Author Archives: R. Kyle Nuttall

Atlantic Coast Pipeline Putting West Virginians in Danger?

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We’ve been supporters of building pipelines. There’s a ton of gas here in West Virginia, the gas is needed in other places, and pipelines are the safest way to transport natural gas. Sure, building power plants here and transporting electricity would be safer, but few people with the connections necessary to do that seem to be doing that. Pipeline companies have been the option. So we’ve supported that.

Of course, we’ve been negotiating great pipeline deals for the people of West Virginia. We’ve gotten much better prices and some really good terms that protect our clients from long-term use and abuse by the companies. We did so believing that the companies would do their best to install the pipelines in a safe way.

Turns out, that was not a safe assumption. Last week I got a call from a local source telling me that the Atlantic Coast Pipeline had been backfilling the trench with rocks. It’s a person that I have no reason to distrust, but it was news that was hard to believe because of the blatant disregard for safety that it displays. I’ve done some construction in my time and backfilling any pipeline trench with rocks is a no-no. Ask any plumber, landscaper, or developer if you don’t believe it.

Now today there’s news that the PHMSA (Pipeline and Hazardous Materials Safety Administration) has cited the ACP for placing the pipeline in a rock-laden ditch, for abutting the pipeline with rock-laden trench walls, and for building a trench that was too narrow for easy access for inspection and work.

The problem with rocks in backfill (or too close to the pipe as part of the trench wall) is that the rocks will scratch the outer protective lining of the pipe creating a location where corrosion will begin much sooner than anticipated. Corrosion is the main culprit in pipeline failures, except for construction guys digging into the pipeline.

This kind of construction is awful. It puts people in danger. When ACP or MVP start construction on your property we highly recommend that you get time-lapse photography of the entire process and watch it. If it looks like they’ve dropped rocks in the trench send the footage to PHMSA and FERC. Post it to YouTube. Make sure that it’s documented so that you can force them to properly install the pipeline.

The State of Oil and Gas: August 2019

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A new LNG plant is opening up in Louisiana. Marcellus Shale gas will flow to the plant, be turned into liquefied natural gas, and shipped abroad. Demand for gas will go up, and prices will (hopefully) start to go back up. One plant isn’t going to make a huge difference of course, but more are coming online in the future.

Speaking of gas prices, this year’s slide into oblivion has been pretty bad. Prices haven’t been above $2.75/MMBtu since about February in spite of lower than normal storage levels. The main reason is that gas production has been able to ramp up to keep up with and even exceed demand, making storage levels moot.

Libya is still struggling with civil war. “Someone” turned off a valve to the Sharara oil field which produces about 290,000 barrels per day, dropping Libya’s production below 1,000,000 barrels per day.

The Texas Eastern Transmission pipeline exploded in Kentucky, killing one and injuring five people. It’s a 30-inch pipe, and one of the major pipeline running from here to Texas. It’s disrupted natural gas supplies and prices have jumped a bit as a result.

Antero is planning to keep costs flat next year, but will drill longer laterals and increase land expenditures just a bit.

The Atlantic Coast Pipeline is looking down the barrel at yet another legal hurdle.

One thing that the FERC looks at when deciding whether to approve a major pipeline project is the need for the project. An independent analysis has called into question the need for the MVP. Whether this analysis was truly independent is, of course, in question. But the original analysis for need was done by the MVP so that was hardly an independent analysis itself.

On the other hand, Roanoke Gas says that the MVP is critical to them not running out of gas.

Since we’re talking about pipelines, West Virginia’s Attorney General has filed a brief with the U. S. Supreme Court opposing the Fourth Circuit Court’s decision to halt work on the Atlantic Coast Pipeline.

There’s a bill in Congress that will improve national pipeline safety. This is a good thing.

We have too much gas. That’s the reason natural gas prices are so low. Lots of gas being produced from the Marcellus Shale, and lots of natural gas being produced with the oil from the Permian Basin are the main culprits. For the next couple of years there will be major natural gas project completions, such as LNG plants and cracker plants, which will drive some demand. But between 2021 and 2023 there are no new major projects slated for completion. That could make 2021 to 2023 a period of time when natural gas prices get really low and put a lot of drillers out of work.

It’s very disappointing to West Virginia that the proposed cracker plant will definitely not be built, at least by Braskem. The land is being marketed, purportedly with a focus on other companies that might be interested in building a cracker plant.

U. S. oil production growth is declining slightly and, according to a Forbes article, it will continue to decline. It doesn’t really give a reason why, though, so who knows.

Rig counts overall are down, but in West Virginia they’re up year over year.

CNX Utica Well Problem

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On Saturday, January 26, a well drilled to the Utica formation, about 14,000 feet deep, communicated with several shallow wells, the deepest of which was drilled to about 3,000 feet. This is bad.

The well, drilled by CNX, and called the Shaw 1G, was being fracked. Pressure dropped suddenly and the workers stopped the fracking process. They discovered something blocking the wellbore. There doesn’t appear to be any information about where exactly the blockage is. That could be important because the blockage could indicate a failure in the casing. If there’s a failure in the vertical portion of the casing, that would explain why this well is communicating with much shallower wells. The casing failed and fracking fluid pushed out into the formation or formations that the shallow wells are producing from.

If, instead, there’s a failure in the horizontal portion of the casing, that means that fracking fluid propagated up through 11,000 feet of rock. The Marcellus Shale lies at around 5,000 to 7,000 feet deep in most areas of West Virginia That would mean that the fractures created through the fracking process in a Marcellus Shale well could potentially reach the surface and could certainly find their way into water wells.

The likelihood that the fractures pushed up through 11,000 feet of rock is low. Fracking has been going on for long enough now that it’s hard to believe that under normal circumstances this kind of thing would happen. There just aren’t any reports of it happening. There have been reports of water wells being ruined and of shallow wells being stimulated by fracking, however. Maybe this happens more often than we think, we just don’t realize what’s going on.

Update: The Pittsburgh Post-Gazette is reporting that there are now nine wells impacted by the problem. Interestingly, none of them are in line with the horizontal path of the well. It runs southeast, and the nine wells are to the north, west, and east. Additionally, the other Marcellus Shale wells in the area are not affected. This almost certainly means that the casing in the vertical portion of the well failed and allowed pressure to flow into a formation that all nine of the affected wells are producing from.

Today, You are Like Columbia Natural Gas

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Columbia Natural Gas has a little bone to pick with Southwestern Energy. It’s one that you might find yourself picking with the company you sign a lease with, too.

Back in 2007 Columbia signed a sub-lease with Southwestern. That means that Columbia had bought a lease from someone and turned around and sold at least some of the rights to that lease to Southwestern.

In that sub-lease, Columbia made it clear that they expected to be paid a royalty on all of the gas produced, whether it was sold or not. You see, it’s expected that royalties get paid on gas that’s sold. But not all the gas gets sold, and when a company doesn’t sell gas it doesn’t want to pay royalties. In other words, if gas was lost through a break in a pipeline, or flared, or used to run machinery, Southwestern wouldn’t usually pay royalties on it.

In this lease, that was not the allowed. Southwestern had to pay royalties on everything that came out of the ground whether it was sold or not.

Columbia is suing for $17,000 in unpaid royalties, plus any amounts it’s not aware of already. I expect that they think there is a lot more to be paid or they probably wouldn’t be worrying about it.

Your lease probably includes language that says your company doesn’t have to pay you a royalty on gas unless it’s sold. That’s pretty standard. However, if you think that it could impact your royalty checks you should make sure to get a clause in your lease or addendum saying that you’ll be paid on all gas produced, whether it’s sold or not.

Pipeline Explosion in PA

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There was another catastrophic pipeline explosion, this one in Beaver County, Pennsylvania.  It happened early this morning, and the company is saying that “earth movement” caused the rupture that lead to the explosion.

The pipeline was 24 inches in diameter, and the resulting fire destroyed one house and melted vinyl siding on other houses within 100-200 yards of the fire.  It also melted a metal tower for a high tension power line, causing it to collapse and pull down other nearby towers.

The most interesting thing about this is that this pipeline was put into service just eight days ago, on September 3, 2018.  It really makes you wonder about the quality control practices of these pipeline companies.  I know the workers wouldn’t purposefully install a pipeline wrong, but people make mistakes and some of these crews just aren’t experienced with building in mountainous terrain.

Pipeline Fire in Kansas

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On June 15, 2018 a pipeline in Kansas exploded.  Kansas being flat and mostly fields makes it easier to get good photos of the fire.  Here in West Virginia we can see what is visible above the trees, sometimes only from a ridge or two back from the actual location.  This pipeline exploded in a rural area, so there are no injuries.  We haven’t been able to find any information about the size of the pipeline or how long it’s been in operation.

The State of Oil and Gas: June 16, 2018

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An interesting analysis of the current state of oil and gas by Financial Times.  Essentially, lots of people thought that oil prices would stay lower for longer, and the recent jump up over $70/bbl has encouraged a lot of people to think that lower for longer is over.  The article argues that the price of oil will drop again when OPEC starts to open up the spigots again, and explains why they will again in the near future.  It’s that explanation that is worth the read.

Also in the news today, Saudi Arabia has increased oil output by 162,000 barrels per day in May.  That puts them within 28,000 bbl/day of their agreed cap.  With oil prices over $70/bbl, and the oversupply just about gone, it makes sense for them to start producing a little more.

There’s a rumor out there that the Parkersburg cracker plant is back on.  The article was in the Pittsburgh Business Times which requires a subscription.

With new pipelines coming online in the Marcellus/Utica region, one would expect that total production from the region would increase.  It hasn’t.  The Mountain Valley Pipeline and the Atlantic Coast Pipeline might not end up running at anywhere close to full capacity when they are completed because producers are apparently not drilling enough wells to fill what we already have.

I ran across this article from about 2014 that gave a quick overview of most of the big players in the West Virginia Marcellus/Utica area at the time. It’s fascinating to read what people were saying just four years ago and think about what has happened since.

Mountain Valley Pipeline has been issued another violation notice in regards to environmental standards.

This article from Forbes suggests that oil prices will stay up for the next six months.  The arguments is that demand has grown, Saudi Arabia won’t increase production, Iran won’t be allowed to increase production by the U.S., the rest of OPEC can’t increase production and may even decrease production, and the U.S. can’t increase production quite fast enough.  It’s an interesting thought for sure.

This article, also from Forbes, goes into a little more detail as to why U.S. producers can’t increase production fast enough.

Kallanish Energy summarized the Energy Information Administration’s “Short-Term Energy Outlook”.  Energy production from gas will go up about 2% in the next two years, from coal will go down about 2%, from renewables will go up about 1%, and from nuclear will go down 1%.  They’re not big changes, but they fit the overall trend of the last few years.

Another article from Kallanish Energy discusses where the money for a natural gas liquids storage hub in the Marcellus/Utica region will come from, and what it takes to get that money.

Leach Xpress Pipeline Explodes

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The Leach Xpress Pipeline is 18 months old.  It’s 36 inches in diameter, runs for 160 miles, and pushes 1.5 BCF of gas at 1440 pounds per square inch of pressure.

It just exploded.

911 Emergency services received 37 calls within three minutes of 4:20 am.  The fire burned until about 6:00 am, or 8:30 am, depending on which news report you find.

The burned area is about 10 acres.

This pipeline is pretty similar to the Atlantic Coast Pipeline and the Mountain Valley Pipeline.  It’s smaller, at 36 inches instead of 42 inches, and shorter at 160 miles instead of 303 miles for the MVP and 600 miles for the ACP.  But they will both push the same amount of gas at the same pressure, and they will both run over more mountainous terrain.

This does not make me feel more comfortable to be living within 1000 feet of the Atlantic Coast Pipeline right of way.

Thankfully, this happened in a spot where there were no houses so no one was injured.

Rogersville Shale Presentation

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This presentation was made to the West Virginia Land and Mineral Owners Association by Philip A. Dinterman in 2017.  The slides include a lot of information, but it sure would have been interesting to hear the actual presentation and discussion.  The long and short of it is that the Rogersville Shale is very likely to produce a lot of natural gas when companies get around to drilling into it, but it’s very expensive and hasn’t been well explored as yet so companies are hesitant to throw a lot of resources at it.

Pipeline Tree-sitter being Starved Out

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There are two people sitting in trees which are in the right of way that the Mountain Valley Pipeline has bought.  They’ve been there for a few weeks, and people have been bringing them food and water.  The county is no longer allowing people to do that.  It probably won’t be long before they run out of water.

Quite a few Virginia State legislators are protesting the county’s decision to cut off the tree-sitters’ supplies.  It will be interesting to see where this story goes.