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Shale Infrastructure Takes Shape Along Ohio-Pa. Border
SPRINGFIELD TOWNSHIP, Ohio -- A three-mile stretch that moves south along State Line Road through Poland and Springfield townships holds evidence as to where development of a $300 million gas exploration, processing and transmission network is likely to emerge.
Wooden stakes planted in the ground topped with thin, flapping orange flags bracket each side of the road, and then veer off across a large field angling southwest.
These markers emerge again along Middletown Road, dotting farmland and fields where a handful of surveyors peer into transit levels mounted on tripods, sizing up the lay of the land. The posts then curve back to State Line and run another two miles or so near the small hamlet of Petersburg.
“Hilcorp is focused on this whole area,” reports Robert Orr, Springfield Township trustee. “It looks like it’s coming from two points in Pennsylvania in the north and then heads south toward the Petersburg area,” and then southwest from there.
In July, Houston-based Hilcorp Energy Co. and NiSource Gas Transmission and Storage entered into a partnership that calls for developing 50 miles of pipelines that extend from Lawrence County in western Pennsylvania and into Mahoning County, where the venture expects to place a processing center
Most likely, the pipeline will extend north from Pennsylvania and cut a swath through Springfield along a corridor between State Line and Rapp roads, Orr says.
The project, called the Hickory Bend Pipeline system, consists of 50 miles of 20- to 24-inch wet gas gathering lines through northeastern Ohio and western Pennsylvania, says NiSource spokeswoman Chevaliet Mayes. Pennant Midstream LLC, an entity created specifically for the project, will operate and own the pipeline, she adds.
“Fabrication of the processing plant is complete, and the plant is stored and is awaiting installation,” Mayes said in an email. The gathering system is expected to come online during the first quarter of 2013 and the cryogenic plant should be in production by the third quarter, she says.
NiSource Midstream and Minerals Group COO and Pennant President Joseph Blount said in a statement the project has been received well in the region. “We’re off to a great start on the Pennant project,” he says. “We have received a warm reception from landowners, suppliers and state and local officials that we’ve met and worked with during this process.”
Meantime, Hilcorp is stepping up its drilling activity in western Pennsylvania and the Mahoning Valley. In a five-day period from Oct. 29 to Nov. 2, Hilcorp was issued eight permits to drill unconventional horizontal wells in Pulaski and Mahoning townships in Lawrence County, just across the border from Ohio.
The company also has wells drilled in portions of North Beaver Township, as does energy giant Shell.
On Oct. 24, the Ohio Department of Natural Resources issued Hilcorp a permit to drill on land owned by Republic Services’ Carbon Limestone Landfill in Poland Township.
“From what I understand, they’re going around the landfill,” reports Mike Heher, division manager at Carbon Limestone. “I don’t think they have determined a path yet, and they’ve been back and forth with plans. “
Heher says the landfill has leased nearly all 2,200 acres of its property, and most of the landowners that live around the site have also leased their land.
However, portions of the landfill contain wetlands that need to be respected, making it impossible for a large pipeline project to pass through. The land Hilcorp will drill on wouldn’t disturb the landfill or the wetlands area, he says.
“They’re already starting some site work there,” Heher adds.
Springfield Township’s Orr says he hasn’t received any information regarding the precise location of the proposed processing plant, but it’s clear that developments are moving along rapidly, and just about every landowner in the township has leased his property. “These companies have been down here doing a lot of aerial and ground mapping,” he relates. “There’s a lot of this going on.”
Much of the physical drilling and pipeline development by Hilcorp is very evident in Lawrence County where officials there have witnessed a sizeable escalation in activity.
“It’s moving a little faster than I originally anticipated,” observes Lawrence County Commissioner Robert Del Signore. “We’re starting to see the beginning of a huge investment in the tri-state area – beyond what we even imagined.”
More than 50 horizontal wells have been permitted over the last three years in the county, Del Signore says. He speculates that earlier reports of the oil and gas content of the Utica shale in this region have been far too conservative, and there is probably much more wet gas to retrieve.
“I think the drillers are keeping quiet about the seismic reports,” he says. “I’m getting the impression there’s more in the ground than they thought originally. If that’s the case, it’s going to bode well for our areas.”
Hilcorp and Shell, the two most active drillers in Lawrence County, are concentrating on a more northern section of the Utica shale. Shell is drilling a well on the corner of state routes 551 and 108 in North Beaver on the Patterson farm. Flagged stakes line Route 88 as it leads into Ohio.
“The Patterson farm has four wells on it,” Del Signore says. A compressor station is likely to be located there because the well could easily tap into the nearby Tennessee Gas line.
In Pulaski Township, a large pipeline project is now under construction along Route 551, signaling new exploration and infrastructure work in this part of Lawrence County.
Other drillers have abandoned the northern portion of the Utica to concentrate on developing land in southern Ohio, such as Harrison and Carroll counties.
Two months ago, Carrizo Oil and Gas sold its positions in Mercer County, Pa., and Trumbull County to Halcon Energy, while Consol Energy pulled up stakes in Trumbull to focus on exploration further south and in North Jackson.
Large producers such as Oklahoma City-based Chesapeake Energy and Gulfport Energy are betting that the southern counties of Columbiana, Carroll and Harrison will yield the most profitable natural-gas liquids from the play.
In a conference call with analysts Nov. 3, Chesapeake CEO Aubrey McClendon called the eastern Ohio corridor from Columbiana County to Harrison counties among the most productive in the United States. The results from wells producing in these counties, he says, “are as good as any from any play. We’re thrilled with the Utica.”
Gulfport has also enjoyed early success in the Utica, especially in Belmont and Harrison counties. In October, the company released production results of its Shugert 1-H well in Belmont, which in terms of peak production rates ranks as the most productive well in the Utica. In late September, another Gulfport well in Harrison County, the Wagner well, yielded similar results.
The key to developing the play is midstream infrastructure. Access Midstream, a former subsidiary of Chesapeake, M3 Midstream/Momentum and EV Energy Partners are developing a $900 million pipeline and processing network that extends from Columbiana County to Harrison County.
Hilcorp and NiSource are embarking on the same strategy in the northern part of the play, as the pipeline puzzle through Mahoning County begins to take shape.
What’s critical to developing the midstream leg is that the partnership secures right-of-way leases from residents in its proposed path.
“They were here a couple of months ago and asked me about a feasibility study regarding a permit for a pipeline,” reports Frank Molnar, who lives on Rapp Road, which runs parallel to State Line Road in Springfield Township. “At the time, they weren’t sure where it would go through.”
Since then, Molnar says no one has approached him about signing a lease regarding a pipeline project. However, his land was leased to a small land development company early in the play. That lease has since been flipped several times.
“We leased our land about five years ago,” he notes. “So, we didn’t get a whole lot of money upfront.”
Some energy companies have offered one-time bonuses as high as $5,900 an acre and 20% royalties on gross production.
Springfield Township’s Orr says most of the public concerns related to the possible impact oil and gas exploration would have on residents’ water supply.
Mahoning County is embarking on a project to test the water for those residents living within a mile of the landfill, Orr says, so there would be documentation of the level of contaminants and minerals in the ground water before any drilling occurs.
“Overall, people around here support this,” Orr says. “The real key is getting these lines laid. We can put more people to work, create products and create energy independence. That’s the hope.”
FIRST PUBLISHED in the Mid-November edition of The Business Journal. CLICK HERE to subscribe.
Copyright 2012 The Business Journal, Youngstown, Ohio.