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Ohio Fracking: State Agency Proposes Rules For Drilling In State Parks

COLUMBUS, Ohio (AP) — An Ohio natural resource agency’s proposed guidelines for drilling in state parks would require natural gas and oil companies to stay at least 300 feet — the length of a football field — from campgrounds, certain waterways and sites deemed historically or archaeologically valuable.

Documents on proposed guidelines were released by the state Department of Natural Resources this week after the Ohio chapter of the Sierra Club filed a lawsuit claiming the agency ignored repeated requests by the group to review them.

The 89-page report lists the “best management practices” on site restoration and other topics, and guidelines for emergency and pollution incidents. Other proposals include state approval before companies could store drilling waste in pits and an agreement on the locations of all drilling equipment.

The agency also released proposals for drilling leases. They show possible arrangements for companies interested in drilling directly below or drilling horizontally from land adjacent to property with oil and gas deposits.

Agency spokesman Carlo LoParo, who said the 300-foot buffer proposal would be applied above ground, said there are no specific policy decisions yet on what state land will be put up for competitive bids for drilling. But he emphasized that hundreds of other state properties besides state parks would be considered. He said a five-member commission that will be appointed later this summer will select the properties and lease the mineral rights, though the state can move forward with plans before the commission is appointed.

Natural gas drillers in Ohio are active in the eastern part of the state, going after deposits in the underground Utica Shale. The state passed a law in September that opened its parks and other state-owned lands for drilling, and officials have been developing leasing terms for drilling companies.

Jed Thorp, the Sierra Club’s Ohio chapter manager, said the proposals are inadequate. He said he’s hopeful state lawmakers will eventually reverse the law.

“When people go to a state park, they don’t want to see fracking, or hear fracking, or smell fracking,” he said in a statement. “They want to relax.”

Thorp also said the Sierra Club, which filed its lawsuit Monday, won’t drop its suit. He said the agency failed to follow the state’s public records law by ignoring requests for the documents as far back as October.

LoParo called the group’s reaction premature because the documents are draft proposals that don’t apply to a particular circumstance. He said the documents were only completed this week.

“Public records are something that we take very seriously,” he said. “You can’t provide something that you don’t have. And these documents were provided as soon as they were available.”

Opponents say they’re concerned about the environmental impact of the drilling, which includes hydraulic fracturing, or “fracking.” The process involves drillers blasting millions of gallons of water, sand and chemicals deep underground to break up rock deposits.

Supporters of the law say there’s a potentially vast reservoir of oil and gas in the Utica Shale, which lies below the Marcellus Shale, where oil companies in Pennsylvania have drilled thousands of wells in search of natural gas and oil.

But natural gas drilling has become a contentious issue in Pennsylvania, where public health advocates have criticized a new law that will limit accessible medical information on illnesses that may be related to gas drilling. It takes effect April 14.

According to the National Conference of State Legislatures, more than 130 bills have been recently introduced in 24 states to address fracking. It includes a range of topics like waste treatment, disposal regulations and requirements to publicly disclose the composition of fracturing fluid chemicals. At least nine states have proposed fracking suspensions or studies on their impact.

 

Source: Huffington Post

Ohio Utica Shale Map Creates a Big Buzz

The Ohio Department of Natural Resources (ODNR) recently released an updated map showing their best guess as to where the best prospects are for Utica Shale drilling in the state (a copy of the map is embedded below). And boy oh boy, is that map creating a buzz! Some residents are excited that their property may now become highly desirable to be leased for drilling, and other residents are discouraged that their properties, once thought desirable, may be less so now.

Larry Wickstrom, one of four men involved in developing the map, says he is a little flabbergasted by all the attention it is getting.

The map is “just the addition of new information … and fine-tuning what we have,” he said. It is merely the state’s best guess as to what might be found thousands of feet underground.

Areas outside the main development area could still be productive, he advised, and the map probably will change as state geologists get even more information.

The map, relying on new data, shows a slightly different footprint in eastern Ohio for Utica shale, identifying a core area for drilling that covers 10.8 million acres from Ashtabula County south into Guernsey County.

Much of the drilling in Ohio has been located in Carroll, Harrison, Columbiana and Jefferson counties. Those four counties generally rate good to very good, according to the new data.

Summit, Medina, Wayne and Portage counties are all in the good area. Most of Cuyahoga, Lake and Lorain counties are now excluded.*

So far energy companies have drilled 60 Utica gas wells in Ohio, with permits to drill an additional 194 approved by the state. Estimates are that over 2,000 wells will be drilled in the Utica in Ohio by 2015, so we’re just at the beginning of major drilling activity. It means there’s a lot on the line for landowners who want to lease their land—and maps like this one will play a part in whether or not they lease, and if they do, how much money they will receive. So contrary to the flabbergasted ODNR rep, it’s no surprise to MDN that there’s a big buzz over this latest map.

Source:  Marcellus Drilling

New Division of Soil and Water Factsheet: Water Withdrawal Regulations for Oil and Gas Drilling

Click to view a PDF

Fresh water is a critical component for the drilling and development of Ohio’s oil and gas resources. Water is used for support purposes, such as dust control on access roads and equipment cleaning; drilling operations for making drilling fluids and the cement used for securing casing in the bore hole; and for well stimulation processes such as hydraulic fracturing.

In most cases, between two and six million gallons of water are needed to complete hydraulic fracturing on a Marcellus or Utica shale well. Drilling and hydraulic fracturing of deep shale wells is in its early stages in Ohio, but all indications are that oil and gas development from shale will expand in the next few years. With the expansion of deep shale drilling, the need for reliable water supplies will expand at an equal pace.

To assist oil and gas drilling companies with understanding the regulations governing withdrawal and use of water in Ohio, the following provides general information regarding water rights, water withdrawal regulations, diversions of water across the Lake Erie – Ohio River watershed divide, and consumptive use of water.

Water Rights in Ohio
In Ohio, land owners have the right to make reasonable use of ground water underlying their land or of the water in a lake or watercourse located on or flowing through or along their riparian land. This right to a reasonable use is a property right protected by Article 1 Section 19b of the Ohio Constitution. Withdrawals that unreasonably interfere with the withdrawals of other land owners using the same stream or aquifer may be subject to liability via civil litigation.

Water Withdrawal Registration
Section 1521.16 of the Ohio Revised code requires any owner of a facility, or combination of facilities, with the capacity to withdraw water at a quantity greater than 100,000 gallons per day (about 70 gallons per minute) to register such facilities with the Ohio Department of Natural Resources Division of Soil and Water Resources. It is important to note that the law requires registration if a facility has the capacity to withdraw 100,000 gallons per day even if a lower volume is actually withdrawn. Registration under this program is not a permit to withdraw water, nor does registration impose any restrictions on withdrawals. Withdrawal registration requirements pertain to all of Ohio.

Diversion of Water from the Ohio River Drainage Basin into the Lake Erie Drainage Basin

Ohio Law (ORC 1501.32) requires a permit, issued by the Director of the Department of Natural Resources, to divert more than an average of 100,000 gallons per day, over any 30-day period, out of the Ohio River drainage basin into the Lake Erie drainage basin. Diversion as applied in this section means the transfer of water from the Ohio River drainage basin to the Lake Erie drainage basin.

Diversion of Water from the Lake Erie Drainage Basin into the Ohio River Drainage Basin


The Great Lakes –St. Lawrence River Basin Water Resources Compact (Compact), a binding agreement among the eight states that border the Great Lakes, which has been enacted into Ohio law and carries the force of Federal law, specifically prohibits (with very limited exceptions) any new or increased diversion of any amount of water out of the Lake Erie drainage basin. Therefore, no permits for the transfer of water out of the Lake Erie basin for oil and gas operations, or other types of operations, are allowed.

Consumptive Use of Water
No facility may have a new or increased consumptive use of more than 2 million gallons of water per day, averaged over any 30-day period (60 million gallons per month), without first obtaining a permit from the Director of the Department of Natural Resources (ORC 1501.33). Consumptive use as used in this law, means a use of water resources, other than a diversion, that results in a loss of that water to the basin from which it is withdrawn and includes, but is not limited to, evaporation, evapotranspiration, and incorporation of water into a product. For oil and gas operations, this could include the incorporation of water into drilling fluids and hydraulic fracturing fluids.

Prior Notice and Consultation Requirement of the Compact
In December 2013 and thereafter, the Compact requires all Lake Erie basin proposals for new or increased consumptive uses of 5 million gallons per day or more, averaged in any 90-day period (450 million gallons or more in a three month period), to be submitted to the eight Great Lakes States and the Canadian provinces of Ontario and Quebec for review and comment.

Information contained in this fact sheet was obtained from ODNR, Division of Soil and Water Resources files, the publication entitled Ohio Conservancy Districts, (ODNR-DW, 1975), ORC Chapter 6101, the Ohio Conservancy District Conference, and the directors or staff of Ohio’s conservancy districts.

For more information, contact the ODNR-SWR by:

Phone: 614-265-6610
Fax: 614-265-6767
E-mail: dswc@dnr.state.oh.us

A pdf of the fact sheet can be found here: http://www.dnr.state.oh.us/Portals/7/pubs/pdfs/fctsht68.pdf

State Rep. Okey Introduces Truth in Leasing Act

Posted: Mar 26, 2012 10:30 AM EDT
Updated: Mar 26, 2012 10:30 AM EDT

COLUMBUS,Ohio –
State Representative Mark D. Okey introduced today his “Truth in Leasing” bill to protect Ohio’s landowners against fraud, abuse, and deceptive practices by the oil and natural gas industry.

“We need to make sure that drilling in Ohio is conducted safely and fairly for all parties involved,” Rep. Okey said. “Far too many landowners are deceived into signing leases that deny them the compensation and accountability that they are entitled to.”

According to a press release, The Truth in Leasing Act will include provisions in three main areas: fairness, honesty, and accountability. Minimum royalty payments will be set at a level that reasonably compensates landowners for their resources, while prohibiting oil companies from using legal loopholes to take more than their fair share. Landowners would have the right to yearly audits – at the driller’s expense – to ensure that their royalty payments are accurate.

To guarantee an honest leasing process, the “landmen” who secure leases on behalf of drillers would be subject to a new licensing system. Before any lease is signed, landowners must be informed of their rights and encouraged to consult with an independent attorney to protect their interests.

Finally, companies would be held accountable for the consequences of drilling, by disclosing all chemicals and compounds used to the Ohio Department of Natural Resources, paying for the testing of local water supplies before and after drilling, and issuing public notification of any accidents or incidents related to drilling that may result in property damage or health risks.

“This is common sense legislation that will prevent exploitation of Ohio’s citizens and resources,” Rep. Okey said. “More and more leases are being signed every day. It is imperative to move quickly to protect as many landowners as possible.”

Rep. Teresa Fedor (D-Toledo) will be a joint sponsor of the bill.

 

Link to Original: http://www.wtrf.com/story/17254675/state-rep-okey-introduces-truth-in-leasing-act 

Extension Educator Says: Shale payments subject to Ohio’s Commercial Activity Tax

Landowners across Ohio may be surprised to learn the bonus lease and royalty dollars received for their Marcellus or Utica Shale leases will be subject to theOhio commercial activity tax (CAT) if payments of over $150,000 are received.

What is it?

The CAT was enacted in House Bill 66, which was passed by the 126th General Assembly in 2005. The CAT is an annual tax imposed on “the privilege of doing business in Ohio,” measured by taxable gross receipts from most business activities.

Most receipts generated in the ordinary course of business are included in a taxpayer’s CAT base. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses.

The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). The tax does have limited exclusions for certain types of businesses, such as financial institutions, dealers in intangibles, insurance companies and some public utilities if those businesses pay specific other Ohio taxes.

A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with the Department of Taxation as a taxpayer.

The term “gross receipts” is broadly defined to include most business types of receipts from the sale of property or in the performance of a service. Please note that certain receipts are not taxable receipts, such as interest income.

The following are some other examples of receipts that are excluded from a taxpayer’s CAT base: dividends, capital gains, wages reported on a W-2, interest (other than from credit sales), or gifts.

 

Oil and gas income

Internal Revenue Code section 1231 provides guidance on why the oil and gas receipts are included in a taxpayer’s CAT base. Specifically, the Code states that timber, coal, and iron ore are considered property used in the trade or business, assuming they are contained in the ground.

Once the mineral is removed from the ground, however, it is no longer an asset used in the trade or business, and therefore receipts from the sale of this mineral are included in a taxpayer’s CAT base.

$150 and 0.26%

 So what are the tax rates for the CAT? The rate for the first $1 million in taxable gross receipts (from $150,000 to $1 million) is a flat $150. The rate for receipts above $1 million is 0.26 percent.

The $150 annual minimum tax is due by May 10 of each year with the annual tax return for calendar year taxpayers or with the first quarter return for calendar quarter taxpayers.

A calendar year taxpayer who will have over $1 million in taxable gross receipts for a calendar year is required to switch to a quarterly taxpayer in the subsequent year and, if it elects to, can switch to a quarterly taxpayer at any time during the current calendar year.

CAT Example

 John B. Landowner owns 400 acres in northeastern Ohio and is a teacher at the local high school. He leases his land for $3,000 per acre, which totals a bonus payment of $1.2 million. To calculate his CAT obligation, Mr. Landowner would pay $150 for the first million dollars and then apply the .26% tax rate for the remainder ($200,000), which equals $520.

He has no other commercial business activity so his total CAT obligation would be $150 + $520 =$670.

Link to original: http://www.farmanddairy.com/news/shale-payments-subject-to-ohios-cat-tax/35664.html

 

ABOUT THE AUTHOR 

David Marrison is an agricultural extension educator in Ashtabula County.

E-mail: marrison.2@osu.edu

Thanks for your Support!

Last night http://www.lookbeforeyoulease.org crossed over 10,000 “hits”. This is great news,being that the site is less than 6 months old. We thank you for your support of Look Before You Lease and for sharing links, articles and our toolkit with your friends and family.

We are also grateful that so many landowners in Ohio, and elsewhere (we have distributed toolkits to landowners, attorney’s, and community leaders in 6 states) are choosing to do research and learn about shale development and leasing issues before deciding whether to lease their property.

We will keep on keeping on, but for now we just wanted to say Thank You!

Athen’s County: Lease situation gives signers more time to reassess situation

A letter to the Editor of the Athens News that mentions “Look Before You Lease”. Thanks to Bob Sheak for helping us to spread the word about the importance of information based decision making around shale development. We don’t know how this will play out in Athens county, but there is a renewed urgency for those who are in the position to extend their lease agreement to review our landowner toolkit and and learn about the other groups mentioned in Mr.Sheak’s letter before making the decision to extend, work out additional terms, wait and see how the first wells produce, or wait for results from studies currently being conducted by federal agencies before making a final decision. If you have a neighbor or friend who is in the group awaiting payment from Cunningham, or is thinking about leasing through another landowner group make sure they have visited our site, or request a landowner toolkit for them. We will send a CD version by mail.

To the Editor:

This Cunningham Energy decision not to sign the oil and gas leases aggregated by local attorney John Lavelle illustrates how little control Athens Countians have in such matters, even with legal advice. Low natural gas prices, too much supply, a moderate winter, perhaps new questions about how to dispose of wastewater — all may help to explain why Cunningham has had trouble finding a corporate partner prepared to share the costs of shale gas/oil mining and to take responsibility for the various operational aspects of such mining.

Groups and individuals such as Look Before You Lease, SD-Frac, Sierra Club, Heather Cantino, Christine Hughes and their many strong allies, letter writers, and others in Athens have worked hard to educate local officials and the general population about the extensively documented dangers of shale gas mining. According to a student-driven poll of over 350 mostly Athens County residents reported Monday in The Athens NEWS, about half of the respondents opposed the option of going ahead with fracking until there are adequate safety regulations in place. My guess is that, despite the economic recession that still rages, the number is this high because of the educational efforts of the aforementioned groups.

I also guess that when, for example, natural gas prices rise and the infrastructure to move the gas is in place, Cunningham will find a corporate partner to commence the drilling in Athens. There are not many large economic alternatives available now for new public investments, publicly supported projects, or a significant shift to solar or wind energy. And the low-or-no tax and small-government policies of Republicans seem to resonate powerfully with a large number of citizens across Ohio and the U.S. So, if there is oil or gas in our part of the Utica shale formation and it can be profitably extracted, the mining corporations will be back.

In the meantime, from the perspective of about half of Athens County, there is some welcome additional time for residents to learn and think about and perhaps see implemented (to some extent) more adequate regulations than now exist. Though we probably should not count on much regulatory assistance from Ohio Gov. John Kasich and the Republicans at the state level. At the state level, with Kasich at the helm, we may well end up unfortunately looking more like Pennsylvania (very supportive of gas/oil shale mining) than New York (which continues to postpone final decisions on the acceptability of shale-gas mining).

Bob Sheak
Athens

(A-news) Editor’s note: Though this won’t be known until actually drilling begins in this area, some geological experts predict that the main “play” in Athens County and the surrounding area will be for oil rather than “dry” natural gas. Currently, natural gas prices are depressed while oil prices are relatively high. TS

 

Link to original Article: http://www.athensnews.com/ohio/article-36389-lease-situation-gives-signers-more-time-to-reassess-situation.html

Cunningham Energy seeks to postpone lease bonus payments, attorney says

Posted: Sunday, March 11, 2012 5:56 pm | Updated: 7:16 am, Mon Mar 12, 2012.

By STEVE ROBB Messenger staff journalist

It is “very unlikely” that Cunningham Energy will be able to meet Thursday’s deadline for making lease bonus payments to Athens County landowners, but the company is seeking a time extension, according to an attorney who has negotiated oil and gas leases for hundreds of local property owners.

Attorney John Lavelle sent his clients a letter Friday updating them on the situation. Contacted Saturday by The Messenger, Lavelle declined to comment. However, The Messenger obtained a copy of the letter from a landowner.

Lavelle has said previously that he has negotiated about 500 leases with Cunningham for local property owners that include signing bonuses of $2,500 per acre for drill leases and $1,250 per acre for non-drill leases. Lavelle has said the bonuses for his clients total more than $100 million. Payment of the bonuses by this Thursday was required in order for the leases to take effect. The leases also call for payment of a 16 percent royalty.

“It is very unlikely the leases will be funded by March 15, 2012. The agreements will therefore expire by their own terms,” Lavelle writes in the Friday letter.

However, Lavelle also writes that Cunningham has presented the lease package to more than 130 “of the largest companies in the world” and is currently in “intense negotiations” with a joint venture partner which are expected to result in a purchase and sale agreement within the next seven to 10 days, with a closing within 45-60 days thereafter.

At a lease signing event last November at the Athens County Fairgrounds, Cunningham land manager Joseph Blackhurst said his company has only conducted vertical drilling in the past and that a joint venture partner working with Cunningham would be the one doing any horizontal drilling.

At the time, Blackhurst would not disclose the name of the joint venture partner, but said it is a well-known publicly traded company.

Lavelle’s letter, though, indicates that an agreement has not yet been reached with a partner.

Lavelle says in the letter that he was approached about extending all the lease agreements to May 18.

“I explained it would be a daunting task to secure the consent of over 500 lessors in a short time frame, but we would do everything possible to extend this opportunity to those who desire to participate,” Lavelle writes.

In exchange for the time extension, Cunningham has agreed to increase the 16 percent royalty to 16.5 percent, according to the letter.

Lavelle also provided his client with an amendment, developed by a Cunningham attorney, to extend Thursday’s deadline to May 18. The letter instructs the clients to return the signed document by Thursday in order to continue to be part of the lease proposal.

According to an affidavit that Blackhurst filed in the Athens County Recorder’s Office last December, Lavelle has a lease agreement with Cunningham for 362 acres of his own property.

“My wife and I plan to sign the amendment concerning our own acreage,” Lavelle says in Friday’s letter. “We play to stay with it until the conclusion.”

Link to Original Article: http://www.athensohiotoday.com/news/article_163c4ff4-6bc5-11e1-bfa8-001871e3ce6c.html

Ohio Sets New Fracking Rules After Quakes

A dozen earthquakes in northeastern Ohio were almost certainly induced by injection of gas-drilling wastewater into the earth, Ohio oil and gas regulators say as they unveiled tough new regulations for drillers.

Among the new or proposed regulations: Well operators must submit more comprehensive geological data when requesting a drill site, and the chemical make-up of all drilling wastewater must be tracked electronically.

The state Department of Natural Resources announced the tough new brine injection regulations because of the report’s findings on the well in Youngstown, which it said were based on “a number of coincidental circumstances”.

For one, investigators said, the well began operations just three months ahead of the first quake.

They also noted that the seismic activity was clustered around the well bore, and reported that a fault has since been identified in the Precambrian basement rock where water was being injected.

“Geologists believe it is very difficult for all conditions to be met to induce seismic events,” the report states. “In fact, all the evidence indicates that properly located … injection wells will not cause earthquakes.”

Northeastern Ohio and large parts of adjacent states sit atop the Marcellus Shale geological formation, which contains vast reserves of natural gas that energy companies are rushing to drill using a process known as hydraulic fracturing.

That process involves freeing the gas by injecting water into the earth, but that water needs to be disposed of when companies are done with it. Municipal water treatment plants aren’t designed to remove some of the contaminants found in the wastewater, including radioactive elements. A common practice is to re-inject it into the ground, a practice banned in some states.

The improper placement of the Youngstown well stemmed in part from inadequate geological data being available to regulators, the report states. New rules would require a complete roll of geophysical logs to be submitted to the state.

“These logs were not available to inform regulators of the possible issues in geologic formations prior to well operation,” the document says.

Requiring well operators to submit more comprehensive geologic data is just one of the added regulations the department will either impose immediately or pursue through legislative or rule changes.

Among other changes:

– Future injection into Precambrian rock will be banned, and existing wells penetrating the formation will be plugged.

– State-of-the-art pressure and volume monitoring will be required, including automatic shut-off systems.

– Electronic tracking systems will be required that identify the make-up of all drilling wastewater fluids entering the state.

“Ohio has developed a new set of regulatory standards that positions the state as a national leader in safe and environmentally responsible brine disposal,” Natural Resources Director James Zehringer said in a prepared statement.

“Ohioans demand smart environmental safeguards that protect our environment and promote public health. These new standards accomplish that goal,” he said.

The US Environmental Protection Agency gave Ohio regulatory authority over its deep well injection program in 1983, deeming that its state regulations met or exceeded federal standards.

The new regulations would be added to those existing rules.

Link to Original Article: http://au.news.yahoo.com/world/a/-/world/13131728/ohio-sets-new-fracking-rules-after-quakes/

Natural Gas Gathering System, Processing, Fractionation and Product Marketing Coming to Ohio

03/07/2012

By Christopher E. Smith
OGJ Pipeline Editor

MarkWest Utica EMG LLC, a joint venture of MarkWest Energy Partners LP and Energy & Minerals Group, signed a letter of intent with Gulfport Energy Corp. to provide gathering, processing, fractionation, and marketing services in the liquids-rich southern corridor of the Utica shale.

MarkWest Utica will develop a natural gas gathering system with Gulfport and other producers, primarily in Harrison, Guernsey, and Belmont counties in Ohio. The companies expect the gathering system to come online later this year.

MarkWest Utica will process the gas at its 200-MMcfd Harrison County processing complex, expected to enter service mid-2013, and will provide NGL fractionation and marketing services at the Harrison County fractionator, where NGL purity products will be marketed by truck, rail, and pipeline.

MarkWest last month announced two new processing plants in Harrison and Monroe counties and the 100,000 b/d fractionation, storage, and marketing facility in Harrison County (OGJ Online, Feb. 1, 2012).

NiSource Gas Transmission & Storage’s Midstream Services last week announced plans to build a roughly 90-mile, large-diameter natural gas gathering system extending through Ohio’s Columbiana, Carroll, Jefferson, Harrison, Belmont, and Monroe counties (OGJ Online, Mar. 2, 2012).

Contact Christopher E. Smith at chriss@ogjonline.com.

Link to original article: http://www.ogj.com/articles/2012/03/markwest-jv-to-build-utica-natural-gas-gathering-system.html