Shale gas 2013: The year in review

By R. Brock Pronko, MBC Regional Business Analyst

The natural gas boom in Pennsylvania has grown in leaps and bounds since 2008 when gas company representatives known as “lease men” descended upon the Marcellus Shale Region with contracts in hand, promising farmers more money than they expected to make in a lifetime.

During the first half of 2013, the commonwealth trumped Louisiana to become the second largest natural gas producer in the nation. Marcellus wells produced 1.4 trillion cubic feet between January and June. Among the 31-gas producing states, only Texas had a greater output during the first six months of the year.

Pennsylvania currently has 6,261 Marcellus wells, increasing from 4,312 wells the same time two years ago. Of those wells, less than half — 2,879 — are currently producing gas due to lack of pipeline infrastructure.

Pipeline Build-out

Thousands of miles of new pipeline in Pennsylvania will be needed to transport the abundant supply of Marcellus Shale gas to market, an estimated at 50 trillion cubic feet. While pipeline development has been an ongoing effort, it picked up steam this year.

“We saw a greater focus on pipeline build-out in 2013; remember, about 3,000 gas wells in Pennsylvania are still waiting to be connected to the distribution system,” said Patrick Henderson, Governor Corbett’s energy executive.

“We’re seeing operators put an emphasis on capital expenditures for building gathering lines and larger interstate and intra-state pipelines, and also for constructing processing facilities, for example, the MarkWest De-ethanizer in Washington County.”

In the next 10 years, $10 billion worth of pipeline is expected to be constructed each year in the growing shale gas plays across the nation.

More than half of the interstate natural gas pipeline projects proposed to federal energy regulators since early 2010 have been in Pennsylvania. They carry an estimated cost of over $2 billion.

PUC reported 2,535.5 miles of pipelines are serving Marcellus Shale wells in the state.  Of these, 1,727.8 miles are gathering lines and 807.7 miles fall under the regulatory jurisdiction of the Pennsylvania Public Utility Commission (PUC).

While PUC has no authority over interstate pipelines and doesn’t keep records on how many miles of interstate pipeline exists in the commonwealth, it does inspect natural gas pipelines that go directly to the consumer and has the authority to enforce both state and federal regulations regarding those pipelines.

“To give you an idea of the extent of the pipeline build-out this year, we’ve reached right-of-way agreements with over 30 pipeline entities across the state, from here in Northeast Pennsylvania all the way to Greene County, which borders Ohio,” said Doug Clark, Esq., an attorney in Peckville, Pa., Lackawanna County, who specializes in landowner agreements.

Natural Gas for Homes and Businesses

Since the gas industry began booming in 2008, much of the natural gas produced in Pennsylvania has been transported out of state through interstate pipelines to Northeast markets such as New York City.

The proposed $1 billion Commonwealth Pipeline was intended to turn that situation around, as Marcellus Business Central reported last November. This year, the partners developing the project — Inergy Midstream LP, UGI Energy Services Inc., and WGL Holdings Inc. – were expecting to break ground on the 200 miles of 30-inch-diameter pipeline to transport about 800 million cubic feet of gas per day from Marcellus gas wells in northern Pennsylvania to Philadelphia and other markets in the southwestern part of the state.

The pipeline was scheduled to go into service by 2015; however, in April the Commonwealth Pipeline partners announced they decided to suspend the pipeline’s development. The decision was attributed to low gas prices, a sluggish economy, and the expansion of existing pipelines, according to Simon Bowman, a spokesman for UGI Corp.

Philadelphia and southeastern Pa. will continue to receive natural gas from Kinder Morgan Energy Partners’ Tennessee Gas Pipeline, which is a 13,900-mile pipeline that transports natural gas to the Northeast from Louisiana, the Gulf of Mexico and south Texas.

In June, Senator Gene Yaw (R-23) and Senate Majority Leader Dominic Pileggi (R-9) introduced legislation designed to make Marcellus gas available to more Pennsylvanians. The “Pennsylvania Natural Gas Expansion and Development Initiative” was designed to promote the expansion, distribution and use of low-cost, energy-efficient, Pennsylvania-produced natural gas, thereby developing an intrastate market for our own resources.

The incentives will primarily focus on encouraging “anchor users,” such as schools and hospitals, to convert to natural gas.

The legislation will also adopt methods for the PA PUC to review current levels of natural gas service and enable public utilities to more efficiently expand natural gas services to areas that are currently underserved.

“The abundant natural gas reserves found in the Marcellus Shale formation represent an incredible growth opportunity for our state,” said Senator Pileggi.

“We should make that resource easily available to as many Pennsylvanians as possible.”

A Private-Public Partnership for CNG Transportation

Efforts to use Marcellus gas for transportation also stepped up this year.

Ohio-based IGS Energy began development of the first compressed natural gas (CNG) fueling corridor in the Mid-Atlantic Region, which will run along I-76, from Charleston, W.V. to Mount Morris, Pa. in the southwestern corner of the state.

IGS cites a growing demand for CNG fueling stations, low priced local Marcellus gas, and alternative fuels tax incentives as the main drivers behind its $10 million CNG fueling corridor, which includes four stations: Charleston, Bridgeport and Jane Lew, W.V., and Mount Morris, Pa. All the CNG stations will be accessible to the public.

“We’re targeting Charleston and Bridgeport for completion by the end of the third quarter of this year, and the other two stations, Jane Lew and Mount Morris, are slated to go online by the end of the year,” said T.J. Meadows, West Virginia business manager for IGS Energy.

Three shale gas companies operating in the area – Chesapeake Energy, Antero Resources and EQT Corporation — have agreed to use the stations.

Chesapeake Energy has already converted 2,000 of its 5,000 vehicles to natural gas. Antero has 200 vehicles converted and is committed to converting its entire vehicle fleet.

IGS anticipates that by January 1, 2014 this first phase of the corridor will be fully operational. Two other phases will extend the corridor though southwestern Pennsylvania and into Ohio.

According to the U.S. Department of Energy, there were nearly 30 CNG stations operating in Pennsylvania this year, most of which are public access, the rest are used by private fleets.

On September 17, the Commonwealth Financing Authority issued more than $2 million in grant awards and a $169,000 loan to build five CNG fueling stations, all of which will be publicly accessible.

Clean Energy Inc. was awarded $196,000 to add another station to an existing CNG fuel stop in Upper Merion Township. It also received another grant for $436,000 to add a CNG fueling station to a gas station in Hamilton Township in Adams County.

Sunoco received over $500,000 for installing a CNG refueling station at the Pennsylvania Turnpike King of Prussia Service Plaza and for another station in nearby Upper Merion Township.

Over the past two years, the commonwealth has invested $7.9 million in 21 alternative fuel projects, which were additionally supported by $22 million in private funding. The projects included CNG buses, taxis, gas storage facilities, and fueling stations.

“The long term goal is to continue to grow the state’s Marcellus Shale-related job markets,” said Steve Kratz, spokesman for the Department of Community and Economic Development.

In January, River Valley Transit in Williamsport held a blue ribbon-cutting ceremony for its new compressed natural gas fueling stations.

The CNG fueling stations are intended to serve 30 CNG buses, CNG fleets from local companies, and CNG vehicles owned by local residents.

The “fast fill” CNG compressors will take about the same time to fill a CNG vehicle that a gas station pump takes to fill a gasoline or diesel vehicle.

River Valley Transit will phase in CNG buses as it retires its diesel powered fleet. The company it will save $500,000 a year in fuel costs by using CNG buses.

Its first CNG bus was paid for with a combination of a $400,000 grant from the federal Highway Transit Administration, a grant for $85,000 from the state Department of Transportation, and $15,000 in city capital funds.

Endless Mountains Transit Authority, which provides bus service for Bradford, Sullivan and Tioga counties, received $750,000 in alternative fuel funds to convert to CNG. Endless Mountains has converted five public transit buses to CNG, which will be fueled at a public fueling station in Bradford County operated by Dandy Mini Marts.

Waste Management of Pennsylvania, Inc. received $700,000 to build a CNG fueling station at its hauling facility in Washington, Pa, which is also open to other fleet operators and individuals with CNG-equipped vehicles.

Clean N’ Green Fuel, headquartered in Seattle, is in partnership with Waste Management and manages the retail fueling station at the site.

Deploying the CNG vehicles will help Waste Management achieve its sustainability goal of reducing fleet emissions by 15 percent and increasing fuel efficiency by 15 percent by 2020.

“We opened a new station in Illinois, and if the demand keeps growing the way it is now, we expect to have 30 public access CNG stations across the country completed by the end of this year,” said Jenny Hanson, Clean ‘N Green’s director of marketing.

Training for good paying gas industry jobs

In May, Penn College of Technology in Williamsport, the lead institute on the $14.96 million federal ShaleNET US grant for advanced gas worker training, announced new stackable certificate and associate degree programs would be offered this fall at the four colleges in the ShaleNET US consortium: Penn College of Technology, Williamsport; Westmoreland County Community College, Youngwood, Pa.; Navarro College, Corsicana, Texas; and Stark State College, North Canton, Ohio.

The certificates programs include production technology, pipeline technology, process technology, and mechatronics (a multidisciplinary field involving mechanics, electronics, control theory, and computer science).

A total of 252 credit students and 44 non-credit students enrolled in the ShaleNET US technical programs at the four schools.

Westmoreland College has 17 students in its mechatronics program. Penn College has run 22 students through its non-credit, short-course gas worker programs since July 1, and it also has a handful of students enrolled in its mechatronics program.

Stark State in Ohio has 34 students enrolled in its ShaleNET US credit courses and 22 in non-credit courses.

Navarro leads the network in the number of students enrolled in credit courses with 200. Navarro started offering oil & gas technician courses seven years before ShaleNET US since oil drilling in Texas existed long before the shale plays began, and much of what applies to oil drilling also applies to gas drilling.

“With the original ShaleNET grant, our focus was getting veterans and people who were unemployed or underemployed into entry-level jobs in the industry to aid the exploration and production of natural gas,” said David Pistner, director of ShaleNET’s Eastern Region at Pennsylvania College of Technology.

A pipeline technology certificate would enable a student to work as a pipeline apprentice for companies involved in midstream operations, which pays on average about $45,000. Or he could go on to earn an associates’ degree in pipeline technology and earn between $56,317 and $89,645 as a pipeline technician.

“The purpose of ShaleNET US is to create a homegrown workforce in the shale play states,” said Pistner.

“The new technical certificate programs implemented this year focused on gas processing, treatment and transmission stages, which represents a major change in the job outlook, training Pennsylvanians for good-paying, technical jobs in the industry.”

 

 


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