Posts Tagged ‘Chesapeake Energy Corp.’

April 03, 2011|By Andrew Maykuth, Inquirer Staff Writer

Natural gas companies have been drilling in Pennsylvania for more than a century, but Marcellus Shale exploration is unlike anything before.

Consider Seneca Resources Corp., which has operated traditional wells that capture gas beneath a small acreage. Seneca has joined the rush to drill deep Marcellus wells, which collect gas beneath vast reaches of land.

“By the time we got to about six wells, we were producing more in the Marcellus than we were in our 3,000 shallow wells,” Matthew D. Cabell, Seneca’s president, told investors in January.

As Marcellus Shale operators move into full-scale production, several trends are emerging that underscore the huge transformation under way in Pennsylvania.

Philly.com

The Associated Press

NEW YORK — Chesapeake Energy Corp. said Monday it will sell all of its assets in a massive natural gas field and stakes in two companies as part of a plan to reduce debt and focus on more profitable regions.

Chesapeake says it hopes to bring in more than $5 billion, before taxes, from the sales. Chesapeake Energy is aiming to reduce its debt by 25 percent by 2012.

The natural gas properties are located in the Fayetteville shale, a natural gas field in central Arkansas. Chesapeake Energy is the second largest producer of natural gas there.

The Oklahoma City company says it will sell its 25.8 percent stake in Frac Tech Holdings LLC and its 20 percent piece of Chaparral Energy Inc.

The move will allow Chesapeake to focus more on higher-margin oil assets as oil prices spike and natural gas prices remain low. The Fayetteville shale is not as profitable as several other major U.S. natural gas fields.

Chesapeake believes the deal will close in the first half of this year, along with the sale of Chesapeake’s stake in a drilling project in an emerging oil field in northeast Colorado and southeast Wyoming announced last month.

China’s state-owned offshore oil and gas company CNOOC Ltd. agreed to pay $570 million for a one-third stake in the project. Chesapeake will operate the 800,000-acre project in a pair of basins in a region called the Niobrara shale. CNOOC will pay two-thirds of the project’s drilling costs, up to an additional $697 million.

Over the past several years, drillers like Chesapeake have learned to tap vast amounts of natural gas in shale deposits. More recently they have learned to adapt the new technology to also produce oil. Engineers have learned to drill down and then horizontally into layers of shale. They then pump a slurry of sand, water and chemicals into the well to crack the rock and allow oil and gas to escape.

Reposted from: Times Leader

Family feels deceived by Chesapeake Energy’s small offer and may fight back.

MICHAEL RUBINKAM Associated Press

MONTROSE — As she lived out her final years in a nursing home, 94-year-old Bernice Price had a visitor one day, a stranger interested in her family’s wooded, 115-acre spread. Would she care to lease it to one of the nation’s biggest energy companies?

It was a paltry offer, only $50 an acre. Price accepted it, signing a 10-year lease giving Chesapeake Energy Corp. the right to sink gas wells on the former dairy farm in northern Pennsylvania.

While other landowners living atop the gigantic Marcellus Shale gas field made similar bad deals as the gas rush began in 2007 — signing industry-friendly leases for a relative pittance — Price’s leasing story came with a twist: She wasn’t the only person who had a say in what happened to the land. Her three grandchildren shared ownership and they knew nothing about the agreement.

Chesapeake not only didn’t get their consent, the company never approached them about the land that’s been in their family since the 1830s.

“We weren’t even invited to the party,” said Craig Stevens, her 50-year-old grandson.

Stevens and his siblings were incensed when they found out, accusing Chesapeake of going behind their backs and disregarding their rights as co-owners. They worried that drilling would ruin the land. They also remembered the words of their late father — Bernice Price’s son — who had voiced deathbed concerns about the approaching gas boom and warned them not to sell out.

Now they were confronted with a dilemma.

Should they fight to keep Chesapeake off the property? Or should they swallow their anger and try to persuade the company to make them an offer, one that would not only pay more than their grandmother had agreed to but include adequate protections for the place they held dear?

Their story, played out over years and concluded just this month, illustrates both the promise and the peril for landowners above the vast Marcellus Shale, a rock formation more than a mile deep that holds the largest known reservoir of natural gas in the United States — one that could supply the entire East Coast for 50 years.

Recent technological advances have allowed drillers to reach and free the gas for the first time, creating a rush that is transforming sleepy villages into boomtowns and fattening landowners’ bank accounts by billions of dollars. Chesapeake alone has forked out more than $1.1 billion in Marcellus lease payments and royalties since 2008.

Yet environmentalists and many homeowners in the Marcellus are fighting the gas industry, contending it is turning a bucolic region of small towns and farms into an industrial zone replete with heavy truck traffic and poisoned drinking water.

In Dimock, Pa., for example, homeowners sued last year after Houston-based Cabot Oil & Gas Corp. drilled faulty wells that allowed methane and, possibly, toxic drilling chemicals to escape into their drinking water aquifer. Chesapeake itself has been blamed for instances of methane migration into some nearby water supplies, though no link to the company has been proven. Federal environmental regulators are also studying the environmental consequences of “fracking,” a controversial drilling technique in which crews inject millions of gallons of water, mixed with sand and chemicals into each well to crack open the shale and release the gas.

A few miles away from Dimock, in Silver Lake Township, Bernice Price’s heavily wooded tract was an insignificant speck on Chesapeake’s map. The Oklahoma City-based company is the most active driller in the United States and the largest stakeholder in the Marcellus Shale, with 2.7 million acres under lease.

But the land meant everything to Craig Stevens, a sixth-generation owner.

So, a few days before Price’s death in January at the age of 97, Stevens moved in to the family’s century-old wood-frame home — determined to set right what he believed to be a terrible wrong.

She had signed near the beginning of a leasing frenzy in which landmen, working on behalf of dozens of drilling companies, rushed to lock up millions of acres in the huge untapped gas field beneath Pennsylvania, New York, West Virginia and Ohio.

Most landowners who signed early could do little but stew as lease prices climbed ever higher, and neighbors banded together and signed lucrative master leases bringing thousands of dollars per acre. But Stevens believed he had a strong case against Chesapeake.

“I was really sickened that they hunted my grandmother down in the nursing home. They came in here as used-car salesman, snake-oil guys,” Stevens said. “I’m sure they were down there stroking her hard: ’Your family will be millionaires, set for life.”’

Strolling an overgrown pasture with his two young sons in late summer, Stevens said he believed that Price, though mentally competent, didn’t have a clear understanding of what she was agreeing to.

“This is all about getting their meat hooks and Dracula fangs into the ground,” the California native said.

He gestured out over the hushed landscape, where thick stands of ash, cherry, oak and maple give way to a 15-acre clearing where dairy cows used to graze. Two natural springs, a stream, and abundant wildlife — including bear, fox, coyote, deer and turkey — complete the picture. “It’s beautiful. It’s not something I want to see destroyed.”

A bulldog of a man — friendly but tenacious, with close-cropped hair and a solid, compact build — Stevens was motivated to speak out in part by his deathbed conversations with his father.

Lloyd Stevens lived with his mother, Bernice Price, for more than a decade after she was seriously injured in a 1994 car accident. Occasionally, drilling company representatives came knocking. He always shooed them away.

Diagnosed with terminal cancer in 2006, Lloyd warned his son about gas drilling. The elder Stevens had co-founded a nonprofit group that manages Salt Springs State Park, a nearby gem that boasts three waterfalls and 300-year-old hemlock trees. He worried that drilling would ruin the unspoiled beauty of his little corner of the Endless Mountains.

Lloyd also had a keen business sense: He knew the family homestead was worth a whole lot more than the landmen were offering.

“Dad knew there was something here. He could see the changes. The last few days of his life, he said, ’Here’s what I want you to do. Here’s what my wishes are,”’ Craig Stevens recalled. “’Don’t sign a gas lease’ was his thing.”

Lloyd Stevens died on April 30, 2007.

Less than three months later, his mother signed the lease.

The agreement was ratified by her other two children, each owning a one-third share of the property. The remaining one-third stake was inherited by Lloyd’s three children — Craig, his brother Mark, and their sister Laurie Strawn.

It’s unclear why Chesapeake apparently made no attempt to contact them about a lease when its own policy says that it should try to obtain agreements with “all co-tenants prior to developing minerals.” Indeed, there’s evidence that Chesapeake was aware of the divided ownership. Mark Stevens received a sheath of documents earlier this month that included an old ratification letter that bore his name and address, along with a sticky note indicating it should be “sent soon.”

It never was.

In a statement Oct. 1, Chesapeake said that while its policy calls for inclusion of all owners, it was not legally bound to get the signatures of the grandchildren in order to drill on the property. Chesapeake cited a 100-year-old Pennsylvania court case to bolster the claim.

Brian Grove, senior director of corporate development, said Pennsylvania and other states follow a “majority rule” allowing a landowner to develop minerals without the consent of the co-owners — so long as the non-consenting parties receive “an accounting for their interest in the minerals developed.”

Thus, he said, “It is Chesapeake’s position that the lease and the ratifications are legal and binding and in full force and effect.”

Stevens and his siblings were in the dark for 14 months until a letter arrived from their estranged aunt: “As you should know,” it said, “Gram signed a ten-year oil and gas drilling lease on her property in July ’07.”

Strawn, for one, was shocked.

“We were very unhappily surprised,” she said. “They did exactly what my father said he had feared for the community: They had signed for very little money, and without regard to the potential environmental problems or liability issues.”

Copyright: Times Leader

Chesapeake Energy facility in Bradford County provides training for safe work in gas fields in Shale region, company says.

STEVE MOCARSKY [email protected]

ATHENS TWP. – Natural gas drilling might have come to an abrupt end in Luzerne County with Encana Oil & Gas announcing on Thursday that two exploratory wells wouldn’t produce enough gas to make drilling here feasible. But there still will be plenty of jobs in the industry just to the north and west.

And the second largest natural gas producer in the country has opened a rig worker housing and training facility in Northeastern Pennsylvania as part of its commitment to hire Pennsylvanians and folks from nearby states for those jobs.

Chesapeake Energy Corp. recently announced the opening of Nomac Drilling LLC’s Eastern Training Center and Housing Facility in Bradford County. Nomac is a subsidiary of Chesapeake.

The 36,960-square-foot facility offers free, temporary housing for Nomac employees working in the Marcellus Shale. It consists of six dormitories that can house 276 workers at a time. Each dorm has 23 rooms with common restroom/shower facilities. Most rooms contain two twin beds; one dorm has 10 rooms with one bed each.

Other on-campus facilities include a cafeteria, a laundry building and two recreation centers – one smoking, one non-smoking. Outside are a baseball field, a volleyball court and horseshoe pits.

The 3,600-square-foot training center is equipped with state-of-the-art technology and training equipment. Training topics will include regulatory and operational training that emphasizes safety, environmental protocols and best management practices to prepare workers for long-term employment, according to company literature.

“This facility, I think, represents not only a commitment to the community, but it also, I think, shows a loyalty we have to our employees,” Chesapeake Vice President of Drilling Services David Fisher said Thursday before a tour of the facilities for area officials and the media.

“What you’re going to see today is a lot of amenities that we provided for all the employees that work on the rigs. … These guys work 14 days straight, 12 hours a day, and it’s very hard work, both in the summer and in the winter. … We want to give them an opportunity to be able to relax … where they can kind of get away and be rested and well fed,” Fisher said.

But training is an equally important aspect for the facility, he said, noting that Chesapeake set up a training program in Searcy, Ark., about two and a half years ago and, since then, saw about 657 people graduate from it.

“Our goal for the next three to six months is to take what we do at Searcy from a training standpoint, which includes a simulator and additional training for new employees and for existing employees, and duplicate that here. We had to set up this facility first and have a foundation to do that from,” Fisher said.

Kimberlee Smithton, director of training for drilling services, said the major focus of training for new and existing employees will be on safety.

“Keeping people safe is our number one priority – period. Now, what happens when you’re out there working on a rig a lot of times, and say you’ve been out there a year or so and you know it like the back of your hand, well then sometimes you get a little complacent. And that’s why we as a company cannot ever let our commitment to safety waver,” Smithton said.

“So I hope when you come back and look at this facility six months from now, you’re going to be even more awe-inspired by the amount of training we have here. … It’s not going to look the same; we don’t want it to look the same. We want it to continually grow. We want to make sure we have people that grow into careers, and, most importantly, when they show up on a location for any of our companies, that they leave that location just like they arrived, all their fingers, all their toes, and they’re safe,” Smithton said.

Currently, people hired for work on rigs in the Marcellus Shale in Pennsylvania spend 18 days at the Searcy training facility and complete two or three seven- to 14-day “hitches” of hands-on training on rigs in Texas. The whole process, with time off in between Searcy training and the hitches, takes 75 to 90 days, Smithton said.

The next step for the center is designing a program and building a drill rig simulator “so we can start doing all of our basic training for Pennsylvanians in Pennsylvania,” Fisher said.

Chesapeake Senior Security Officer Steve Evans said there will be two security officers in an office at the entrance to the facility 24 hours a day “to enforce the strict rules that are in place here. It’s a facility for work purposes, for housing hard-working individuals who have to perform a hard job. And when they come in here, the rules are no contraband. Basically, it’s a place to rest,” he said.

Copyright: Times Leader

Clean-Burning Marcellus Natural Gas Helping Small Businesses Reach “The American Dream”: Fred Raco is living proof that hard work plays a big role in reaching the American dream. … Raco is negotiating to purchase and refurbish a new facility in Richland Township, giving him three times more space than the city site. “We’re really gearing up for this,” he said of the Marcellus Shale. Raco currently has 23 employees working at his Johnstown laboratory and in the field. He expects his employment to reach 50 within two years. … Raco thinks Marcellus may allow more young people to stay at home. “They are by no means minimum-wage jobs.” Raco rejects the notion that the Marcellus jobs are going to workers from Texas. “There is a real misconception that all the jobs are being filled by people from out of the state,” he said. “We’re doing work with companies that are Pennsylvania-based that are manufacturing metering stations, manifold piping, that type of thing.” (Tribune-Democrat, 12/15/10)

Marcellus Shale Creating Jobs for America’s Veterans: A Penn State economic impact study predicted the industry will be an $8 billion boon to the state, with about half of that money generated in southwestern Pennsylvania. The study, commissioned by the Marcellus Shale Coalition, also projected that 88,000 jobs would be created in Pennsylvania this year.Those jobs are great opportunities for veterans, said Kathryn Klaber, executive director of the Marcellus Shale Coalition. Range employs dozens of veterans, Mr. Pitzarella said. “They’re ideal candidates,” he said. “They’re hard workers, team-oriented, natural leaders and have no issues with long hours.” … When Carl Dokter served another tour of duty overseas, Range held his job for two years and hosted a welcoming ceremony for him when he returned, he said. … Chesapeake Energy Corp. is another driller that employs a large number of veterans and is expanding its local footprint. The company employs about 150 military officers and servicemen, spokesman Rory Sweeney said. (Post-Gazette, 12/16/10)

Small Business Owner: “I am a Marcellus Overnight Success”: Three years ago, Larry Mostoller had two employees and was trying to develop a business park outside Somerset. Today, Mostoller employs 100 people and provides work for more than 30 subcontractors. He has gotten involved in the Marcellus Shale industry. “I am a Marcellus overnight success,”Mostoller said. Mostoller is co-founder and CEO of Somerset Regional Water Resources, a two-year-old company that provides nearly all general labor needs on a gas drilling site. …Mostoller is proof of Marcellus Shale’s role in changing the economic landscape. … One thing is certain: Marcellus is having an impact. … “It’s absolutely phenomenal. All of us are going to live better.” He is convinced that Marcellus Shale gas will continue to help meet the nation’s energy needs for years to come, and its development will take decades. “The person that drills the last Marcellus well has not been born yet,” Mostoller said. (Tribune-Democrat,12/15/10)

Mayor: ‘Marcellus Multiplier’ Jobs Good “For The Entire Region” : For one Mon Valley municipality, drilling for natural gas into the Marcellus Shale will create dozens of new jobs. Export-based Dura-Bond Industries will open a 55,000-square-foot pipe-coating facility along the Monongahela River in Duquesne. It will serve to complement the company’s existing coating facility in nearby McKeesport. … Once opened, the facility will create between 75 and 85 new jobs in the Mon Valley, a fact that is not lost on Duquesne Mayor Phil Krivacek.“Well, anytime you can bring in a company that will create new jobs in the region is a definite plus,” said the mayor. “I think this a good thing for not only Duquesne, but for the entire region.” … “We are good stewards of the environment and will continue to be. It is imperative that the needs for job and energy production can meet with the needs of the environment.” (Post-Gazette, 12/16/10)

Small Business Owner on Marcellus Supply Chain Related Work: “We Were So Lucky”:Chesapeake has spent more than $94 million this year to pave or repair 300 miles of roads in Bradford and three other counties. That has benefited Leo Drabinski, who co-owns Calvin C. Cole Inc., a hard-rock quarry and construction company in Bradford County. He said demand for rock used for roads and well sites used by gas companies grew 10 times in the past year. He increased his quarry staff to 15 from six, and even started a van service to shuttle rig workers to their jobs. “We were so lucky,” Mr. Drabinski said. “We’re right in the heart of this natural-gas boom.” Business is also booming for truck dealerships, restaurants and motels.Some farmers have sold lease rights for $5,000 an acre, using the money to pay off debt, invest in new farm equipment or retire. … Chesapeake, whose Towanda offices are in a renovated department store, says it is working with local colleges so it can train an all-local work force. In the past year, the company increased its staff in the state to 1,100 from 250 and said more than 400 employees are state residents. (Wall Street Journal, 12/14/10)

Responsible Marcellus Development “The Region’s Gold Rush”: The Marcellus Shale is said to be the biggest natural gas field in the United States — spanning nearly 61 million underground acres under Ohio, West Virginia, Pennsylvania and New York. Southwestern Pennsylvania is called the “fairway” of the shale by industry experts, and its economic impact reaches beyond the energy in demand. Local politicians have described it as the region’s gold rush and the second coming of the coal and steel industries. (Post-Gazette, 12/16/10)

Economic Leaders: “Marcellus-Related Opportunities Have Meant Jobs in Various Areas”: Economic leaders…have been watching the Marcellus action to the west of the region and in the state’s northeastern counties. “JARI has identified the Marcellus Shale opportunity as one of the top opportunities for our region in the coming years,” Thomson said. … “The Marcellus industry needs just about anything and everything. It’s just amazing the amount of things that are needed.” … “The spinoff is where we’re going to see the economic impact,” Silka said. … Bradford County Commissioner John Sullivan said Marcellus-related opportunities have meant jobs in various areas. “They’re building three motels in the county,” said Sullivan. Sullivan has a friend who sells tires, and the Marcellus drilling has had a significant impact on his business. Another friend has a quick-lube shop and is overrun with business… Williamsport has seen 75 new businesses open during the past 18 months – since the surge in Marcellus drilling began there. … Kathryn Klaber, president of the Marcellus Shale Coalition said much of the economic benefit will be outside the direct industry. “The jobs story is starting to have a much broader reach,” Klaber said. … State Sen. John Wozniak, D-Westmont, said the Johnstown region is on the cusp of an improved economy. “It’s just beginning and there is a tremendous opportunity out there.” (Tribune-Democrat, 12/15/10)

Wall Street Journal Underscores Marcellus Shale’s Positive Economic Impact: A recent Penn State study estimates that Marcellus is the second largest natural gas field in the world. The study notes that Pennsylvania had $4.5 billion in Marcellus-related investment in 2009, generating nearly $400 million in state and local tax revenue and 44,000 jobs. … The drilling industry could compensate with new jobs in construction, trucking, engineering and a variety of attendant services. The industry also pays royalties and leases land from landowners, who pay taxes and buy goods. … The EPA and the Ground Water Protection Council, a nonprofit made up of state regulatory agencies, have published studies concluding that fracking is safe. While energy exploration is never risk-free, the Ground Water Council hasn’t found a single documented case of fracking having polluted local ground water. (Editorial, 12/16/10)

New Fed. Govt. Analysis Projects Rapid Growth in Clean-Burning Natural Gas

“DOE sees rapid growth in natural gas”: The Energy Department foresees a rapid growth in natural gas production over the next 25 years, according to a report from its statistical arm Thursday. … Natural gas will represent 62 percent of new capacity by 2035, EIA said.The greatest chunk of that should come from shale gas, which has already increased production 14-fold over the last decade. (Politico, 12/16/10)

“Shale-Gas Output May Double by 2035, Reducing Energy Imports, U.S. Says” roduction forecasts for natural gas locked in shale have doubled, which will help the U.S. become less reliant on imported energy, according to a federal agency. The Energy Information Administration’s annual long-term forecast shows gas from shale will play a bigger role in meeting U.S. demand, Richard Newell, agency administrator, said today in Washington.Production in 2035 is “twice the level that we had in last year’s outlook,” he said. … This year’s outlook more than doubles the estimate of U.S. technically recoverable reserves of natural gas from shale, a type of sedimentary rock, to 827 trillion cubic feet from 347 trillion cubic feet. New technologies that let natural-gas producers drill horizontally and fracture the rock formations with injections of water, sand and chemicals account for the increase, Newell said. (Bloomberg, 12/16/10)

“US doubles estimates for gas reserves”: In the first release from its Annual Energy Outlook for 2011, the EIA more than doubled its central estimate of the country’s technically recoverable reserves of shale gas, from 353,000bn cubic feet to 827,000bn cubic feet. The estimate would be enough to cover the entire gas consumption of the US for 36 years. The rapid development of shale gas production has already had profound effects on the US energy system, driving down prices and inspiring companies to invest in plants to produce supercooled liquefied natural gas that can be exported in tankers to Europe or Asia. (Financial Times, 12/16/10)