires operators to report the volume of water used. Dr. Dan Hardin, resource planning director of the Texas Water Development Board, projects that in 2020, more than 40 percent of water demand in La Salle County (in the Eagle Ford Shale) will go toward fracing. http://www.nytimes.com/2012/01/15/us/new-texas-rule-to-unlock-secrets-of-hydraulic-fracturing.html

Last year, Dr. Robert Howarth, a professor at Cornell University, published an article concluding that natural gas causes more global warming per unit of energy created than coal, upsetting the widely published belief that natural gas is a more climate-friendly fuel. Dr. Howarth said that previous studies did not take into account that as much as eight percent of produced natural gas escapes into the atmosphere between the wellhead and its consumption. Now a colleague of Howarth at Cornell has published a study challenging Howarth's fugitive gas estimate. Dr. Lawrence Cathles concludes that gas has one-half to one-third the greenhouse gas footprint of coal.

The U.S. Energy Information Administration said that the average wellhead price for natural gas fell from $4.37 per MMBu in 2010 to $3.98 in 2011, the lowest since 2002. http://fuelfix.com/blog/2012/01/10/natural-gas-production-drives-price-down/ Cheap natural gas is making it hard for wind and solar projects to compete. http://blogs.desmoinesregister.com/dmr/index.php/2012/01/05/cheap-gas-a-threat-to-renewables/http://www.npr.org/2012/01/05/144526652/solar-panels-compete-with-cheap-natural-gas 

With low gas prices and high oil prices, rigs continued to move toward shale plays:

 

 

 

 

2011 saw a record $86 billion in 2011 U.S. oil and gas upstream deals, up 15% from 2010 -- a year that was itself a record. Top deals in 2011: BHP Billiton's acquistion of Petrohawk, $15.1 billion; Kinder Morgan's acquisition of El Paso Corp, $7.2 billion; BHP Billiton's acquisition of Chesapeake's Fayeteville Shale properties, $4.75 billion; Statoil's acquisition of Brigham Exploration, $4.7 billion; Marathon's acquistion of Hilcorp Marcellus Shale interests for $3.5 billion. All of these deals were driven by shale plays. China's Sinopec oil company recently announced that it will pay $2.2 billion for a one-third stake in Devon Energy's plays in five shales in Mississippi, Colorado, Ohio, and Michigan. Oil & Gas Journal estimated that E&P spending will rise 9.3% this year to a record $595 billion.

In New York, the four-month comment period is closing on regulations proposed by the Department of Environmental Conservation for fracing. The DEC received more than 20,800 comments, a record. State Democratic leaders called on the governor to withdraw the proposed regulations and for a permanent ban on fracing. Industry lobbyists called the proposed regs excessively restrictive, inequitable and unjustified. The Independent Oil and Gas Association of New York claimed that the rules would render half of the desirable drilling parcels unuseable. Environmental groups are divided. The Sierra Club,the Natural Resources Defense Council and the Nature Conservancy have been working with regulators and the industry to come up with workable regulations, seeing natural gas as a cleaner "bridge fuel" for transition to renewable energy sources. Other local environmental groups are opposed to any regulations that would allow development of the Marcellus in New York. Clair Sandberg, a founder of Frack Action, called the cooperation between national environmental industry groups and industry a "marriage of convenience." "It was too daunting to try to take on coal and gas at the same time. Now they find themselves with a mutiny on their hands."

Reports continue to surface in Pennsylvania of methane contamination of water wells allegedly caused by fracing. The Pennsylvania Department of Environmental Protection cited Cabot (again) for contaminating three water wells in Lenox Township, citing inadequate casing. DEP is also investigating methane contamination in wells in Wyoming County, Pa. operated by Chief Oil & Gas. A Chief spokesman said that the levels of methane in the water matched levels found in the water before the wells were drilled.

 

I started writing this blog in February 2009. This is my 136th post. It's been fun. I had no idea I could find enough topics to write about, but material has not been a problem. A lot has changed in the oil and gas industry in the last three years. The development of unconventional shale plays. The BP oil spill in the Gulf. Falling gas prices. Rising oil prices. The "fracing controversy."

All of this news pales in comparison to my personal year-end tragedy: My secretary of 27 years is retiring.

I have looked back on my posts from the last year, and here are some parting thoughts for 2011:

Range Resources' fight with landowners in Parker County over alleged contamination of groundwater continues. The fight began in 2010 when the EPA issued an "emergency order" against Range, alleging that its Barnett Shale wells had charged landowners' groundwater supply with methane. Range has fought back fiercely. It appealed the EPA's order to the 5th Circuit court of appeals, and it called a Railroad Commission hearing, at which it presented extensive evidence showing that its wells were not the source of the methane in the landowners' water. The EPA and the landowners declined to participate in that hearing. Instead, the EPA filed suit in federal court to enforce its order. That court has stayed EPA's action until the 5th Circuit issues its opinion. The landowners also brought suit against Range in state court. Range filed a counterclaim, also suing the landowners' consultant Alisa Rich, alleging a conspiracy between the landowners, Rich and the EPA, and seeking damages for civil conspiracy and defamation.

Range's fight is one chapter in the larger controversy over hydraulic fracturing that continues to occupy the media. Most recently, the EPA issued a report concluding, after extensive study and testing of groundwater around Pavillion, Wyoming, that fracing is "likely" the cause of contaminated local water supplies. Every major media outlet picked up the story. Just Google Pavillion Wyoming to see the media frenzy. Encana, an operator in the Pavillion field, called for an independent review of the EP's findings and labelled the agency's report "irresponsible." The American Petroleum Institute and Wyoming regulators have also questioned the study's scientific soundness.

The EPA is continuing with its ponderous design of a study of fracing, mandated by Congress. Results of its study are not expected until 2013. The State of New York, which has imposed a moratorium on fracing, issued a draft environmental impact statement that contains a remarkably thorough study of alleged incidents of groundwater contamination and detailed recommendations of best practices to reduce risks to groundwater. Major studies have been done by several universities, including Duke and MIT, and the University of Texas is proposing its own study. The Department of Energy appointed an advisory panel to study the issue.

Meanwhile, the media continues its frenzied coverage of the "fracing controversy." A so-called documentary on the issue, Gasland, was even nominated for an Oscar.

The Texas Leglisature passed legislation requiring oil companies to post on the internet the chemical content of their frac fluid. The RRC has proposed rules implementing the new law. Similar legislation has been passed or is pending in other states.

The EPA has also issued proposed regulations to reduce emissions of contaminants into the air at all oil and gas facility sites, viewed by the industry as an attempt by EPA to extend is regulation of the industry.

The huge increase in gas supplies resulting from the shale boom has cause gas prices to decline further and companies to shift their exploration budgets to oil shale plays, including the Eagle Ford and the Barnett Shale oil "window" in Texas and the Bakken in North Dakota. Rigs drilling gas wells in Texas declined from 941 to 820 this year, and rigs drilling oil wells increased from 756 to 1,196. There are now 240 rigs drilling in the Eagle Ford alone. Meanwhile, the gas price has dropped to around $3.00/mmBtu, whereas the oil price has moved between $85 and $100/bbl.

The Texas Supreme Court issued several opinions of importance to royalty owners this year: In Shell v. Ross, BP v. Marshall, and Samson Lone Star v. Hooks, the court threw out landowners' jury verdicts against oil companies based on statutes of limitation. In FPL Farming v. Environmental Processing Systems, the court held that injection well operators could be held liable for subsurface trespass.  In Leslie v. Veteran's Land Board, the court appeared to reverse its prior rulings that the holder of executive rights has no duty to lease.  And in Texas Rice Land Partners v. Denbury Green Pipeline, the court said that pipeline companies must prove that they are in fact common carriers in order to exercise condemnation powers.

Meanwhile, oil companies keep leasing and drilling. The demand for energy will not soon abate. A happy new year to all.

 

Recent news of interest:

New York Times reporter Ian Urbina has a recent article claiming that lenders taking mortgages on real estate are restricting their borrowers from granting oil and gas leases on the mortgated property. The article also discusses whether the granting of a lease on mortgaged property might violate the terms of the mortgage. Urbina says Congressmen Ed Markey and Maurice Hinchey asked Fannie Mae and Freddie Mac how they deal with oil and gas leases on mortgaged property. Chesapeake said that they don't seek approval from lenders before acquiring leases on mortgaged property, but wait until they are ready to drill to ask the mortgage company to subordinate their lien to the mortgage.

In my experience in Texas, the standard practice has been for the oil company to lease the land first, then determine if it is mortgaged, and if so ask the lender to subordinate is lien. Lenders are generally agreeable, believing that, if a well is drilled, the value of their collateral will be enhanced, since they will still have a lien on the royalty interest reserved by their borrower. I recently learned, however, that Fannie Mae is requiring that its borrowers on commercial properties insert specific provisions in the lease before agreeing to the lease, as well as charging a substantial fee. On new leases of residential lots in the Barnett Shale, Chesapeake is sending a lender subordination form to the lot owner along with the lease and asking the owner to get their mortgagee's consent before paying for the lease.

The Booming Eagle Ford Shale

There are now 1,231 wells producing from the Eagle Ford Shale in South Texas, in 25 counties. Total production to date is more than 37 million barrels of oil/condensate and 311 Bcf of gas. The biggest counties are DeWitt, Karnes, Dimmit, Webb and La Salle.  DeWitt and Karnes Counties are the best oil producers so far. In DeWitt County, 99 Eagle Ford Wells have produced 6.8 million barrels, and the average peak month daily production was 555 barrels. Webb County is tops on Eagle Ford gas production, with 116 Bcf of gas to date, and an average initial production rate in the first month of 3.4 mmcf from 215 wells. As of last month, 238 rigs were running in the Eagle Ford play (compared to 115 in the Marcellus). Drilling in the Barnett Shale play, a gas play, has declined to its lowest level in seven years because of the low price of natural gas.

 

 Kinder Morgan Buys El Paso Corp. for $21 Billion

Kinder Morgan's acquisition will make it the largest operator of gas pipelines in the US and the fourth largest energy firm in North America. Kinder Morgan is reportedly planning to sell El Paso's exploration and production assets, for as much as $7 billion.

Brigham Exploration Sold to Statoil for $4.4 Billion

On the local front, in my home town of Austin, the two Brigham brothers have cashed in, selling their company for $4.4 billion to Norway's Statoil. The Brighams started their company here in Austin several years ago, taking in public, and recently acquired 375,00 acres on the Bakken and Three Forks plays in North Dakota and Montana. Brigham has already been sued by its shareholders, who say that Statoil's price of $36.50 per share is too low.

 RRC Eagle Ford Task Force Adopts "Advisements"

A task force appointed by the Commissioner David Porter of the Texas Railroad Commission has adopted "advisements" regarding construction of pipelines and roads in the area of the Eagle Ford Shale play. The task force was appointed in July to "open the lines of communication between all parties, establish best practices for developing the Eagle Ford Shale, and promote economic benefits locally and statewide."  The task force has twenty members:

• Leodoro Martinez - Middle Rio Grande Development Council, Executive Director, Cotulla
• Kirk Spilman - Marathon Oil, Asset Manager Eagle Ford, San Antonio
• The Honorable Jaime Canales - Webb County Commissioner, Precinct 4, Laredo
• Teresa Carrillo - Sierra Club, Executive Committee Member - Lone Star Chapter, Treasurer - Coastal Bend Sierra, Corpus Christi
• James E. Craddock - Rosetta Resources, Senior Vice President, Drilling and Production Operations, Houston
• Erasmo Yarrito - Texas Commission on Environmental Quality, Rio Grande Valley Water Master, Harlingen
• Steve Ellis - EOG Resources, Senior Division Counsel, Corpus Christi
• The Honorable Daryl Fowler - Dewitt County Judge, Cuero
• Brian Frederick - DCP Midstream, Southern Unit Vice President for the East Division, Houston
• Anna Galo - Vice President, ANB Cattle Company, Laredo
• The Honorable Jim Huff - Live Oak County Judge, George West
• Stephen Ingram - Halliburton, Technology Manager, Houston Business Development & Onshore South Texas, Houston
• Mike Mahoney - Evergreen Underground Water Conservation District, General Manager, Pleasanton
• James Max Moudy - MWH Global, Inc., Senior Client Service Manager, Houston
• Trey Scott - Trinity Minerals Management, LTD, Founder, San Antonio
• Mary Beth Simmons - Shell Exploration and Production Company, Senior Staff Reservoir Engineer, Houston
• Terry Retzloff - TR Measurement Witnessing, LLC, Founder, Campbellton
• Greg Brazaitis - Energy Transfer, Vice President, Government Affairs, Houston
• Glynis Strause - Coastal Bend College, Dean of Institutional Advancement, Beeville
• Susan Spratlen - Pioneer Natural Resources, Senior Director, Corporate Communications & Public Affairs, Dallas
• Chris Winland - Good Company Associates; University of Texas at San Antonio, Interim Director, San Antonio Clean Energy Incubator, Austin/San Antonio
• Paul Woodard - J&M Premier Services, President, Palestine

The task force adopted the following advisements regarding pipelines and roads.

Pipelines:

• Placement of pipelines should avoid steep hillsides and watercourses where feasible.

• Pipeline routes should take advantage of road corridors to minimize surface disturbance.

• When clearing is necessary, the width disturbed should be kept to a minimum and topsoil material should be stockpiled to the side for replacement during reclamation, accelerating successful revegetation.

• Proximity to buildings or other facilities occupied or used by the public should be considered, with particular consideration given to homes.

• Unnecessary damage to trees and other vegetation should be avoided.

• After installation of a new line, all rights-of-way should be restored to conditions compatible with existing land use.

Roads:

• Trucking companies partnering with the Texas Department of Public Safety to develop a program that would alert companies when their drivers receive moving violations or drivers license suspensions.

• Creation of road use agreements or trucking plans between operators and local authorities, including parameters such as:

1. Avoiding peak traffic hours, school bus hours, and community events.

2. Establishing overnight quiet periods.

3. Ensuring adequate off-road parking and delivery areas at all sites to avoid lane/road blockage.

The task force is supposed to meet monthly.

 

In the Marcellus:

 

•  Democratic representatives in Ohio are calling for a moratorium on hydraulic fracturing in that state until the EPA completes its study of fracking.
• ABC News reported that the Marcellus and Utica shale plays have created thousands of jobs in Ohio, causing people to flock to Steubenville, Ohio, which last year had an unemployment rate of 15%.
• The Pennsylvania Department of Environmental Protection has told Cabot Oil & Gas that it can stop delivering water to residents of Dimock Township. Cabot was required to furnish water to residents after claims that its wells had contaminated groundwater there. The residents still have a pending case against Cabot.
• Range Resources is challenging the constitutionality of a town's drilling ordinance in South Fayette, Pennsylvania as so strict as to prevent any drilling in the town, causeing a taking of Range's mineral rights. Range's action is being considered a test case on the limits of municipal regulation of drilling in Pennsylvania.
• Companies are considering abandonment of their acreage in New York after reviewing that state's proposed rules on horizontal drilling and fracking.

 

Christopher Helman has recently written two articles on Aubrey McClendon, CEO of Chesapeake Energy, one in the October 24 edition of Forbes, and one -- an interview with McClendon --  on Helman's blog. McClendon is the Steve Jobs of the US oil & gas exploration industry, in many ways the face of the industry. And he's not bashful about taking that role. Helman's articles provide a good summary of McClendon's and Chesapeake's meteoric rise and the controversies surrounding him and the industry.

Chesapeake has a market capitalization of $17 billion and is estimated to have $2 billion in profits on $9.5 billion in revenues this year. It has 12,000 employees and added 3,300 employees this year. The company has 4,500 land scouts acquiring oil and gas leases from Ohio to Pennsylvania to Michigan to South Texas. Chesapeake is expanding beyond the E&P business into the oilfield service industries. According to McClendon, it is the fourth-largest drilling company in the US, the second-largest compression company, and in the top three in oilfield trucking and tool rental. Chesapeake intends to spin off its oilfield services businesses next year into a new public entity.

McClendon's great uncle was Robert Kerr, founder of Kerr-McGee Oil & Gas and a goveronor of Oklahoma. At age 23, he partnered with Tom L. Ward to start Chesapeake, and it went public in 1993. Ward and McClendon parted ways in 2006, and Ward started his own company, SandRidge Energy. McClendon owns a huge wine collection that is served at his Oklahoma eatery the Deep Fork Grill. He recently sold his personal collection of antique maps to his company for $12 million. 

Now 52 years old but looking much younger, according to Forbes McClendon is worth $1.2 billion. He owns 2.5% of every well Chesapeake drills--interests now worth some $500 million. "You could say I'm the only CEO in America who truly participates alongside his company in the day-to-day business activity on the same basis as the company," he says. "Would we have had the financial collapse in 2008 if every CEO of a bank, of a mortgage company or a securities firm had been forced by his board to participate personally in some proportionate part of every loan made, every mortgage-backed security sold or every real estate deal financed by those firms?" In 2009 his Chesapeake compensation package was valued at $100 million, including $20 million in CHK stock.

Chesapeake is admired and hated in the industry. The company sweeps into each new play paying the highest prices for leases and gobbling up all acreage in sight. In the past five years the company has acquired 600,000 leases covering 9 million acres, paying $9 billion in bonuses. Chesapeake paid $1.7 billion for 700,000 acres in the Eagle Ford in 2010; then in November 2010 the company sold a one-third share of that acreage to China's state-owned oil company for $1.1 billion and an additional $1.1 billion in future drilling costs. Chesapeake has entered into similar agreements withe BP, Statoil and Total to lay off interests in its acreage.

Continue reading "Chesapeake's Aubrey McClendon" »

Items of interest recently in the news:

On March 25, the Texas Railroad Commission adopted its examiners' recommended decision finding that Range Resources was not responsible for water-well contamination in Parker County, Texas.  (For my previous posts on this controversy, go here and here.)  The U.S. Environmental Protection Agency, which had previously entered a cease-and-desist order against Range based on its investigation of the water well contamination, issued a statement standing by its findings:  "The decision by the Texas Railroad Commission is not supported by EPA's independent, scientific investigation, which concluded that Range Rsources Corporation and Range Production Company have contributed to the contamination of homeowners' drinking water wells."  EPA has posted the full record of its investigation of Range on its website.  EPA has filed a federal suit against Range to enforce its order. "EPA stands by the order issued to Range Resources and seeks to secure Range's full compliance," said EPA's statement.  Range has filed a motion in that suit to dismiss the case, based on the Railroad Commission's findings. Railroad Commissioner Michael Williams said that "I see this as sort of a cavalier attempt by the federal government to reach its arms into our state's jurisdictions." Commissioner Elizabeth Jones said after the RRC hearing that Range's operations "have not contaminated and will not contaminate" the water wells in question. Steven Lipsky, one of the water well owners who believes that Range is responsible for the contamination, said: "It's a corrupt system. It's kind of sad."

Chesapeake Energy has entered into two more agreements to shed part of its acreage positions, one in Texas and one in Arkansas.  Chesapeake agreed to sell all of its Fayetteville Shale leases in Arkansas to mining giant BHP Billiton for $4.75 billion cash. Chesapeake entered into an agreement with Clayton Williams Energy to transfer 75% of its 75,000 acres of leases in the Wolfbone play in Reeves County to Williams, in exchange for Williams' agreement to drill at least 20 wells in the first year, with an option to drill 20 more earning wells every year over the next four years.

Investment firm Harrington Investments, Inc., a firm specializing in socially responsible investing, announced that it is divesting its entire holding in Chesapeake Energy because of (1) 109 citations against Chesapeake by the Pennsylvanie Environmenta Protection Department for "environmental health and safety" violations, and (2) The poor record of Chesapeake in executive compensation.  In 2008, Chesapeake CEO Aubrey McClendon was paid a $77 million bonus in a year when the stock price fell 60 percent. Harrington also noted that "McClendon funneled $450,000 to [Pennsylvania] gubernatorial candidate Tom Corbett via the State Republican Leadership Committee. Since Corbett's victory, Chesapeake has obtained 839 Marcellus Shale drilling permits in Pennsylvania, more than any other company, and has drilled at 126 sites, making it the second-biggest operator in the region."

A report issued by the Bipartisan Policy Center and the American Clean Skies Foundation has recommended that electric utilities enter into more long-term contracts for the purchase of natural gas.  Prior to natural gas shortages in the 1980's, utilities traditionally entered into long-term gas purchase contracts with producers with fixed prices, or prices that were adjusted periodically. Because of gas price volatility, state regulators of electric utilities discouraged the utilities from entering into such long-term contracts and encouraged purchases on month-to-month contracts based on market or spot prices. Today, most gas is sold on mont-to-month contracts. The report, from a task force including executives from Dow Chemical, The Willliams Companies, Spectra Energy, the American Gas Association, the Natural Resources Defense Council, Southern Company, ConocoPhillips, and Pacific Gas & Electric Company, concludes that because of a near 50% increase in gas reserves and and an increase of nearly 700 billion cubic feet of new gas storage capacity in the past decade, utilities are shifting their emphasis to gas-fired generation instead of building new coal-fired generation or retrofitting coal plants to cut emissions.  The reports says that utilities should include long-term gas contracts in their portfolio of energy supplies, and it encourages state utility regulators to emplement policies that encourage such long-term contracts. "Realizing and maximizing these benefits [of greater gas supply], however, will require that investors have confidence in the mid- to long-term stability of natural gas prices," says the report.  The complete report can be found here.

Recent news items of interest:

Southwest Energy and Environmental Defense Fund Developing Best Practices for Hydraulic Fracturing.

         Scott Anderson, senior policy advisor for the Environmental Defense Fund, and Mark Boling, Executive Vice President of Southwestern Energy, have begun talks to bring together representatives of energy and environmental groups to propose uniform standards for best practices for hydraulic fracturing, in hopes that such standards will be adopted by states and give the public assurance of the safety of the completion technique.    The talks have resulted in a 40-page draft of proposed model regulations to be presented to state officials, covering public disclosure of frac fluid additivies, standards for casing and cementing wells, and pressure monitoring.  An inverview of Scott Anderson on the efforts can be found here.  "It is our obligation as an industry to let [the public] know what the issues and obstacles are and show them we are willing to work with environmental groups and state regulators to come up with solutions," said Boling.

Dr. John Baen Paper on Estate Planning Opportunities for Mineral Owners.

     Dr. John Baen, a professor of real estate at the University of North Texas, has written a paper, "Contemporary Land, Oil and Gas Valuations, Estate Planning Opportunities, and Possible Strategies in the New Estate and Tax Environment," presented at the recent meeting of Texas Land & Mineral Owners' Association in San Antonio.  The paper can be found here:  John Baen Article.pdf

EPA Subpoenas Halliburton for Data on Hydraulic Fracturing

    The EPA has issued a subpoena to Halliburton to obtain a description of the additives used in its frac fluids.  Halliburton was the only one of nine oilfield services firms to refuse EPA's request for information on the content of their frac fluids. Halliburton posted a response on its website, here. Halliburton has also announced an "eco-friendly" frac fluid that has additives "sourced entirely from the food industry."

State Senator Wendy Davis Introduces Barnett Shale-Related Bills

     Senator Davis, D-Fort Worth, has introduced several bills for the 2001 legislative session aimed at issues in the Barnett Shale:

• SB 102 - allocation of funds to monitor air quality in the region
• SB 103 - to allow saltwater pipelines to be placed in state rights-of-way
• SB 104 - to require operators to capture natural gas produced in testing the well instead of flaring it - "green completions"
• SB 105 - to require that commercial salt water disposal wells be drilled to the Ellenburger formation or below
• SB 106 - regulation of the condemnation of municipal property for pipelines, and municipal regulation of such pipelines
• SB 107 - regarding Railroad Commission inspection of pipeline leaks and reporting results to municipal authorities

NY AG-Elect Opposes Hydraulic Fracturing

     The Attorney General-Elect of New York, Eric Schneiderman, has announced that he will oppose hydraulic fracturing in his state until it has been determined that it is a safe practice. See story here.

PA Board Approves Water Line, PA DEP Says Cabot to Pay For It

     A Pennsylvania board has voted to approve a six-mile water line costing about $12 million to provide water to residents of Dimock Township, PA.  The Pennsylvania Department of Environmental Protection blames wells drilled by Cabot Oil & Gas for contaminating the residents' groundwater, and has ordered Cabot to pay for the water line. Cabod denies that its wells are the cause of the contamination. See article here.

Recent news items of interest:

Barnett Shale Well Reaches 5 Bcf

The XTO Energy - TRWD #H2H Well in Tarrant County has produced more than 5 Bcf of gas, the first Barnett Shale well to reach that milestone.  The well was completed in June 2005 with a 3,500-foot lateral. The well was drilled under a reservoir operated by the Tarrant Regional Water District, Eagle Mountain Lake, in northwest Tarrant County.  It still produces more than 1 mmcf per day. The well highlights the difference between community acceptance of horizontal drilling and fracing technology in Texas compared to fears that the technology will cause water contamination in New York State, which so far has banned such wells. The newly elected Attorney General for New York, Eric Schneiderman, has recently said he opposes use of hydraulic fracturing until he is convinced that it is safe: "Neither the state nor the federal government has determined that hydrofracking is a safe practice, and I will sue to make sure that no drilling takes place until those determinations have been made."

TCEQ Air Monitor Installed in Decatur

The Texas Commission on Environmental Quality has installed a continuous air monitoring device in Decatur, Texas to continuously sample and report air quality and measure 46 volatile organic compounds. It is one of five such devices sited in the Barnett Shale area. Each monitor costs up to $250,000, plus $100,000 per year to operate.  The data can be viewed on the TCEQ website, here: 

http://www.tceq.state.tx.us/compliance/monitoring/air/monops/agc/agc_barnett.html 

A map showing the locations of TCEQ air quality sampling locations may be found here:

http://www.tceq.state.tx.us/implementation/barnettshale/bshale-viewer

Chevron Buys into Marcellus Shale

Chevron Corporation announced that it has agreed to acquire Atlas Energy, which controlls 486,000 net acres in the Marcellus and 623,000 net acres in the Utica Shale. Atlas had previously made a joint venture with Reliance Industries Limited of India to develop its Marcellus leases. Chevron thereby joins Exxon Mobil (XTO acquisition) in buying into the domestic shale plays.

Halliburton Subpoenaed for Contents of Frac Fluid

The Environmental Protection Agency has issued a subpoena to Halliburton to obtain information on the chemical additives it uses in hydraulic fracturing fluids after Halliburton refused to voluntarily disclose the data.  EPA has asked nine oilfield service firms to disclose data on frac fluid, and only Halliburton refused to respond.

http://www.star-telegram.com/2010/11/09/2617267/epa-issues-subpoena-to-halliburton.html

Natural Gas In Storage Reaches Record

The U.S. Energy Information Administration has reported that natural gas in underground storage has reached 3.84 trillion cubic feet, a new record.  The EIA forecasts that gas production in the U.S. will reach 61.49 Bcf per day in 2010, the highest level since 1973.

Texas Crude Oil Production on the Rise

Texas oil production in September rose to 32.7 million barrels, an increase of 1.1 percent over September 2009. Oil production in Texas peaked at 3.4 million barrels per day in 1973, and declined to 979,000 barrels per day in 2003, where it has leveled off in recent years. Because of higher oil prices in relation to natural gas, companies have been switching from drilling gas wells to oil wells. Rigs drilling oil wells now account for 43% of the 1683 active rigs in the U.S., up from 33% a year ago.

Fort Worth City Council Increases Budget for Air Quality Study

Fort Worth will spend an additional $250,000, for a total of $900,000, on an air quality study to be conducted by Eastern Research Group, testing 75 percent of the wells in the city. ERG told the city council that 68 percent of the approximately 200 sites it has tested so far have shown detectable emissions that require further study.

http://www.star-telegram.com/2010/11/09/2619036/fort-worth-backs-extra-spending.html

Chesapeake Threatens Colleyville Council with Suit over Attempt to Regulate Pipelines

The Colleyville City Council has revised its drilling ordinance to give it authority over pipeline routes in the city limits. An attorney representing Texas Midstream Gas Services, a Chesapeake subsidiary, told the council that the ordinance conflicts with state and federal law governing pipeline safety issues. The issue of municipal regulation of oil and gas activity will be a topic for the upcoming Texas legislative session.

Dimock to Get Water Line

The village of Dimock in Pennsylvania has been much in the news since residents found their water wells charged with natural gas. Cabot Oil & Gas, which has been drilling wells in the area, has denied responsibility, but the Pennsylvania Department of Environmental Protection has concluded that Cabot's wells have charged the community's aquifer. Now Pennsylvania authorities have approved a project to construct a $12 million, six-mile municipal water line to supply drinking water to Dimock residents. The Pennsylvanid DEP has said it will sue Cabot if it refuses to pay for the water line.

 

EIA Forecast of Energy Prices

   The Energy Information Administration has forecasted that oil and natural gas prices will rise slightly through 2011. It predicts oil to average $84/bbl in 2001, and that the Henry Hub spot price for natural gas will average $4.98/MMBtu in 2011, an incurease of 6% from 2010.  EIA forecasts that US natural gas consumption will increase 3.8% from 2009 levels in 2010, then remain flat in 2011. It predicts total natural gas production to increase by 1.1 Bcf/d in 2010, an increase of 1.9%.

Devon Energy CEO Says Low Prices Will Mean Lower Rig Counts

  John Richels, President of Devon Energy, said that the natural gas rig count will begin to fall by mid-2011 if prices continue to remain at $5/MMBtu or less.  Richels said in a speech at the Houston Petroleum Club that drilling has remained high to hold leases bought in 2007 and 2008, and once that acreage is drilled enough to prevent lease expirations there will be little reason to continue drilling unless prices rise to the $6 to $7 range. 

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/HeadlineNews/NaturalGas/6297353/

Rig Count

  The US Baker Hughes rig count as of August 20 was 1,651 total rigs -- 655 oil and 985 gas. This is up 666 from a year ago, or 68%. The Texas rig count was 716, up 344 from last year's count of 372, or 92%. The state with the next highest rig count was Louisiana, with 184 rigs.

EOG Reports Results in Oil Window of Barnett Shale

   EOG Resources reports that it has had significant success with wells in the Eastern Barnett 'Combo Play.' EOG says it has about 150,000 net acres in the liquids-rich portion of the Barnett. It says its Settle #1H has an EUR of 260,000 bbls of oil, 412,000 bbls of natural gas liquids and 3 Bcf of natural gas based on the first three months of production. Its Richardson 3H in Cooke County came on production at 325 bbls/d, and in Montague County, its King 1H had initial rates of 344/bbls/d, while its Olden B-1H had initial rates of 323 bbls/d and 1/7 MMcf/d, and its Alamo B-6H came on at 500 bbls/d.

http://www.ogj.com/index/article-display/7019703212/articles/oil-gas-journal/drilling-production-2/2010/08/eastern-barnett_combo.html

EPA Postpones NY Meeting on Fracturing Study

  The Environmental Protection Agency has been holding public hearings across the country on its study of hydraulic fracturing, mandated by Congress. It was forced to postpone a hearing scheduled to take place on August 12 in the Syracuse convention center. Originally that hearing was to take place at Brighamton University, but was moved after Binghamton said it wanted $40,000 to cover costs of an overflow crowd expected to exceed 8,000 people. No new date has been set. The agency originally scheduled three four-hour sessions for the New York meeting in anticipation of the larger crowds.

http://yosemite.epa.gov/opa/admpress.nsf/0/EA536794EF7EFDFB8525777B00608470

Range Resources Plublishes Contents of Frac Fluids

  Range Resourcss has voluntarily published the chemicals used in its frac fluids in wells drilled in Pennsylvania. It has posted the information for three Marcellus wells on its website, and will publish the information for additional wells as they are drilled and completed.

Rosetta Resources Announces Results of Eagle Ford Shale Drilling

Rosetta Resources provided details of the results of its drilling in the Eagle Ford Shale in northern Webb County. In its Gates Ranch area, Rosetta has drilled 14 horizontal wells, and those wells have averaged 320 Bbl/d of condensate, 500 Bbl/d of natural gas liquids and 3.1 MMcf/d of gas for their first seven days of production. It said about 80% of the value from these wells is comprised of liquids. Wells costs are averaging $6.5-$7.5 million per well, with 13-15 frac stages per well. Rosetta expects to drill 30-35 Eagle Ford wells in 2010.

http://www.marketwatch.com/story/rosetta-resources-inc-announces-second-quarter-2010-results-provides-capital-program-update-and-announces-additional-asset-sales-2010-08-09?reflink=MW_news_stmp

EOG Announces Eagle Ford Plans

EOG Resources has announced that it plans to drill 111 Eagle Ford wells this year and 245 Eagle Ford wells in 2011. EOG has about 505,0000 acres mostly in the oil window of the play. EOG said its recent Eagle Ford wells have had initial completion rates of 1,033, 1,022 and 625 Bbls/d of oil and condensate, and that its first two wells in Wilson County came on at rates of 707 and 836 Bbls/d.

http://www.ogj.com/index/article-display/4882105480/articles/oil-gas-journal/exploration-development-2/2010/08/eog-to_quicken_its.html