Archive for Marcellus Shale News
The features and benefits of the world’s top natural gas-producing region are not going to end anytime soon.
In 2010, natural gas production in the Marcellus shale region was at a low 2 Bcf/d. Predictions for the end of 2014 expected production to surpass 16 Bcf/d.
This is just some of the data pointing toward one fact: there is no shortage of natural resources or drilling activity.
But a lack of infrastructure is preventing the glut of gas from reaching key areas. And this continues to suppress natural gas prices.
The 2015 Marcellus-Utica Midstream Conference (MUM) scheduled later this month in Pittsburgh is designed to answer many top midstream questions:
Which projects will move forward? How can companies capitalize on the need for midstream investment in the Northeast?
With more than 1,800 attendees and over 200 exhibitors and sponsors, including media sponsor Marcellus Business Central, the Marcellus-Utica Midstream conference and exhibition is the region’s premier midstream event.
Each year key decision makers and stakeholders from the financial community, producers, pipeline operators, contractors and service providers gather to review metrics and options at the Marcellus-Utica Midstream event.
Dubbed “the best in the East,” the Marcellus and Utica shale formations are the undisputed drivers of the U.S. shale gas revolution. Now the largest natural gas-producing region in the world, both formations account for almost 40 percent of total U.S. natural gas production.
More than 20 executive-level speakers are scheduled, and almost 10 hours of exclusive networking opportunities are available.
“Top operators joining our speaker roster have been a huge attraction,” said Stephanie Palmer, spokeswoman for Houston-based Hart Energy. “This year’s conference is themed, “Extending the Reach: Meeting Global Demand.
“Annually, this news and networking event attracts 1,800 attendees and 200 exhibitors,” Palmer added.
Barry Davis, CEO of EnLink Midstream Partners LP, is the opening keynote speaker focusing on Appalachia’s Continuing Grown. EdLink Midsteam has an expanding presence in the Utica and Marcellus plays through its Ohio River Valley operations. Davis will provide insights on what he sees ahead for the region.
John Kneiss, Director of Governmental Affairs at Stratas Advisors will provide a Regulatory & Policy Update. With the congressional elections just completed and a presidential election next year, the industry’s regulatory environment is in flux. Learn how the midstream sector will likely be affected.
Karen Kabin, Vice President of Business Development at Kinder Morgan Energy Partners, L.P., will review the market for the region’s growing gas and gas liquids production—and Kinder Morgan’s own organic growth plans to connect producer and consumer.
Also speaking is Richard Hoffman, Executive Director of INGAA Foundation. He will deliver the Keynote Address: Meeting The Pipeline Challenge, discussing how the industry faces major challenges as it repurposes existing systems and adds new capacity, thanks to the growing unconventional plays.
The MUM Conference and Exhibition will be held Jan. 27-29 at the David L. Lawrence Convention Center. Attendees can register for the conference online: www.marcellusmidstream.com
Last January, when temperatures in New York City plummeted into the single digits, natural gas delivered to the city from the Gulf Coast spiked to a record $123 per thousand cubic feet (Mcf) on the spot market. Not far away, in Pennsylvania’s Marcellus shale play, the price was 30 times cheaper at $4 per Mcf.
The price difference wasn’t due to a lack of supply, but a lack of adequate interstate pipelines, a problem that will be remedied by 10 new “greenfield” interstate pipelines, which are expected to begin transporting Marcellus and Utica gas to major markets in the Northeast between 2016 and 2018.
Williams, an Oklahoma-based midstream company, is sole sponsor of three of the new pipelines – Atlantic Sunrise (PA), Diamond East (PA, NJ), the Western Marcellus Pipeline Project (OH, WV) – and a co-sponsor of the Constitution Pipeline (PA, NY). Williams is best known for owning and operating the largest volume pipeline system in the nation — the 10,200-mile Transco Pipeline, which moves natural gas from the Gulf of Mexico to the East Coast.
The new midstream projects are designed to bring reliability and price stability to growing markets in the Northeast, Mid-Atlantic, and Eastern seaboard, especially during peak-demand periods in the winter.
“The shale-gas revolution has generated huge infrastructure demands,” said Tom Droege, a spokesman at Williams.
“We’re responding with a multi-billion pipeline expansion program that will add three billion cubic feet of natural gas gathering to the Northeast by 2017.”
One of Williams’ major projects, the 124-mile Constitution Pipeline, received FERC (Federal Energy Regulatory Commission) approval about a month ago on Dec. 2. Assuming timely receipt of all remaining regulatory approvals, the Constitution Pipeline would begin construction as soon as the first quarter of 2015 in order to help meet the growing demand for natural gas in New York and New England by the winter of 2015 or 2016.
“When the Transco pipeline was built, it was designed to move gas from south to north, from the Gulf of Mexico to the East Coast, but since the 1980s, natural gas production in the Gulf of Mexico has been declining,” said Droege.
“Today, we’ve reached a tipping point where more natural gas enters our pipeline system in Pennsylvania than the Gulf.”
Marcellus gas wells produce between 13 and 14 Bcf/d (billion cubic feet per day), accounting for about 20 percent of U.S. supply – up from just 2 percent only a few years ago. By 2020, that number is expected to climb to 64 percent.
“Because natural gas is clean and affordable, we’re seeing increased demand from both local gas distribution companies and power-generators,” said Droege.
“Our plan is to connect the best supplies with the highest-value markets by providing large-scale natural gas and natural gas liquids infrastructure.”
To carry out that plan, Williams has developed partnerships with other midstream companies, like Chevron and Shell.
The Laurel Mountain Midstream joint venture in southwestern Pennsylvania includes nearly 1,400 miles of pipeline, with average throughput of 200 MMcf/d (million cubic feet). Williams Partners operates the joint venture and owns 51 percent of it. Chevron, the other partner, owns 49 percent.
In April 2013, Williams and Shell formed Three Rivers Midstream Joint Venture to develop infrastructure for 248,000 acres of rich-gas land in northwest Pennsylvania and northeast Ohio.
Three Rivers plans to construct a large-scale 200 MMcf/d (million cubic feet per day) cryogenic gas processing complex, which would be expandable as business grows. The initial plant is expected to be in service by second quarter 2015.
In October 2014, Williams Partners L.P. and Access Midstream Partners, L.P. entered into a merger agreement, with Williams retaining controlling interests in the two master limited partnerships.
The addition of Access Midstream more than doubles the volume of natural gas Williams gathers each day to 11 billion cubic feet and makes Williams a natural gas powerhouse with positions in most key North American production basins.
Last year, Williams brought additional fractional and processing facilities online at its Ohio Valley Midstream business in northern West Virginia, southwestern Pennsylvania and eastern Ohio. The Moundsville, Ohio fractionator plant receives raw natural gas liquids (NGLs) from the company’s Fort Beeler and Oak Grove, WV processing plants. The fractionator separates the NGLs into purity products – butane, pentane and propane – so they can be stored, transported and sold separately.
“Williams’ presence in the Northeast has grown dramatically in the past five years,” said Droege.
“We started out in the Marcellus and Utica shale plays with fewer than 200 employees – today we have almost 1,100 people in Pennsylvania, West Virginia, New York and Ohio working to develop the Marcellus and Utica shale plays.”
Dramatic growth in U.S. oil and gas production creates shockwaves around the world
They say you can’t have too much of a good thing — but that adage doesn’t apply to energy markets.
Demand for oil and natural gas is expected to rise indefinitely in the future, but currently supplies are outpacing demand due to slow economic growth in Europe and Central Asia and abundant energy supplies in the U.S.
On Dec. 16, the price of Brent Crude Oil — a trading classification of sweet light crude oil that serves as a major benchmark price for purchases of oil worldwide — dropped to a five-year low of $60 per barrel. In the U.S., the price for West Texas Intermediate fell to $55.73 per barrel, far less than the $106 per barrel price in late June — a 47 percent price decline in less than six months.
Record oil production in the nation, made possible through the efficient hydrofracturing of oil-rich shale, has produced a worldwide glut that has been driving down oil prices since last summer. In response, oil & gas companies have announced cutbacks to their drilling and development budgets for 2015, with some drillers pulling rigs from the oil-rich Eagle Ford and Bakken shale plays.
In December, drilling rigs targeting oil dropped by 10 to a six-month low of 1,536, according Baker Hughes Inc. (BHI), the Houston-based field services company. Up to 800 additional rigs now drilling for oil could potentially be idled if oil prices remain low, which would slow the boom in domestic production and cause U.S. gasoline and diesel prices to rise.
In March 2012 when oil prices hit a record $140 per barrel, the industry moved rigs from gas plays to oilfields; however, the migration of rigs back to shale gas is less likely since the price of natural gas liquids, which had been the thrust of the Marcellus and Utica shale gas plays last year, generally follows oil.
With oil prices down more than 40 percent since last summer, some companies, including ConocoPhillips, have cut their drilling and development budgets by about 20 percent. Chevron Corp and Exxon Mobil Corp are expected to follow suit. Oil & gas service companies such as Halliburton and Hercules Offshore have begun laying off employees.
Pennsylvania’s most prolific shale driller, Range Resources, announced an 18 percent cutback in its spending budget for 2015, though the company still plans on investing nearly $1 billion in Marcellus wells and increasing gas production by at least 20 percent.
Unlike Europe and Asian markets, the price of methane (“dry gas”) is decoupled from oil in the U.S., so natural gas can remain competitively priced.
“Where the drop in oil prices is likely to have the greatest impact on natural gas demand is in transportation since over 90 percent of the oil consumed in the U.S. is used for transportation,” said Jim Ladlee, associate director, Penn State Marcellus Center for Outreach & Research (MCOR).
Owners of some of the largest truck fleets in the nation including United Parcel Service, Lowe’s and Procter & Gamble are shifting their fleets to natural gas. P&G currently has seven percent of its trucks running on natural gas and plans to convert 20 percent of its fleet within two years.
“Natural gas fleet conversions still have appeal because in the long run natural gas is cheaper and gas prices are more stable than oil. However, when you add in the cost of conversion, it’s more challenging now that gasoline and diesel prices are so low,” said Ladlee.
For example, the cost of an liquefied natural gas (LNG) tractor trailer is $50,000 more than a diesel-powered rig.
“The world energy markets are currently experiencing a period of adjustment due to the dramatic increase in North American oil production,” said Ladlee.
“The U.S. alone has produced 3 million more barrels of oil per day during the past five years, with 2.3 million barrels a day coming from the Eagle Ford and the Bakken shale plays.
“When the Eagle Ford started in 2008, it only produced 50 barrels a day, but now it’s up to 1.4 million barrels a day, so there’s been a sharp increase in domestic oil production, and Canada, our biggest energy partner outside of Saudi Arabia, is also producing more oil.”
The increase in domestic oil and gas production has implications for both national security and diplomatic relations. The U.S. stopped buying oil from some foreign countries.
“Even Saudi Arabia, which generally likes us because we’re their biggest customer, has been impacted now that we’re gaining more energy independence, and it’s starting to come out of their market share so they’re seeking a new trading partner in China, and so are the oil producing countries in North Africa,” said Ladlee.
Saudi Arabia’s oil production costs are about $30-$50 per barrel, but no one knows for certain because Saudi Aramco is state-owned. Saudi Arabia has continued to produce oil at pre-glut rates, which has added to the downward spiral in world oil prices and has allowed Saudi oil to remain competitive against U.S. oil.
It would be “difficult, if not impossible” for Saudi Arabia or OPEC to give up market share by curbing production, said Ali Al-Naimi, Saudi Arabia’s oil minister in the Saudi press.
By comparison, the breakeven point for Bakken shale oil is $64.74 a barrel, and $84.45 a barrel for the Barnett Shale-Southern Liquids Rich oil, according to Credit Suisse.
“If the Saudis can produce oil at a cheaper cost than we can, then countries are going to buy from them, but we could still be competitive with LNG exports,” said Ladlee.
“We are marching toward energy security — a term I prefer to energy independence — because Canada and Mexico are our energy trading partners, and since Canada buys natural gas from us, it doesn’t make sense to cut them off.
“While energy abundance is a good thing for the U.S., it’s creating shockwaves in global energy markets and foreign energy producing countries, which will need to make a major adjustment to cope with the new reality of the U.S. as the world’s largest energy producer,” Ladlee said.
MONACA, PA – Seven years ago, a visitor to the Beaver County region near the Horsehead Corp. zinc smelter site here would have had a difficult time finding a hotel room to spend the night.
That is no longer the case.
Six new hotels have been constructed in the past three years, with more to be built on commercial property that is becoming more and more of a commodity.
One could say that the proposed Shell cracker plant is the proverbial golden goose laying a large basket of golden eggs in Monaca and surrounding Beaver County.
It would be the first cracker plant built in the Northeast. A “cracker” converts ethane, a by-product of natural gas, to ethylene, which is used to make plastics, plastic bags, antifreeze and detergents.
After three lease renewals, Shell exercised its option to buy the property on Nov. 7, 2014. The company said the purchase will help advance the permitting process. Shell has applied for an air-quality permit and has contracted with Consol Energy Inc. to ship ethane to the proposed plant. Consol is drilling 45 wet gas wells on 9,000 acres at the Pittsburgh International Airport.
Shell also recently held a meeting with engineers last month at the state Department of Transportation building to talk about the next phase of the Route 18 realignment.
In additional recent developments, Shell just purchased
According to Beaver County Commissioner Joe Spanik, Route 18 currently runs past the plant itself. Shell is planning to move the highway about 1,000 feet into the hillside, and create a six-lane highway for a certain portion of it.
Spanik said that, even though the plant is still “proposed” and not a sure thing as of yet – the “golden opportunity” awaiting the area is evidenced by the commercial development upswing as of late.
“Even though Shell is still calling it a proposed cracker plant, I can tell you that here in Beaver County, hotels, housing, retail office space are getting a lot of developers coming in and purchasing property in anticipation of the growth of the area due to the cracker plant,” Spanik said in a telephone interview from the commissioners’ office. “Even though it’s not a 100 percent sure thing, developers don’t want to miss out on a golden opportunity by coming in after Shell finalizes its plans and property values have already gone up.”
Plants like this do tend to bring regional impacts. They can draw manufacturers that work with the chemicals to make plastic products, cleaners, paints and even fabric. State Department of Labor & Industry research has estimated every one permanent worker at this kind of plant would lead to 15 more permanent jobs at other companies, including drillers that would hire more to produce more ethane for the plant.
Spanik said Shell just recently purchased property outside of the plant, including MidWay Bar & Restaurant and a number of residential homes.
“They are moving forward in security the property outside the plant,” Spanik said. He added that Shell is currently waiting on approval of a required air quality permit – which Spanik anticipates will be finalized very soon.
He said the thousands of jobs that will be created by the plant, both directly and indirectly, will be a boon for Beaver County and the surrounding area.
“Construction-wise, it will create anywhere from 8,000 to 10,000 jobs. There will be 400 to 500 permanent plant jobs once the construction is finished.
“Ancillary jobs, or what we call the ‘downstream customer base,’ could create another 15,000 to 20,000 jobs,” Spanik said.
And while commercial property is being snatched up at a record rate, Spanik said there is no reason to panic.
“There is still industrial property available,” Spanik said. “Hopewell is looking at putting in two hotels in their community. And the Beaver Mall is looking to expand.”
He said the mall property owners were originally seriously considering selling the property.
“Now, they’re looking at renovating and expanding it,” Spanik said. “Next to the mall, Columbia Gas is supposed to be moving one of its regional headquarters there. And housing developments are expanding.”
As a result, Spanik expects a boost in population, which currently stands at just above 170,000 persons – about 20,000 more than Centre County.
“It will take three to five years of development before people will be moving in, depending on the nature of their business drawing them here,” Spanik said. “But we are certain that population will grow in certain areas, like Center Township.”
R. Brock Pronko contributed to this story.
New “greenfield” pipelines to take Marcellus and Utica gas to markets in Northeast, Southeast and New England
This year, the Federal Energy Regulatory Commission (FERC) announced 10 proposed Marcellus and Utica shale gas transmission pipeline projects. All but one have significant new “greenfield” construction, which means they are new pipelines with new rights of way.
Before 2014, all of the Marcellus and Utica interstate pipeline projects had been upgrades to existing pipelines that carried natural gas from the Gulf Coast and the West. Some of those pipelines were expanded or “looped” to accommodate additional gas from the Marcellus and the Utica shale plays. The 10 new “greenfield” pipelines would transport Marcellus and Utica shale gas to markets and processing facilities.
Currently, 20 interstate natural gas pipeline systems operate within the northeast region. The larger capacity pipelines are owned by the Columbia Gas Transmission Company (9.4 Bcf per day), the Transcontinental Gas Pipeline Company (8.5 Bcf per day), Texas Eastern Transmission Company (7.3 Bcf per day), and The Tennessee Gas Pipeline Company (6.7 Bcf per day).
The interstate pipelines transport gas to several intrastate natural gas pipelines and at least 50 local distribution companies, which deliver gas to homes and businesses. They also serve large industrial customers and natural gas fired electric power plants.
“The Marcellus shale play has made Pennsylvania the second largest natural gas producer in the country, and the Utica in Ohio is a proven major source of valuable natural gas liquids,” said Dave Messersmith, a member of Penn State Extension’s Marcellus Education Teams.
He said production has reached the point where new lines are needed to get the gas to market, which is why new “greenfield” projects are being proposed in Pennsylvania and surrounding states.
Additionally, because existing interstate pipelines run from south to north and laterally across the state, new pipelines would originate in the major shale gas regions like the Northern Tier and the southwest to take the gas out of state.
Williams, an Oklahoma-based midstream company that owns 100 percent of the 10,200-mile Transco Pipeline and 49 percent of the Gulfstream Pipeline, is the sole sponsor of three of the 10 new pipeline projects — Atlantic Sunrise, Diamond East and Western Marcellus Pipeline Project. It would also own 70 percent of a fourth proposed project — the Constitution Pipeline.
This pipeline would run 178 miles north to south from Susquehanna County to Lancaster County, and have a capacity to deliver 1.7 Bcf per day of natural gas.
The pipeline is expected to increase economic activity in project regions by $1.7 billion, according to Williams. If approved by FERC, construction would begin in 2016, with an in-service target of 2017.
Residents of Lebanon County opposing the pipeline are trying to use an ordinance that would return major infrastructure decisions to local communities rather than corporations and the state and federal government.
Legal challenges have sometimes been effective in stopping intrastate pipelines such as distribution lines. For example, a Columbia distribution line was stopped from going through downtown State College in 2013. Local laws have rarely stopped interstate pipelines from proceeding — although pipelines are sometimes rerouted if significant environmental impacts are discovered.
Earlier, the proposed Commonwealth Pipeline had a similar path from north to south, but after the open season seeking customers and gas drillers was announced, the project was cancelled.
“It’s not unusual for large scale, capital intensive pipeline projects to get pulled because of lack of open season interest or perhaps issues with planning and execution of the pipeline, and that could happen with any of these new proposed pipelines,” said Messersmith.
Announced in August, the Diamond East Pipeline is designed to be a large scale transmission pipeline that would stretch from a gathering system in Luzerne and Lycoming counties, run through the Delaware River Basin, and terminate in Mercer County, New Jersey. The project includes new pipeline looping and additional compression to transport about 1 billion cubic feet of natural gas per day.
The project will need permits and authorizations from the Federal Energy Regulatory Commission (FERC), the Army Corps of Engineers, and the Pennsylvania and New Jersey Departments of Environmental Protection before it can proceed.
“The permitting process for pipelines can take two to three years because of all the regulatory bodies involved,” said Messersmith. “Before a company can receive a permit for construction, it must also prove there’s an economic need for the project, meaning in this case that the market price of gas coming from the northern Marcellus counties is less than where it’s going to be delivered by a substantial margin.
Last year, when temperatures plummeted into single digits, the price of gas coming from the Gulf cost was 35 times higher on the spot market than Marcellus gas.
Western Marcellus Pipeline Project
By late 2018, the Western Marcellus Pipeline would connect Williams’ Ohio Valley Midstream processing and gathering system in northern West Virginia with the Transco pipeline, and provide as much as two billion cubic feet per day of Marcellus and Utica natural gas to markets in the Mid-Atlantic and southeastern U.S.
The Constitution Pipeline
This 124-mile pipeline through Pennsylvania and New York would have a capacity to transport 650,000 dekatherms of natural gas – enough natural gas to serve approximately 3 million homes per day.
The 30-inch pipeline would collect Marcellus gas from pipelines in the Northern Tier feeding into the Williams Midstream Central Station in Susquehanna County and transport it into New York State to the Iroquois Gas Transmission to move gas to New York City, and to the Tennessee Gas Pipeline to move gas to Boston.
In addition, the pipeline would have five tap lines to bring gas to local communities in New York State along the pipeline path. The target in-service date is 2016.
This proposed 105-mile pipeline would emanate in the Wilkes-Barre area and move gas southeast to Trenton, NJ. Sponsors include Atlanta-based AGL Resources, NJR Pipeline Company, PSEG Power LLC, South Jersey Industries, UGI Energy Services, and most recently, Spectra Energy Partners.
“What’s unique about some of these newer projects is that instead of being owned by one major midstream company such as Williams or Kinder Morgan, they’re sponsored by a number of different companies including gas distributors,” said Messersmith.
The remaining pipeline projects include: Duke Energy, Piedmont Natural Gas, AGL Resources and Dominion Energy’s Atlantic Coast Pipeline in WV, VA, and NC; Kinder Morgan’s Northeast Energy Direct in PA, NY and MA; Energy Transfer Partners’ ET Rover Pipeline in OH and MI; Sunoco’s Mariner East Phase II in PA; and Mountain Valley Pipeline in WV and PA.
The 550-mile Atlantic Coast Pipeline would move Marcellus gas into North Carolina, and the 300-mile Mountain Valley Pipeline into Virginia.
“These are the first major pipelines to move Marcellus gas into the Southeast market,” said Messersmith.
“All these projects are still in the permitting phase with the exception of Mariner East II, which would use an existing pipeline that was repurposed to move natural gas liquids from western Pennsylvania to the Markus Hook refinery in Philadelphia.
“The gas from all 10 projects will ultimately end up being used in homes, businesses, manufacturing plants, power plants, and at some of the export terminals that will be shipping liquid natural gas abroad.
“It’s hard to overemphasize the importance our domestic oil and gas production will have toward our nation’s goal of becoming energy independent,” said Messersmith. “These new pipelines are a step in that direction.”
The “glut of natural gas” in the Marcellus and Utica shale plays has brought numerous midstream companies to the forefront of the natural gas industry. Now that there seems to be an enormous amount of natural gas in storage, addressing how to get it to market is another situation altogether.
Numerous pipelines, or infrastructure, have been proposed within Pennsylvania to carry gas to places like New York, New Jersey, and other east coast states like the Carolinas. It is expected that these pipelines will someday bring natural gas to millions of homes and businesses.
But many people are surprised to see that it takes years for these projects to start, and even longer to be completed.
According to Blaine A. Lucas, shareholder at Babst Calland law firm of Pittsburgh whose expertise is in the public sector services of energy and natural resources, there are numerous factors leading to a completed pipeline project.
“It’s fair to say that we have had this dramatic increase in potential supply of natural gas from all the exploration and production companies, but the pipeline infrastructure is not in place to bring it to market,” Calland said in a telephone interview from his Pittsburgh office. “Just from an economic standpoint, the cost of constructing (the infrastructure) in place is significant.
“Combined with the myriad of regulatory issues at the local, state and federal level, the combination of those factors to put it in place with approvals beforehand has been daunting.”
Lucas said the regulatory levels between constructing and fracking a rig is different by leaps and bounds from constructing infrastructure.
“A pipeline is hundreds and hundreds of miles, compared to a well site,” Lucas said. He said there are three issues that the midstream industry is facing:
First, there is too much gas.
“You have significant increase in production because of the thousands of wells in the state, so now there is inadaequate infrastructure to move the gas to market,” Lucas explained. “Next, you need to go through many hurdles of regulatory issues. There is significant time and cost involved in building that infrastructure.”
Lastly, there are regulations, rules, and more regulations.
“You’re not just dealing with one or a limited number of properties, you’re dealing with hundreds and thousands of properties within hundreds of miles,” Lucas said, specifically citing issues with obtaining permits, rights-of-way, and more.
Additionally, there has been a changing level of regulations within the numerous layers of government and regulatory agencies.
Lucas said that, depending on local zoning ordinances, the local governments vary greatly on how they address pipelines. Some interpret the ordinances to not apply to pipelines; therefore there aren’t really any public requirements.
Or, officials may treat pipelines as a permitted use by right, which as long as the requirements are met, the company can then apply for a permit.
In a third situation – which mostly is the case with well pads — pipelines may be authorized by conditional use, which requires a hearing by the local government body, which is usually a board of township supervisors or an appointed zoning hearing board.
“This is where these issues tend to bubble up to get to the public realm,” Lucas said. He said opposition to the construction of pipelines varies.
“Unless it is an inter-state, federally regulated pipeline, there is no power of eminent domain,” Lucas said. “So if a property owner doesn’t want to sell, they don’t have to. But that is just a private property issue.”
Lucas said most opposition is drive by the NIMBY syndrome – Not In My Back Yard – which is a characterization of opposition by residents to a proposal for a new development or construction project because it is close to them, often with the connotation that such residents believe that the projects are needed in society but should be further away.
“Most of opposition is driven by NIMBY,” Lucas said. “Some is philosophical, others are from greenhouse gas or as it pertains to environmental issues. And some are just opposed to natural gas development in general,” Lucas said.
Lucas added that in the western part of the nation, there aren’t a lot of gathering lines and issues surrounding them. “but I do hear of them in the northeast part of Pennsylvania in Tioga, Bradford and Susquehanna counties where drilling is big,” Lucas said.
Exciting times are forecast for the Shale industry in 2015 and beyond. Ten Marcellus and Utica interstate pipeline projects are in the process of development. The state will host the first two liquid natural gas (LNG) facilities in the Northeast built exclusively for LNG-powered tractor-trailer fleets and drilling rigs. More homes and businesses in Pennsylvania are expected to use natural gas next year for heating and cooking as utilities bring gas to underserved areas. And four our ethane cracker plants have been proposed for the Appalachian Basin, which are expected to draw a host of manufacturers to our region.
Two new natural gas liquefaction plants
REV LNG, based in Ulysses, supplies LNG-powered, 18-wheel-truck fleets and gas drilling rigs, using its own LNG-powered cryogenic delivery fleet. Natural gas must be cooled to 260 degrees below zero to become liquefied for more compact storage and transport as opposed to compressed natural gas (CNG).
For REV LNG to remain competitve with diesel fuel suppliers, the company has to deliver LNG to fleets and rigs within a 400-mile radius of a liquefaction plant. The problem is that large LNG plants were built to serve the natural gas utility market. As a result, in the winter months when LNG is in its greatest demand for heating homes and businesses, REV LNG supply gets cut off.
“It’s difficult to be in a distribution business when you’re feedstock can be cut off three out of 12 months a year,” said David Kailbourne, REV LNG owner.
“By having smaller merchant LNG plants that sell directly to the distribution market and not the utilities, we will provide a safe, secure supply of fuel for ourselves as well as our customers.”
The company’s first LNG plant will be built in Herrick Township in Bradford County and produce up to 50,000 gallons of LNG per day. The second LNG plant will be located south of Pittsburgh. Both plants are expected to be operational by fall of 2015.
The other end of the LNG transportation business is fueling the truck fleets and drilling rigs. LNG gas stations cost between $2 to $5 million to build. Fureling long-haul trucks would require hundreds of LNG stations in the Northeast and thousands of LNG stations across the country.
“We realized we couldn’t build all that infrastructure, so our business model targets the 60 percent of the 18-wheeler truck fleets that return to base each day after traveling up to 700 miles,” said Kailbourne. “We provide companies with a private fuel island, which is a mobile LNG fuel tank and dispensing unit. We own it, insure it, service it, and maintain it. The new LNG plants will make us a one-stop shop.”
REV LNG received an $800,000 grant from the state Dept. of Environmental Protection to help with the construction of the plants.
Utilities serve Marcellus gas to new customers
When the shale gas industry arrived, it made two promises: new jobs and a cheap source of energy.
The jobs came and continue to grow, but the only Marcellus gas Pennsylvanians received was co-mingled in interstate transmission lines with more expensive Gulf Coast gas, and that reduced price gas went primarily to urban customers already receiving natural gas.
Three new gas utility projects aim to bring Marcellus gas to underserved areas in the state. Last month, UGI Energy Services Inc., headquartered in Reading, completed its Union Dale Pipeline project, which consists of six miles of 12-inch diameter pipeline that takes Marcellus gas from Clifford Township to the UGI Penn Natural Gas system in Union Dale in Susquehanna County.
The new pipeline can transport up to 100 million cubic feet of gas per day, which could serve about 500,000 homes, according to the American Gas Association.
UGI also made upgrades to its Manning Compressor Station in Washington Township in Wyoming County, which added 50 million cubic feet of capacity to deliver gas from Susquehanna County north to the interstate Tennessee Gas Pipeline and south to the Wilkes-Barre area and the interstate Transco Pipeline, which runs through Luzerne County.
“Today, UGI gets 80 percent of its supply from Marcellus gas, which allows the company to charge customers 30 percent less than it did in 2008,” said Terry Fitzpatrick, president & CEO of the Energy Association of Pennsylvania in Harrisburg, the trade group for the electric and natural gas utilities in Pennsylvania. “Homeowners who convert from fuel oil save an average of $1,500 per year.”
Peoples Natural Gas, headquartered in Pittsburgh, recently proposed a cost-share program to serve Marcellus gas to customers in the Gallitzin-area in Cambria County. Building new pipelines carries an upfront cost of millions of dollars, which prevents gas utilities from investing in areas where there’s not density population or a high usage industrial “anchor” customer.
Under the new program, Peoples Natural Gas would front the cost of the new pipeline and then charge customers $70 per month with about 11 percent interest until the pipeline was paid off. Even with the charges, Peoples claims that customers would realize energy savings as soon as they switched over.
“With this abundant supply of Marcellus gas available and its accompanying lower price, there’s pressure on gas utilities to build out the system to serve new customers who previously weren’t on the system,” said Fitzpatrick. “Some utilities such as Peoples already have filed cost-sharing programs with the PUC to make it easier for customers in underserved areas to receive gas service.
Shell buys property for cracker plant, three other crackers planned
Three years ago, Shell leased the former Horsehead Corp. zinc smelter site in Monaca, Beaver County, to explore the feasibility of building an ethane cracker plant, with an estimated cost from $2.5 to $3 billion.
It would be the first cracker plant built in the Northeast. A “cracker” converts ethane, a by-product of natural gas, to ethylene, which is used to make plastics, plastic bags, antifreeze and detergents.
.After three lease renewals, Shell exercised its option to buy the property on Nov. 7. The company said the purchase will help advance the permitting process. Shell has applied for an air-quality permit and has contracted with Consol Energy Inc. to ship ethane to the proposed plant. Consol is drilling 45 wet gas wells on 9,000 acres at the Pittsburgh International Airport.
Shell will hold a meeting with engineers on Dec. 8 at the state Dept. of Transportation building to talk about the next phase of the Route 18 realignment.
“Shell has talked with Trumbull Corporation and Mascaro Construction, both headquartered in Pittsburgh, who will potentially design and construct the $60 to $90 million road realignment project,” said Beaver County Commissioner Joe Spanik. “Shell is also having two new piers built on the nearby Ohio River, which they’re working on with the Army Corps of Engineers.”
Shell has hired Bechtel, a San Francisco-based, international engineering and construction firm, to build the plant. Bechtel’s specialties include pipelines, oil & gas field development, and building refineries and petrochemical facilities. The company employs 53,000 worldwide and earned $37.9 billion last year.
“Shell has held a series of public meetings to keep residents informed about what the company is doing and to address any issues, for example, Shell reps held a meeting two weeks ago in Lincoln Park to discuss environmental impacts,” Spanik said.
In addition to meetings, Shell is also sending representatives into nearby communities such as New Brighton and Beaver Falls to discuss the project with local residents.
Three other cracker plants have been proposed within a 750-mile radius of Pittsburgh.
Odebrecht, a Brazilian petrochemical company, has proposed a cracker plant complex, called Project Ascent, 10 miles outside of Parkersburg, W.Va. The complex would include an ethane cracker plant and three polyethylene plants.
Appalachian Resins Inc. recently announced plans for a $1 billion cracker plant in Ohio on a 50-acre site along in Salem Township, Monroe County, which like the Shell property, sits next to the Ohio River.
PTT Global Chemical of Thailand and Marubeni Corp., a Japanese trading and investment house, are considering the former site of Wheeling Pittsburgh Steel Chemical in Allenport, Washington County, as a possible location for a cracker plant. The site sits next to the Monongahela River and is accessible by rail.
“All of this interest in building cracker plants here gives us even greater optimism about a future economic boom for the Appalachian Basin as manufacturers are attracted to the region to be close to the feedstock,” said Spanik.
In early September when Williams’ largest fundraising event featured natural gas companies grilling pulled pork, beef brisket and pork ribs in the late summer heat vying for top Williams BBQ honors, the last thing they were probably thinking about was the winter holiday season.
The Barbecue Cook-Off is Williams’ largest fundraising event to benefit the United Way in northeast Pennsylvania. Williams matches all proceeds from the event, dollar for dollar.
In 2014, Williams raised more than $70,000 in its third season, a 40 percent increase from 2013. With the pledged Williams match, the company provided about $140,000 to local United Way agencies.
Referred to as a “signature event” by Williams’ public outreach representative Mike Atchie, the annual BBQ is more than just bragging rights.
“We wanted to do something to drive interest in (United Way)”, Atchie explained. “Some companies do golf outings, but this is our industry. Many Marcellus-related companies have cooking equipment like giant grills or smokers to cook for their workers. So we bring them in for a fundraiser, make it a compettion and have some fun.
“The idea is to continue to build on this and make it our signature event for the Northeast,” Atchie said.
Many teams were from local natural gas production or pipeline companies or contractors working in the Marcellus Shale. According to Atchie, rather than pick and choose which charitable organizations the company should donate to, it was better to donate to the local United Way organizations in the Marcellus shale area so that the funds could be distributed more uniformly.
The Williams BBQ is just one of many examples of how the shale gas companies are giving back to the shale communities.
In 2012, Tropical Storm Lee wreaked havoc in the northern and central Pennsylvania regions, mostly due to massive flooding.
According to the Marcellus Shale Coalition (MSC), member companies controlled their operations in northern Pennsylvania to ensure no environmental damage was incurred and no well pads were compromised. At the same time companies operating in the flood-affected areas also stepped up to pledge valuable financial resources, work hours, supplies, and expertise to help communities heal more quickly in the wake of the flooding.
In total, MSC member companies donated approximately $1 million in financial and in-kind contributions to impacted communities in the days following the flood conditions.
Shale companies say they are being good neighbors with the commitment to the communities in which its employees live and work. MSC member companies Anadarko Petroleum Corporation, Cabot Oil & Gas, Chesapeake Energy, Chief Oil & Gas, EXCO Resources, Pennsylvania General Energy, Penn Virginia Resource (PVR) Partners, Range Resources, Talisman Energy USA, Williams, and XTO Energy, among others provided financial contributions to numerous organizations like the American Red Cross, Meshoppen Volunteer Fire Company, and Lycoming County Chamber/First Community Foundation of Pennsylvania to name a few.
According to Joseph T. Kolarik, CPA, MBA and tax director at SF&Company, CPAs and Business Advisors based in State College and York, most businesses, regardless of size, want to be good neighbors regardless of the season.
“Business owners, no matter the business structure, feel a sense of responsibility or need to give to the charitable organizations in the community that they operate in,” Kolarik said. “The charitable interests do vary, but most business owners give charitably to local or national charities, depending on the scope of their businesses.”
And of course, businesses are likewise rewarded for their charitable efforts.
“Businesses do receive a tax deduction for their contributions, and it’s a way to promote a business in the community. But those motivations are not the primary motive,” Kolarik continued. “There are many businesses with marginal profits that give charitably.
“It all comes down to the charitable human interest of the owners.”
Entries for the much-anticipated 2015 Northeast Oil & Gas Awards will continue to be accepted until the submission deadline of Thursday, Dec. 11.
The Oil & Gas Awards is a 5-star red carpet, tuxedo affair that attracts the most senior and well-respected leaders within the oil and gas industry. The Industry Summit brings together the leading organizations in each region to network and share their experiences on the topics most important to the industry.
The awards are a platform for the oil and gas industry to demonstrate and celebrate the advances made in the key areas of environmental stewardship, efficiency, innovation, corporate social responsibility and health & safety.
In addition to the awards event, the Northeast Industry Summit will be held immediately preceding the awards gala dinner. The Northeast Industry Summit will provide an extended platform to deliver strategic and operational business insights that have clear commercial benefits. The draft agenda will be released shortly.
Listed below are the categories for the upcoming awards.
- Award for Drilling Excellence
- Award for Excellence in Corporate Social Responsibility
- Award for Geophysical Excellence
- Award for Excellence in Health & Safety
- Award for Excellence in Well Completion
- Breitling Energy Future Industry Leader
- Construction Company of the Year
- Corporate Consultancy of the Year
- E&P Company of the Year
- Engineering Company of the Year
- General Industry Service Award
- Industry Leader
- Industry Supplier of the Year
- Law Firm of the Year
- Manufacturer of the Year
- Midstream Company of the Year
- New Technology Development of the Year
- Oilfield Services Company of the Year
- Operational Consultancy of the Year
- Recruitment Agency of the Year
- Risk Management Company of the Year
- The Oil & Gas Financial Journal Transaction of the Year
- Trucking Company of the Year
- VZ Environmental Award for Excellence in Environmental Stewardship
- Water Management Company of the Year
After the entry deadline, all entries are correlated by region and category into judge’s packs. The packs are sent to the judges for review, voting and to pass comment on. The judge’s votes are correlated to define the shortlist of finalists for each region.
Judging will take about four weeks. After the judging period, the finalists will be announced on the Oil & Gas Awards Website and by the association and media partners.
After the finalists’ announcement, the events team will be in touch to deliver the finalist’s logo badge and press release so finalists can promote their achievements.
Finalists will also need to provide marketing assets such as high-resolution logos and corporate bios. Organizations entering the awards and are voted finalists by the awards judging panel must attend the relevant awards gala dinners for all of the regions in which they are voted a finalist. Finalists are asked to budget to attend the awards and schedule availability of attendees.
Pricing is available at www.oilandgasawards.com/2014-pricing/.
Information about how to enter can be found at www.oilandgasawards.com. Companies requiring assistance with writing an entry or who have questions can contact the Oil & Gas Awards’ editorial team to assist with the entry process by contacting firstname.lastname@example.org or by telephone at (210) 591-8468.
A Columbia Gas of Pennsylvania, Inc., pilot program approved in late October by the Pennsylvania Public Utility Commission (PUC) will provide a new way to bring natural gas service to those who request it.
A similar program launched by UGI Utilities Inc – the Get Gas Program – is likewise designed to provide natural gas service to additional areas, which are currently unserved or underserved.
At the recent Keystone Energy Forum held at the Nittany Lion Inn in State College, Columbia Gas spokesman Russell Bedell explained the residential situation in Centre County.
“There are 7,400 miles of (natural gas) pipe in Centre County, serving 12,000 customers,” Bedell said. “Columbia Gas now has a new area service program to help grow that customer base, and bring natural gas to people who want it.”
The new program means many potential Columbia Gas customers will have an option to pay for all or a portion of their natural gas line extension payment over a period of 20 years, rather than with just the lump sum payment that Columbia Gas has historically been required to charge.
A typical cost for a property owner to access a natural gas line averages about $10,000 – and with the new program, that cost can be broken down and added to the customer’s monthly payment as opposed to paying it up front.
“We are excited that the PUC has given us the opportunity to bring natural gas to more Pennsylvanians who are not currently adjacent to existing natural gas pipelines,” said Columbia Gas President Mark Kempic. “The Commission’s initiative in approving this program furthers the goal of making natural gas more readily available to residents of Pennsylvania, the second-largest producer of natural gas in the country. Natural gas can be as much as 40 percent less expensive than other home energy choices, so now is a great time to be a natural gas customer.”
The company’s current procedure for any extension of gas mains to serve new customers is to perform an economic analysis and determine if the cost of the pipeline extension can be justified by projected revenues, or if an upfront payment needs to be made.
Instead of paying the entire amount up front, under the new program, qualifying customers may be able to pay all or a portion of the upfront payment through a monthly charge of “up to” $35 for new gas service.
UGI’s GET Gas program will be available initially as a 5-year pilot to customers of UGI Utilities – Gas Division, UGI Penn National Gas and UGI Central Penn Gas. Under UGI’s plan, GET Gas customers will pay a monthly surcharge over a 10-year-period to cover the cost of the main extension rather than making a substantial up-front contribution.
GET Gas is projecting that UGI may extend natural gas service to a reasonable prospect of 50 percent or more of existing homes along the main extension, and will convert their primary heating service to natural gas over the next 12 years, provided the cost of the main extension is greater than $15,000 and expected costs per new customer doesn’t exceed $10,000.