Oil & Gas Law Report

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ODNR Releases 2012 Utica Shale Production Results

Ohio law requires oil and gas operators to report prior year production from oil and gas wells on an annual basis — by March 31 of the following year. The Ohio Department of Natural Resources (ODNR) recently unveiled the 2012 production results from Ohio’s Utica shale play. These figures have been much anticipated by investors, land owners and the oil and gas industry, who are all trying to glean insights about the most productive areas and the overall potential of the play.

First, a Look Back at 2011

The first production from Ohio’s Utica Shale was realized in 2011 and reported on March 31, 2012. That data showed that merely nine Utica wells were in production during some part of 2011 — all drilled by Chesapeake Appalachian, LLC. Six of those wells were located in Carroll County. The remaining data came from wells in Portage, Harrison and Mahoning counties.

Though none of those nine wells were in production for all of 2011 (all but two were in production for less than six months), combined they still produced 2.56 billion cubic feet of natural gas and 46,326 barrels of oil, which amounted to 3.5% of the state’s overall gas production and 1% of oil production for that year. These are impressive statistics considering that Ohio had more than 50,000 conventional (vertical) wells reporting production in 2011.…

Management of Oil Field Wastes

The disposal of wastes associated with oil and gas production continues to draw the attention of regulators and concerned citizens. In a series of articles we will examine the waste issue from the characterization of these wastes (discussed below) and their ultimate disposal in underground injection wells.

A Brief History of Waste Management and RCRA

By the 1960s it was becoming clear that the country had a waste management problem. The only modern environmental law on the books at the time was the Clean Air Act. So the Solid Waste Disposal Act of 1965 was enacted as an amendment to the air law. This initial foray into comprehensive waste regulation proved inadequate in many respects.  The treatment, storage and disposal of waste — even defining what a waste is — is complicated, especially when recycling is considered.

The modern regulation of solid and hazardous waste can be traced to 1976 with the enactment of the Resource Conservation and Recovery Act (RCRA). Generally, when looking at the world through the lens of RCRA, all material is either a product or a solid waste. A subcategory of solid waste is hazardous waste that is regulated under Subtitle C of RCRA.…

Lawsuits Over “Fraudulent” Oil & Gas Leases Often Lack Merit

The Ohio shale boom started slowly when a few small companies quietly began acquiring mineral leases for as little as $25 per acre.  This soon gave way to a full blown land rush in the fall of 2010.  But as lease prices skyrocketed through the Fall of 2011, disillusioned lessors who signed before the peak of the market were the ones rushing – to the courthouse to file lawsuits to cancel their leases.

In order to gain leverage and legitimize their lawsuit, lessors frequently allege that their lease is “unconscionable” or they were fraudulently induced to sign it.  “Exhibit A” to these lawsuits is often a technical error in the lease signing or a “fraudulent” statement made by a landman.  There are exceptions, but many of these kinds of lawsuits have no legal basis.…

Oil & Gas Terms… Confused? You aren’t the only one

The terms “pooling” and “unitization” are often used interchangeably. To confuse the matter further, in Ohio, there are statutory definitions for a “pool” and a “drilling unit” and neither is related to a “unit.” Hopefully, this will provide some clarification.

Pooling and Unitization, Generally

To “pool” [the verb] is to combine multiples into a common entity or fund. In an unfortunate and confusing coincidence, a “pool” [the noun] is an accumulation of a liquid, including oil. As in other specialized areas of law, common terms can have special meanings – so-called “terms of art.”

In the world of oil and gas, the common understanding of pooling, a pool or a pooled unit is the joining together or a combination of small tracts or portions of tracts for the purpose of having sufficient acreage to receive a well drilling permit under the relevant state spacing laws and regulations, and for the purpose of sharing production by interest owners in such a pooled unit. Bruce M. Kramer & Patrick H. Martin, The Law of Pooling and Unitization 1-3 (3d ed. 2006).

In contrast, “unitization” or unit operations refers to the consolidation (don’t use the word “pooling”) of mineral or leasehold interests covering all or part of a common source of supply. Id. at 1-4. That is, “unitization” refers to field or reservoir-wide development, which entails much more to accomplish than a pooled unit around a single well.

The objective of unitization is to provide for the unified development and operation of an …

USGS Confirms Potential of the Utica Shale; Finds Ohio Shale Oil “Sweet Spot”

Part of the mission of the Energy Resources Program of the United States Geological Survey (“USGS”) is to determine the location, quantity, and quality of U.S. mineral and energy resources.  In pursuit of that mission, the USGS recently conducted a survey of the potential of the Utica shale across the Appalachian Basin. 

The results of the USGS survey are summarized in its report, Assessment of Undiscovered Oil and Gas Resources of the Ordovician Utica Shale of the Appalachian Basin Province, 2012, recently published on the USGS website

The USGS concluded that Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia are all in the Utica shale play.  The survey also makes some rather eye-popping findings about the potential of the Utica shale in Ohio.  The survey found that based on certain observed characteristics of the Utica shale and assumptions grounded in observations in other shale plays, Ohio is in an oil “sweet spot.”  The USGS actually defined both an oil sweet spot and a gas sweet spot in the Utica shale play as shown on the following map*: 

*Kirschbaum, M.A., Schenk, C.J., Cook, T.A., Ryder, R.T., Charpentier, R.R., Klett, T.R., Gaswirth, S.B., Tennyson, M.E., and Whidden, K.J., 2012, Assessment of undiscovered oil and gas resources of the Ordovician Utica Shale of the Appalachian Basin Province, 2012: U.S. Geological Survey Fact Sheet 2012–3116, 6 p., Figure 4.

The USGS survey projected the mean “technically recoverable continu­ous (unconventional) oil and gas resources” from the Utica and Point Pleasant shale …

Waterless Alternatives to Fracking Attract Attention

As public concern about hydraulic fracturing (“fracking” or “fracing”) grows and historic drought conditions parch most of the country, the limelight is focused on technologies that offer alternatives to traditional hydraulic fracturing, which uses large volumes of water. 

One of the more established technologies in this emerging market is a process that uses liquid petroleum gas (or “LPG”) gel to replace water in traditional fracking operations.  The LPG gel is composed primarily of propane or butane gas.  GasFrac Energy Services, Inc. has used its proprietary LPG gel fracking process on more than 1,000 wells in Canada and the United States.  GasFrac is expected to dramatically expand its operations in the Utica and Marcellus shale plays in the coming months and years. 

Another alternative to traditional hydraulic fracturing that operators have been testing uses carbon dioxide or nitrogen foam instead of water.  This technology, being marketed by Baker Hughes under the trade name “VaporFrac,” uses merely 10% of the water needed for traditional fracking.  Earlier this year Chesapeake reported that it fracked a well in Portage County, Ohio using carbon dioxide foam.

Finally, Chimera Energy Corporation is pioneering a new process it describes as a “revolutionary exothermic non-hydraulic extraction process.”  Although Chimera has not disclosed the details of the process, its website explains that the process relies on a chemical reaction among various metal oxides to create extreme heat and pressure to force open shale fractures and release trapped oil and gas.  The process is apparently completely waterless but …