West Virginia is in competition with Ohio and Pennsylvania for an ethane cracker plant.  That appears to be driving legislation to encourage industry to “Pick me, Pick me.”   Per an AP report, The House suspended procedural rules on Monday to allow for an early vote on a bill to give big tax breaks on real estate and property taxes for 25 years to a cracker developer.  The bill was passed over to the Senate chamber.  To qualify a cracker plant must be cost at least $2 billion.  That leaves the announced Aither catalytic cracker plant out; it is expected to cost about a third that price.

Ken Ward reviewed the question of whether or not big tax breaks for a cracker were justified back on December 19th.  That post in Sustained Outrage referred to an analysis by the West Virginia Center for Budget and Policy that pointed out that industry already enjoys lower taxes in WV than in OH or PA.  Our real estate tax rate is much lower than our neighboring states of PA and OH.  Thus, even though WV imposes property taxes and our neighbors do not, the total tax burden in WV is  lower than that of  it’s neighbors.   The industry will be holding onto an estimated $500 million dollars in lost taxes that our counties will not receive to fund education and other county government functions if the bill is finalized.

Chesapeake Shifts Rigs to Wet Gas Areas

Recent news shows that the drilling activity is shifting to areas of wet gas i.e. natural gas that has higher percentages of the heavier hydrocarbons such as ethane, propane and butane.  Here is a map showing where the wet gas and dry gas are found in the Marcellus formation.  Most of the wet gas is in the northwest corner of PA and the far western part of WV.  But then there’s the Utica shale which is richer in wet gas.  Here is a map of the Utica shale. Those who follow the shale gas news are aware that Chesapeake Energy is excited about the Utica opportunity.  In fact today Chesapeake announced that drilling rigs will be shifted to areas of wet gas.  Per Paul Gough of the web- based Pittsburgh Business Times:

That means the eight Chesapeake rigs in southwestern Pennsylvania and northern West Virginia will be cut to six and redeployed to the liquids-rich areas here; the 18 in northeastern Pennsylvania will be downsized to 12 rigs.

As reported by Bloomberg News on January 4^th  the largest oil company in France has acquired a $2.32 billion holding in Ohio’s Utica shale region from Chesapeake Energy Corp. and EnerVest Ltd.  TOTAL will gain a 25 percent stake in 619,000 acres of Utica shale in eastern Ohio which is rich in liquids as well as natural gas. Chesapeake is reported to get $2.03 billion and EnerVest $290 million.

“Given current weakness of U.S. natural gas, now below $3, it is clear to us that TOTAL is being attracted by the liquid-rich portion of this acreage,” said Bertrand Hodee, head of oil and gas research at Kepler Capital Markets in Paris.

Chesapeake will remain the operator of the Utica venture. TOTAL will also help pay for infrastructure projects such as pipelines used for production. The Oklahoma City-based Chesapeake received $610 million in cash from the deal when it closed on December 30th and TOTAL will pay about $1.42 billion toward future drilling costs.

The Utica shale play is hot, hot, hot!  Deals are being announced like popcorn popping. On Tuesday, Chesapeake Energy chief executive Aubrey McClendon, who is particularly bullish on the Utica, said he expects to strike a joint venture in the play by the end of next month according to UpstreamOnline.com. Results from Chesapeake’s first horizontal well in the Utica have been encouraging, testing at 6.5 MMcfepd, per a report by the Oil and Gas Financial Journal.

It was noted in the Sept. 8 Reuters news report (see below) that “PDC paid about $1,700 per acre, while the Hess joint venture with CONSOL is valued at $6,000 per acre but there is some talk that recent prices have climbed as high as $10,000 per acre, analysts said.”

Sept. 7   (Reuters)  Petroleum Development Corporation (PDC) plans acquisition of 30,000 leasehold acres in Utica .

Sept. 7   (Reuters) Consol and Hess announce joint venture deal to explore Utica.

Sept. 8    (Reuters) Hess increases Utica position with purchase of Marquette Exploration.

Recall that Consol entered into a joint venture with Houston-based Noble Energy in mid-August in which Noble acquired a 50% interest in the Consol’s Marcellus holdings.   Consol had acquired 750,000 acres in Marcellus but needed money to develop them; partnerships are an answer to that problem.

The Wetzel Chronicle reported today that a press conference was held to announce that county commissioners from six Northern Panhandle counties had signed a joint resolution to bring an ethane cracker plant to that panhandle.  Commissioners from Ohio, Tyler, Wetzel, Marshall, Brooke and Hancock counties signed a joint resolution committing to “secure maximum investment for this region of West Virginia to the absolute best of their ability.”   Bayer Corp. has land and facilities at Institute, WV, near Charleston, and at New Martinsville in Wetzel County, and has previously expressed interest in participating in the development of a cracker plant.  The commissioners are concerned that a cracker plant would be built at Institute rather than in the panhandle where the gas is rich in ethane, the raw product converted to ethylene at a cracker plant.

From the Chronicle, “State Sen. Orphy Klempa, D-Ohio, later commended the commissioners for supporting the Northern Panhandle’s natural gas business. “We are in the area of the so-called ‘wet gas,’“ he said. “The Northern Panhandle should be rewarded for having the gas extracted here.” However, Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, hopes more than one cracker will come to the state. “ I hate to see this become some sort of north-south struggle,” he noted. “We have plenty of room for two or more crackers here.”

In other news from the Northern Panhandle, the Weirton Daily Times reported on July 20 that the Wellsburg City Council had voted on a first  reading to repeal the ban on fracking within the city limits and one mile beyond following the governor’s announcement of emergency rules going into effect.  Chesapeake Energy had threatened a legal challenge to the ban.

Scott Rotruck, Vice President for Corporate Development for Chesapeake Energy, has stated to FrackCheckWV that the pledge for band funding to the Wellsburg Middle School (Brooke Co.) will be honored conditional upon the Wellsburg City Council voting on the second reading on August 9 to repeal the ban.

A Chesapeake spokesperson stated that the cause of the well blowout in Bradford County appears to be a failure of a flange connection to the well head on the surface and there is no evidence of any problems with the well itself.  The well blowout occurred on April 19th and spewed thousands of gallons of frack water into a trout stream and tributary to the Susquehanna River,  Towanda Creek, for more than half a day before it was diverted.

The state Department of Environmental Protection sent a letter to Chesapeake on April 22 asking the company to provide information surrounding the incident, including the cause of the accident, the contents of the fracking fluid that spilled and an explanation for why Chesapeake took 12 hours to address the uncontrolled leak. The department said it has received and is reviewing Chesapeake’s response but is yet to make it public.

Chesapeake suspended fracking operations in Pennsylvania and West Virginia during the investigation of the cause.  Chesapeake has not set a date for the resumption of fracking in those states. Full story

A press relesase by Chesapeake says, “Chesapeake has voluntarily suspended all completion operations in Pennsylvania as we evaluate this incident.” Ken Ward reported in his Sustained Outrage blog “Rory Sweeney, a spokesman for Chesapeake, just clarified that Chesapeake has halted  “fracking” operations at all of its eastern operations,including in West Virginia, while it investigates the Pennsylvania incident.”

Thousands of gallons of toxic frack fluid flowed into a stream in Bradford County, Pa after a Chesapeake well blowout that began at 11:45 p.m. Tuesday.  It took till mid-afternoon Wednesday for Chesapeake’s crews to stop the fracturing fluid from running into a nearby tributary of Towanda Creek — a state-designated trout stock fishery that eventually flows into the Susquehanna River.  Seven families who live adjacent to the site in Leroy were evacuated as a precaution, and a local farmer was told to not let his cows drink surface water on his farm, officials said.

Read more: Post Gazette story, 4-21-11

When word about a deal to drill in Oglebay Park first appeared, many of those concerned about the impacts of Marcellus shale gas drilling were shocked that a beautiful park like Oglebay would allow such industrial development.  The subtitle of the article is “Park officials had objected to several points of plan.”

The article states:  “members of the Wheeling Park Commission quickly objected to several of Chesapeake’s drilling plans.”  The list of objections includes many of the issues listed in this website, and would be addressed by our legislative agenda.

The park commission’s comments questioned Chesapeake’s Oglebay drilling plans in the following areas:

> incomplete report on water use and transportation;

> incomplete report on gas distribution;

> incomplete report on coal seam depth;

> incomplelte report on the source of hydraulic fracturing, or fracking, water;

> questions on the size of the drill pad;

> questions regarding the disposal of hydraulic fracturing “fracking” fluid;

> questions regarding the construction of an impoundment pond;

> incomplete report on how the company will deal with accidental spills or runoff;

> incomplete report on how the firm will protect nearby streams from pollution;

> an additional comment regarding potential spills; and

> an adequate safety plan.