House bill would require drillers to report production monthly

In an age of big, fast data, Pennsylvania takes its slow, sweet time collecting information on how much gas is produced from wells in the commonwealth.

A bill in the state House of Representatives aims to change that by requiring companies that operate Marcellus Shale and other unconventional wells to report their gas production monthly rather than only twice a year.

House Bill 2278, a minor redraft of a bill proposed in September, was introduced in late May by state Rep. Tina Pickett, R-Towanda.

Monthly reports would offer landowners “greater transparency” because they would more closely correspond with the monthly royalty payments sent to gas leaseholders, she wrote in her co-sponsorship appeal to legislators. By comparing the reports, landowners could better verify that they are paid for their share of the gas drained from their property.

“It gives you a public way to audit,” said Matthew Henderson, shale gas asset manager with Penn State’s Marcellus Center for Outreach and Research. Many leases have clauses that allow landowners to audit a gas company’s records to make sure their royalty payments are accurate but at the landowner’s expense, he said. Comparable public production reports could help them decide if it is worth it.

“If you see a major discrepancy, it throws that red flag up so you can contact your attorney or your accountant to maybe do that audit,” he said.

Monthly reports would help clarify the big picture as well as the small one.

A key factor for analysts trying to measure and forecast the size of any natural gas resource is the rate that wells decline in terms of the volume of gas they produce. The metric can reveal how quickly wells peter out and how much gas they can be expected to produce in their lifetime.

In a February report on the Marcellus Shale’s “astounding” growth, the investment research firm Morningstar noted that energy forecasters and other “in-the-know” groups had consistently underestimated the shale’s performance.

Morningstar analyst Mark Hanson said the slow pace of data releases from the states likely contributed to those errors.

“There are a lot of analysts that depend on private databases, which in turn rely heavily on publicly available data,” he said. “If the publicly available data is stale, that is definitely going to lead to underestimation or at least misinformation or a whole lot more in the way of assumptions and guesses.”

Pennsylvania does not have the least frequent production reporting requirements in the region: West Virginia only requires annual reports. Ohio recently began requiring operators of horizontal oil and gas wells to submit production data quarterly instead of annually. But many major oil and gas producing states, including Texas, North Dakota, Louisiana, Oklahoma, Colorado and Wyoming, require monthly reports.

Penn State geosciences professor Terry Engelder, whose early estimates of the Marcellus Shale’s production potential helped spur interest in its development, said more frequent reports would help indicate how long wells are going to be productive and how much gas they are going to produce. That information has real world consequences for companies making investment decisions or building infrastructure related to gas development.

“The more precise you can make those estimates, the more likely you are to have good business decisions,” he said.

The federal government is also interested in gathering more information on Pennsylvania oil and gas production.

The Energy Information Administration, the statistical branch of the Department of Energy, plans to expand its monthly natural gas production survey to include 21 states and regions — including Pennsylvania, Ohio and West Virginia — instead of just the seven geographical areas that are included in the current survey.

Unlike the data submitted by operators to the Pennsylvania Department of Environmental Protection, which is posted publicly and details production from each well, the EIA survey collects information on a statewide basis from a sample of operators and is not released in its raw form. Instead, the agency summarizes the data in several publications and uses it to estimate the nation’s oil and gas production.

The agency wants to capture the dramatic growth from unconventional oil and gas sources in new regions, which now outpace production from some traditional gas extraction areas like New Mexico and the Gulf of Mexico, the EIA said. The proposal is open for public comment until July 7.

The Robinson-based Marcellus Shale Coalition supports the EIA’s proposal but it is still reviewing House Bill 2278, spokesman Patrick Creighton said. The industry trade organization’s member companies recognize “that more timely production data is key for analytical and forecasting purposes,” he said.

Mr. Henderson said that he does not expect opposition to the bill.

“The operators are beyond that major leasing push so the secrecy is no longer needed,” he said.

Plus, gas companies already have more precise information at hand, Mr. Hanson noted.

“It’s not a big hurdle for oil and gas firms to provide that,” he said. “These guys know down to the minute how their wells are producing.”

Laura Legere:

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