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You Found It, Now What Do You Do With It? Gas and Oil Gathering in New Shale Plays

Arthur J. Wright, Anna R. Irion, Laranne A. Breagy, Proceedings of 58th Annual Rocky Mountain Mineral Law Institute (2012)

A new shale play is in the news every day. Shale gas is projected to account for roughly 49% of all natural gas produced in the United States by 2035 and will increase overall production of all gas sources from roughly 21.6 trillion cubic feet in 2010 to over 28 trillion cubic feet in 2035.1 Furthermore, as of December 2011, it was estimated that there are more than 982 billion barrels of recoverable shale oil in the United States.2 Producers have been rapidly developing these plays, but in many areas where there is little or no recent history of oil and gas production, there is a shortage of infrastructure to gather, dehydrate, process, and fractionate the produced hydrocarbons. Producers either lack the capital to develop the necessary infrastructure or have otherwise determined that their money is better spent drilling wells. Privately owned midstream providers are uniquely positioned to design, construct, and operate the necessary facilities. Such midstream companies will obtain producing acreage dedications, build the infrastructure, and when there is cash flow, “flip” such assets to master limited partnerships (MLP) that need the cash flow to pay their dividends.
Many existing pipeline companies, including pipelines owned by MLPs, have been beaten to market in certain situations by small, private-equity backed portfolio companies that have the ability and incentive to