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May 16, 2016
by David Conti


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In search of an energy policy

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Discussions around energy policy garner attention in national politics every four years.

In Pennsylvania, it’s been an ongoing debate for about 12 years, starting not long after the Marcellus shale was first tapped in Washington County.

One would think after all this time we might be closer to settling on something close to an energy policy, or even just a natural gas policy in the country’s No. 2 natural gas producing state.

Listen to the different sides in the debate, though, and it seems they aren’t speaking the same language.

In Harrisburg, Gov. Tom Wolf and some lawmakers have translated “energy policy” to mean “taxes,” according to Rep. Jim Christiana.

“That’s been the extent of energy policy in Harrisburg for the past 24 months,” the Beaver County Republican said during a recent Pittsburgh Airport Area Chamber of Commerce forum in his district.

Because lawmakers four years ago decided to call the state revenue stream from gas wells a “fee” instead of a “tax,” we’re stuck in a debate over words and how to increase that revenue stream, instead of looking at the best ways to balance safe and reliable production with increased demand, Christiana said.

“We’ve got to have a serious conversation about energy policy,” said Christiana, who has opposed a severance tax on production but this year proposed that very thing as an attempt to end the debate.

The Wolf administration continues its push to add a tax to the existing impact fee. It also says Wolf wants to see the gas industry flourish in Pennsylvania.

That’s one reason he gathered a task force to help with the pipeline buildout the industry needs, Denise Brinley, special assistant to the secretary of the Department of Community & Economic Development, said during the same chamber forum.

“The governor recognizes the need to get the gas to market,” she said, calling shale gas an opportunity for economic growth even outside the Marcellus footprint.

Administration officials have echoed this sentiment, causing some in the industry to scratch their heads. Such words of support for gas are incompatible with what they consider an onerous tax policy and regulatory scheme.

Scott Roy, a vice president at producer Range Resources, pointed out to Brinley what he sees as a disconnect between Wolf’s words and “what we see in the field.”

“The pipelines won’t matter if there’s no gas to flow into that pipe,” Roy said. Wolf’s policies stifle production, he said.

“We can’t have a 230-mile pipeline bisecting the state with no off-takes for Pennsylvanians,” Brinley responded, a possible reference to the Mariner East pipeline, which delivers Range’s ethane to a terminal south of Philadelphia for export overseas.

And the debate goes on.

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May 2, 2016
by David Conti


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Out in the cold

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The long-term winter forecast for New York and New England keeps getting colder.

It might get dark in spots, too. It certainly will get more expensive.

More and more, people there are relying on natural gas to keep their homes warm and to keep the lights on as power plants switch over from coal and nuclear plants close from Vermont to the Empire State. Demand for the fuel is forecast to keep growing.

But the chance of meeting all that demand in Northeast states became less certain over the past few weeks.

One major pipeline set to deliver gas across New England was shelved by its proposed operator, Kinder Morgan. Another project meant to link New York customers to Marcellus shale producers — the Constitution Pipeline — encountered a major stumbling block thrown up by that state’s environmental regulators.

It’s hard to predict whether the Constitution line or a competitor to the Kinder Morgan project will eventually get built.

What’s certain, though, is those hoping for easier access to the huge quantities of cheap gas coming from the Marcellus — just miles from the New York line — will have to wait. And those power plants and utilities will have to find alternative and more costly supply lines to keep fires burning and lights flickering.

“This was our big chance to pay lower energy costs, like everybody else,” Anthony Buxton of the Coalition to Lower Energy Costs told the Boston Globe when Kinder Morgan canceled its long-planned Northeast Energy Direct project in mid-April.

New Englanders pay some of the highest electricity rates in the country, and gas prices often spike there in winter when demand surges and supplies dwindle. An extension of Kinder Morgan’s existing Tennessee line across the top of Massachusetts and into New Hampshire would have helped ease that.

Opponents of the pipeline said utilities can get extra gas when it’s needed from imports. Despite overflowing supplies in Appalachia, a terminal south of Boston continues to take in more expensive liquefied natural gas from overseas.

In New York, alternative sources of gas might be more scarce, especially since Gov. Andrew Cuomo banned the use of fracking to explore shale. His Department of Environmental Conservation on April 22 denied environmental permits needed to build the Constitution Pipeline from northeast Pennsylvania to his state.

The companies that want to build the line say they are considering an appeal to federal court.

It’s hard to tell how many cold winters such a case would take.

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April 6, 2016
by David Conti


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A win for coal

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Last June, we told readers about an effort by retired and current coal miners to form a collegiate mine rescue association.

The goal was to formalize rules and relationships among teams at several universities. The competitive events and exercises leading up to them are invaluable to student miners-in-training and the future of the industry overall, organizers and former team members said.

Good news came in the summer, when the Eastern Collegiate Mine Rescue Organization organized under the Society for Mining, Metallurgy & Exploration, with a six-member board and a rules committee.

Better news came last weekend when the group held its first full competition at West Virginia University Extension’s Doll’s Run Training Center with teams from WVU, Penn State, the University of Kentucky and Virginia Tech.

Kentucky took first place.

“Things went extremely well,” said Don Hager, the Virginia tech team trainer and retired Consol Energy miner who helped bring together the organization. “WVU Extension was a great place to have it and they did an exceptional job handling it.”

Given the nationwide slowdown in coal production that has led to mine closures and layoffs across Appalachia, it might be easy to assume that new generations of mine rescue teams would become less necessary.

Miners say the opposite is true. Younger workers who have spent time on these teams in college enter jobs with a safety-first attitude that helps prevent accidents, they say. They can work together easily when problems happen underground.

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April 4, 2016
by David Conti


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Is the gavel mightier than the pen?

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The stroke of Gov. Tom Wolf’s pen last month brought some rejoicing among Pennsylvania’s environmental community.

After essentially conceding his nine-month budget battle with the Republican-controlled General Assembly and allowing its spending plan to become law, the Democrat axed a related bill that generally gets less attention but carries big implications.

His veto of that fiscal code killed attempts by lawmakers to take more control of two major efforts underway at the Department of Environmental Protection: writing a proposal to comply with the federal Clean Power Plan aimed at cutting carbon emissions, and rewriting the so-called Chapter 78 environmental rules around oil and gas well development.

The fiscal code would have forced a restart on the process to rewrite the Chapter 78 rules targeting conventional wells, the shallow, vertical drilling operations overshadowed by deep shale drilling.

“This would be a significant setback to the DEP’s efforts to enhance environmental safeguards for natural gas development,” Wolf’s office said in explaining one of a half-dozen reasons for the veto. It also called the attempt to control approval of a Clean Power Plan proposal unconstitutional.

It’s up to judges to make the next decisions on these issues.

A federal appeals court has been reviewing challenges to the Clean Power Plan. On Chapter 78, an oil producers trade group wants a state appeals court to put the brakes on the revisions before the Independent Regulatory Review Commission considers them this month.

The Pennsylvania Independent Petroleum Producers Association contends DEP didn’t follow the letter of law in drafting revisions that target the conventional oil industry. Making smaller producers follow rules similar to those governing major shale gas corporations would put the legacy industry out of business, the group said in its request for an injunction from Commonwealth Court.

Judges scheduled arguments for April 7. But even if the producers don’t get their injunction, they have advocates pleading their case to the regulators.

The review commission has received at least six letters recently from legislators. Five expressed concern over whether state officials properly considered the rules’ financial impact on the conventional industry.

“Having failed the threshold question of statutory authority and consistency with legislative intent, the regulation should not be approved,” wrote Rep. John Maher, chair of the House Environmental Resources and Energy Committee

The question now is whether the applause from environmental advocates that Wolf’s pen brought will be drowned out by banging gavels or a commission’s order.

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March 21, 2016
by David Conti


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Where is the question

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Advocates for renewable energy have mastered the art of answering most of the so-called Five W’s.

What should we install? More solar panels and wind turbines for starters, they say, followed by smaller hydropower plants.

Who should do this? Everyone, of course, unless you’re some climate change denier who wants to keep polluting the air and making the Earth hotter.

When? Before it gets any hotter, silly.

The question of where, though, has proved stickier.

Not all locations make sense — shady corners of river valleys might not provide much sun or wind — and some are filled with people who don’t want turbines or panels blocking their views of that warm Earth, say at the beach.

Ines Azevedo is looking to answer the question based on where harnessing the wind or sun gets the most bang for our bucks.

“Where you are, how you use energy … is likely to affect the consequences of those interventions in the energy systems,” Azevedo, co-director of Carnegie Mellon University’s Climate and Energy Decision Making Center, said last week during a talk kicking off CMU’s Energy Week.

The key to answering where, it turns out, comes in answering why. Why do you want to use more renewables on the grid? Is it to lessen carbon emissions to impact climate change, are you looking to cut down on pollutants that cause more immediate health problems, or do you just want to produce a lot of electricity?

Where to install differs based on the ultimate goal, Azevedo showed on a series of maps.

Starting with solar, the regions with the best and most efficient production came as no surprise: Arizona, New Mexico and South California.

But if the aim of building more solar panels is to cut pollution or greenhouse gas emissions, the prospect of getting many benefits in those sunny states gets dim. Solar, and wind turbines for that matter, will just replace natural gas-fired power plants in those areas that emit little carbon, sulfur dioxide or fine particulates, Azevedo said.

If you want to make a dent in those emissions, put the solar panels in the Midwest, where coal-fired power still dominates. A panel in Ohio “provides 17 times more health and environmental benefits than a solar panel in Arizona, even though that solar panel in Ohio produces 30 percent less,” Azevedo said.

For the same reasons, turbines, which generate more juice across the windy Plains and Texas, can provide more health and environmental benefits in more densely populated areas to the east.

Asking questions about the buildout of renewables will often result in being tagged as an obstructionist or denier. Asking the right questions, Azevedo shows, can lead to a smarter buildout, though.

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March 7, 2016
by David Conti


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Powering the line

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Today, West Penn Power is one of many. Akron-based FirstEnergy Corp. counts the utility among 10 electric distribution companies under its corporate umbrella.

In 1916, though, West Penn was born from many. It formed when more than 50 small outfits were consolidated to create a regional company with multiple operations.

This week, the utility will celebrate its centennial with a gathering for current and retired “West Penners” at its Greensburg headquarters, where some old-timers are expected to swap stories beside company memorabilia and black-and-white photos. West Penn’s parent company’s foundation is using the opportunity to donate $5,000 to the Pennsylvania Trolley Museum in Washington County.

Directing that money toward the preservation of old trolley cars might seem an odd choice, until one explores West Penn’s roots a little more deeply.

Many of those smaller companies that eventually would combine to become West Penn were formed for the purpose of powering streetlights in the business districts of towns stretching from Uniontown and Connellsville to Kittanning and Butler.

Others existed to power their street cars and to connect those communities together. They ran railway operations among the towns — and to the coal mines, coke ovens and mills that supported them.

When West Penn Power formed, the separate West Penn Railways was created from those companies. With about 340 miles of track and 55 million annual passengers at its peak in the 1920s, the railway company provided a dominant, regional transportation network outside Pittsburgh.

“The soul and heart of the system … were the lines in the coke region where big orange cars transported miners, shoppers, visitors, newly arrived immigrants and anyone else needing transportation between work, home, and town,” wrote the authors of Railroadiana Online, a site devoted to rail history and artifacts.

It’s hard to imagine today the bustle in and among those widespread towns that once formed the energy backbone fueling Pittsburgh industrial might.

The railway company fizzled out by the 1950s as highways were built and cars filled them. More than a few public transit advocates and commuters who sit in daily gridlock on those roads probably would like to have the rail lines back.

The power company survived and serves those same towns once connected by West Penn rails, with more than 720,000 customers.

A few reminders of the railway company survived, too. The Trolley Museum houses two West Penn Railway cars — Nos. 739 and 832 — and one of the system’s electric locomotives, reminders of when powering the line had a different meaning at West Penn.

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February 22, 2016
by David Conti


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Tracking production

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Pennsylvania last year changed the way gas companies report shale well production to make it easier for leaseholders to check their monthly royalty checks against state records.

It also provided a trove of data for those tracking the industry.

Requiring companies to file reports monthly instead of every six months opens a more transparent window into how production is changing, especially as the most active companies in the Marcellus and Utica shales adjust to low prices that settled into the landscape.

The December report posted by the Department of Environmental Protection last week provides a full-year picture of trends among shale gas producers.

Most companies reduced drilling and some stopped altogether, so despite a backlog of wells to bring online, fewer producing wells were added to the roster than in previous years.

Some took wells offline. The state’s top producer, Oklahoma City-based Chesapeake Energy, started the year with 699 active shale wells. By December that number dipped to 624 and production for the month was 6.5 percent lower than it was in January.

Anadarko Petroleum Corp., the state’s ninth biggest producer in 2014, fell to No. 11 as its active well count dropped from 308 to 196. Consol and Rice Energy bypassed the Texas producer as both Cecil-based companies boosted production and active well counts, especially in the second half of the year.

Their growth, combined with sustained activity by fellow Western Pennsylvania producers Range Resources and EQT Corp., pushed a geographic shift in production as well.

Susquehanna County remained the top shale gas producer in the state last year. But December production surged by nearly 40 percent in Washington County from the January total, pushing it past No. 2 Bradford County, where production fell by 5 percent in that time. It climbed by 25 percent in No. 4 Greene County.

Greene and Washington represent the “core of the core” for companies such as Range and EQT that continue drilling but at a slower pace. A network of well pads and operations in the region, along with some new pipelines to carry gas and liquids away, make the area south of Pittsburgh a smarter area to develop.

With prices expected to remain low for at least another year because of an over-supply, the monthly reports could provide signs of further adjustments this year. Analysts have predicted lower production in response to the glut. Though overall production in 2015 still increased, it was at a lower rate than in previous years.

A meaningful drop in production could spur a boost in prices, though that would require more than just Chesapeake and Anadarko cutting back.

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February 8, 2016
by David Conti


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A little government cheer

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Reports from the U.S. Energy Information Administration hardly qualify as motivational messages.
The Department of Energy agency’s daily updates, weekly reports and period outlooks usually lean heavier on data and statistics than cheerleading. Its mission is to gather and distribute “impartial energy information.”
A few of its recent announcements, though, have provided the closest thing to good news that Marcellus and Utica shale gas drillers have heard in months.
Producers are in desperate need of a pep talk as layoffs mount and spending plans for 2016 shrink. Low prices are making for dark days in the shale fields.
Southwestern Energy recently cut 200 employees in Appalachia, and Range Resources followed suit with 55 workers. The reductions in capital spending at top producers are eclipsing multibillion-dollar levels.
A ray of light came from the EIA at the tail end of January indicating that prices are starting to improve.
The national benchmark price for natural gas is based on how much it fetches at a pipeline connection in Louisiana known as Henry Hub. Because of limited pipelines and oversupply in the Marcellus, producers here can’t get that same price at Pennsylvania connections.
The EIA noted in a daily report that the spread between those prices was shrinking, averaging less than a dollar difference over the past few months and headed toward 50 cents.
In all honesty, that’s partly because Henry Hub’s price has dropped closer to Marcellus levels. Traders there haven’t seen $2.50 per million British thermal units since Oct. 12, and in December the price hit 16-year lows as a warm start to winter stomped all over demand.
But Marcellus prices that fell below $1 over the summer have crept up as more pipelines come online. Which led to more good news for drillers from the EIA.
“New pipeline projects increase Northeast natural gas takeaway capacity,” the report was titled. Slowly but surely, all that gas coming from our shale is finding new paths to more lucrative markets, the EIA said.
A decent batch of new large pipelines and connections to the established interstate systems went into operation late last year and early in 2016. More are on the way: The Federal Energy Regulatory Commission last week OK’d several hundred miles of new lines that will connect high-paying markets in the Sun Belt.
The net effect of more pipelines — especially those that lead to export terminals, new gas-fired power plants or Mexico — should make drillers happy. EIA predicts prices will get back to $3 by December and will average $3.22 next year.

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January 25, 2016
by David Conti


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Agreeing on gas

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Deep down, both sides seem to agree on methane.

It’s just hard to see through some of the past week’s rhetoric.

The latest dustup between Pennsylvania Gov. Tom Wolf’s Department of Environmental Protection and the shale gas industry shows the usual animosity at the surface.

The department is rolling out rules aimed at reducing methane emissions from well sites, processing facilities and pipelines.

An hour after Wolf announced the move, the American Petroleum Institute called such rules unnecessary and duplicative because government figures show emissions of the greenhouse gas have fallen.

The next day, DEP Secretary John Quigley questioned the validity of those figures and challenged the industry to prove it’s cutting leaks.

“It’s very easy for a trade group to claim we’re doing all the right things. It’s very hard to prove it,” he told reporters.

Within hours, the Marcellus Shale Coalition was using the DEP’s own numbers to do so. The United Shale Advocates tagged Quigley, the DEP and reporters in a tweet quoting Environmental Protection Agency Administrator Gina McCarthy singing the praises of natural gas as a game-changer in reducing emissions.

Now we have a regulatory agency looking like it doesn’t know what it’s talking about and an industry appearing to want to shirk responsibility for emissions.

Neither is true.

Resetting the debate to Wolf’s initial announcement shows that the combatants actually started closer to agreement on methane.

Although he’s never been viewed as a friend to the gas industry, Wolf pointed out that many companies have been doing the right thing, using state-of-the-art equipment to detect and repair leaky wellhead equipment and pipes.

The industry has dropped some serious money on this issue. Because, as Wolf himself noted, gas that escapes can’t be sold. Even at today’s basement prices, those are dollars and cents that leak from a bad connection.

Both sides obviously agree that allowing methane to escape into the air from gas operations is a bad idea. If they can direct their energy away from quibbling over how it’s counted, it will be interesting to see whether they find some common ground on methods.

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December 29, 2015
by David Conti


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Price party

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Back in July, the folks at price tracker GasBuddy.com predicted the national average for gasoline would dip below $2 per gallon by Dec. 31.

They were only two weeks off.

Pump prices, which flirted with the symbolic national average of $1.99 this year, hit it on Dec. 18. The first sub-$2 gas since 2009 is just in time for the final holiday push to the malls.

“For the vast majority of consumers, the gasoline price decline is a blessing that provides a little extra cash when it’s most needed,” GasBuddy senior petroleum analyst Patrick DeHaan said in announcing the price point.

It’s an attractive number that likely will keep falling, for reasons that are not new to anyone who’s been paying attention to how much they’ve paid to fuel up.

Oil supplies are up all over the world as domestic shale companies get more than they ever expected from every well they drill even after reducing their rigs count and as OPEC maintains its production to spite U.S. crude — as doing so cuts off a few members’ noses.

As for demand? Not so much. Despite expectations of a record number drivers heading over the rivers and through the woods this season, descriptions like “tepid” and “unremarkable” remain common.

“It’s likely that gasoline prices will eventually decline even further into early January as demand bottoms out, but eventually the party comes to an end,” DeHaan said.

What’s unlikely is that we in Western Pennsylvania will receive an invite to that party.

“It’s going to be close,” fellow GasBuddy analyst Jeff Pelton told the Tribune-Review, saying “$2.05 is probably more realistic.”

It’s a source of frequent calls and emails to the Trib: Why do we pay 25 or 30 cents more than folks a few miles over the border in Ohio?

Pennsylvania’s fuel tax of 50.5 cents per gallon makes the tax bill here higher than any other state’s. Add to that some increased transportation costs of shipping gas from the closest refineries to these parts of the state and we’ll likely be left out in the cold.

Your best shot of knocking those last few cents off the tab will come from retailers such as Costco that might drop the price if competitors are close to the $2 mark.

“They might try to start 2016 off on a bang,” Pelton said, noting the $1.99 sign might draw in some extra shoppers.

A bigger dip in the national average could work, too. The average in the Pittsburgh region was about 20 cents higher than the national number this week. If refineries wait a few more weeks into February to start the spring maintenance that usually boosts prices, some analysts predict the national average might bottom out at $1.79, giving Pennsylvania a shot.

As long as the folks in Harrisburg don’t raise those taxes, too.

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