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January 28, 2015
by David Conti


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Tapping shale’s opportunity

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The talk in the shale biz this week is all about them pipes.

Hart Energy’s Marcellus-Utica Midstream Conference started Tuesday night at the David L. Lawrence Convention Center, attracting most of the big names in gas pipeline and infrastructure development.

Builders say they’re insulated (so far) from the low natural gas prices that have some producers slashing budgets and jobs, and are moving fill-speed ahead. But a slow build-out of pipelines from the Appalachian basin has fueled the glut that’s helping to drive down prices.

A plodding and Byzantine regulatory and permitting process slows work, the industry says. That leaves overstocked producers in the Marcellus and needy consumers from Boston to Charlotte waiting.

Another group tapping their toes is a manufacturing sector eager to take advantage of what shale offers.

The American Shale & Manufacturing Partnership today released a report two years in the making that highlights challenges facing the industry and includes suggestions for moving forward. Based on brainstorming session that began in 2013 in Pittsburgh, many of the recommendations surround infrastructure, regulatory issues and permitting.

“Too often, regulatory barriers and insufficient agency personnel and resources inhibit forward motion. Industry may identify an implementation approach and plan the needed infrastructure only to return to the drawing board when government agencies express disagreement,” the report states.

Suggestions for overcoming such challenges include forming a task force or interstate board to smooth permitting and regulatory issues.

“We must commit to pursuing common sense policies that encourage capital investment into the region while identifying more practical ways to utilize these abundant resource,” said David Spigelmyer, president of the Marcellus Shale Coalition.

The report suggests speeding up some permitting processes, an idea that would likely garner some happy dances over at the Convention Center, where attendees heard about legislation aimed that way.

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The report also calls for building better relationships in the community to “resolve concerns.” The infrastructure build-out hasn’t always been embraced with open arms in towns through which new pipes must run.

One suggestion in the report for companies to deal with this: Don’t rely on tap-dancing from the in-house PR staff.

“Influential and trusted partners can play key roles in enabling public understanding. Community leaders, regulators, the media, community advisory panels, chambers of commerce, faith-based organizations, and universities and extension services can serve as trusted resources,” the report says. “These messengers can help to overcome the stigma which can be associated with industry-led communication campaigns.”

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January 26, 2015
by David Conti


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Round it goes

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Two years ago, a critic of natural gas development warned about a revolving door in Pennsylvania government.

Too many people moved too freely between positions in government and jobs at companies involved in the industry, the nonprofit Public Accountability Initiative claimed in a report, raising “questions about whether regulators are serving the public interest or private industry interests in their oversight of fracking.”

A few recent appointments by incoming Gov. Tom Wolf highlight a revolving door in Harrisburg, though this portal points in a different direction.

John Hanger, the new Democratic governor’s secretary of planning and policy, founded the environmental advocacy group Citizens for Pennsylvania’s Future — known by most as PennFuture — before serving as then-Gov. Ed Rendell’s secretary of the Department of Environmental Protection.

Wolf’s choice for his secretary at DEP, the department with the most oversight of gas drilling and related activities, is John Quigley. After leaving Rendell’s administration as secretary of the Department of Conservation and Natural Resources, which regulates drilling in state parks and forests, Quigley started working at PennFuture. For a second time. (See update below).

Who did Wolf pick to lead his DCNR and carry the new court-affirmed power to approve leases for drilling beneath parks? Cindy Dunn, a former DCNR official under Quigley who spent the past 14 months as president and CEO of a Harrisburg-based group you might have heard of: PennFuture.

Given Wolf’s choices, one could assume a gas industry struggling with low prices and the governor’s threat of higher taxes sees a revolving gun turret pointing at them from Harrisburg.

Dunn told the Trib a few months ago that she supported stronger regulations on the industry and drew “a strong red line” around drilling on public land. “We feel there’s already enough,” she said.

Quigley has been outspoken on his blog, calling for tighter rules on drilling, and told the Trib in September that he thought “government has generally missed the boat” on scientifically studying the effects of the drilling industry.

Senate Republicans made some recent noise about Quigley’s hard line on regulations, but the industry so far has shown a friendly front. The Marcellus Shale Coalition congratulated Quigley and Dunn, and America’s Natural Gas Alliance said it looked forward to working with Wolf’s administration.

Indeed, the revolving-door report from the Public Accountability Initiative included Hanger and Wolf’s Chief of Staff Katie McGinty among the industry greenwashers. McGinty, the group complained, served on the boards of gas power plant operators NRG Energy and Iberdrola USA. The anti-fracking film “Gasland,” the group pointed out, called Hanger “an equivocating tool of the natural gas industry.”

Surely Wolf told his new staff to check their industry tools at his office’s revolving door.

UPDATE:

Quigley’s 2011 return to PennFuture was in a contract role. He consulted with the group for about 14 months.

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January 20, 2015
by David Conti


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Not so well in the field

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Last month we talked with officials at GasFrac Energy Services about shale gas producers experimenting with waterless fracking technologies such as those the Calgary-based company offers.

At the time, marketing manager Adam Friio said GasFrac was getting more clients and more business, despite putting itself up for sale in November. “Things are going well in the field,” he wrote in an email.

They weren’t going so well in the boardroom, though. The company last week filed for protection from creditors under a Canadian bankruptcy law, and a Chapter 15 case in the United States.

A release from the company blamed “a combination of continuing negative operating results, limited access at the present time to capital markets … reduced industry activity resulting from depressed petroleum and natural gas commodity prices and the inability of the corporation to obtain a suitable offer for the purchase of the corporation or its assets.”

The “reduced industry activity” flowing from low oil and gas prices might become a recurring theme in some shale fields. Oilfield services firms such as Schlumberger and others are laying off workers and idling rigs as energy companies dial back activity.

A group of nine companies that include Downtown-based EQT Corp. and Houston firm EnerVest worked with GasFrac in the fall to frack an experimental well in Tuscarawas County, Ohio, using 75 percent butane and 25 percent mineral oil instead of water. The companies said it would be a few months before they knew how well it worked.

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January 13, 2015
by David Conti


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Still no clarity on cracker

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The only sure thing anyone can really say about Royal Dutch Shell’s proposal to put an ethane cracker in Beaver County is that it would create a lot of polyethylene to make plastics, and put a lot of compounds in the air.

“The facility will be a major source of air pollution,” said John Lee, an official at the Philadelphia-based Clean Air Council, which today released a review of the proposed plants potential health impacts.

More than two years after the international energy firm broached the idea of building the multibillion-dollar plant on the former Horsehead zinc smelter site, it has yet to make a final decision on the project.

The company has taken a few steps so it can get cracking right away if the project gets the green light; it agreed to buy the property and some nearby land and it’s moving the closest highway around. Last week it demolished the last Horsehead smokestack. Last year applied for an air quality permit from the state, which is required for major polluters.

That permit gave us our clearest look at what the plant will do as it converts ethane — which comes up with the natural gas in many Marcellus shale wells around here — into the building blocks of diapers, bottles, detergent and other plastics-based products. Analysts told the Trib last year this would be a major producer of the chemical.

And pollution. The emissions numbers Shell wants a permit for would put it among the Top 10 air polluters in the region. That’s probably why the state Department of Environmental Protection is still doing its technical review of the application, a line-by-line look at all 715 pages that began in June.

“They’re just going through it very carefully,” said DEP spokesman John Poister.

The Clean Air Council spent seven months reviewing the application and surveying neighbors for its health impact assessment. Its conclusion: “If the proposed facility is eventually constructed, it will have significant environmental, social, and economic impacts. However, the full extent of these impacts is not clear at this time.”

The council said it really wanted to get a discussion going on potential impacts, though that began last year when Shell started hosting some well-attended meetings on the project.

Civic leaders and some neighbors say they’re tired of talking about the cracker. They want to know if it’s ever coming.

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January 12, 2015
by David Conti


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What if he asked nicely?

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Dr. Alfonso Rodriguez won’t try just asking nicely.

He says he wants to know exactly what’s in the fluid that gas drillers use to fracture the Marcellus shale deep below his Luzerne County home for many reasons: so he can treat patients who come into contact with it; because he thinks it will tell him how pure the drinking water is in his town; and so he can tell others that he thinks drillers are poisoning the environment.

But he will not ask the companies.

“He’s not going to jump through their hoops,” said Paul A. Rossi of Kennett Square, Rodriguez’s attorney in the doctor’s two-year legal battle with Pennsylvania. “We’re doing this to make a point as well.”

The Act 13 state gas law from 2012 requires drillers to divulge to doctors any secret ingredients in their fracking fluid if they need the information to treat or diagnose a patient, and if they sign a confidentiality agreement promising not to improperly share any trade secrets.

It’s that second “if” that keeps Rodriguez from asking, and his lawyer appealing rulings against them.

Rodriguez, president of the anti-industry Gas Drilling Awareness Coalition, considers that part of Act 13 a medical gag rule and has asked federal courts to declare it unconstitutional. A judge twice ruled Rodriguez lacked legal standing because, among other reasons, the law hasn’t actually harmed him.

Because he hasn’t asked.

Rodriguez, who last year appealed to the 3rd U.S. Circuit Court in Philadelphia, says asking would put him in jeopardy of violating his professional duty to share with others knowledge of a harm to fellow man. Because if he asks for the names of any fracking fluid ingredients that drillers consider proprietary, they’ll make him sign a confidentiality agreement.

“The state can’t leverage its police power by forcing my client to give up his First Amendment rights,” Rossi said.

For its part, the state disagrees.

“Dr. Rodriguez, like any other citizen of Pennsylvania, does not have an independent right to obtain trade secrets and proprietary information from private parties in the oil and gas industry,” the state Attorney General’s Office wrote in a response to the appeal last week. “He is no more injured by these restrictions than anyone else who wishes to obtain and use such information to advance their own personal beliefs or political viewpoint.”

Commonwealth Court last year upheld a separate challenge to this part of Act 13 because, its judges ruled, a confidentiality agreement would not keep a doctor from sharing information with fellow doctors or putting it in medical records, which are confidential.

The attorney general argues that blocking the law would do Rodriguez more harm than good. This part of Act 13 not only doesn’t limit the release of information, “it has created a mechanism through which medical providers may obtain information for the limited purpose of providing medical treatment for patients.”

He just has to ask.

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December 30, 2014
by David Conti


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Follow the signals

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A few months ago, when Steve Mueller was explaining why Southwestern Energy would spend $5.4 billion on wells and leased acres in the southwest corner of the Marcellus shale, he said he thought the market was “missing some of the signals” that demand would prop up natural gas prices.

On Tuesday, the Houston company’s CEO admitted “many may be thinking Southwestern missed the signals of the supply side of these economics.” That’s the glut of the natural gas supply that has driven natural gas prices to two-year lows over the past month.

If investors expected an about-face from Southwestern, which got battered by investors who thought the company overpaid for the assets Chesapeake Energy abandoned in West Virginia and Washington County, or for the company to follow others that announced cuts in capital spending for next year because of the prices, they were disappointed.

Mueller doesn’t seem like much of a follower in these times of belt-tightening in American shale. He still expects a growth in demand to bring natural gas prices back above $4.

Mueller announced the company is increasing its Appalachian budget for next year as it looks to drill up to 70 wells in this corner of the Marcellus and another 100 in Northeastern Pennsylvania, where it bought more acres from WPX Energy. Southwestern will spend $2.8 billion as it looks to increase gas production by more than 28 percent.

Since oil prices tanked on OPEC’s declaration of a price war on U.S. shale production, many analysts and companies have talked of declining rig counts across the heartland, with a chance more drilling might crop up in Appalachia.

That seems to be playing out. Mueller, whose company passed EQT Corp. to become the state’s No. 4 shale producer before it went on its buying spree, said he expects to have 11 rigs working in the Marcellus and stacked horizons by 2017.

Cecil-based Rice Energy plans to keep eight rigs running in the Marcellus and Utica shales next year, CEO Dan Rice said recently. Rice is on pace to crack the top 10 in shale production soon.

Both companies are making moves worth following in 2015.

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December 29, 2014
by David Conti


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No love in New York

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The cheers from environmentalists were audible when New York officials said this month their six-year moratorium on fracking beneath the state would continue as an outright ban.

Reporters on an unrelated conference call that day actually heard “hoorays” when the topic came up.

“We congratulate everyone involved in the anti-fracking movement in New York for this historic victory,” said Karen Feridun, founder of Berks Gas Truth, who holds out hope Gov.-elect Tom Wolf will follow suit across the border, despite all signs to the contrary.

In the shale fields of Pennsylvania, though, the general reaction to New York Gov. Andrew Cuomo’s move amounts to a collective yawn.

Advocates for the gas business that blossomed here during a six-year window of inaction called the decision misguided and politically motivated. But energy companies don’t expect to take a hit.

The fact is they just weren’t that into you, New York.

Shale gas producers are too busy fighting a three-front war in much of Appalachia.

• The global crash in oil prices has put a major dent in their stock values as investors paint the entire energy sector with what analyst Kent Moors called a “really broad brush.” Companies including Consol Energy and Chesapeake recently announced stock buybacks.

• Gas prices have dropped to their lowest point in nearly two years, prompting companies such as Range Resources and Rex Energy to cut capital spending for next year.

• Pennsylvania’s next governor wants to increase taxes on the industry and some fear changes in environmental regulations aren’t far behind.

The industry is set to retrench in 2015 and focus on getting the most gas from the cheapest wells. That means completing and turning on wells drilled — of which there are several thousand in Pennsylvania — and drilling only on pads or within reach of pipes and processors.

“Every pad has multiples now,” said Dan Rice, CEO of Cecil-based Rice Energy. whose strategic approach to drilling involves building fewer pads, but putting them above the most productive core positions in the shale.

If Cuomo had put up the “open” sign in his state’s storefront window instead, it’s unlikely drillers would have walked in. Few companies are looking to invest hundreds of millions in the new roads and processing stations and gathering lines such exploration would require when they’re cutting budgets.

New York likely has few core acres. Estimates of gas in place in the Marcellus show only a sliver of high quantities in Broome County, south of Binghamton. That doesn’t provide the high return on investment companies are looking for in this low-price environment.

It’s hard to tell what drilling would look like in New York after being shut out for so long. Cuomo’s ban seems to have bolted a window that closed some time ago.

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December 15, 2014
by David Conti


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The answer, my friends…

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Like other businesses, so much of success in producing energy from wind comes down to location, location, location.

Developers looking to tap the renewable energy source need to find locations for their massive turbines in the remote spots atop mountains or across prairies that get the most wind. Yet the wind farms need to be close enough to population centers wired for transmission to have any chance of connection to the grid. And they can’t interfere with migratory bird patterns.

It’s why they’ve built so many in Iowa, where wind produces more than a quarter of that state’s electricity.

In Pennsylvania, their prominent and longtime location along the Allegheny ridges, within eyesight of the turnpike, might lead some people to believe we have a lot of wind power in this state.

The numbers say “no.”

The state gets less than 2 percent of its electricity from the 720 turbines spread over 25 wind farms.

That’s only enough to power about 300,000 homes. And only when the big turbine blades are moving.

Which doesn’t seem to be very often at one of the oldest and most visible wind farms in the state.

On many days, there’s little action from the six turbines that tower 213 feet above a farm just south of the Pennsylvania Turnpike in Somerset County. The windmills seem to have hit a standstill.

The Somerset Wind Energy Center went online 13 years ago in the earliest days of the state’s wind industry. Its 1.5-megawatt turbines are weaker than new turbines with nearly double that power.

The facility’s owner, NextEra Energy Resources, did not respond to questions about its operation or future.

Such low productivity from turbines in a high-profile location can’t help the advocates making their case for more government subsidies for wind.

The debate cropped up again this month when the U.S. House approved a bill that would retroactively extend a tax credit for wind producers through this year. The Senate was considering it.

Those who say wind energy could provide a reliable and more environmentally conscious alternative to the fossil fuels that keep our lights on want a multiyear extension.

“Why end a successful policy like this?” asked David Ward, deputy director of strategic communications at the American Wind Energy Association, who says the subsidy has helped drive private investment and jobs by making its price competitive.

Opponents hear only hot air in that argument.

“I could not support this wind subsidy tax package and the billions of taxpayer dollars it would continue to waste in an effort to prop up the failing wind industry,” Rep. Bill Shuster, a Republican from Blair County, said in explaining his “no” vote on the House extension.

His district is dotted by wind farms stretching from north of Altoona to south of Somerset. It’s a great location, as long as the turbines continue to spin.

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December 1, 2014
by David Conti


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Power plan needs producers

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Organizers of a gathering in Pittsburgh next week aimed at writing an energy plan for the region admit they face a daunting task. In fact, they’re not quite sure exactly how they will accomplish their goal.

“The event is a kickoff of a process yet to be determined,” explained Court Gould, executive director of the nonprofit Sustainable Pittsburgh.

His group is one of 20 nonprofits and academic centers behind an event called Energy for the Power of 32, a seven-hour summit planned for Dec. 11 at the David L. Lawrence Convention Center. The Power of 32 is a regional collaborative focusing on economic, environmental and educational planning in 32 local counties across four states.

The plan for the event is to gather experts to set a “baseline” of the region’s energy picture — “where it comes from, where it goes, what do we get from it,” as Gould explained — and then figure out how to plan its future.

The presenting groups, sponsors and speakers include lots of universities, environmental organizations, UPMC and Highmark, and a few utilities.

Only one speaker works for an energy producer: Robyn Beavers, a senior vice president at NRG Energy who heads up that company’s San Francisco-based unit focused on sustainable microgrids.

The industries that actually create energy in those 32 counties are noticeably absent from the agenda. No coal companies that provide 40 percent of the electricity we use; no companies making the Marcellus shale beneath those counties the most productive natural gas region in the country; nothing from the nuclear power industry that was born in Beaver County.

Gould said organizers did not want any presenting organizations that are “wedded to one industry or to one fuel source” as they consider all options for powering the future.

The planning work will be done by the audience, he said, which he thinks will include energy producers.

“All stakeholders are invited to the event,” he said. “For sure, whatever the design of the process to craft this, that has to be fully inclusive of all.”

Organizers enlisted the help of the Bravo Group to promote the event, which might help attract some of those producers. The PR and lobbying firm’s clients include energy companies and it took an active role in last spring’s Marcellus jobs rally that brought 3,000 people to the state Capitol.

“It would be regrettable if there was a perception that this was leaning toward any bias,” Gould said.

Some might find it more regrettable if a gathering of so many experts turned into a waste of energy.

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November 19, 2014
by David Conti


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Snowy peaks

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Call it another polar vortex or an Alberta clipper or just a cold snap. Either way, it’s cold, and it’s only November.

Just ask the people outside Buffalo using walls of snow as beer coolers. Or the fine folks who keep the lights on in our neck of the woods.

PJM Interconnection, the company that operates the regional electrical grid in Pennsylvania and 12 surrounding states, said Tuesday’s peak usage set a record for November. At 7 p.m. that day, we asked the grid for 121,987 megawatts, shaming last November’s peak of 114,699.

Twelve hours before hitting that peak, PJM predicted demand would top out at 120,838 MW. Close enough. And it said it would have 149,328 MW on hand.

That 38,000 megawatts of backup is comforting until you recall that when PJM set several winter demand records last January, hitting nearly 142,000 MW, the grid didn’t have 40,000 megawatts it thought it would. Officials say the power “didn’t show up.”

Maybe it had to commute from Buffalo.

It was supposed to be generated by gas- and coal-fired plants that couldn’t get their fuel or load it. PJM has said it’s working to make sure such no-shows don’t happen again.

That means coal-fired plants that competed all summer with oil for space on rail cars need to bring up their inventories. And gas-fired plants need to prepare for another volatile winter.

Just in the past three days, prices for gas delivery next month shot up 8 percent, dropped 2 percent, and bounced up another 3.6 percent to a five-month peak. Demand and winter-weather predictions are playing havoc with prices already strained by pipeline uncertainty.

And it’s only November.

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