Monthly Archives: January 2016

More Horizontal Oil Drilling in West Virginia

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We’ve talked about drilling for oil in West Virginia before.  The same folks who brought drilling to the Big Injun formation are introducing us to drilling to the Weir Sand formation.

Cunningham Energy has announced that it’s drilling for oil in Kanawha County, WV.  It’s currently working on another site in Clay County, WV.

It doesn’t seem like a really good time to be drilling for oil.  The Saudis have said they will produce enough to keep up with demand, and American frackers will follow the dictates of the market, so it’s impossible to tell how low oil prices will go.

Cunningham seems to think that their oil will be marketable.  They may be right.  Getting leases in that part of West Virginia will be cheap, probably in the $100-$300 per acre range when they’re dealing with knowledgeable mineral owners.  They’ll be able to pick up leases for $5-$10 per acre from people who don’t take the time to educate themselves about oil and gas.  Drilling only 2000 feet down and 4000 feet out will not present any kind of technology challenge.  The real trick will be putting systems in place to be efficient.

New Pipeline Projects in West Virginia

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Gas Pipelines in Columbia

I was going to write up something about these new pipeline projects, but the folks over at Kallanish Energy already put together a good summary.

The Utica Access project is only five miles long and will come online at the end of 2016.  It will only move 205 million cubic feet per day and only down in Kanawha County, so it won’t impact production and royalty amounts much, if at all.

The WB Xpress will be an interesting project to watch, as it will move 1.3 billion cubic feet per day and will open in 2018.  There will be quite a few other project opening in 2018 as well.  2017 could be a very interesting year for West Virginia mineral and royalty owners whose rights aren’t leased.

West Virginia Forced Pooling: Woody Ireland’s Arguments in Favor

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Woody Ireleand has been interviewed again for an article in the Wheeling Intelligencer.  The Forced Pooling legislation that he is championing has improved over the years, but it’s never going to overcome the one argument that is foremost in my mind: forcing someone to sell or use their land is not right, even when it’s lawful.

Stonewall Gathering Pipeline Finished!

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Great news for West Virginia royalty and mineral owners!  The Stonewall Gathering project is complete and pumping gas out of the Marcellus Shale area.  It takes gas from Doddridge, Harrison, and Lewis counties and transports it to Braxton County where it connects with an existing Columbia Gas pipeline.  That pipeline takes the gas out of state.

It’s a big pipeline, at 36 inches in diameter, and is currently moving about 700 MMcf/day.  It’s highest capacity is expected to be 1.4 billion cubic feet of gas per day.  If it’s like other pipelines, it could probably be pushed a bit higher with some additional compressors.

The most pressing need in the Marcellus shale and Utica shale area is for take away capacity.  There is so much gas in the region that there simply aren’t enough pipelines to transport it all to market.  Consequently, pipeline companies can name their price to transport the gas, and they take a huge chunk of the value of the gas.  When all is said and done, Marcellus shale gas has been netting West Virginia producers more than a dollar less than what gas sells for at Henry Hub.

With more pipelines, the “differential” between Henry Hub and the Marcellus/Utica region will decrease.  That means more money in royalty owners’ and lessors’ pockets.  The Stonewall Gathering pipeline itself will not make a large difference.  Combined with other projects that should be completed in the next few years, though, we will start to see better royalty payments.

Fracking Earthquake Record

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earthquake-hazard-sign-5186792Well this is interesting.  It turns out that fracking activities have been linked to an earthquake that registered 4.6 on the Richter scale.  That’s strong enough that people indoors will feel it, with noticeable shaking of indoor objects and rattling noises.  People outdoors will feel it slightly.

It’s the biggest earthquake caused by fracking that has been clearly linked to fracking to date.

Most fracking earthquakes won’t ever be felt by anybody.  Apparently, bigger fracking projects in the right, er, wrong location could lead to bigger earthquakes.  It wasn’t something we had been concerned about previously, but it appears it’s time to look into it a little closer.  Stay tuned.

 

The Challenges of Converting Power Plants from Coal to Gas

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Here is an interesting article in the Pittsburgh Post-Gazette.  FirstEnergy closed down a coal-fired power plant in 2013, and had no plans to re-open it.  In the last few months, however, they have changed their minds.  At least, they have changed their minds about looking at the possibility of re-opening it.

The article states that market conditions have changed.  The price of electricity hasn’t gone up much, but the price of oil and gas has gone way, way down.  Who wants to bet that that one factor alone has reduced costs?

One other interesting point that was made in the article is that building a brand new gas-fired plant would (just a couple years ago) have been cheaper than converting the coal-fired plant to gas.

Five Facts About Fracking

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You won’t hear this phrase on this blog very often: the information in this article blew my mind.  Andrew Follett wrote an article published at the Daily Caller that describes five facts about fracking that haven’t gotten much traction in the news.  Most of them are extremely interesting.  The point about Russia’s economy shrinking because we no longer rely on their oil could have both good and bad long-term effects.  Click on over and read.  It’ll make you think.

Pipeline Negotiation Stories

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Ford Turner at the Reading Eagle, a Pennsylvania newspaper, put together a pretty nice article which illustrates how different attitudes can bring different results in negotiating with a pipeline company.  In writing the story, he interviewed a number of people from his community about their experiences with putting together a deal with the pipeline.  Each person had a different experience.

If you have been approached by someone who represents the Atlantic Coast Pipeline or the Mountain Valley Pipeline, you should definitely take a few minutes to read the article.

Oil Prices Will Not Recover Soon

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In this article in the Wall Street Journal, you can see that the price of oil is not going to jump up any time soon.  Any industry that relies on high oil prices to get by is going to have a bad couple of years.  Luckily there aren’t very many industries that rely on high oil prices.  There are quite a few more industries which do significantly better when oil prices are low.  Also, American consumers benefit greatly when oil prices are low.  It seems that America and maybe the world in general is going to have a pretty hot economy in the next couple of years, just because energy is going to be so affordable.  While this firm may suffer some in the short term, we expect to benefit from an improved economy.  Here’s to shale development and the Saudi war on shale!