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Friday, April 17, 2015

Legal Battle Between Aubrey McClendon and Chesapeake Energy Takes Interesting Turn

From Reuters:
Energy & Minerals Group, a major investor in new oil and gas ventures launched by former Chesapeake Energy Corp CEO Aubrey McClendon, said on Tuesday it has settled a lawsuit alleging the oil executive stole his former employer's trade secrets. 
Houston-based EMG, a private investment firm, had originally defended McClendon and called Chesapeake's claims "meritless." 
The settlement could raise questions about whether EMG, which has invested more than $3 billion in ventures formed by McClendon since 2013, may be separating itself from McClendon, a successful oil and gas executive who co-founded Chesapeake in 1989. He resigned from the company in 2013 following a corporate governance crisis. 
He then formed American Energy Partners (AEP), a new venture whose financial backers have included EMG.

Chesapeake in February sued AEP and affiliates, American Energy-Utica, and unnamed investors, alleging McClendon stole trade secrets from his former company and that the defendants used them to raise new funds and buy oil and gas land leases.
Read more of that article here.

McClendon doesn't seem happy with EMG reaching a settlement for itself and leaving him to hang in the wind.  He issued this statement:
OKLAHOMA CITY, APRIL 14, 2015: Aubrey K. McClendon and American Energy Partners, LP (AELP) responded today to the announcement by American Energy – Utica, LLC (AEU) and The Energy & Minerals Group that Chesapeake Energy Corporation (Chesapeake) has dismissed AEU and the John Doe Defendants 1-20 from the lawsuit filed by Chesapeake on February 17, 2015. 
AEU apparently chose to settle with Chesapeake before any discovery was taken, evidently for the business purpose of mitigating further damage that Chesapeake’s litigation has been having on AEU’s business and financing activities. AEU has the right to resolve the case in this fashion, but this resolution should not be mistaken as reflecting an informed view of the merits of Chesapeake’s claims or a concession of any liability by any party to Chesapeake. 
Although Mr. McClendon is a director and the single largest non-institutional shareholder in AEU, he did not approve the settlement and neither he nor AELP were advised of the negotiated terms of this settlement. AELP and Mr. McClendon will continue their efforts to have the dispute arbitrated as required by Mr. McClendon’s agreements with Chesapeake. As he will show in the appropriate forum, Mr. McClendon rightfully possesses an extensive array of information about more than 16,000 wells, and the related leasehold acreage and future wells, he jointly owns with Chesapeake, including land, well, title, accounting, geological, engineering, reservoir, operating, marketing, and performance information. Mr. McClendon’s well- documented agreements with Chesapeake gave him the right to own and use this information for his own purposes, including sharing it with his employees, contractors, advisors, consultants and affiliated entities. 
In December 2014, Mr. McClendon agreed to the appointment of his long-time colleague Jeff Fisher as Chairman of the Board of AEU's parent company and Mr. Fisher succeeded Mr. McClendon as CEO of AEU. Mr. McClendon remains a director of AEU's parent company and is the Chairman of the Board or CEO of American Energy – Permian Basin, LLC, American Energy – Woodford, LLC, American Energy – NonOp, LLC, American Energy – Midstream, LLC and American Energy Minerals Holdings, LLC. 
Mr. McClendon and AELP have established a website (www.AELPvCHKLitigation.com) on which copies of relevant documents concerning this dispute are located.

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Thursday, April 16, 2015

Energy Information Administration Project U.S. Energy Imports and Exports to Equalize in 5-15 Years

EIA's AEO2015 projects that U.S. energy imports and exports come into balance, a first since the 1950s, because of continued oil and natural gas production growth and slow growth in energy demand

The Annual Energy Outlook 2015 (AEO2015) released today by the U.S. Energy Information Administration (EIA) presents updated projections for U.S. energy markets through 2040 based on six cases (Reference, Low and High Economic Growth, Low and High Oil Price, and High Oil and Gas Resource) that reflect updated scenarios for future crude oil prices.

"EIA's AEO2015 shows that the advanced technologies are reshaping the U.S. energy economy," said EIA Administrator Adam Sieminski. "With continued growth in oil and natural gas production, growth in the use of renewables, and the application of demand-side efficiencies, the projections show the potential to eliminate net U.S. energy imports in the 2020 to 2030 timeframe. The United States has been a net importer of energy since the 1950s. In cases with the highest supply and lowest demand outlooks, the United States becomes a significant net exporter of energy," said Mr. Sieminski.

Some key findings:



U.S. net energy imports decline and ultimately end in most AEO2015 cases, driven by growth in U.S. energy production—led by crude oil and natural gas—increased use of renewables, and only modest growth in demand. Net energy imports end before 2030 in the AEO2015 Reference case and before 2020 in the High Oil Price and High Oil and Gas Resource cases (Figure 1). Significant net energy imports persist only in the Low Oil Price and High Economic Growth cases, where U.S. supply is lower and demand is higher.

Continued strong growth in domestic production of crude oil from tight formations reduces net imports of petroleum and other liquids. Through 2020, strong growth in domestic crude oil production from tight formations leads to a decline in net petroleum imports and growth in product exports in all AEO2015 cases. The net import share of petroleum and other liquids product supplied falls from 26% in 2014 to 15% in 2025 and then rises slightly to 17% in 2040 in the Reference case. With greater U.S. crude oil production in the High Oil Price and High Oil and Gas Resource cases, the United States becomes a net petroleum exporter after 2020.



Regional variations in domestic crude oil and natural gas production can force significant shifts in crude oil and natural gas flows between U.S. regions, requiring investment in or realignment of pipelines and other midstream infrastructure. In most AEO2015 cases, Lower 48 crude oil production shows the strongest growth in the Dakotas/Rocky Mountains region, followed by the Southwest region (Figure 2). The strongest growth of natural gas production occurs in the East region, followed by the Gulf Coast onshore and the Dakotas/Rocky Mountains regions. Interregional flows to serve downstream markets vary significantly among the cases.

Technology and policy promote slower growth of energy demand. U.S. energy use grows at 0.3%/year from 2013 through 2040 in the Reference case, far below the rates of economic growth (2.4%/year) and population growth (0.7%/year). Decreases in transportation and residential sector energy consumption partially offset growth in other sectors. Declines in energy use reflect the use of more energy-efficient technologies as well as the effect of existing policies that promote increased energy efficiency. Fuel economy standards and changing driver behavior keep motor gasoline consumption below recent levels through 2040 in the Reference case.



Renewables meet much of the growth in electricity demand. Rising long-term natural gas prices, the high capital costs of newcoal and nuclear generation capacity, state-level policies, and cost reductions for renewable generation in a market characterized by relatively slow electricity demand growth favor increased use of renewables (Figure 3).

Energy-related carbon dioxide emissions stabilize with improvements in energy and carbon intensity of electricity generation. Improved efficiency in the end-use sectors and a shift away from more carbon-intensive fuels help to stabilize U.S. energy-related carbon dioxide (CO2) emissions, which remain below the 2005 level through 2040.

Other AEO2015 highlights:

In the AEO2015 Reference case, the price of global marker Brent crude oil is $56/barrel (bbl) (in 2013 dollars) in 2015 (Figure 4). Prices rise steadily after 2015 in response to growth in demand; however, downward price pressure from rising U.S. crude oil production keeps the Brent price below $80/bbl through 2020. U.S. crude oil production starts to decline after 2020, but increased output from non-OECD and OPEC producers helps to keep the Brent price below $100/bbl through most of the next decade and limits price increases through 2040, when Brent reaches roughly $140/bbl. There is significant variation in the alternative cases. In the Low Oil Price case, the Brent price is $52/bbl in 2015 and reaches $76/bbl in 2040. In the High Oil Price case, the Brent price reaches $252/bbl in 2040. In the High Oil and Gas Resource case, with significantly more U.S. production than the Reference case, Brent is under $130/bbl in 2040, more than $10/bbl below its Reference case price.



Total U.S. primary energy consumption grows from 97.1 quadrillion Btu in 2013 to 105.7 quadrillion Btu in 2040 in the AEO2015 Reference case with most of the growth in natural gas and renewable energy use. In the High Oil Price case, total primary energy use is 3.9 quadrillion Btu higher in 2040 than in the Reference case, even though liquids consumption is 3.3 quadrillion Btu lower. Total primary energy consumption is very sensitive to economic growth assumptions, with projected levels in 2040 ranging from 98.0 quadrillion Btu in the Low Economic Growth case to 116.2 quadrillion Btu in the High Economic Growth case.

In the AEO2015 Reference case, energy use per dollar of GDP declines at an annual rate of 2.0% from 2013 through 2040, as per capita energy use declines at an annual rate of 0.4%. Energy intensity declines at a lower rate in the Low Economic Growth case and at a slightly higher rate in the High Economic Growth case.

In the AEO2015 Reference case projection, U.S. energy-related CO2 emissions are roughly 5,550 million metric tons (mt) in 2040. As renewable fuels and natural gas account for larger shares of total energy consumption, CO2 emissions per unit of GDP decline by 2.3%/year from 2013 to 2040. Among the alternative cases, emissions show the greatest sensitivity to levels of economic growth, with 2040 totals varying from roughly 5,980 million mt in the High Economic Growth case to 5,160 million mt in the Low Economic Growth case. In all the AEO2015 cases, emissions remain below the 2005 level of 5,993 million mt.

The AEO2015 cases generally reflect current policies, including final regulations and the sunset of tax credits under current law. Consistent with this approach, EPA’s proposed Clean Power Plan rules for existing fossil-fired electric generating units or the effects of relaxing current limits on crude oil exports are not considered in AEO2015. These topics will be addressed in forthcoming EIA service reports.

To focus more resources on rapidly changing energy markets and the ways in which they might evolve over the next few years, EIA has revised the schedule and approach for production of the AEO. Starting with AEO2015, EIA is adopting a two-year release cycle for the AEO, with a full edition of the AEO produced in alternating years and a shorter edition in the other years. AEO2015 is a shorter edition of the AEO. The projections from the AEO2015 Reference and alternative cases are available at http://www.eia.gov/forecasts/aeo/.

The product described in this press release was prepared by the U.S. Energy Information Administration (EIA), the statistical and analytical agency within the U.S. Department of Energy. By law, EIA's data, analysis, and forecasts are independent of approval by any other officer or employee of the United States Government. The views in the product and press release therefore should not be construed as representing those of the Department of Energy or other federal agencies.
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Does Governor Kasich Want Oil and Gas Drillers to Stop Activity in Ohio?

From Watchdog.org:
Free-market think tank Opportunity Ohio released a video last week criticizing Kasich’s plan to increase taxes on companies using horizontal hydraulic fracturing, also known as “fracking,” to extract oil and natural gas from shale deposits. 
In March, dozens of employers and elected officials launched the Protect Ohio Jobs Coalition, claiming a fracking tax hike could jeopardize tens of thousands of jobs. 
According to Opportunity Ohio, the proposal included in Kasich’s 2016-17 budget clashes with President Ronald Reagan’s adage, “if you want less of something, tax it.”
A series of Opportunity Ohio videos released in 2013 warned that a fracking tax hike represented government picking winners and losers, and it was likely to harm employment — not just in the industry but in much of Appalachian Ohio. 
Opportunity Ohio estimates energy companies have invested more than $30 billion in fracking in southeast Ohio and have earned $3 billion from those investments. Oil production has been far lower than anticipated, already prompting some companies to leave the state. 
Kasich, a Republican, has been pushing for a tax hike on fracking since 2012.
Click here to continue reading.  The video referenced in the article can be viewed below.


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OPEC Doesn't Think It's Fair for Non-OPEC Producers to Look Out For Their Own Interests

From CNBC:
The Organization of the Petroleum Exporting Countries published a stinging critique on Monday of oil-producing countries that had refused to follow its lead in holding back supply in an effort to boost prices. 
"Today, operating purely through self-interest is quite simply frowned upon," said the intergovernmental organization in a bulletin
"Yet, when it comes to the supply of petroleum, there is a stubborn willingness of some non-OPEC producers to adopt a go-it-alone attitude, with scant regard for the consequences." 
OPEC, which represents 12 countries but is dominated by top exporter Saudi Arabia, has steadfastly refused to cut output, despite the 50 percent tumble in Brent and WTI crude oil prices since June 2014.
Click here to read more.


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Ohio Representative Wants More Oversight of Water Withdrawals by Drillers

From The Intelligencer/Wheeling News-Register:
Ohio Rep. Jack Cera, D-Bellaire, is not sure the ODNR should allow such activity without more oversight, however. He said an XTO lobbyist assured him the company had stopped drawing water from McMahon Creek. 
"He said they weren't doing it anymore, but that was a while ago so they may have started again," Cera said. "This is a concern." 
After originating in central Belmont County, McMahon Creek empties into the river at Bellaire. Cera said he believes the withdrawals would be less worrisome if they occurred closer to the river because there is generally more water there. 
"Basically, the ODNR thinks, 'They have the permits, so they should be able to do it.' I just think we need to have more oversight instead of just have the ODNR sign off on it," Cera said. 
Stream levels naturally fluctuate based on season, rainfall amounts and other factors. Even if the water is plentiful enough at one point, it may not be at another.
Click here to read more.

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Belmont Couny Landowners Using Shale Money to Help Others in Community

Landowners give others a helping hand
From The Intelligencer/Wheeling News-Register:
A small group of Belmont County residents who are benefiting from the shale boom want to ensure their neighbors also reap the benefits for generations to come. 
While the fund grew exponentially in its first year, co-founder and advisory committee member Gabe Hays said he would like to see it swell to $10 million in the next 10-15 years, so the oil and gas legacy continues to improve the lives of Belmont County residents. 
The fund was established in December 2013 with an initial $25,000 in seed money from Rice Energy, which has a contract with a group of five landowners in Smith and Goshen townships who make up the fund's advisory committee. 
The fund has grown to $170,000 and already has awarded about $40,000 to nonprofit entities in the county, including the Barnesville food bank, several fire departments, the St. Clairsville library and Tri-County Help Center.
You can continue reading the article by clicking here.

With a lot of stories out there, stories which anti-drilling groups draw a lot of attention to, about the money that comes into communities from shale development causing rifts, it's refreshing to see people using a portion of their oil and gas money to help others who haven't profited from the new development.

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Fairfield Township Trustees Studying Contract to Allow Drilling Under Cemetery

From the Lisbon Morning Journal:
Fairfield Township Trustees want more time to study a contract with Hilcorp Energy regarding a one-quarter acre of Bunker Hill Cemetery that would be included in the production property off the Nolker well being drilled.

Ben Mehl of Western Land Services said presented a one-year contract with a $ 500 signing bonus with a 15 percent royalty provision from the gross proceeds. 
Trustees discussed the issue at previous meetings but the small amount of money and the fact Hilcorp could place the property into a production royalty unit anyway pre-empted formal action. 
Mehl said the contract "will not affect surface usage of any type" including cutting down trees and "it protects the surface and the landowners."
Read more by clicking here. 

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Wednesday, April 15, 2015

ODNR Releases Latest Utica and Marcellus Shale Well Activity Maps





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