®
The
PIOGA press
The monthly newsletter of the Pennsylvania Independent Oil & Gas Association
March 2015 • Issue 59
Governor Wolf’s proposed budget
More for DEP, more for DCNR and a severance tax too
G
overnor Tom Wolf unveiled his proposed state budget on
March 3, a $33.8-billion spending plan that represents an
8.7-percent increase over the current budget that expires
June 30. The ambitious proposal features a $1-billion increase in
education spending, reduction of the corporate net income tax
from 9.99 percent to 5.99 percent, increase in the personal
income tax from 3.07 to 3.7 percent, increase in the state sales
tax from 6 to 6.6 percent and an expansion to cover more goods
and services, reduction in property taxes by about 50 percent,
and more taxes on tobacco products.
As described in the accompanying article, the new
Democratic governor also wants a severance tax on natural gas
of 5 percent plus 4.7 cents per mcf.
All in all, Wolf is proposing approximately $5 billion in new
taxes, or a combined increase in taxes of 16 percent.
“It’s time to do something different and work together to get
the state back on track,” Wolf said in his budget address. “Our
budget should be as bold and ambitious as Pennsylvania has
been for over 300 years.”
The reaction from leaders of the Republican-controlled
(Continues on page 2)
Details of of Wolf’s severance tax
A
ttempting to fulfill one of his campaign pledges,
Governor Tom Wolf is proposing a natural gas severance
tax of 5 percent plus 4.7 cents per mcf as part of his
budget package. The governor claims the tax would generate
approximately $1 billion annually, with most of that going
toward public education.
“Natural gas production is growing faster in Pennsylvania
than anywhere else in the country,” Wolf said in his March 3
budget address. “Yet, we are the only major producer of natural
gas that does not ask drillers to pay their fair share or provide a
return on our resources.”
Wolf rolled out his “Pennsylvania Education Reinvestment
Act” in mid-February with a statewide tour of schools, and at
Governor Wolf delivers his budget address to a joint session of
one point he warned that the alternative to his tax would be a
the General Assembly on March 3. (Associated Press photo)
drilling ban.
Said to be modeled after West
Virginia’s severance tax, Wolf’s plan
PIOGA at the Congressional Call-Up . . . . . . . 4
FracFocus updates announced. . . . . . . . . . . 30
would do away with the impact fee creHarrison v. Cabot decision . . . . . . . . . . . . . . . 6
LNG tax increase reversed . . . . . . . . . . . . . . 30
ated under Act 13 of 2012. The impact
Winter Meeting recap . . . . . . . . . . . . . . . . . . . 9
PIOGA Member News . . . . . . . . . . . . . . . . . 31
fee paid annually by operators of
Aggregation ruling favors industry . . . . . . . . 12
2014 activity statistics . . . . . . . . . . . . . . . . . . 32
unconventional gas wells last year genDEP revamps its advisory panels . . . . . . . . . 15
Unconventional production still climbing . . . . 32
erated $224.5 million, the majority of
PIOGA’s newest board member . . . . . . . . . . 18
Oil & Gas Trends . . . . . . . . . . . . . . . . . . . . . . 36
which went to communities and counFebruary Spud Report . . . . . . . . . . . . . . . . . 20
New members . . . . . . . . . . . . . . . . . . . . . . . . 38
ties where natural gas development is
FAA proposes drone regulations. . . . . . . . . . 23
Calendar of Events . . . . . . . . . . . . . . . . . . . . 39
occurring, with a share distributed
Insurance smooths pipeline kinks. . . . . . . . . 25
PIOGA contacts . . . . . . . . . . . . . . . . . . . . . . 39
among a variety of state agencies and
Taxing the oil and gas industry . . . . . . . . . . . 26
programs. The governor’s proposed
Accredited safety training . . . . . . . . . . . . . . . 29
(Continues on page 2)
Page 2
Budget: Continued from page 1
General Assembly could be summed up by comments from
Senate President Pro Tempore Joe Scarnati, who called it “a very
bad plan,” and from Speaker of the House Mike Turzai, who
described the proposal as “disrespectful of people’s hard-earned
tax dollars. He wants to take so much out of their pockets.”
The conservative Commonwealth Foundation said the impact
of Wolf’s budget would cost the average Pennsylvania family
$1,450 a year in what would be the largest tax hike in state history.
As far as agencies and programs related to the oil and gas
industry, the proposed budget for the Department of
Environmental Protection would increase by 3 percent to $147
million. An estimated $10 million would be earmarked from severance tax revenue for additional inspection and oversight of the
industry. Acting Secretary John Quigley said 50 additional
inspectors would be hired, spread across all DEP program areas.
The Department of Conservation and Natural Resources
would see a bump of 2.4 percent in funding to manage the 120
state parks and 2.2 million acres of state forest land. The total
DCNR budget would be $342.6 million, including $34 million
from the general fund.
DCNR initiatives under the proposed budget would include:
• A monitoring program to track, detect and report on the
impacts of shale gas development on state forest lands to continue to improve management practices.
• A major upgrade of the environmental review tool that identifies threatened and endangered species for protection.
• Improvements in seismic monitoring to enhance the sophis-
The PIOGA Press
tication of the department’s geological information.
• An auditing program to ensure the Commonwealth is adequately compensated for shale gas activities on DCNR lands.
The budget for the Department of Health includes $10,000 for
the creation of a registry to monitor the health of residents in
areas where shale-gas development is occurring.
Wolf is also proposing to issue $675 million in new bonds to
fund energy investments. Among other programs, the bond plan
includes $50 million to re-launch the Pennsylvania Sunshine
solar program, $50 million for energy efficiency grants, and $25
million to extend natural gas distribution lines to manufactures
and business parks. He projects the debt service on the bonds
will be $55 million a year, to be paid from the gas severance tax.
Many are predicting that partisan wrangling over the final
form of the budget will go well beyond the annual June 30 deadline for putting a new spending plan in place. House Republicans
prefer to raise new revenue by dismantling and selling the state
liquor store system before they consider tax hikes. Senate
Republicans want Wolf to reduce future pension payments for
government employees, and to make other retirement system
changes to save money before they look at new taxes, too. Wolf’s
budget does neither. ■
Severance tax: Continued from page 1
budget (see related article) includes $225 from the severance tax
to go to local communities to manage the impact of unconventional gas development.
Other provisions include exemptions for gas given away free,
gas from low-producing wells and wells brought back into production after not producing marketable volumes of gas.
Producers would be barred from deducting the tax from royalty
payments.
Based on statements made during the initial announcement of
the tax proposal, it would include conventional gas production.
Backing off from initial claims that the severance tax would
generate $1 billion annually, the governor’s budget shows the tax
taking effect January 1, 2016, and bringing in $165.7 million for
the remainder of the 2015-16 fiscal year. For the first full fiscal
year (2016-17), $765.3 million in severance tax revenue is projected, growing to $948.1 million by FY 2019-20.
“This is not a partisan idea. It’s a recognition that
Pennsylvanians are right now getting a bad deal. We deserve to
be fairly compensated for the use of our resources,” Wolf said,
obviously not understanding that natural gas is privately owned,
except under public lands where the state holds subsurface
rights.
“Threat of extortion”
Most disturbing was a remark made by Wolf in response to a
reporter’s question early into the governor’s “Education
Reinvestment” tour. Asked about working with the industry to
accept a severance tax, the governor responded that “the alternative is not really no tax, the alternative is no drilling, a ban as in
the case of New York.”
PIOGA’s Lou D’Amico said in response to the governor’s
remark: “This statement is tantamount to threat of extortion
against an industry that is responsible for creating and supporting
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hundreds of thousands of jobs in the Commonwealth, that is now
producing 20 percent of our nation’s natural gas and that is significantly contributing to our nation’s growing energy independence. Suggesting a potential ban of the very activity being touted
as the source of promised tax revenues does not belong in a tax
proposal announcement–unless, of course, the reference to a
drilling ban was intended as a warning to our industry.
”We have been through this before, when our industry fought
a severance tax proposed several years ago by former Governor
Ed Rendell and received undue attention and excessive delays
from certain state agencies” D’Amico continued. “Given the
return of several former Rendell-era leaders to this administration, we are prepared to face similar tactics in the months ahead,
but it will not deter us from opposing a tax that will put 250,000
jobs at risk or from fighting a moratorium on natural gas drilling
in Pennsylvania.”
Aside from Wolf’s proposal, early into the 2015-2016 session
legislators had either introduced or announced plans for about a
dozen different severance tax bills that would tax production at
rates ranging from 3.2 percent to 8 percent and direct the result-
The PIOGA Press
ing revenue at budget problems such as education and state pension obligations.
Get involved
PIOGA is working with oil and gas industry groups, the
Pennsylvania Chamber of Business and Industry and other supporters to deliver the message to elected officials that a severance
tax would be devastating to our industry and harmful to
Pennsylvania’s economy. We encourage you to reach out to your
state representative, senator and Governor Wolf to let them know
what this tax would mean to you and your business. We also ask
that you urge employees, industry colleagues, royalty owners,
family and local businesses to do the same.
If you don’t know how to contact your elected officials, visit
www.bipac.net/lookup.asp?g=PIOGA for an easy-to-use lookup
tool.
You can also check www.pioga.org for sample letters that you
and others can use. These letters should be available by the time
you read this.
Please take the time to become involved! ■
PIOGA and IPAA partner for another successful Congressional Call-Up
M
embers of PIOGA and the Independent Petroleum
Association of America joined together in Washington,
D.C., for the annual Congressional Call-Up on March
2-4 to talk about the challenges and opportunities for the oil and
gas industry in America. Fourteen PIOGA members joined over
100 oil and gas representatives from across the country in the
nation’s capital for our meetings with over 125 congressional
members.
The PIOGA group met with 19 congressmen and senators
from Pennsylvania, Maryland, Ohio and New York. Many of the
Pennsylvania legislators and their staff continue to be knowledgeable about the importance of oil and gas development to the
nation, but some still need to be educated about the complexities
of our industry as it relates to tax and capital reinvestments, the
benefits of allowing more exports, and the continued struggle for
our industry with overregulation from multiple state and federal
agencies. Another key area of discussion was the differences
between legacy conventional producers and shale producers, and
the important distinctions between their operations and impacts.
On the federal level, IPAA’s top legislative concerns for the
114th Congress are taxes, oversight of administrative actions and
job creation. Our members were able voice their concerns
regarding the negative effects that bad tax policy would have on
our industry. We explained that access to capital is critical in
constructing a business plan for independents. Higher oil and
natural gas taxes mean less money for capital budgets, which
means less drilling and production will take place and fewer jobs
will be created. We urged the legislators that we met with to keep
the current provisions in place.
We also discussed the need for more transparency with
Endangered Species Act listing decisions, limiting the amount of
taxpayer money spent on litigation, expanding the role for states,
and ensuring the ecosystems and the species that occupy them
are protected for future generations. We also discussed the
importance of crude oil exports and the market opportunities that
From left: Jim Kriebel of the Kriebel Companies, PIOGA’s Lou
D’Amico and Tom Bartos of ABARTA Energy in D.C.
exist to help even out the global market. Lastly, we were able to
convey the importance of independent producers to the workforce, supporting more than 2 million jobs in the United States.
Our industry continues to face significant challenges and misperceptions and it was critical for our independent producers to
get this face time with members of Congress to discuss the
potential impacts to their businesses and their ability to create
jobs, economic prosperity and affordable domestic energy for
America. We encourage all PIOGA members to get involved in
this political process and contact your local, state or federal representatives to keep our issues at the forefront.
PIOGA would like to extend a thank-you to our members
who attended our annual trip to D.C. to help us talk about the
issues: Jim and Shane Kriebel from Kriebel Companies;
Gary Slagel and Holly Christie, Steptoe & Johnson; Daria
Fish, Chief Oil & Gas; Patrick Marty, Anadarko; Burt
Waite, Moody & Associates; Kevin Gormly, Vorys, Sater,
Seymour and Pease; Tom Bartos, ABARTA Energy; and Carl
Carlson, Range Resources. ■
March
February
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2014
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Pennsylvania Supreme Court
decision makes operators
bear risk of challenged
lease’s expiration
S
hould an operator in a lawsuit challenging the validity of
its oil and gas lease have to risk having its lease expire
during that suit by not commencing operations? Nearly all
states whose courts have addressed this issue say, “No.” Those
states’ courts allow operators to extend or “equitably toll” their
challenged leases if they prevail in the suit. But not in
Pennsylvania, where the Supreme Court has rejected equitable
tolling in most situations and forced the operator to bear the risk
that its lease will expire during the suit challenging that lease.
On February 17, the Pennsylvania Supreme Court issued a
significant opinion in Harrison v. Cabot Oil & Gas Corp. in
which the court refused to apply equitable tolling principles.
Wayne and Mary Harrison filed suit in the United States District
Court for the Middle District of Pennsylvania by asserting a
declaratory judgment claim that they had been fraudulently
induced by Cabot to enter into an oil and gas lease. Cabot counterclaimed seeking its own declaratory judgment that in the event
the Harrisons’ claims failed, Cabot was entitled to an extension
of the lease’s primary term under equitable tolling principles for
so long as the suit was pending. In fashioning its claim for relief,
Cabot suggested that the lease term be extended for the period
commencing at the end of the litigation for so long as the case
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The PIOGA Press
was pending. For instance, if the case took
Author:
18 months from start to finish, Cabot advocated that the lease should extend for an
additional 18 months once the case ended.
Cabot justified its request to extend the
lease term by arguing that the Harrisons’
suit put a cloud on its lease and prevented it
from prudently taking steps to commence
operations—which would have tolled the
lease’s primary term.
Steven B.
The District Court ultimately granted
Silverman, Esq.
Cabot’s motion for summary
judgment, thereby disposing of
all of the Harrisons’ claims. The
trial court, however, denied
Cabot’s counterclaim, holding that Pennsylvania law did not support equitable tolling of a gas lease under these circumstances.
The trial court relied on the 1982 case of Derrickheim Company
v. Brown, 451 A.2d 477. In that case, the Superior Court held
that an operator who suspended operations until a title defect was
resolved was not entitled to equitable tolling. The Superior Court
held that the operator was not justified in ignoring the lease’s
express language regarding the lease expiring during a cessation
of operations. The trial court believed that the facts of the two
cases were significantly similar and that the reasoning of
Derrickheim controlled.
As a result of the District Court’s decision, Cabot appealed to
the United States Court of Appeals for the Third Circuit, which
then certified the case to the Pennsylvania Supreme Court on the
grounds that there was an issue “of first impression and of signif-
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Page 7
icant public importance, given that its resolution may affect a
large number of oil and gas leases in Pennsylvania.” Thus, in
somewhat unusual circumstances, the case went from a federal
appeals court straight to the Pennsylvania Supreme Court for its
determination.
In a unanimous decision, the Supreme Court upheld the trial
court’s decision not to toll the oil and gas lease. In so ruling, the
court noted that a party acts at its own peril if it refuses to perform its contractual duties. In this instance, the court held in
essence that Cabot should not have risked expiration of the lease
by failing to commence operations. The court also noted that
finding for Cabot would require the adoption of a “special
approach to repudiation pertaining to oil and gas leases,” which
it declined to do. The court acknowledged, but ultimately chose
to ignore that nearly every other state addressing this issue
adopted the equitable tolling rule Cabot advocated. Those other
states which have adopted the rule Cabot argued for include
Louisiana, Arkansas, Illinois, Texas and Montana.
The Supreme Court explained that the Harrisons’ attempt to
invalidate the lease did not justify “altering material provisions”
of the lease—i.e. the primary term. The court noted as an alternative approach operators are free to negotiate tolling agreements
in their leases, particularly since lease challenges are so prevalent. The court also noted that the result of the case may have
been different “where there is an affirmative repudiation of the
lease.” In other words, had the lessors prevented the operator
from entering the leasehold property to conduct operations, the
court may have been willing to toll the primary term of the lease.
The Harrison case is significant in several respects and its lessons should not be ignored. First, the case opens the door for
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lessors to try to “run out the clock” on leases by filing frivolous
lease litigation. Although operators might have claims against
lessors for bringing frivolous suits, it may tip the scales for
lessors in deciding whether to pursue litigation that may “be a
close call” where a lease is at risk for expiring during the suit.
Secondly, the case clearly imposes on operators both the obligation and the risk to continue operations even in the face of suits
challenging the validity of their leases. That risk is obviously
great where the operator faces the potential ruling that its lease is
invalid. Third, if a lessor files suit to challenge a lease’s validity
and simultaneously denies the operator the right to conduct operations, the operator must now consider filing for equitable relief
through an injunction before seeking to toll the lease term. In
other words, believe it or not, an operator whose lease is being
challenged may be in a better position to extend the term of its
lease if it is being prevented from operating by the lessor. Lastly,
and most importantly, the Harrison case makes clear that all
future leases entered into in Pennsylvania contain tolling provisions to extend the primary terms of those leases in the event of a
validity challenge by the lessor.
If you would like additional information about this important
development, contact the author at 412-253-8818 or ssilverman@babstcalland.com. ■
Page 8
The PIOGA Press
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March
February
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Page 9
Winter Meeting
in review
T
here’s no doubt about it: Our members and our industry
are facing difficult times due to low product prices.
Nevertheless, we were very pleased with the turnout for
our February 24-25 Winter Meeting at Seven Springs.
Things started off with sporting clays on Monday the 23rd,
and about three-dozen hardy souls showed up to shoot on a day
with single-digit temperatures but brilliant sunshine and cloudless blue skies. On Tuesday and Wednesday, well over 200 members and guests participated in the conference sessions, dinner
and the ever-popular Monte Carlo Night.
Conference report
The theme of the conference was “Clouds on the Horizon,”
and many of the conference presentations dealt not only with
approaching challenges but also issues confronting the industry
right now. Opening the conference, PIOGA President &
Executive Director Lou D’Amico thanked the members who take
the initiative to participate in the association’s activities, whether
through involvement in committees or supporting events such as
the Winter Meeting.
Kevin Moody, PIOGA vice president & general counsel, provided an overview of important legal activity and then led a
panel discussion on local ordinances with Kevin Garber and
Blaine Lucas of Babst Calland and Lisa McManus of
Pennsylvania General Energy. They discussed a pending federal
lawsuit against a “community bill of rights” ordinance in Grant
Township, Indiana County, that is preventing PGE from operating a legally permitted injection well and forcing the company to
bear the expense of trucking wastewater out of state. The consensus was that industry will prevail in this and other challenges to
similar ordinances. Looking at trends in local regulation, Lucas
said the tendency is toward placing geographic rather than environmental constraints on industry—limiting compressor stations
to industrial zones, conditional-use requirements that hold up
projects and increased setbacks that greatly limit where development may occur.
Next up was D’Amico, delivering an impassioned sermon on
the evils of a severance tax and
the need for
those in the
industry and
those who support the industry
to start telling
their story to the
General
Assembly and
the public (see
page 1).
“I hope you
Top: Lou D’Amico urges members of the
don’t just stand
industry to actively oppose a severance tax.
on the sidelines,”
Above: Enjoying Monte Carlo Night.
he cautioned.
“This issue is just too important to all of us.”
Ron Cusano of Schnader Harrison Segal & Lewis, along with
Roy Rakiewicz and Meghan Barber of ALL4, Inc., ran through
several federal and state emissions issues. Among them were
final amendments to the U.S. Environmental Protection Agency’s
Subpart OOOO New Source Performance Standards affecting
emissions from well completions, production, storage vessels
and other sources; the Obama administration’s recently
announced strategy for reducing methane emissions, an effort
PIOGA is attempting to become involved in as a representative
of small businesses; aggregation of emissions sources for New
Source Review permitting (see the related article in this issue);
and modifications by the state Department of Environmental
Protection to its General Plan Approval/General Operating
Permit, known as GP-5.
PIOGA Environmental Committee co-chairs Paul Hart of
Fluid Recovery Services and Ken Fleeman of ABARTA Energy
teamed up with the association’s regulatory consultant Scott
Roberts to provide a rundown of the many topics under the committee’s radar. For example, Roberts explained that as a result of
Page 10
sue-and-settle legal tactics by environmental activists, the U.S.
Fish & Wildlife Service is expanding its efforts regarding threatened and endangered species to include restrictions on “critical
habitat”—areas where a species doesn’t necessarily exist, but
could. Currently, PIOGA is working to counter a listing by the
agency of the northern long-eared
bat which could affect the industry’s operations.
Dan Weaver, PIOGA director of
public outreach, and Dave Mashek
of Meinert/Mashek
Communications offered perspective on how opponents of natural
gas development have changed tactics over the past several years. In a
session that generated a good
Ken Fleeman discussing
amount of dialogue among conferenvironmental issues.
ence participants, Mashek emphasized: “We need voices out there across the Commonwealth, supporting our industry.” He advised those in the industry to utilize
their employees and their families to help counter the negative
message of the “professional protesters” and tell how the industry is benefitting local communities. Weaver provided an update
on PIOGA’s energy education project, which is using a teachthe-teachers approach to create a generation of energy-aware citizens.
Dick Gmerek of Gmerek Government Relations kicked off the
Wednesday sessions with an insider’s view of what’s happening
in Harrisburg as a new Democratic administration begins butting
up against the staunchly conservative leadership setting the agenda for the GOP-controlled legislature. A natural gas severance
tax, he predicted, may become the litmus test for whether the
Republican leadership is able to achieve its goal of finding ways
of dealing with a massive budget deficit that don’t involve raising taxes. Anticipating a protracted budget process, rancorous
confirmation hearings in the Senate for Governor Wolf’s choice
to head DEP and a deluge of industry-related legislation, Gmerek
opined: “It’s going to be a long year.”
Legislative and regulatory activities in Washington were
addressed by Samantha McDonald of the Independent Petroleum
Association of America (IPAA). She touched on many of the
same federal issues of concern to PIOGA—such as the Obama
administration’s new methane-reduction strategy and endangered
species designations—and also explained that a major emphasis
of the IPAA involves clearing the way for crude oil exports and
increasing exports of liquefied natural gas.
Some of the event’s most positive news came during a session
on the benefits of the natural gas impact fee. Due to unforeseen
circumstances, the scheduled county commissioner panelists
were unable to attend; however, one sent a written statement that
was read aloud at the meeting and the other participated via conference call.
In his written statement, Doug McLinko, chairman of the
Bradford County Board of Commissioners, recounted the prosperity natural gas development brought to his county and said he
originally did not support the Act 13 impact fee because “we did
not want to make a decision that would hurt the industry that had
already done so much for us.” However, after much consideration, the county decided to opt in to the impact fee program, and
The PIOGA Press
the result has been very beneficial. The Act 13 money has
allowed the county to implement several new programs, including the Bradford County Infrastructure Bank that provides lowinterest loan financing to support infrastructure projects countywide.
McLinko stated that he strongly opposes efforts to impose a
severance tax, which he would be “incredibly irresponsible” and
would harm not only the industry but also the communities of
Bradford County.
Speaking by phone, Washington County Commissioner Diana
Irey Vaughan agreed that the impact fee has been very good for
local governments within her county, allowing officials to rehabilitate bridges, update emergency response capabilities and to
soon construct a new public safety facility. “It’s impossible to
overstate the importance of the funds,” she said. The commissioner also described drilling that has occurred on county-owned
property, noting that it has been a tremendous success with little
nuisance.
Joe Baran of Bertison-George provided detailed statistics on
how the impact fee revenue has been distributed, emphasizing
that the entire state—even areas where no unconventional gas
development has occurred—is benefitting. The message of the
widespread effect of the impact fee isn’t getting out, he said.
Baran analyzed taxes and activity surrounding states, arguing
that drilling has been suppressed
by a severance tax in West
Virginia—the state which Governor
Wolf says is the model for his proposed tax. Baran also took issue
with Wolf’s contention that a severance tax in Pennsylvania would
generate $1 billion annually.
RJR Safety’s Wayne Vanderhoof
wrapped up the conference programming with a presentation on
safety issues surrounding condenJoe Baran talks about the
sate, the highly flammable natural
impact fee.
gas liquids found in the “wet” gas
typical of southwest Pennsylvania.
He advised producers and service providers to identify where
condensate-related hazards exist in their operations, engineer out
as much of the risk as possible, establish safety procedures for
workers and provide employees with appropriate personal protective equipment.
Something new
A new feature to PIOGA’s major events was unveiled at Seven
Springs—the Product and Services Showcase. It’s an opportunity
for our service and supplier members to make presentations
highlighting their products to attendees. Offering Showcase presentations were AM Health and Safety, Community Bank, Fortis
Energy Services, Guttman Energy, MHF Services, PIC
Appalachia, Profire Energy and Tensar International. We will
continue to tweak this concept, but from reports we’ve received
the Showcase sessions were well-received.
Thanks to our attendees, speakers and sponsors for making
PIOGA’s 2015 Winter Meeting a success. We greatly appreciate
your support.
Next up on our schedule is the June 1 Summer Picnic and
Golf Outing at Wanango Golf Club in Reno. ■
March
February
2015
2014
Page 11
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Page 12
The PIOGA Press
Federal judge rules in favor of common sense in PA aggregation case
T
he U.S. District Court for the Middle District of
Pennsylvania relied on the plain meaning of the word
“adjacent” in a case challenging whether a producer’s
compressor stations should be grouped together for the purpose
of more stringent emissions permitting. Taking on the issue of
aggregation in Citizens for Pennsylvania’s Future v. Ultra
Resources, Inc., U.S. District Judge Robert D. Mariani ruled that
Ultra Resources’ eight compressor stations in Potter and Tioga
counties did not constitute a major emitting source of nitrogen
oxide (NOx) under the federal Clean Air Act or Pennsylvania’s
New Source Review (NSR) rules and that the Department of
Environmental Protection had properly permitted the facilities.
Any facility that emits—or has the potential to emit—100
tons per year (TPY) of a pollutant must be classified as a major
emitting source and is subject to a tougher permitting process
than facilities that fall below the 100 TPY threshold. While the
compressor stations at issue individually emit far below the 100
TPY threshold for NOx, in the aggregate they have the potential
to exceed the threshold.
Citizens for Pennsylvania’s Future, the environmental advocacy group more commonly known as PennFuture, filed suit in
2011, arguing that Ultra violated NSR requirements by constructing a major NOx source without the proper permit. Ultra
obtained separate DEP authorizations to use the General Plan
Approval/General Operating Permit known as GP-5 for each of
the compressor facilities. PennFuture contended that the stations
are functionally interrelated—even though the compressors are
not connected by a common pipeline, they all feed into the same
metering station—and should be considered a single facility with
the potential to emit in excess of the 100 TPY threshold.
Aggregation requires meeting a three-pronged test: Whether
the pollution sources are within the same industry, whether the
facilities are located on one or more adjacent or contiguous properties and whether they are under control of the same entity. The
federal Environmental Protection Agency has interpreted adjacent or contiguous property to include an analysis of “interdependence.”
The definitions of “adjacent” and “interdependent” are
open to interpretation, however,
and Pennsylvania
has not always
agreed with the
federal agency on
what they mean.
The EPA prefers
a functional interrelationship test
in making singlesource determinations, but in 2012
the U.S. Court of
Appeals for the
Sixth Circuit
One perspective on PennFuture’s case:
“It’s as if a Wal-Mart store were to be required to secure a
building permit for constructing 1.82 million square feet of floor
area because it happened to be building 10 supercenters of
182,000 square feet each in 10 nearby communities. Common
sense quickly tells us how absurd that would be. Nonetheless,
that’s exactly what PennFuture was asserting in this case; that,
because the facilities were part of the same distribution system, they should be considered a unit for permitting purposes,
even though they are miles apart (this case involved a roughly
30 square mile area of Potter and Tioga counties on which
were proposed eight compressor stations or about one per
four square miles).”
—Tom Shepstone, writing in the Natural Gas NOW blog
ruled in Summit Petroleum Corp. v. U.S. EPA ruled against the
EPA’s approach.
In the case involving Ultra Resources, Judge Mariani agreed
with the Sixth Circuit that “the plain meaning of ‘contiguous’
and ‘adjacent’ should control a determination of whether two or
more facilities should be aggregated.”
“Because a number of separate and unconnected parcels of
land on which the compressors are located would have to be
aggregated in order for the [NOx] emissions to reach the level of
a ‘major’ source, and some of these properties are separated by
several miles, the properties at issue cannot reasonably be considered…to be ‘adjacent,’ ” Mariani wrote in his decision. The
compressor stations are located several miles from one another,
and DEP generally considers facilities adjacent when within a
quarter-mile of each other.
The District Court judge found that the compressor stations
also are not interdependent, even though all deliver gas to the
same receipt point. Mariani wrote that DEP should consider
interdependency on a case-by-case basis.
“Despite this court’s finding that the plain meaning of ‘contiguous’ and ‘adjacent’ should control a determination of whether
two or more facilities should be aggregated, we decline to hold
that functional interrelatedness can never lead to, or contribute
to, a finding of contiguousness or adjacency,” he stated, adding
that the court “recognizes the risk that a strict application of the
plain meaning of the terms ‘adjacent’ and ‘contiguous’ may
allow oil and gas exploration and production companies to
manipulate or structure their wells and compressors in such a
technical way as to avoid being deemed a “major” source,
including by avoiding the aggregation of their wells and compressors.”
In addition to being a significant loss for PennFuture, the ruling could have implications beyond Pennsylvania. Since the
2012 Summit Petroleum ruling, the EPA has taken the position
that the more commonsense application of aggregation applies
only to emitters within the area covered by the Sixth Circuit—
essentially Kentucky, Michigan, Ohio and Tennessee. This latest
ruling may help to change that.
PIOGA member Babst Calland defended Ultra Petroleum in
the case. ■
March
February
2015
2014
Page 13
Page 14
The PIOGA Press
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Page 15
DEP reformulates TAB,
announces new conventional
producers’ advisory group
A
s the Department of Environmental Protection is poised
to release a second formal draft of its Chapter 78 rulemaking, the Wolf administration decided to appoint a
new slate members to DEP’s Oil and Gas Technical Advisory
Board (TAB) and announced the creation of a separate committee to offer input on rules affecting the conventional industry.
TAB was created under the Oil & Gas Act of 1984 (and reauthorized under Act 13 of 2012) to consult with DEP in the development of oil and gas regulations of a technical nature. The
board reviews and comments on draft regulations before they are
formally presented to the Environmental Quality Board to start
the rulemaking process. TAB’s five members are appointed by
the governor and must include three individuals who are a petroleum engineer, a petroleum geologist or an experienced drilling
representative of the oil and gas industry; one experienced mining engineer from the coal industry; and one geologist or petroleum engineer chosen from among three names submitted by the
Citizens Advisory Council.
The Wolf administration wanted to make its own mark on
TAB, calling for new members on the panel. The five members
had served between seven and 26 years, and had included three
PIOGA directors—Gary Slagel, Burt Waite and Sam Fragale.
At least one of those individuals wasn’t contacted to tell him
his service was no longer needed. Waite told the Pittsburgh PostGazette: “The official word is that they are reinvigorating [the
technical advisory board] with all new membership. If the
department was dissatisfied with the volunteer work that I was
doing, or the other members were doing, I don’t know.”
At the Citizens Advisory Council’s February 17 meeting, DEP
indicated TAB was being refocused to advise the agency on
unconventional oil and gas regulations and policy. On the same
day, DEP formally announced it was creating the Conventional
Oil and Gas Advisory Committee (COGAC). The new committee
will advise DEP about matters related to conventional oil and gas
extraction practices and regulations and will be structured similarly to TAB. A DEP news release said COGAC will “increase
transparency and communication about regulating the conventional oil and gas drilling industry.”
“Creating this advisory committee will increase dialogue
between DEP and the regulated community as well as broaden
the interests we hear from,” Acting DEP Secretary John Quigley
said. “Improving communication between all stake holders and
our department will foster stronger environmental safeguards in
the future.”
The Citizens Advisory Council provided three names to be
considered for TAB, per the requirements of the Oil & Gas Act,
and also offered three recommendations for COGAC. Both
groups will have to be populated by the time TAB meets on
March 20 and COGAC holds its first meeting on the 26th.
DEP intends present revised drafts of the Chapter 78,
Subchapter C regulations governing surface operations at the
March meetings. Apparently, TAB will be reviewing the portions
that apply to unconventional operations and COGAC will consider the version dealing with conventional oil and gas operations.
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The PIOGA Press
As part of the state budget package for the current fiscal year,
lawmakers directed DEP to split its oil and gas regulations into
conventional and unconventional sections.
The timing of the change in the makeup of TAB is “terrible,”
in that “we’re right in the middle of this regulatory process,”
Waite told the Post-Gazette. DEP began working on changes to
the Chapter 78 regulations in 2012, and the regulatory process is
mandated to be completed by 2016—a timetable that will require
the rulemaking to continue on a fast track.
Another conventional producers’ council?
As DEP was rejiggering its oil and gas advisors, the General
Assembly was advancing legislation to create the Pennsylvania
Grade Crude Development Advisory Council. Senate Bill 279
unanimously passed the Senate on February 18.
Sponsored by Senator Scott Hutchinson (R-Venango County),
SB 279 establishes a 17-member panel to:
• Examine and make recommendations on existing regulations
that impact the conventional oil and gas industry.
• Explore the development of a regulatory scheme that provides for environmental oversight and enforcement specifically
applicable to the conventional industry.
• Promote the long-term viability of the conventional industry.
• Assist with and comment on new DEP policies impacting
conventional producers.
• Review and comment on all proposed DEP technical regulations under the Oil & Gas Act.
• Facilitate cooperation and communication in support of the
conventional industry among government agencies and the academic and research community.
• Make recommendations on the promotion and development
ONE
CALL
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IT ALL.
of the conventional industry in Pennsylvania.
• Develop a plan to increase the production of Pennsylvania
Grade crude oil in an environmentally responsible way to more
adequately supply the refineries that depend on Penn Grade
crude.
• Develop a working group with DEP to explore and develop
an environmentally responsible and economically viable method
of managing produced water.
Two of the council’s members would be named by PIOGA,
and the association strongly supports the legislation.
A companion bill has been introduced in the House of
Representatives as HB 600, sponsored by Representative Kathy
Rapp (R-Warren County). Legislation creating the council had
received wide support among lawmakers last session, but time
ran out before the proposal could find its way to the governor’s
desk.
“The council created under this bill would work to promote
the conventional gas and oil industry and protect it from regulations intended solely for the Marcellus Shale gas extraction
industry,” said Hutchinson. “The panel would work with the DEP
to ensure that the differences between the operations are taken
into account as these regulations and laws are developed and
implemented.”
DEP’s announcement of its own conventional oil and gas
advisory panel came the same day that SB 279 received the
unanimous approval of the Senate Environmental Resource and
Energy Committee, and Hutchinson said he was pleased that the
department recognizes the need for the conventional industry’s
input.
“I am pleased to see the DEP is now moving in a similar
direction as I propose in Senate Bill 279, but I still believe it is
important that we codify this initiative in law,” Senator
Hutchinson said. “One significant difference is the Penn Grade
Crude Development Advisory Council is intended to promote the
conventional oil and gas industry in the Commonwealth…. This
industry is an important part of the regional economy. It should
be supported by the state, not stymied by excessive and unnecessary regulatory burdens.” ■
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Page 18
Meet your newest PIOGA board member
Rich Adams, Chief Oil & Gas
R
ich Adams had a distinguished 35-year career at the
Northcentral Regional office of the Pennsylvania
Department of Environmental Protection in Williamsport.
Throughout his career, he specialized in water quality and watershed protection, providing program management for environmental permitting and projects including industrial and mine
drainage treatment plants, and stream and wetland restoration.
He was also instrumental in developing DEP’s policies and modeling protocols for the special protection programs on high quality / exceptional value watersheds. In his last two years with DEP,
he was tasked with managing the water resource elements of
Marcellus Shale development.
After retiring from state government in 2008, he consulted
with the Susquehanna River Basin Commission on projects relating to water usage and Marcellus development. In 2009, Adams
was hired by Chief Oil & Gas as a senior regulatory advisor for
water resources. Over the past five years, he has held positions of
increasing responsibility and is currently Director of EHS
Programs. His team of nine Chief employees includes environmental specialists, engineers, and health and safety coordinators.
He has been a member of the Northcentral Pennsylvania
Conservancy and is an active member of PIOGA, serving on the
Environmental Committee and now on the Board of Directors.
Professional achievements include the DEP Secretary’s Award
for Excellence and the Governor’s Award for Excellence, as well
as being a certified professional engineer.
As a PIOGA board member Adams hopes to help facilitate
communication and provide additional coordination with DEP.
The PIOGA Press
He would also like to
highlight industry standards for environmental
diligence and showcase
the successes that have
resulted in industry innovations and best management practices.
“I like to think of
myself as a practical environmentalist,” he says. “I
look for solutions to serve
the industry, and at DEP I
enjoyed providing compliance assistance and training to communities and
companies. We all need clean air, clean water, sustainable land
practices and we all need energy. We must protect the environment while we are producing energy needed for our country—to
heat our homes, to produce and transport the variety of manufactured goods we use every day, and to strive towards energy independence. ”
Adams, originally from Aliquippa, holds a bachelor of science
degree in chemical engineering from Bucknell University and a
master’s in chemical engineering with a minor in environmental
studies from Clarkson University. He enjoys the outdoors, especially fishing and golfing. He resides in Williamsport and has
been married to his wife, Sandy, for 35 years. Together they have
two children, Cynthia Adams, MD, a pediatrician at Boston’s
Children’s Hospital and Richard Adams, EIT, a civil and environmental engineer in New York. ■
March
February
2015
2014
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Page 20
The PIOGA Press
available at www.portal.state.pa.us/portal/server.pt/community/
oil_and_gas_reports/20297.
The table is sorted by operator and lists the total wells reported as drilled last month. Spud is the date drilling began at a well
site. The API number is the drilling permit number issued to the
well operator. An asterisk (*) after the API number indicates an
unconventional well.
Spud Report:
February
The data show below comes from the Department of
Environmental Protection. A variety of interactive reports are
OPERATOR
WELLS SPUD
A&S Prod Inc
Bearcat Oil Co LLC
Whilton Brooks A
Cabot Oil & Gas Corp
Catalyst Energy Inc
2 2/3/15
2/19/15
1 2/24/15
3 2/4/15
2/22/15
2/26/15
4 2/16/15
2/16/15
2/16/15
2/16/15
9 2/2/15
2/4/15
2/9/15
2/12/15
2/17/15
API #
COUNTY
MUNICIPALITY
053-30638
053-30639
123-47582
123-47548
123-47547
123-47546
115-21915*
115-21916*
115-21919*
115-21920*
121-45722
121-45721
121-45793
121-45792
121-45794
Forest
Forest
Warren
Warren
Warren
Warren
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Venango
Venango
Venango
Venango
Venango
Hickory Twp
Hickory Twp
Mead Twp
Mead Twp
Mead Twp
Mead Twp
Bridgewater Twp
Bridgewater Twp
Bridgewater Twp
Bridgewater Twp
Cranberry Twp
Cranberry Twp
Cranberry Twp
Cranberry Twp
Cranberry Twp
OPERATOR
WELLS SPUD
Chief Oil & Gas LLC
EQT Production Co
Gas & Oil Mgmt Assoc Inc
Hilcorp Energy Co
1
1
1
2
Howard Drilling Inc
Northeast Natural Energy LLC
PA Gen Energy Co LLC
PVE Oil Corp Inc
1
1
1
4
2/9/15
2/12/15
2/17/15
2/25/15
2/3/15
2/26/15
2/11/15
2/12/15
2/12/15
2/10/15
2/24/15
2/18/15
2/11/15
2/20/15
2/26/15
API #
COUNTY
MUNICIPALITY
123-47675
123-47676
123-47677
123-47673
015-23172*
059-26741*
123-47660
085-24724*
085-24734*
083-56589
031-25657*
105-21845*
083-56701
083-56703
083-56704
Warren
Warren
Warren
Warren
Bradford
Greene
Warren
Mercer
Mercer
McKean
Clarion
Potter
McKean
McKean
McKean
Brokenstraw Twp
Brokenstraw Twp
Brokenstraw Twp
Brokenstraw Twp
Overton Twp
Morris Twp
Pleasant Twp
Shenango Twp
Shenango Twp
Wetmore Twp
Toby Twp
Keating Twp
Sergeant Twp
Sergeant Twp
Sergeant Twp
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OPERATOR
Page 21
WELLS SPUD
Range Resources Appalachia
7
Rice Drilling B LLC
8
Southwestern Energy Prod Co 10
SWEPI LP
3
Sylvan Energy LLC
2
Talisman Energy USA Inc
3
Trimont Energy LLC
4
Victory Prod Co LLC
Xite Energy Inc
1
3
2/4/15
2/23/15
2/23/15
2/23/15
2/23/15
2/19/15
2/19/15
2/19/15
2/9/15
2/9/15
2/9/15
2/9/15
2/21/15
2/21/15
2/21/15
2/21/15
2/1/15
2/1/15
2/1/15
2/4/15
2/4/15
2/4/15
2/12/15
2/12/15
2/11/15
2/11/15
2/11/15
2/13/15
2/14/15
2/12/15
2/19/15
2/5/15
2/5/15
2/5/15
2/6/15
2/23/15
2/24/15
2/25/15
2/17/15
2/4/15
2/22/15
2/26/15
API #
COUNTY
MUNICIPALITY
083-56672
125-27583*
125-27584*
125-27585*
125-27586*
125-27581*
125-27400*
125-27582*
125-27561*
125-27562*
125-27563*
125-27564*
125-27568*
125-27569*
125-27570*
125-27571*
115-21445*
115-21927*
115-21928*
115-21929*
115-21931*
115-21930*
115-21423*
115-21424*
125-27385*
125-27379*
117-21760*
117-21764*
117-21765*
121-45588
121-45583
015-21468*
015-21470*
015-23179*
121-45781
121-45859
121-45783
121-45860
083-56654
121-45650
121-45654
019-22386*
McKean
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Washington
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Susquehanna
Washington
Washington
Tioga
Tioga
Tioga
Venango
Venango
Bradford
Bradford
Bradford
Venango
Venango
Venango
Venango
McKean
Venango
Venango
Butler
Wetmore Twp
Cross Creek Twp
Cross Creek Twp
Cross Creek Twp
Cross Creek Twp
Robinson Twp
Robinson Twp
Robinson Twp
N Bethlehem Twp
N Bethlehem Twp
N Bethlehem Twp
N Bethlehem Twp
S Strabane Twp
S Strabane Twp
S Strabane Twp
S Strabane Twp
Jackson Twp
Jackson Twp
Jackson Twp
New Milford Twp
New Milford Twp
New Milford Twp
New Milford Twp
New Milford Twp
Donegal Twp
Donegal Twp
Rutland Twp
Sullivan Twp
Sullivan Twp
Allegheny Twp
Allegheny Twp
Pike Twp
Pike Twp
Pike Twp
Allegheny Twp
Allegheny Twp
Allegheny Twp
Allegheny Twp
Bradford Twp
Cornplanter Twp
Cornplanter Twp
Summit Twp
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The PIOGA Press
Groundwater & Environmental Professionals Since 1891
Oil
Oil and
and Natural
Natural Gas
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Page 23
FAA proposes regulations that
would allow use of drones in oil
and gas operations, but do they
go far enough?
T
hrough recent advances in technology, unmanned aircraft
systems (UAS) are easier to operate and capable of performing many functions in various commercial sectors. In
light of these capabilities, a variety of commercial entities,
including those in the oil and gas sector, have recently sought
approval from the Federal Aviation Administration (FAA) to use
these devices as part of their commercial operations.
The FAA’s current policy is that no one may use UAS in
activities related to a commercial purpose, unless specifically
authorized by the agency. However, the FAA issued a notice of
proposed rulemaking on February 23 setting forth its long-awaited proposal for how to begin allowing the use of unmanned aircraft by businesses without case-by-case approvals from the
agency. (See 80 Fed. Reg. 9544, Feb. 23, 2015.) Although the
regulations are a step in the right direction, some limitations may
prove insufficient for certain stakeholders in the oil and gas
patches in Pennsylvania and across the country that seek to maximize the use of these devices as part of day-to-day operations.
Background
UAS, as they are referred to by the FAA, are also known as
remotely piloted aircraft (RPA) or unmanned aerial vehicles
(UAV). In the mainstream news and popular
culture, these devices are often referred to
as “drones.” They are aircraft—usually
small planes or helicopters—that do not
have an on-board pilot, but are instead operated remotely. These devices can range from
very small (less than 5 pounds) to very large
(e.g., UAS used in military operations), and
operate at different speeds and altitudes.
They can be equipped with cameras, video
transmission devices and a variety of sensor
packages that can perform, for instance, air,
biological, chemical or radioactive sampling, or geophysical surveying.
Authors:
Thomas R.
DeCesar
The use of drones in oil and gas
operations
The demand by oil and gas companies
for using unmanned aircraft continues to
rise. Potential industry uses include pipeline
and right-of-way monitoring/investigation,
George A.
project siting and surveying, environmental
Bibikos
monitoring through video feed or
chemical sensors, and drill-site inspection. If necessary, unmanned aircraft
can also help provide situational awareness for first responders.
In fact, the first two commercial unmanned aircraft operations
approved by the FAA were used for surveying and pipeline monitoring related to oil drilling operations in Alaska. In addition,
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the FAA has granted authority to two other companies in the oil
and gas industry to perform flare stack monitoring and aerial
monitoring of operations for safety purposes. Several other
requests for specific authorization within the oil and gas industry
are pending.
Proposed regulations
As noted above, the use of drones is prohibited unless the
FAA grants an exception under Section 333 of the Modernization
and Reform Act of 2012 to authorize the use of UAS for commercial purposes. Specific authority to use unmanned aircraft for
commercial purposes under Section 333 has, to date, been granted to fewer than 40 companies across the country.
In response to the increasing demand for the ability to use
UAS in commercial operations, the FAA has proposed regulations that would authorize the widespread use of UAS weighing
55 pounds or less without requiring specific approval from the
FAA. There are some notable, safety-based limitations on the use
of unmanned aircraft under the FAA’s proposal: operations
would be restricted to daylight, within the operator’s visual line
of sight and to a maximum altitude of 500 feet. While flights
near structures are permitted, flights over people generally are
not. The FAA will also require unmanned aircraft operators to
pass an aeronautical knowledge test and obtain a UAS license.
Owners of unmanned aircraft must register their device with the
FAA.
The upside and a potential downside
Overall, the proposed rules are generally beneficial to oil and
gas companies, which would be able to use unmanned aircraft in
The PIOGA Press
day-to-day operations without specific permission from the FAA.
As currently proposed, the rules would allow for efficient aerial
surveying and mapping of project sites, providing companies
with useful planning and safety information that may not otherwise be available. Given the rapid pace of innovation in the UAS
field, the future should provide even more advances for companies to utilize.
One limitation imposed by the FAA that will likely have a
significant effect on some potential oil and gas-related operations
is the requirement that flights must take place within the operator’s visual line of sight. For some operations, particularly
pipeline or right-of-way monitoring, this limitation may be crucial. These operations would typically entail programming an
unmanned aircraft to fly a pre-set route, or using a streaming
video feed so the operator could guide the aircraft from a remote
location. The utility of these operations diminishes, if not completely disappears, when an operator must remain within sight of
the aircraft. The agency’s proposal in this regard may fall short
by not providing flexibility where a company can show that its
operations outside the line of sight would be just as safe as operations with the operator present.
Conclusion
In sum, the overall reaction to the FAA’s proposed rules is
tempered optimism. The agency’s proposal would certainly be
helpful to many oil and gas companies interested in using this
technology.
Unfortunately, the restrictions suggested by the FAA may
limit the extent of UAS usage within the industry unless changes
are made and the FAA takes a more flexible approach in deter-
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mining which unmanned aircraft operations are safe.
In addition, oil and gas companies should understand that the
rulemaking process may take a long time to complete. Until the
FAA’s rules are finalized—a process some expect to take two or
more years—receiving specific authority from the FAA continues to be the only way for companies to use unmanned aircraft
under current FAA guidelines. Stakeholders wishing to utilize
UAS in their operations may wish to consider engaging counsel
to apply for specific approvals from the FAA in the interim.
Finally, the agency is requesting comments on the issues
involved with the proposed rule, and companies interested in
using these devices should strongly consider letting the FAA
know how the proposed rules could be improved.
Smoothing pipeline kinks
By Adrianne Vigueras, Vice President
ECBM Brokerage
ipelines are the arteries of the natural gas industry. The
necessity to move product efficiently is paramount to a
profitable industry. Having said that, pipeline debates have
begun among residents as well as environmentalists across
Pennsylvania as to the pros and cons of a pipeline in “my backyard.”
All of these debates are in the court of public opinion, and
pipeline companies need tools to address the concerns of the residents whose land is being utilized. Insurance has sometimes
been used to quell the fear of residents that in the event of a leak
the pipeline company will not be able to make reparation.
P
Page 25
Given the expected time frame of more than two years until
implementation, oil and gas companies with an immediate interest in deploying UAS applications within the proposed rule’s
limitations might also consider comments to the agency urging
the quick adoption of the rules, even provisionally—especially
since the proposed rules are not terribly complex or controversial. Industry stakeholders would be well served to consider
engaging the FAA in the regulatory process and offering comments on the proposed regulations. ■
Martin L. Stern, Edward J. Fishman and James B. Insco II also
contributed to this article as part of K&L Gates’ unmanned aircraft team.
policy can also include environmental risks as well as business
interruption for clients if limited to one or two. In this way, the
pipeline company can more easily project financial risk.
Residents along the pipeline will be more comfortable with the
fact that if there is a breach the company will be able to pay for
the quick repair. They do not have to worry about a pipeline
company not having the assets to respond quickly.
By smoothing out these kinks, pipelines will have a bit easier
time convincing residents to allow them to go through their property. It will also allow them to better project financial risk.
For more information on this subject contact the author at
610-664-8299 ext. 1335. ■
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third-party only and do not cover the pipeline company for damage to its pipe. This does, however give the company some credibility toward having a good business ethic and taking responsibility for any accidents. This helps in the court of public opinion.
To protect the pipeline company from the financial burden of
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The PIOGA Press
Death and taxes
Taxing the oil and gas industry in
Pennsylvania and elsewhere
Commentary
T
has an “impact fee” on every well drilled for gas in the
Marcellus Shale formation and New York has a real property tax
which allows for ad valorem taxes on the value of natural gas
produced. In both of these cases, the revenue goes back to the
local community to support schools, fire departments and other
services. As of late 2014, the Maryland legislature was considering both fees and severance taxes on natural gas produced from
the Marcellus Shale.
Taxes and fees
Thirty-five states have enacted taxes or fees on oil and gas
production and three of these states have taxes on oil and gas
even though they don’t have any production (North Carolina,
Idaho and Wisconsin).
Maryland, New York and Pennsylvania are the only oil and
gas producers without a severance tax. However, Pennsylvania
Pennsylvania
Pennsylvania’s new governor, Thomas Wolf, is on record for a
natural gas severance tax. Even as the downturn in the oil and
gas industry hit the Commonwealth, he was quoted as saying “I
want that industry to see a tax.” (Editor’s note: See this issue’s
page 1 article about Wolf’s proposed tax.)
New York has effectively eliminated the tax problem by shutting down the industry via politically motivated bureaucratic
studies. Several years ago, just as Marcellus Shale development
was taking off in Pennsylvania and no development had begun in
New York, several New York legislators were calling for a tax on
natural gas production even though it hadn’t started—a sure way
to turn away potential operators and significant revenue that taxpayers would have appreciated.
Finding and producing natural gas and oil is an expensive
venture. Natural resources don’t enter commerce at no cost. Each
operating company has capital costs, operating costs (fixed O&M
By David Palmerton
GZA GeoEnvironmental, Inc.
he quote, “Nothing can be said to be certain except for
death and taxes,” is commonly attributed to Benjamin
Franklin writing in 1789 about our new constitution. Just
a few years after Franklin’s quote, it was protesters in Western
Pennsylvania who rebelled against an excise tax on whiskey
(Whiskey Rebellion, 1794); this is the same state that seeks to
tax oil and gas production 221 years later.
Although death may be peeking over the horizon for some oil
and gas producers in Pennsylvania, taxes certainly are for most.
Thirty-three states produced oil or gas in 2014. The top five
natural gas producers were Texas, Pennsylvania, Louisiana,
Oklahoma and Wyoming. The top five oil producers were Texas,
North Dakota, California, Alaska, and Oklahoma (Energy
Information Agency, 2015).
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2014
Source: www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/researchnews/research/publications/global-petroleum-survey-2014.pdf
Global Petroleum Survey provides independent evidence as to
how particular jurisdictions compare and where oil and gas companies are likely to not invest.
Fraser’s 2014 survey shows that Pennsylvania dropped one
place from 17 to 18, with Oklahoma being the most attractive
U.S. jurisdiction at number one. Moving closer to New York and
the bottom of the list is not a positive for Pennsylvania’s economy.
EN E
RG Y S
ER
CE
S
EXP
SS
VI
RE
and variable O&M), and other costs such as royalties to
landowners, royalties to other owners, depletion, depreciation and taxes.
The use of revenue generated by severance taxes (or
fees) varies by state, but most states deposit at least
some portion of the revenue in the general fund. As
mentioned, states such Pennsylvania contribute a large
portion of the revenue collected to local counties or
municipalities, typically according the need (e.g.
municipalities affected by drilling and production operations). In other states, the taxes or fees go to the general fund, often not offsetting any local oil and gas
effects.
Some argue that severance taxes will limit production or cause operators to seek more favorable states for
development. There may be some truth to this for
some, but generally operators are not going to pick up
and leave unless the burden is much greater than in
other states. However, the tax burden is especially critical when the cost to produce nears the sale price and
the margin is small. Of the 375 conventional oil and
gas operators here in Pennsylvania, about 350 can be
classified as small to medium size and 245 of them are producing from fewer than 50 wells, mostly oil. About 165 are producing from fewer than 10 wells—family-owned mom and pop type
operations. Only 14 conventional gas wells were drilled in
Pennsylvania in 2014.
Designed to identify states, provinces and other geographic
regions that have the greatest barriers to investment in oil and
gas exploration and production, the Fraser Institute’s 2014
Page 27
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The PIOGA Press
Source: www.ifo.state.pa.us/download.cfm?file=/resources/PDF/SR2014-02.pdf
According to Pennsylvania’s Independent Fiscal Office,
Pennsylvania has the lowest total effective tax rate (including
state severance and certain local taxes) among the comparison
states.
So far, the Pennsylvania impact fee has brought in $630 million ($204 million in 2011, $202 million during 2012 and $224
million in 2013). The Public Utility Commission expects more
Serving the Oil & Gas Industry
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than $200 million more
to be collected for 2014.
This is in addition to
the $34.7 billion the oil
and gas industry has contributed to Pennsylvania’s
economy (according to an
American Petroleum
Institute study) and the
$2 billion in state taxes
(according to the state
Department of Revenue).
Greenpeace has said
that the oil and gas supporters have an agenda to
“Cut taxes to starve and
shrink government, to
keep it ineffective.” It’s
difficult to see how taking billions of dollars out
of the economy would be
a positive for government
or the people of the state.
The Pennsylvania Budget and Policy Center says a severance
tax on natural gas, which every other major gas-producing state
already has in place, will generate significantly more revenue for
Pennsylvania than the current impact fee, even at lower gas
prices (biz570.com/energy/pbpc-severance-tax-will-bring-inmany-times-the-revenue-of-impact-fee-1.1810476).
According to a May 2014 policy memo by Elizabeth Stelle of
the Commonwealth Foundation:
A severance tax doesn’t solve the problems of runaway welfare costs, which are growing faster than
state revenue, or our $50 billion pension liability
which would require an additional $3 billion in payments each year for the next 30 years. Pennsylvania
already maintains the 10th highest state and local
tax burden, which hurts our ability to compete. If
lawmakers do not address these cost drivers, a severance tax will be just one of many tax hikes necessary
to prop up spending as the state’s economy languishes.
Another danger of a severance tax is divorcing the
revenue from local impacts, creating a slush fund
for unrelated programs [emphasis added]. The
impact fee requires 60 percent of the revenue to stay
in the local communities facing impacts from
resource extraction. Transitioning to a severance tax
removes the very rationale for the impact fee: to
allow local governments to deal with costs related to
the impact of drilling.
(Source: www.commonwealthfoundation.org/
research/detail/dangers-of-a-severance-tax)
The Pennsylvania oil and gas industry isn’t dead yet, but as
the industry slows and the economics become less favorable,
taxes can only hurt, possibly bringing the industry that much
closer to the certainty of death and taxes. ■
March 2015
SafeLand USA – AWARE Rig
Pass program is fully accredited
as SafeLand USA
By Wayne Vanderhoof, CSP
and Jackie Barkus, ASHM
RJR Safety Inc.
afeLand USA is a curriculum of 24 specific topics that are
required to be included in training for accreditation as a
SafeLand USA program. The accreditation can be through
any one of the three accrediting bodies—the International
Association of Drilling Contractors (IADC), PEC or Energy
Training Council (ETC).
Though there are minor differences in the accrediting bodies’
training program presentation and course layout, all of the programs present the same 24 specific topics, just in a different
order. All training programs are required to have testing of 100
questions. The testing may be broken into a different number of
modules or tests
depending on the
accrediting bodies. The passing
score is 80 percent.
In the
Appalachian
Basin, the two
main training
S
Page 29
Safety Committee Corner
programs by the accrediting bodies are IADC Rig Pass and PEC
Basic Safety Orientation, both of which are accredited as
SafeLand USA training.
SafeLand USA – AWARE Rig Pass is accredited by IADC
Rig Pass as an extension of the IADC Rig Pass training program.
It has been accredited since January 2014. The AWARE Rig Pass
training program provides instruction on the required 24 topics
of SafeLand USA and has the required testing totaling 100 questions with the required passing score of 80 percent. It was developed through a partnership with the oil and gas industry in the
Appalachian Basin.
The SafeLand USA – AWARE Rig Pass program is fully
accredited as SafeLand USA and will be accepted by whoever
requires SafeLand USA as a basic safety orientation.
References: www.safelandusa.org, www.iadc.org. ■
Page 30
The PIOGA Press
New updates increase transparency of FracFocus
By Varun Krovi
Energy In Depth
he Ground Water Protection Council and the Interstate Oil
and Gas Compact Commission have announced improvements to FracFocus.org—the national database which discloses the chemicals used in the hydraulic fracturing process.
These updates will maximize transparency, providing the public
with even easier access to information.
The upcoming improvements will:
• Reduce the number of human errors in disclosures
• Expand the public’s ability to search records
• Provide public extraction of data in a “machine readable”
format
• Update educational information on chemical use, oil and gas
production, and potential environmental impacts
The latest improvements to the website include installing a
new self-checking feature that will help companies detect and
correct possible errors before the information is entered into the
database. Further, the search engine of the website has been
improved, with the addition of new menus and new search terms,
such as the “disclosure submission date.”
Finally, large amounts of data from the website will now be
able to be extracted through “machine readable” data sets, greatly enhancing the ability of educational institutions, organizations
and the public to learn more about the hydraulic fracturing
process.
Currently, FracFocus has over 93,125 wells registered. As
T
we’ve noted before, President Obama’s former top energy and
climate adviser, Heather Zichal, expressed the White House’s
strong support for FracFocus.org: “As an administration, we
believe that FracFocus is an important tool that provides transparency to the American people,” she said.
U.S. shale development has fundamentally changed domestic
and international energy markets, but the number-one priority is
a commitment to operate in an environmentally sound manner,
protecting the health and safety of the public and surrounding
communities. The new update to FracFocus.org is one of many
steps in that process. ■
Tax increase reversed on LNG
A
fter considering the environmental and economic development benefits of using liquefied natural gas (LNG) as
a vehicle fuel alternative to diesel, Acting Secretary of
Revenue Eileen McNulty recently announced that Governor Wolf
has reversed a decision made in late 2014 that increased state tax
on LNG.
“One of my goals is to promote and develop a comprehensive
energy portfolio for Pennsylvania that supports clean energy
alternatives to imported petroleum,” said Wolf. “Liquefied natural gas is not only a cleaner alternative to diesel, generating
lower pollutant emissions when used to fuel vehicles, but it’s
also produced here in Pennsylvania from abundant natural gas
reserves.
“Given the immediate environmental benefits of fueling
trucks with LNG and the future economic gains that will come
from further development of the alternative fuels industry in
Pennsylvania, it makes no sense to discourage LNG consumption
by taxing it at a higher rate.”
For 2015, a gallon of gasoline is subject to state tax of 50.5
cents, while diesel is taxed at 64.2 cents per gallon.
LNG is defined in Pennsylvania law as an alternative fuel that
should be taxed based on its energy potential as compared to
gasoline, and the Department of Revenue has historically taxed
LNG using a cents-per-gallon basis indexed to gasoline. The policy shift late last year, which followed a Department of Energy
change in how LNG is measured at the federal level, applied the
higher diesel tax to LNG, effectively increasing the state tax on
LNG by 4.3 cents per gallon.
The reversal of the tax change for LNG will be effective
retroactively to January 1, 2015, the date the increase took effect.
The new rate of 33.5 cents per gallon equivalent of LNG will be
reflected in the March 13 edition of the Pennsylvania Bulletin. ■
“PA Independent Oil and Gas Association”
March
February
2015
2014
PIOGA Member News
U.S. Gain and “O” Ring CNG partner to expand
fueling opportunities
U
.S. Gain is partnering with compressed natural gas
provider and station builder “O” Ring CNG Fuel
Systems, LP and its affiliates to co-brand “O” Ring
CNG’s existing fueling stations as “O” Ring CNG / GAIN Clean
Fuel and incorporate them into U.S. Gain’s nationwide infrastructure of CNG stations. Two of the four existing “O” Ring
CNG stations are located along Interstate 80—one in Brookville
and the other in DuBois. The third is on Interstate 70 in
Bentleyville , just south of Pittsburgh, and the fourth on Route
119 in Punxsutawney. “O” Ring CNG has several more stations
slated for completion 2015- 2016.
Through this partnership, U.S. Gain will have 43 stations in
operation or under construction throughout the United States. In
addition, the partnership enables “O” Ring CNG to leverage U.S.
Gain’s CNG stations for use with its partner carriers.
Schetroma elected to Steptoe & Johnson
executive committee
Page 31
overall industry average in 18 of 22 performance categories.
BP Energy Co. is a registered swap dealer and is the leading
energy marketer in North America, offering natural gas, power
and natural gas liquids. BP Energy Co. combines equity and
third-party supply with transport and storage to ensure optimal
pricing and service quality for customers, serving more than
3,000 commercial, industrial and utility customers, while also
providing hedging and risk-management services.
Curry expands product line with 2,500-gallon
articulated water truck
Curry Supply Company has teamed up with Hydrema US Inc.
to produce 2,500-gallon articulated water trucks on a Hydrema
chassis. These new off-highway trucks are designed for use in a
variety of industry applications including underground and surface mining, oil and gas, forestry, and construction. The low profile makes these vehicles ideal when working on rough to normal
terrain where low operating height is a concern, or where unstable ground conditions are a factor.
With the addition of this new product, Curry Supply offers
off-road articulated water trucks with 2,500- to 20,000-gallon
water tanks. All Curry Supply off-road articulated water trucks
feature a low center of gravity, a no-weld tank mounting design,
interior tank coating that exceeds industry standards and an interlocking baffle design for durability. ■
Steptoe & Johnson PLLC has elected attorney Russell L.
Schetroma to serve as a member of its executive committee. The
seven-member committee is responsible for guiding and setting
strategy for the firm.
Schetroma is an energy law veteran with more than 40 years
of experience and is widely regarded as the “dean of
Pennsylvania energy law.” He serves as managing member of the
firm’s Meadville office and The Woodlands, Texas, office. His
legal practice focuses on representation of oil and gas exploration and production companies in all aspects of their operations
including lease and other document design, negotiations, permitting, administrative proceedings, joint operating agreements, farmouts, acquisitions, dispositions, due diligence reviews, title
examination and reporting, financing, arbitration, mediation, and
litigation in state and federal courts. Schetroma is a frequent
author and speaker at energy trade and professional events and is
included among The Best Lawyers in America® for 2015.
BP Energy exceeds industry benchmark
for customer satisfaction
BP Energy Co. exceeds the industry benchmark for customer
satisfaction among its peer group, according to the leading independent measure of preference and performance. The results are
from the 18th annual Natural Gas Marketers Study, which
Mastio & Company conducted in late 2014. The company interviewed 981 representatives of commercial and industrial end
users, investor-owned utilities, independent power producers,
retail energy providers, and local distribution companies in the
U.S. and Canada. BP scores indicate that it is best-in-class in
four categories: reliable natural gas supply, historic dependability, financial products and quality of information provided to
enable decision making. BP’s performance was better than the
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The PIOGA Press
2014 activity recap
Unconventional
255
238
229
11
0
0
119
0
93
86
58
23
34
34
34
25
30
27
26
16
12
12
0
6
0
2
0
1
0
0
1,371
2014 Total
259
238
230
225
224
170
126
111
94
86
58
55
35
34
34
30
30
27
26
16
12
12
9
7
5
3
2
1
1
1
2,161
2013 Total
126
206
220
211
306
165
95
172
108
169
67
70
12
13
15
40
33
24
5
4
10
21
13
29
11
3
1
0
17
1
2,174*
*Total includes some counties where no drilling occurred in 2014
Data source for the statistics presented in this section (unless otherwise noted):
PA Department of Environmental Protection
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ccording to media reports in midFebruary, Pennsylvania natural
gas production topped 4 Tcf for
2014. But Department of Environmental
Protection production statistics show
3.78 Tcf of unconventional production
and 120.92 Bcf of conventional production for the year, bringing the total to
3.896 Tcf. Perhaps the production
reports had been updated by the time
we looked at them in early March.
Operators of unconventional wells
must self-report production twice annually—January through June and July
through December (beginning at the
end of this month, unconventional production will be reported monthly).
Production from conventional wells is
reported annually.
For the first six months of 2014,
unconventional production totaled 1.80
Tcf, increasing to 1.97 Tcf for the second half of the year, according to DEP’s
production reporting website. Production
was reported from 7,391 unconventional
wells in the first half of the year and
8,045 for the second six months.
By comparison, Pennsylvania shale
gas production totaled 3.1 Tcf in 2013
and 2.04 in 2012.
The top three producing counties for
the second half of 2014 were
Susquehanna (478 Bcf), Bradford (406
Bcf) and Washington (252 Bcf).
Condensate production from unconventional wells totaled 3.98 million barrels—1.84 million in the first half of 2014
and 2.14 million barrels in the second
six-month period.
A
Wells Drilled by County
County
Conventional
Greene
4
Susquehanna
0
Washington
1
McKean
214
Warren
224
Venango
170
Butler
7
Forest
111
Bradford
1
Lycoming
0
Wyoming
0
Elk
32
Allegheny
1
Lawrence
0
Sullivan
0
Armstrong
5
Tioga
0
Fayette
0
Cameron
0
Jefferson
0
Beaver
0
Mercer
0
Crawford
9
Westmoreland
1
Clarion
5
Clinton
1
Cambria
2
Centre
0
Indiana
1
Somerset
1
Totals
790
Unconventional production
continues to climb
Conventional production
Conventional gas production
declined from 215.9 Bcf in 2013 to
120.9 Bcf last year. PIOGA President &
Executive Director Lou D’Amico told the
Pittsburgh Tribune-Review that the drop
in conventional gas is expected to continue in 2015.
March 2015
Page 33
“There is virtually no new conventional drilling going on at this time, and
the reason’s pretty simple — the economics just don’t warrant it,” he said.
“It’s difficult enough with the big
Marcellus players with larger volumes
of gas to attempt to make a dollar in
today’s environment. For the conventional operators, it’s totally impossible.”
Crude oil was a bright spot, climbing from 1.7 million barrels in 2013 to
1.87 million barrels in 2014.
Condensate production from conventional wells also increased, from
124,098 barrels to 198,516 barrels,
according to DEP reports.
DEP’s reports can be found at
www.paoilandgasreporting.state.pa.us/
publicreports. ■
2014 Drilling Permits Issued by County
First number is conventional, second number is unconventional.
Conventional 1,271 / Unconventional 3,200 / Total 4,471
Top Gas-Producing States
2012 vs. 2013
Source: U.S. Energy Information Administration Natural Gas Annual
Office: (724) 742-1122
Fax: (724) 742-4703
NEW PROSPECT COMPANY
NEW PROSPECT COMPANY
120 MARGUERITE DRIVE, SUITE 201 • CRANBERRY TOWNSHIP, PA 16066
DANIEL R. STEFFY
NE Business Development Manager
Engineering, Completions and Drilling Consultants
dsteffy@newprospect.com
Cell: (412) 667-9817
www.newprospect.com
Page 34
The PIOGA Press
2014 Wells Drilled by Operator
Operator
EQT Production Co
Range Resources Appalachia LLC
Cabot Oil & Gas Corp
Southwestern Energy Prod Co
Chief Oil & Gas LLC
Chesapeake Appalachia LLC
Catalyst Energy Inc
Seneca Resources Corp
CNX Gas Co LLC
Trimont Energy LLC
Rice Drilling B LLC
Chevron Appalachia LLC
Hilcorp Energy Co
RE Gas Dev LLC
XTO Energy Inc
Talisman Energy USA Inc
Noble Energy Inc
Lendrum Energy LLC
Vista Opr Inc
Howard Drilling Inc
MSL Oil & Gas Corp
Devonian Resources Inc
PennEnergy Resources LLC
Vantage Energy Appalachia II LLC
Cameron Energy Co
Energy Corp Of America
ARG Resources Inc
Snyder Bros Inc
Enervest Opr LLC
SWEPI LP
D&S Energy Corp
EM Energy PA LLC
Gas & Oil Mgmt Assoc Inc
Inflection Energy (PA) LLC
Anadarko E&P Onshore LLC
Minard Run Oil Co
NTS Energy LLC
MDS Energy Dev LLC
Stateside Energy Group LLC
Sylvan Energy LLC
Titusville Oil & Gas Assoc Inc
Airdale Oil & Gas LLC
Branch John D
Bull Run Energy LLC
Operator
Conventional
Unconventional
Total
0
0
0
0
0
0
79
1
0
59
0
0
0
0
0
1
0
30
30
29
29
28
0
0
27
0
24
18
20
0
19
0
19
0
0
16
16
0
13
13
13
12
12
11
171
165
106
106
97
93
0
70
68
0
50
48
44
41
41
36
33
0
0
0
0
0
28
28
0
27
0
6
0
20
0
19
0
19
17
0
0
13
0
0
0
0
0
0
171
165
106
106
97
93
79
71
68
59
50
48
44
41
41
37
33
30
30
29
29
28
28
28
27
27
24
24
20
20
19
19
19
19
17
16
16
13
13
13
13
12
12
11
PA Gen Energy Co LLC
SLT Production LLC
Kastle Resources Enterprises Inc
Kylander Oil Inc
Pecora Enterprises
Universal Resources Holdings Inc
Autumn Ridge Energy LLC
SV ABS Interest Wetmore Proj
Wilmoth Interests Inc
Chautauqua Energy Inc
Curtis Oil Inc
Dannic Energy Corp
Mead Oil LLC
Northwestern Well Svc Inc
D&M Energy LLC
Interstate Gas Mkt Inc
Weldbank Energy Corp
Xite Energy Inc
B&B Resources
Coastal Petro Corp
KCS Energy Inc
Lindell & Maney LLC
Mieka LLC
Missing Moon Oil Inc
Pembrooke Oil & Gas Inc
Penneco Oil Co Inc
Aiello Bros Oil & Gas Inc
Batista Mark F
BF Adventures LLC
Galati Enterprises Inc
MJ Oil LLC
Otter Exploration Inc
Remington Capital Holdings Inc
Rick & Sons Oil LLC
Russ Holden Well Svc
Bailey & Holden Oil
BJS LLC
Daniel P Hornburg
Jett Oil LLC
McCool John E
Oz Gas Ltd
RB Robertson & Son Gas & Oil Co
Roilwell Inc
Susquehanna Expl & Prod LLC
Vantage Energy Appalachia LLC
Conventional
Unconventional
Total
0
10
9
9
9
9
8
8
8
7
7
7
7
7
6
6
6
6
5
5
5
5
5
5
5
5
4
4
4
4
4
4
4
4
4
3
3
3
3
3
3
3
3
3
0
11
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3
11
10
9
9
9
9
8
8
8
7
7
7
7
7
6
6
6
6
5
5
5
5
5
5
5
5
4
4
4
4
4
4
4
4
4
3
3
3
3
3
3
3
3
3
3
March 2015
Page 35
Operator
Warren E&P Inc
WB Prod Mgmt Co
Willard M Cline
Curtin & Curtin
Holden Oil & Gas
Leali & Leali Oil Inc
Marcellx LLC
Mark & Troy Johnson
New Horizon Oil LLC
R&N Resources LLC
Redmill Drilling
Samson Exploration LLC
US Energy Exploration Corp
Apex Energy (PA) LLC
Arrington Oil & Gas Operating LLC
Bald Hill Oil
Bearcat Oil Co LLC
Bittinger Drilling LA Bittinger DBA
Campbell Oil & Gas Inc
David L Hill
Dominion Trans Inc
Dri Opr Co
Exco Resources Pa LLC
Jalog Oil & Gas LLC
Jesmar Energy Inc
Koebley Timothy W
Lt Oil Co LLC
Marco Drilling Inc
Conventional
Unconventional
Total
0
3
3
2
2
2
2
2
2
2
0
0
2
0
0
1
1
1
0
1
1
1
0
1
1
1
1
1
3
0
0
0
0
0
0
0
0
0
2
2
0
1
1
0
0
0
1
0
0
0
1
0
0
0
0
0
3
3
3
2
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
Operator
Conventional
Unconventional
Total
1
1
1
1
1
1
790
0
0
0
0
0
0
1,371
1
1
1
1
1
1
2,161
Mcgaughey Scott
Old Glory Energy LLC
Pierce & Petersen
Stonehaven Energy Mgt Co LLC
Whilton Brooks A
William Mcintire Coal Oil & Gas
Totals
What types of wells were drilled in 2014?
Unconventional
Horizontal
1,352
Vertical
19
Conventional
Oil
703
Gas
14
Combined oil & gas
64
Coalbed methane
1
“Multiple well bore type”
1
Injection
7
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Page 36
The PIOGA Press
Penn Grade Crude Prices
$110.00
$100.00
Oil & Gas Trends
Natural Gas Futures Closing Prices
As of March 6
$90.00
$80.00
$70.00
$60.00
$50.00
$40.00
Month
April 2015
May
June
July
August
September
October
November
December
January 2016
February
March
Price
2.757
2.790
2.906
2.957
2.974
2.962
2.909
3.078
3.195
3.293
3.339
3.286
March
February
2015
2014
Page 37
Pennsylvania Rig Count
Sources
80
American Refining Group: www.amref.com/Crude-Prices-New.aspx
Ergon Oil Purchasing: www.ergon.com/prices.php
Gas futures: http://quotes.ino.com/exchanges/?r=NYMEX_NG
Baker Hughes rig count: http://gis.bakerhughesdirect.com/Reports
NYMEX strip chart: Emkey Energy LLC emkeyenergy.com
75
70
65
60
55
50
45
Month
Mar
Apr
Apr
May
May
May
Jun
Jun
Jul
Jul
Aug
Aug
Sep
Sep
Oct
Oct
Oct
Nov
Nov
Dec
Dec
Jan
Jan
Feb
Feb
Mar
40
PreviousYear
CurrrentYear
Advertise Your Products & Services
Contact Matt Benson, 814-778-2291 / matt@pioga.org
Page 38
The PIOGA Press
New PIOGA members — welcome!
B&B Oilfield Equipment Corp.
P.O. Box 492, Mount Pleasant, MI 48804-0492
989-773-6403
www.bboilfieldeq.com
Service Provider
Virginia Grosz
122 Scenery Circle, McMurray, PA 15317
Associate
Daniel B. Grove
8590 Remington Drive, Pittsburgh, PA 15237
Associate
Huntington Insurance
9218 Route 119 South, Blairsville, PA 15717
724-313-0902
www.huntington.com
Professional Firm
Have industry colleagues or vendors you think
should be PIOGA members? Encourage them to
click on “Join PIOGA” at the top of our
homepage, www.pioga.org. There’s strength in
numbers!
March
February
2015
2014
Page 39
Integrated Environmental Systems
368 Commercial Street, Suite 100, Bridgeville, PA 15017
412-564-5800
www.ies-pgh.com
Service Provider
John Nealen
P.O. Box 221, Nicktown, PA 15762
Royalty Owner
The Novosel Family Trust
P.O. Box 682, Kane, PA 16735
Royalty Owner
PLH Group
400 East Las Colinas Boulevard, Suite 800, Irving, TX 75039
469-206-5872
www.plhgroupinc.com
Service Provider
Calendar of Events
PIOGA Events
PIOGA Summer Picnic & Golf Outing
June 1, Wanango Golf Club, Reno
Info: www.pioga.org/events/category/pioga-events
PIOGA Pig Roast, Equipment Show & Seminar
July 28-29, Seven Springs Mountain Resort, Champion
Info: www.pioga.org/events/category/pioga-events
18th Annual Divot Diggers Golf Outing
August 26, Tam O’Shanter of Pennsylvania, Hermitage
Info: www.pioga.org/events/category/pioga-events
Eastern Oil & Gas Conference and Trade Show
October 27-28, Monroeville Convention Center, Monroeville
Info: www.pioga.org/events/category/pioga-events
Industry Events
IPAA Midyear Meeting
June 24-26, Eldorado Hotel & Spa, Santa Fe, NM
Info: hwww.ipaa.org/meetings-events
KOGA Annual Meeting
July 14-16, Hyatt Regency Lexington, KY
Info: koga.memberclicks.net/2015-annual-meeting
IOGANY Summer Meeting
July 8-9, Peek'n Peak Resort & Conference Center,
Findley Lake, NY
Info: www.iogany.org/events.php
IOGAWV Summer Meeting
August 2-4, The Greenbrier, White Sulphur Springs, WV
Info: events.iogawv.com
IOGANY 35th Annual Meeting
October 21-22, Buffalo Marriott Niagara, Amherst, NY
Info: www.iogany.org/events.php
IPAA Annual Meeting
November 9-10, The Ritz-Carlton, New Orleans, LA
Info: hwww.ipaa.org/meetings-events
➤ More events: www.pioga.org
PIOGA Board of Directors
Gary Slagel (Chairman), Steptoe & Johnson PLLC (representing
CONSOL Energy)
Sam Fragale (Vice Chairman), SEF Consulting, LLC
Frank J. Ross (2nd Vice Chairman), T&F Exploration, LP
James Kriebel (Treasurer), Kriebel Companies
Craig Mayer (Secretary), Pennsylvania General Energy Co., LLC
Terrence S. Jacobs (Past President), Penneco Oil Company, Inc.
L. Richard Adams, Chief Oil and Gas
Thomas M. Bartos, ABARTA Energy
Stanley J. Berdell, BLX, Inc.
Rob Boulware, Seneca Resources Corporation
Carl Carlson, Range Resources - Appalachia, LLC
Mike Cochran, Energy Corporation of America
Don A. Connor, Open Flow Energy
Ted Cranmer, TBC Consulting
Jack Crook, Atlas Resource Partners, LP
Robert Esch, American Refining Group, Inc.
Michael Hillebrand, Huntley & Huntley, Inc.
Jim Hoover, Phoenix Energy Productions, Inc.
Ron McGlade, Tenaska Resources, LLC
Jim McKinney, EnerVest Operating, LLC
Steve Millis, Vineyard Oil & Gas Company
Gregory Muse, PennEnergy Resources, LLC
Joy Ruff, Dawood Engineering, Inc.
Stephen Rupert, Texas Keystone, Inc.
Jake Stilley, Patriot Exploration Corporation
Burt A. Waite, Moody and Associates, Inc.
Roger B. Willis, Universal Well Services, Inc.
Thomas Yarnick, XTO Energy
Committee Chairs
Environmental Committee
Paul Hart, Fluid Recovery Services, LLC
Ken Fleeman, ABARTA Energy
Legislative Committee
Ben Wallace, Penneco Oil Company
Holly Christie, Steptoe and Johnson, PLLC
Pipeline & Gas Market Development Committee
Bob Eckle, Appalachian Producer Services, LLC
Ron McGlade, Tenaska Resources, LLC
Health & Safety Committee
Pat Carfagna, CONSOL Energy
Meetings Committee
Lou D’Amico, PIOGA
Tax Committee
Donald B. Nestor, Arnett Foster Toothman, PLLC
Communications Committee
Terry Jacobs, Penneco Oil Company, Inc.
Staff
Lou D'Amico (lou@pioga.org), President & Executive Director
Kevin Moody (kevin@pioga.org), Vice President & General Counsel
Debbie Oyler (debbie@pioga.org), Director of Member Services
Matt Benson (matt@pioga.org), Director of Internal Communications
(also newsletter advertising & editorial contact)
Joyce Turkaly (joyce@pioga.org), Director of Natural Gas Market
Development
Dan Weaver (dan@pioga.org), Public Outreach Director
Danielle Boston (danielle@pioga.org), Director of Administration
Chris Lisle (chris@pioga.org), Manager of Finance
Tracy Zink (tracy@pioga.org), Administrative Assistant
Pennsylvania Independent Oil & Gas Association
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724-933-7306 • fax 724-933-7310 • www.pioga.org
Northern Tier Office (Matt Benson)
Mail: P.O. Box L, Mount Jewett, PA 16740-0554
Physical address: 167 Wolf Farm Road, Kane, PA 16735
Phone/fax 814-778-2291
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