American Oil and Gas Reporter - January 2015 - 208

The Presidential Papers
some of the newest and most prolific
horizontal shale discoveries. Investment
exceeding $20 billion has brought our
state great prosperity and economic development.
Utica development kicked off in Ohio
four years ago. Since then, more than
1,200 wells have been drilled and about
700 have come on production. The U.S.
Energy Information Agency projects total
Ohio natural gas production at 1.30 billion
cubic feet a day, which includes production
from both the Utica/Point Pleasant and
conventional reservoirs.
For perspective, consider that Ohio's
total average production in January 2012
was only 160 million cubic feet a day.
The Ohio Department of Natural Resources confirmed that the increase in
natural gas production from 2012 to 2013
was the largest single year growth in
state history. With more than 40 rigs running in the Utica, production should continue to soar.
Threats To Prosperity
In the midst of these exciting times,
however, many challenges have arisen
for our members, whether their projects
are predominantly conventional or unconventional. Increased activity also has
attracted many new federal and state regulations. The U.S. Environmental Protection Agency proposes new rules on us
regularly. Many of these have encumbered
the process and appear to be more about
stopping activity than protecting the environment. Dozens of new or proposed
rules from multiple agencies have inundated our membership. Merely keeping
track of new regulations is a full-time
job. Deciphering and complying with
them requires much more.
The top challenge for conventional
producers probably is the steep negative
basis differentials in local natural gas
prices. This, along with oil prices' downturn and proposed state tax hikes on unconventional production, has everyone
concerned. These challenges undoubtedly
will have major impacts on 2015 budgets
and will control the extent to which the
Utica is developed in Ohio. The ongoing
discussion of raising state production
taxes in this price environment certainly
makes little sense.
This trifecta of issues, in addition to
the increased regulatory burdens, threatens
to dampen the industry's ability to tap the

Utica's full economic potential. This is
true not only for our industry, but also for
all supporting sectors of Ohio's economy.
Southeastern and eastern Ohio in particular
(which already face financial challenges),
along with industry players holding acreage
in marginal areas of the Utica play, are
most at risk. The aforementioned manmade challenges, including burdensome
regulations and tax proposals, threaten to
keep literally millions of acres from development. The negative economic impact
to landowners and companies holding
these acres would be staggering.
While these headwinds may prevent
the Utica from reaching its full potential,
activity is likely to continue flourishing
in the sweet spots of the play's wet and
dry gas regions. Attempts to crack the
code in the oil window also are under
way. Corporate press releases reveal that
tweaked completion designs, improved
lateral placement, and significantly improved drilling and completion costs
should push development farther west
into the oil window. Revolutionary processes such as waterless fracturing that utilizes
liquid butane are being tested in the oil
window. These are exciting times.
Other new developments are under
way in Ohio's conventional exploration

and production plays as well. These advancements are being led by legacy operators who have lived and worked in
Ohio for decades. Unconventional technological innovations are being applied
to shallower conventional reservoirs with
some initial success. These reservoirs
have been drilled and produced for more
than a century, but new life is being
breathed into them thanks to lessons
learned from the shale revolution.
It has been quite an amazing ride
seeing things come full circle here in
Ohio and northern West Virginia. Considering Ohio was home to the likes of
Cleveland native John D. Rockefeller, we
can boast that our entire industry began
right here. At one point, the world oil
price was set in Macksburg, Oh., a sleepy
little town only 15 miles north of SOOGA's
headquarters in Marietta. Will the Utica
help set the price again? Who knows?
Once considered past its prime, the
Appalachian Basin has returned to the
forefront as a world leader in oil and gas
production and reserves. As it has for
more than 150 years, this industry will
continue to find new ways to unlock
more reserves previously thought unrecoverable, even in the face of regulatory
and political headwinds.
Ì

Tennessee Oil & Gas
Association
WILLIAM GOODWIN II
President
W.D. Goodwin Inc.
Brentwood, Tn.

FROM THE CHAIRMAN
Looking ahead to what 2015 will bring
the oil and gas industry, and to Tennessee
in particular, I was reminded of Greek
philosopher Heraclitus' statement: "The
only constant is change."
The rapid growth and development of
the oil and gas industry during the past
decade certainly has produced constant
change as we face new challenges, make
new discoveries and discover new opportunities.
Sometimes it happens in the blink of

208 THE AMERICAN OIL & GAS REPORTER

an eye. Sometimes it progresses slowly.
Whatever the pace, independent oil and
gas producers' ingenuity, fortitude and
perseverance have gotten us this far and
will continue to be our greatest asset in
the year ahead.
The New Normal
Part of TOGA's new normal is the
legislative fight that begins every second
Tuesday in January. For the past four
years, Tennessee activists have introduced



American Oil and Gas Reporter - January 2015

Table of Contents for the Digital Edition of American Oil and Gas Reporter - January 2015

Contents
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