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.

In March 2010, CONSOL Energy paid Dominion Resources $3.5 billion for 500,000 acres of Marcellus Shale gas leases, instantly tripling their lease holdings. CONSOL has continued to invest in Marcellus acreage and now has 750,000 acres under lease.  A map of the Marcellus holdings of CONSOL is shown in the article.

 Now, Noble Energy of Houston, TX, will buy a 50 percent interest in 663,350 net undeveloped acres and fund drilling and completion costs in a deal worth $3.4 billion over an eight-year period. This joint venture will concentrate on Indiana, Greene, Washington and Westmoreland counties in Pennsylvania as well as Barbour and Marshall counties in West Virginia. CONSOL plans to increase the number of drilling rigs its operating in the Marcellus region from four to eight this year, with further plans to increase that number to 12 rigs by 2013 and 16 rigs by 2015.

CONSOL will operate in the dry gas areas of the acreage, while Noble will operate the wet gas acreage. Wet gas contains ethane, propane and butane, in addition to the methane natural gas. Noble is expected to operate a portion of the dry gas area after the wet gas area has been fully developed.

Pennsylvania’s Marcellus Shale drilling industry is posting huge gains in production. The state’s 1,632 working Marcellus wells produced 432.5 billion cubic feet of natural gas through the first six months of the year, a 60 percent increase over the amount of gas reported for the last six months of 2010, according to the PA Department of Environmental Protection.  Bradford, Susquehanna and Tioga counties in northern Pennsylvania led with 260 billion cubic feet, The Times-Tribune of Scranton reported. A well drilled by EQT Production Co. in Greene County produced the most gas in the reporting period, 3 billion cubic feet.

Restoration plans were described on August 25^th in Morgantown for Dunkard Creek.  In September of 2009, some 22,000 fish and thousands of mussels (14 species) were decimated by the toxins from an extensive golden algae bloom. The algae may well have invaded from Texas or Oklahoma where it is rather common, in brackish waters.  The algae bloom was possible because of the high level of total dissolved solids resulting from mining operations, over 20,000 parts per million (or milligrams per liter).

CONSOL has now broken ground on a $200 million water treatment facility near Mannington (Marion county) to remove dissolved inorganic compounds (salts) from about 2500 gallons per minute of contaminated mine water from three area mines, namely Blacksville 2 (Monongalia county), Loveridge (Marion county), and Robinson Run (Harrison county).  The treated product water will go to the Hibbs Reservior, which drains into Buffalo Creek.  The residue filter cake and crystallized salts will be landfilled near the treatment plant.

The WV Division of Natural Resources (DNR) described a five year project to restore smallmouth bass and 30 inch muskies to Dunkard Creek.  Another project was described to restore six mussel species if possible, described as difficult and complex.   Mussels depend upon adequate water flow and a fish population as well as limits on contaminants.  Seasonal variations in flow rate and water removals for mining operations and Marcellus hydrofracking could be a serious challenge for the mussel restoration plan.  Northeast Natural Energy already has Marcellus drilling operations ongoing near Dunkard Creek.

David Wellman of WV-DNR reported that earlier instances of golden algae detection in other streams of West Virginia were probably in error, and that even Dunkard Creek has not shown the presence of the golden algae since November of 2009.  Apparently, golden algae are very difficult to detect and easily misidentified. Residual golden algae may well remain in Dunkard Creek. And, the theory still remains that the occurrence of the golden algae in Dunkard Creek arose from contaminated trucks working here in the Marcellus gas industry, from Texas or Oklahoma.

Information on the 2009 Dunkard Creek Fish Kill is available from the WV-Department of Environmental Protection. Shortly, the WV-DNR is to post their “Proposed Dunkard Creek Fish and Mussel Restoration Plan” on the following web-site and provide for a thirty day comment period:    Select the “Fishing” category at www.wvdnr.gov

J. Brett Harvey, CEO of CONSOL Energy, Inc., says the only disappointing thing about drilling gas in 2010 was the prices: an oversupplied market, partially the result of increased production from Marcellus Shale plays, has kept gas prices low.  Consequently, the company has trimmed its horizontal drilling fleet for the Marcellus Shale.  Until April 2011, CONSOL plans on running just three rigs– down from an average of five.

Harvey added that another of CONSOL’s goals for 2011 is to drill “a modest number” of exploratory wells in the Utica Shale after having initial success last year. The Utica Shale formation lies 3000 to 7000 feet below the Marcellus Shale.   Read the full article here…

For more information on current development of gas play in the Utica Shale, visit this article on geology.com