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May 06, 2014 02:00 AM

BP says decision to abandon Utica shale is 'strictly business'

Dan Shingler, Crain's Cleveland Business
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    CLEVELAND—It's not you, or your governor. It's the rocks.

    That's BP America's message to Ohioans who might wonder whether it really was the company's drilling results, or the fear of higher taxes and more regulations, that led the company to abandon its position in the Utica shale.

    The company announced April 29 that it was abandoning the play. BP's Ohio spokesman Curtis Thomas said the company would begin marketing the mineral rights to its Ohio acreage immediately, as the company reported it would take a writedown of $521 million as a result of its decision.

    Some, including the Ohio Oil and Gas Association—a strong opponent of some current proposals to increase oil and gas severance taxes in Ohio—speculated that BP's decision might have been driven in part by the threat of increased taxes and regulations here.

    That was not the case, Thomas told Crain's Cleveland Business last week. Crain's Cleveland Business is a sister publication of Rubber & Plastics News.

    “We've made it very clear this had nothing to do with pending legislation or anything other than what the rocks were telling us,” Thomas said. “This was strictly a business decision.”

    That might be good and bad news for Gov. John Kasich, who has proposed increasing the severance tax and is counting on increased tax revenues from oil and gas drilling to help pay for a cut in the state's personal income tax.

    BP's decision is just the latest piece of evidence that parts of the Utica shale—particularly the play's northern portions—might not be as profitable as once thought, with prices for natural gas still at relatively low levels.

    Late last year, Halcon Resources said it was suspending its drilling activity in the play's northern tier.

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