How Fracking in the Northeast Could Impact Farmland in Oklahoma

The federal government issues mortgages and loan guarantees to low-income Americans living in rural areas.

But the U.S. Department of Agriculture is considering requiring environmental studies before issuing money to those leasing their land for oil and natural gas production.

Why is this happening? U.S. Rep. Dan Boren says it’s because the USDA is bowing to political pressure exerted by opponents of hydraulic fracturing — particularly those in the Northeast, reports the Tulsa World.

 The USDA’s Rural Housing Service generally doesn’t require a down payment, and has been especially popular in the wake of tight credit markets, writes New York Timesreporter Ian Urbina:

… the program’s loans have roughly quadrupled since 2004.

Much of the money has gone to states like Pennsylvania, Texas and Louisiana, which are booming with oil and natural gas drilling.

The National Environmental Review Policy Act — NEPA — requires environmental reviews before federal money is spent, but home and rural business loans are generally excluded.

The rural housing decision might also impact the department’s Rural Business and Cooperative Program, which issues grants and loans to rural businesses.

Hydraulic fracturing is an increasingly common drilling technique, and it’s has had a big economic impact in Oklahoma and a lot of states. But there are environmental concerns about water contamination, spills and air pollution.

Over the last year, some banks and federal agencies have started revisiting their lending policies to account for the potential impact of drilling on property values, reports the Times.

One Agriculture Department office in New York said they were no longer financing homes with gas leases because, in part, of the expensive environmental studies.

It’s not clear if this is happening yet in Oklahoma, reports the World, but Boren isn’t waiting for confirmation.

“… taking away this loan option would only discourage economic development in rural communities like the many located in my eastern Oklahoma district,” Boren wrote Monday in a letter he sent to Agriculture Secretary Thomas J. Vilsack.

“Not only would an environmental review harm the individuals that need the loans the most, it would also be detrimental to our nation’s progress towards energy independence,” Boren wrote. “If we make potential home owners choose between getting a home loan to keep their house or maintaining a mineral lease, viable sources of oil and gas may become less accessible.”

http://stateimpact.npr.org/oklahoma/2012/03/20/how-fracking-in-the-northeast-could-impact-farmland-in-oklahoma/

Oil, gas taxes vary widely by state

As the debate unfolds, both sides will use examples from other states. Researchers warn that there are big challenges to comparing the vastly different approaches, and many reasons to proceed with caution in deciding how to structure a tax.

“It’s a bag of snakes more than a can of worms,” said David Passmore, director of the Institute for Research in Training & Development at Penn State University.

Most of the debate is about “severance” taxes, a tax on natural resources that are being “severed” from the earth. Nearly all the money collected comes from oil and natural-gas production.

http://www.dispatch.com/content/stories/business/2012/03/19/oil-gas-taxes-vary-widely-by-state.html

Shale gas lawyers in big demand in Ohio

Firms that already had oil and gas practices are now expanding them. Industry veterans from Texas and Oklahoma are partnering with Ohio lawyers to grab business. Small firms and solo practitioners like Piergallini are representing landowners, while big firms are courting the gas companies. And in Cleveland, law schools are scheduling courses that deal with shale exploration.

Leasing and title quandaries are just the opening volley in what will be years of legal work -- and probably thousands of lawsuits -- tied to exploration, drilling, production and pipeline construction.

"I wouldn't be surprised if there wasn't tens of thousands of disputes already," said Roger Proper Jr. at Critchfield, Critchfield & Johnston in Wooster, adding that many may not have reached the courtroom.

For Piergallini, shale work now consumes 100 percent of his law practice in Tiltonsville, a short drive south of Steubenville along the Ohio River.

In two 12-hour shifts last August, Piergallini, 56, helped 550 families in Harrison and Jefferson counties execute leases with oil and gas companies covering 32,000 acres.

"My practice was real estate and probate, and coal was a big part of that," said the grandson of Italian immigrants who moved to southeast Ohio in the 1920s to work in bituminous coal mining. "It only made sense that it would transition into oil and gas."

The rush by energy companies to get at eastern Ohio's resources has Lee Plakas working long weeks, too.

The managing partner of Tzangas, Plakas, Mannos & Raies in Canton helps property owners form associations that combine their land into bigger chunks that are more attractive to developers.

"In numbers there is strength, and because of the dramatically different technology of the horizontal drilling, all of the procedures and customs have been thrown out the window," Plakas said.

Harvesting oil and gas from shale uses techniques for drilling horizontal wells and then fracturing, or "fracking," the rock. Wells go down about 8,000 feet before they branch into horizontal sections that can extend a mile or more from the vertical shaft. A mixture of water, sand and chemicals is pumped under pressure into the horizontal borings.

Plakas said it's a world different from the time when farmers would lease land for $10 or $15 an acre, with operators setting up see-saw natural gas "grasshoppers" that almost blended into the landscape like rusty farm equipment. Today's horizontal drilling rigs tower up to 90 feet, surrounded by rock and gravel well pads stretching 5 to 15 acres.

http://www.cleveland.com/business/index.ssf/2012/03/shale_play_lawyers_in_big_dema.html

Kasich’s plan for tax hike, cut gets mixed reaction

COLUMBUS: A plan by Gov. John Kasich to tie higher taxes on oil and gas drilling to an eventual reduction of the statewide income tax met with opposition on multiple fronts Wednesday.

The oil and gas industry said the tax increase would discourage investment coming as a result of a boom in Utica and Marcellus shale drilling in the state. Cleveland-based Policy Matters Ohio, a liberal think tank, said the tax hike on oil and natural gas liquids within the next two years should be even higher than Kasich’s proposed 4 percent.

Meanwhile, public safety groups and advocates for the poor argued that revenue from the increase shouldn’t be used for income-tax relief at all. They want to see money raised reinvested in government programs hit with recent cuts.

“They’ve cut local governments by 50 percent, and local governments are where the most essential services are provided: police, fire, emergency medical services,” said Ohio Fraternal Order of Police President Jay McDonald. “And those local governments are really struggling to provide those services because of the lack of funding, and the state is directly responsible for that lack of funding.”

Kasich, a Republican, proposed his one-two tax punch as part of an unusual “mid-biennium review,” which revisits the state’s $57 billion, two-year operating budget after just one year.

Kasich’s idea was inspired by Congress, which passes a budget annually. The former congressman called his concept historic, and the sweeping policy proposals touching energy, education, health care and taxes necessary.

“Frankly, almost every time I turn around, I find another piece of broken Ohio,” he said in unveiling details to reporters.

State budget director Tim Keen said that as U.S. House budget chairman in the 1990s, Kasich became accustomed to the cycle of annual budgets in Washington. Keen said the administration has spent the past six months coming up with its second set of big policy priorities in as many years. The current budget cycle began July 1.

The Ohio Oil and Gas Association noted in a statement that the tax structure for the industry was revamped just two years ago. The industry group, which says its members are poised to invest as much as $34 billion in the state over the next several years, called the current tax system “fair, competitive with neighboring states and attractive to investment.”

“Though we would generally support an income-tax decrease, we do not support asking one industry to disproportionately fund it,” the association said. “We also believe that Ohioans who have struggled during the economic downturn would prefer to have a good-paying job now, instead of a small tax break years down the road.”

Zach Schiller, research director for Policy Matters Ohio said, “We applaud

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Chesapeake Energy to Build Processing Facility in Ohio's Utica Shale Region

Chesapeake Energy Corp. continues to expand its presence in the Utica Shale region by partnering with two firms to build a complex that will process natural gas and natural gas liquids in eastern Ohio .

Chesapeake along with M3 Midstream and EV Energy Partners will invest approximately $900 million in the midstream services complex, Chesapeake said March 13.

The structure will include natural gas gathering and compression facilities constructed and operated by Chesapeake subsidiary Chesapeake Midstream Development as well as processing, natural gas liquids fractionation and loading and terminal facilities built and operated by Momentum.

The complex will be located in Columbiana County, a region where the company already has several drilling sites. 

Chesapeake announced earlier in the year its plan to shift more production to liquids-rich shale fields as prices for dry gas continue to drop. Chesapeake currently has eight rigs operating in the Utica Shale and plans to have 20 by the end of the year, says company spokesman Pete Kenworthy.

http://www.industryweek.com/articles/chesapeake_energy_to_build_processing_facility_in_ohios_utica_shale_region_26866.aspx?SectionID=5

Natural Gas Industry Gets Water Permits for Fracking While Science and Public Get Ignored

As the Susquehanna River Basin Commission (SRBC) conducts its quarterly business meeting today, a coalition of organizations strongly criticized the agency for prohibiting public comment at the event and continuing to issue water permits for the natural gas industry without taking measures to prevent negative impacts across the Basin.

In a March 9 letter to SRBC, the groups said that full public participation at all meetings is necessary for the Commission to receive valuable public and expert input, have current information to consider in its permit reviews, and, as a public agency, to maintain transparent decision-making. (The full text of the letter is available by clicking here.)

The Commissioners represent Maryland, New York and Pennsylvania, as well as the federal government through the U.S. Army Corps of Engineers. But at a recent hearing on 40 water withdrawal permits to support the natural gas industry, only the Commission chair (from Pennsylvania) was present and comment was taken by a hearing officer.

This highlighted growing concern that SRBC is violating its mandate to operate on the basis of equal, joint involvement by all member states. SRBC continues to approve permits and will soon put in place weak regulations to promote shale gas development in Pennsylvania—even though the other two members, Maryland and New York, haven’t decided whether to even allow it to occur. And by not conducting any studies to determine the effects of the industry across the Basin over time, SRBC is ignoring its legal requirement for long-term planning. (These points are detailed in a document available here.)

“As drilling explodes across the Basin, communities and the environment are being harmed. It’s no wonder that residents are speaking out, taking a closer look at the work of the SRBC, and turning out for meetings like never before,” says Nadia Steinzor, Marcellus regional organizer for Earthworks’ Oil and Gas Accountability Project. “SRBC should face this new reality and do what it takes to support productive public participation and protect the water resources with which they’re entrusted.”

“The Commissioners should take the time to consider and respond to citizen comments. The public has invested time and expense in coming before the Commission to speak and the public should be heard,” said Thomas Au, conservation chair of Pennsylvania Sierra Club.

“The SRBC needs to stop the premature authorization of growth-inducing actions like the shale gas-related water withdrawals on March 15th’s docket,” said Guy Alsentzer, staff attorney for Lower Susquehanna Riverkeeper. “The Commission must first take the initiative to study shale gas development’s impacts on water resources and water resources management on a Basin-wide scale and incorporate those findings into its decision-making. Only by doing so can it fulfill its Compact and regulatory duties to preserve water quantity and quality for present and future generations.”

“SRBC should stop rushing to judgment on these huge water withdrawal permit applications. These proposed withdrawals are not happening in isolation,” said Myron Arnowitt, Pennsylvania State director for Clean Water Action. “SRBC needs to stop approving individual permits and conduct a study on the cumulative impact of full scale gas extraction on the entire Susquehanna watershed. These decisions affect residents in three states and should not be made without conducting real, science-based study.”

“The routine approval of water withdrawals for drilling and fracking in the Susquehanna River Watershed by the SRBC is resulting in water and air pollution and community degradation, and yet the SRBC is not addressing the outcomes from their decisions. They cannot bury their heads in the sand while the air and water of the Basin are polluted and people are getting sick,” said Maya van Rossum, the Delaware Riverkeeper. “The SRBC should not approve the proposed water withdrawals and instead enact a moratorium while they address the damaging fallout from gas extraction and put in place a plan to protect and restore the Susquehanna River Watershed. The degradation from gas in the Susquehanna affects us all and it’s time to stop it.”

http://ecowatch.org/2012/natural-gas-industry-gets-water-permits-while-science-and-public-get-ignored/

Chesapeake, Partners to Build Ohio Pipeline

Chesapeake Energy Corp. said Tuesday that it and two partners plan to build a $900 million pipeline system in eastern Ohio to transport and process natural gas tapped from the Utica Shale.

Eastern Ohio is seen as the latest hot oil-and-gas producing region, and Chesapeake was one of the first large explorers to move into the region, snapping up drilling rights to some 1.3 million acres at a cost of around $2 billion.

While the discovery of vast natural-gas stores locked in shale formations has pushed prices to 10-year lows this year, energy producers are optimistic about the Utica Shale. They expect large swaths of the deeply buried rock formation to yield oil and natural gas liquids, such as propane, butane and ethane, which trade at a premium to methane, or natural gas.

As of late last month Chesapeake had drilled 42 wells in Ohio, but only seven were producing as the company waiting to be completed, or hydraulically fractured, and connected to pipelines. The company has said it plans to ramp up drilling in Ohio this year, but like other new production fields, the area lacks crucial pipelines and other infrastructure to carry oil and gas to customers.

The planned Utica distribution system will carry and process both natural gas and liquids, which are often used in manufacturing. The abundance of shale ethane, for example, has prompted Royal Dutch Shell PLC to plan a plant in the region that converts the liquid into ethylene, a core component of plastics.

Oklahoma City based Chesapeake, through its publicly traded subsidiary Chesapeake Midstream Partners LP, will own 59% of the pipeline project and operate it. M3 Midstream LLC will control 33% and EV Energy Partners LP, a Houston firm with which Chesapeake owns some of its Ohio drilling land, will have an 8% stake.

French oil giant Total SA, which paid $2.32 billion for a 24% stake in 619,000 of Chesapeake's Ohio acres, has the right to participate in the project, Chesapeake said. Should Total choose to do so, the stakes of Chesapeake and EV Energy Partners would be trimmed.

The system is expected to be operational by the second quarter of 2013.

It's main cryogenic processing plant will be located in rural Columbiana County, northwest of Pittsburgh, and will be able to initially handle 600 million cubic feet of gas per day. Once separated there, gas liquids will be transported to a rail-connected complex in a nearby county that will be able to store up 70,000 barrels.

http://online.wsj.com/article/SB10001424052702304450004577279920334359392.html?mod=googlenews_wsj