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Tuesday, February 26, 2013

GAS/OIL SLOWING DOWN? YOU DECIDE.

GAS/OIL SLOWING DOWN?
YOU DECIDE.

Song lyrics like “shin bone connected to the knee bone, knee bone connected to the thigh bone, thigh bone connected to the hip bone …” help make us aware that life happenings, discoveries, and on-going actions are like body parts, i.e. not singular in nature. The same is true for businesses. What they do now is a direct result of what was accomplished yesterday, and what they plan to do in the future.

Take note: Many individuals in this region signed leasing documents with companies like Penn Virginia and Guardian (& others) a few years ago, and felt very good about their transactions. The $$$ and lease clauses were fair enough. Now, some of these same people have received no royalty payments due to no production, plus their leases are about to expire or already have. What’s next? For those no longer holding leases and those whose leases will expire this year a new world is out there. The $$$, lease wording, environmental clauses, technology, and infrastructure tied into our sub-surface resources have all expanded. Nothing about Marcellus/Utica shale has been static … not its uses, not the infrastructure it demands, not the politics surrounding it, nor the ever-expanding technology that drives all facets of the industry forward.

SO WHAT’S SLOWING DOWN? … or is this an updated version of
THE CHICKEN or the EGG CONTROVERSY?

PA (and specifically this region) have not gone off the development and production grids of the O&G industry. Headlines in the FEBRUARY 6 edition of the Potter Leader-Enterprise announced the “ramp up” of shale gas activity in Potter. The county commissioners’ recent edition of Shale Gas Roundup which contains shale news pertinent to both McKean and Potter counties has done an admirable job informing the public of “the latest”.

Consider: PA has 37 gas-fired power plants in operation with more on the way. This gas isn’t coming from NY but some of it does (and will) surely go that way! PA’s DEP has 9 applications for more gas-fired generators in various stages of the approval process that would more than make up for the 13 coal-fired plants recently retired or on the soon-to-be-retired list. Cheap natural gas is fattening PA’s wallet in many ways. This writing has been on the wall for years, but how clear is our vision?

Companies long-involved in various enterprises connected to energy have been hopping around the Marcellus expanse for years. Coal giant Consol has bought into Dominion’s interstate gas pipeline in recent times. You may recall what a massive pipeline project that was for our area a decade ago … from Olean’s Rock City Hill, down across the 4-County region and beyond.

Millions Billions continue to be spent, but now the focus across our portion of PA is on gathering pipelines … those lines joining well sites to main lines. These are approaching our region from multiple directions. What are some of the firms that have stepped on board this train? UGI, Penn Virginia,… and giant NiSource are three. So what comes first … wells or pipelines? Possibly big pipelines following known geological strata, followed by test wells and fine-tuned seismic testing, months and years poring over scientific data and boots-to-the-ground work experience and … OH, HEAR IT ALL COMES AGAIN!!

What has been committed? UGI --- $65 M in Potter for now, Penn Virginia’s (PV) $$$ amt. unknown other than to say the company has signed lengthy distribution agreements with major drilling companies and/or their subsidiaries … e.g. Range Resources and Royal Dutch Shell. PV has also set a goal to connect to Tennessee Gas Pipeline 300. NiSource says it will be spending $1.8 B over the next 5 years to tie into all this with new line as well as up-grades current inventory.

Thus far 2013 has seen 98 fewer wells drilled in PA than in 2012 according to DEP’s records, but information on whether these are test wells, straight vertical wells or horizontal well is sketchy. How many drilling arms would the latter have?

The flurry of activity that was brightening the horizon for local businesses a couple years ago wasn’t a flash in the pan. It was representative of companies coming in and doing their homework. How ready were we then? Signing leases that ranged from $5 AC - $500 AC with clauses that sometimes took control of land for depths we knew little about. Just as all manner of Marcellus companies were doing their homework, many citizens across this region were doing their own by following news stories, informational blogs, and attending meetings for hands-on educational materials and lengthy Q & A sessions. 

Much is going on in our region and at its borders related to shale development . Whether we recognize it or not, we are on the cusp. The North American Prospect Exposition (NAPE) held the forepart of February in Houston, TX brought over 140 inquiries to the 10-man team sent to represent this region, and other PA counties. Now the chaff is being winnowed from the wheat in Wexford offices. Through exposure @ Texas’ global event the Marcellus/Utica shales have generated enough interest to make a second NAPE event necessary. In April NAPE East will be held in Pittsburgh.

Still think this industry is passing us by?

May-be that’s not what is standing still.

Janice L. Hancharick
Information gathered from O&G Journal publications, state records, Penn State’s MCOR, Energy in Depth, NGI’s Shale Daily, CX-Energy, and Potter’s “Shale Gas Round-up”.

9 comments :

Anonymous said...

Of course the industry is going to flourish in PA, but I think Potter County may very well get passed by. PGE and PV both drilled in Potter County and the results were marginal. These big companies will go after the low hanging fruit first, so to speak, and expanded production will not be seen here for many years. Nobody is buying mineral rights in this area at all. I know, b/c I am sitting on over 300 hundred acres of un-leased OGM's and haven't even talked to a land man in over 2 years.

Anonymous said...

Do you want a cookie or what?

Anonymous said...

So I ask why did my natural gas bill increase by over $60.00 last month??? Was it because they are not drilling as much or just greed.
It was a great day for the gas companies and now we pay higher cost local. Don't make sense to me
cause I now pay more for heating my home than ever before. I beleive the notice I received in the mail in dec. said they were going to raise our rates by 7 %.

Anonymous said...

No thanks, I have a glass of scotch ang a cigar.

Anonymous said...

It's not worth leasing now. Once the pipelines are completed and the gas is exported to China the price of gas both here and overseas will go through the roof! Don't sell yourself short!

Anonymous said...

Just wondering. Exploration having been done in this region through all matter of seismic (underground, fly-over, bumper-thumper, and satellite) AND test drilling, WHY is there such a rush to put in gathering lines, expand the inter-state lines, and make more connections?
Has anyone out there profited by upfront payments on leases that have expired?

Anonymous said...

Anon. 7:04 You are blessed for not having seen a landman! Dealing 1 on 1 w/gas company "rep", whether you have 300 AC or 3,000 that could be YOU vs.Penn VA, Shell,Range, etc.. What kind of odds are you thinking you'd have? Not knocking your intellect, just the logic of your initial response.
Steady income from gas/oil comes in royalties, and that is years away. But a fair and protective lease is NOW income. Based on this article and the informational sources behind it, action starts with those ready to step out.

Joe Bob the Redneck said...

My gas bill increased dramatically also, but I noticed that it isn't the cost of the gas itself that went up,it was the supply charge.

Anonymous said...

http://www.lockhaven.com/page/content.detail/id/543900/To--frack--or-not-to--frack---You-can-t-wash-away-fracking-s-effects.html?nav=5003