A couple of positive steps for the cracker.

Land purchase as CLOSED they own the Horsehead land PLUS additional land:

http://powersource.post-gazette.com/powersource/companies/2015/06/1...

Air permit has been GRANTED.  This was a key milestone for the project.

http://powersource.post-gazette.com/powersource/companies/2015/06/2...

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OK; Think of it this way:

You're a dairy farmer.  You sell your raw milk to the creamery.  The creamery turns it into skimmed milk, 2%, "whole", cottage cheese, mozzerella, ice cream, butter, etc.  The creamery sells its products to a wholeseller or grocery chain for more than the cost of the raw milk and doesn't share any of its profits with you, the dairy farmer.  Is that fair?

Chesapeake sells its undifferentiated natural gas/natural gas liquids/oil to MarkWest who sells the separated products to companies like Dominion in Natrium, Sunoco Logistics, Enterprise Pipeline Partners, etc., etc.  At each stage in the transformations, higher value is realized, none of which redounds to the benefit of Chesapeake, the original producer.  Is that fair?

Not a very good analogy from my perspective.

If CHK was really selling to a non-affiliated company what you say would make some sort of sense. However that is not the case in our area. CHK says who they sell to is not affiliated, but essentially they are selling to themselves when you look at who is doing a good part of the work(CHK employees) for these other companies.

Also under your premise the creamery should be charging a transportation/gathering fee for the raw milk as well as a processing fee, since the raw milk isn't a sellable product.

See the light yet?

 

I think it wrong to charge lessors the cost of processes that enable downstream sales whose sell price is determined / controlled and is at the sole discretion of the developer / producer.

No landowner representation after extraction other than to pay costs incurred by reducing royalty.

I think such one sided leases / agreements should be disallowed by rules / regulations / law.

JMHO
To my way of looking at it; if lessors are disallowed greater profit due to 'differentiation' then they should not be charged the costs to 'differentiate'.
Problematic however, is the price paid to the lessor per volumetric unit of each type of production (used to base lessor royalty payments on) ?

It would seem to me that it would have to vary with the specific well, the market, the crude oil volume and type produced and the NGL constituent % contained within the natural gas production being sold by the developer / producer.

Complicated / complex and variable.

Also, another issue would be who audits all of it each period ? ?

Anyone have any ideas ? ?

Perhaps all it can work out to be is an average based on producer / developer sales ?

TMP,

   So Ethane is safe as long as you aren't in a low lying area when it dumps to the environment. Sounds like there would be no oxygen to breathe. So we condemn houses in low lying areas where Ethane pipelines and plants are built.

Yes, NIMBY applies to Ethane pipelines and cracker plants. 

Lets build one out in the desert. Wait, there are endangered species we want to protect in the desert.

OK, Monaca it is!  Big O&G can pay everyone in the area to move, or pay the politicians to declare the plant safe for nearby habitation. 

Hi Ron and George!

Here is a little more information on ethane and ethane crackers that you might find useful:

First, let's take a look at Canada's largest petrochemical complex in Sarnia, Ontario near Detroit.

A little more than a year ago, the two main operators of ethane crackers there - - - Imperial Oil and Nova Chemicals - - - converted their plants from using naphtha (derived from crude oil) to ethane derived from methane as their feedstock.  Today, 100% of their ethane comes from Ohio, West Virginia and Pennsylvania through Sunoco Logistics' Mariner West pipeline.  Those plants have been operating for decades in low-lying areas with no associated catastrophic effects that I'm aware of.

On the Gulf of Mexico coast in Texas, Louisiana and Mississippi, there are many long-established ethane crackers, now converting from naphtha to ethane feedstocks:  Chevron Phillips Chemical (Cedar Bayou / Baytown, TX), Dow Chemical (St. Charles, LA), Sasol (Lake Charles, LA), Shell Chemicals (various sites along the coast), BASF (Port Arthur, TX), Westlake Chemical, LyondellBasell, INEOS, Williams Cos., etc.  Of course, the entire coast is low-lying and has a fairly high concentration of population.  Yet, in all the years of their operations, I haven't heard of any devastating, catastrophic events associated with them let alone long-term health effects, thanks to EPA, OSHA et al oversight.

In 1919, the first ethane cracker was established in South Charleston on the Kanawha River (aka "chemical valley") by Union Carbide (now Dow).  I'm sure that operations there are far safer today than they were in the early 20th century.

Among the proposed Ohio Valley ethane crackers (Shell Chemicals, Odebrecht/Braskem, Appalachian Resins and PTT/Marubeni) all but PTT have signed long-term (20-year) ethane contracts with Antero Resources as the anchor supplier.  Of course, those are years away from being fulfilled.  But already, Antero is the lead supplier to the Sarnia plants.

Thomas,

      Thanks for the update on Ethane Crackers.

From your response it appears we have enough Cracker Plants to process Ethane to supply our needs.

Why help an O&G company engaged in theft produce a profit at a faster rate than necessary by adding additional Crackers in the Appalachian Basin?

Let's let the ethane flow slowly while the law slowly closes in on those engaged in corrupt activity.

Mail Fraud, that's one law I would have never considered until lately. These court cases against our producer are full of laws being violated.

Now why would a PROFESSIONAL who knows the laws being violated be content to turn a blind eye, while other PROFESSIONALS recover some royalties but never go for a conviction? That may be a violation of the law in itself.

Lets see, I left those law books somewhere nearby, let me check this idea to see how deep our PROFESSIONALS are in, possibly over their heads don'tchathink?

Why contaminate the Chinese they are God's children too. Build and process here but make sure the plants are safe for workers and the environment.
I agree.

I think we can do anything.

But, anything we do we need to do safely and correctly.

LewPa writes he's being paid 15 cents per for 'it'. I assume 'it' is his extracted ethane. 15 cents per what volume I wonder ? Kindly confirm all please.

I believe LewPa is out of Pennsylvania.

Perhaps only Ohio lessors are not being paid for their ethane ?

Confirmation please - anyone who knows.

Thanks.

J-O

Well Jed, Some of us view your post as Good News!
Being pro-development, I think it's good news too Trapper - but.......there seems to be many devils in the details.

Don't you agree ?

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