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September 22, 2014
by David Conti


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Introducing ‘On the Grid’

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The shale gas boom no doubt fueled Pennsylvania’s most recent rise to national energy prominence. Well production reaches record levels with each report and will likely top 4 trillion cubic feet this year.

The state’s role in powering the nation runs deeper than the Marcellus and Utica shale formations, though.

Two of the three most productive coal mines in the country call Pennsylvania home. They help feed an electricity sector that produces the third most power in the nation. So do the reactors at five plants that make Pennsylvania second only to Illinois in nuclear power generation.

Now generators from New England to the Carolinas are switching to natural gas and need new pipeline connections to the Marcellus and Utica.

The Keystone State is powering the grid, thanks to the success of natural gas, coal, nuclear and utility companies centered in Western Pennsylvania.

The stories behind that success have a new home at Trib Total Media.

OnTheGridLogo

On the Grid, premiering Monday in print and at triblive.com, will bring readers a fresh, multimedia view of the energy sector. Every other week, our pages will deliver new insight into the people, markets and issues driving the industry.

Every day, visitors to the new Web page can find breaking news and more in-depth stories from Trib Total Media and other reliable sources. Online readers can connect with energy voices through social media, explore interactive maps, see the latest video from the field and find out where shale rigs are drilling.

Here on the Flowback blog, we’ll bring stories together with deep perspective from industry sources.

Watch for new features to be added in coming weeks. And please send feedback and story ideas to dconti@tribweb.com.

In the meantime, this week promises to be a busy one.

Leaders of the coal industry that has called Pennsylvania home for more than 200 years will gather Downtown for two days of networking and workshops. Expect the tough international market and even tougher environmental rules on power plants to dominate many talks.

The Marcellus Shale Coalition’s annual Shale Insight conference will return home from a few years in Philadelphia and bring with it big names in politics and political analysis. A celebration of Marcellus drilling’s 10th birthday is in order, between plenty of panel discussions.

And as that conference wraps up here on Thursday, an important policy discussion will begin in Harrisburg. The Department of Environmental Protection’s Technical Advisory Board will talk about big changes in state oil and gas regulations, including a split in rules for conventional and unconventional drillers prompted by a budget bill in July.

Watch the board meeting online at dep.state.pa.us. And, of course, watch for updates On the Grid.

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September 16, 2014
by David Conti


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A well-studied industry

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A recent batch of studies focused on shale drilling, particularly its potential impacts on water supplies above the Marcellus, has dominated energy headlines this month.

Sometimes it seems we need a study to determine the potential impact of all the studies.

The EPA is conducting what should be the definitive examination of whether today’s methods of extracting gas from deep underground — from site prep through fracking to production — endangers our drinking water, and how.

In the meantime, we are exposed to frequent, piecemeal research that critics often say is influenced by whoever is funding it.

Last week a Yale study caught national headlines with reports that it determined drilling is bad for you. Gas wells are doing something to the air and water in Washington County making it more likely to develop rashes and upper respiratory problems if you live nearby, writers said.

But the study didn’t actually connect health problems to wells, which would require a close look at people’s medical records, its lead author said. The study only surveyed households and didn’t explore other explanations for what ailed them.

Critics said we couldn’t trust a study funded by anti-drilling environmental groups such as The Heinz Endowments. The head of that foundation responded by criticizing the critics, accusing the industry of following a rapid-response playbook.

Of course, several environmentalists followed that same playbook in responding to a Penn State study publicized the same day that predicted frack water will stay locked in the shale and not migrate north to drinking supplies. You can’t believe that one, they said, because it was funded by the drilling industry and employed a Shell scientist.

A study released this week claimed to find the source of stray methane in water supplies in Pennsylvania and Texas, saying it was faulty gas wells and not the fracking itself. It was bolstered by a Department of Energy study that showed frack water staying put in the shale far below a few wells in Greene County.

But even the government called its study “limited,” focused only on one well pad, which belies some of the sweeping headlines it earned. And the stray methane study drew its conclusions from a form of molecular analysis that one expert questioned as being relevant.

The EPA says it hopes to issue results of its water study this year. Hopefully researchers haven’t muddied the waters so much with conflicting studies that the government can’t clear the air on this question.

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September 8, 2014
by David Conti


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More Benjamins from the Land of Lincoln

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Could the EPA regulations everyone is blaming for the demise of American coal actually improve the bottom line at the industry’s most public face in Pittsburgh?

If Consol Energy Inc. gets a good price for its 1 billion tons of reserves in the Illinois Basin, the Cecil-based company might thank a market turned a bit upside down by the government crackdown on air emissions.

Power companies that use coal to generate electricity once avoided the basin’s dirty, high-sulfur coal because of the pollutants it creates when burned. But companies that invested in scrubbers or new plants to meet new and proposed air rules are now seeking out the sooty stuff because their equipment can burn it cleanly and cheaply, Bloomberg news reported over the weekend.

With new demand for dirty Illinois coal in clean-tech plants, mining companies and investors are taking a second look at tapping the resource. Enter Consol, which is looking to offload what it considers a “non-core asset” in the Land of Lincoln.

Consol CEO Nick DeIuliis said during the company’s latest earnings call it’s looking to get the best price for the reserves “either through selling it in one piece or breaking it up into multiple pieces that will make sense for multiple buyers.”

A spokesman said he had no updates on attempts to sell the coal. DeIuliis said in July he hoped to have an update during the next earnings call.

Consol last year sold several older mines to Ohio-based Murray Energy but has poured big money into its Bailey complex operations in Washington and Greene counties. Although Bloomberg notes that sales of more expensive Appalachian coal are down and some companies are closing or selling mines, Consol said it has no intention of selling its core-operations, which include the Bailey mines and the Buchanan mine in Virginia.

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September 3, 2014
by David Conti


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A billion-dollar debate

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The debate over how to tax record levels of gas coming from Pennsylvania shale wells did not end with the signing of state budget deals over the summer.

As political analyst Joe DiSarro predicted in March, the severance tax vs. impact fee battle remains one of the hottest topics in the gubernatorial race. And it continued to play big this week.

Democrat Tom Wolf, a York County businessman looking to unseat Republican Tom Corbett, says we’re not getting enough money from drillers. He proposes a combination of per-well fee and a tax based on sales and production that adds up to the equivalent of a 5-percent levy.

This week he said such a plan would raise $1 billion, much of which he wants to put into education, funding state pensions and filling a budget deficit.

Corbett has rejected more taxes on the industry. Today, the industry’s biggest lobbyist posted a video touting the benefits of the impact fee.

The two-minute clip from the Marcellus Shale Coalition shows how townships, state agencies and all 67 counties have shared and spent $630 million in impact fee money over the past three years. The group has blasted any argument to replace the fee with a tax.

The clip and accompanying announcement from the North Fayette-based coalition never mention the governor’s race or a severance tax. But the coalition has become more politically active in recent months through its United Shale Advocates campaign, which is encouraging people to register to vote.

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September 2, 2014
by David Conti


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Border-line study

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Driving north out of Bradford on U.S. 219, you’ll see two distinct signs announcing that you’ve crossed into New York.

The condition of the road turns from OK to deplorable, a departure from what we’re used to in these parts.

And signs on the side of that decrepit road make it clear that a booming business in the Keystone State has no place in New Yorkers’ state of mind.

Picture of anti-fracking signs

Credit: WNYC

Fracking isn’t allowed in New York. Nor is it welcome in many spots, if the yard signs all around the Finger Lakes wine country is any indication.

A state moratorium remains in effect while officials study potential health effects of shale gas drilling and hydraulic fracturing in the same Marcellus shale and other formations that run beneath both New York and Pennsylvania.

Industry advocates say New York is missing out on its potential rewards of employment and tax revenues. For example, Susquehanna County on Pennsylvania’s northern border, the top gas producer in the state, received $5.4 million in impact fees on wells this year and its townships and boroughs collected another $8.4 million combined.

The area across the border around Binghamton, N.Y., has lost 64 percent of its manufacturing jobs base since 1990.

Researchers backed by one of New York’s oldest charitable foundations want to know what kind of effect the ban is having on families. Penn State University sociology professor Molly Martin is going to compare economic indicators in counties on both side of the border to see who’s been better off over the past six years.

Tax records, teen pregnancy levels and crime rates should give some indication of where families have won or lost in the battle over drilling, the researcher says.

Watch for signs of the study’s results in about a year.

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August 27, 2014
by David Conti


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Counting golden eggs

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A few months ago, Washington County Commissioner Larry Maggi summed up his fear of what fellow politicians might do with higher taxes on the state’s gas drillers.

“They see a golden goose and want to strangle it,” said the Democrat, whose county is benefiting greatly from the $200 million the state has been collecting annually in per-well impact fees.

Photo credit: Dallas Morning News

Photo credit: Dallas Morning News

A wolf seems to be nosing around that, er, goose house.

Democratic candidate for governor Tom Wolf this week employed similar imagery to describe the potential he sees in an extraction tax to fund his list of spending priorities.

He told Trib reporters and editors on Tuesday that the gas industry is “the goose laying the golden egg,” before giving some examples of how he wants to dice it. Several hundred million dollars more going to the general fund could help fuel struggling schools, prop up the underfunded pension system and plug the budget deficit, he said.

“That would make Pennsylvanians a partner with the industry,” he said about what he called a “reasonable” severance tax.

Wolf called claims by the industry that higher taxes would push drillers to less-expensive shale plays “disingenuous” because “the market is here.” That drew a rebuke from the shale lobby.

“While shale development will remain here, the industry’s growth potential – and the broad-based associated benefits that could be fully realized – will be unnecessarily jeopardized. To suggest otherwise is disingenuous,” said Marcellus Shale Coalition President Dave Spigelmyer.

Wolf said he wanted to add a tax based on how much money wells were making on top of the per-well fee that mostly benefits host communities, bringing the total collected to about 5 percent of gas revenue. A state estimate this year put the impact fee’s equivalent at about 2 percent.

Wolf conceded that calculating the tax rate could get tricky — should it be based on wellhead prices or the much higher benchmark prices that energy companies are not getting?

He also did not explain how that gas money — about $500 million if we’re going from 2 percent to 5 percent — would pay for all those initiatives.

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August 26, 2014
by David Conti


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Detecting a spirit of collaboration

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The sniping that has plagued the cooperative effort at a Pittsburgh collaborative between energy companies and environmental groups doesn’t mean such joint projects are doomed.

The Environmental Defense Fund is working with seven energy companies to develop technology that can cheaply and easily detect methane leaks from their gas wells and related operations.

The groups announced last week they chose five finalists to design a device that EDF spokeswoman Kelsey Robinson described as “like a smoke detector for methane.”

The technologies will get tested by the Southwest Research Institute in San Antonio. The cooperating companies — Shell, Anadarko, Apache Corp., BG Group, Hess Corp., Noble Energy and Southwestern Energy — will field-test the top device.

Robinson said her DC-based environmental group has a history of what politicos call “reaching across the aisle.”

“EDF has always used an approach that draws on science, economics, partnerships and bipartisan outreach. We believe that by working with diverse groups, we can bring insights and solutions that aren’t available otherwise,” she wrote in an email Tuesday.

One of those partnerships has had a rough time with both sides of the aisle here in the Marcellus.

EDF participates in the Downtown-based Center for Sustainable Shale Development, which aimed to bring together environmental groups, foundations and energy firms to set standards for responsible drilling.

Nearly two years after it formed, only one drilling company applied for certification through the center. Presumably it was one of the founding companies — Chevron Corp., Consol Energy Inc., EQT Corp. or Royal Dutch Shell — though nobody will say.

Last year a report from Public Accountability Initiative — whose funders include environmental groups — caused turmoil in the center and at the Heinz Endowments by pointing out then-endowments leader Bobby Vagt’s connections to drillers. He left the endowments (to lead the board at Rice Energy) during the firestorm and the endowments cut its funding to the center.

The PAI this year tried to start another fire by attacking the center’s leadership for connections to various industries.  The report was squelched by certain details, such as Executive Director Susan Packard LeGros’ work for both chemical companies and the EPA, which local environmental groups lauded.

Tension still smolders on the energy side. Some drilling companies that haven’t partnered with the center publicly said they would not seek certification, and privately question its credibility.

This effort might need its own special smoke detector.

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August 21, 2014
by David Conti


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Energy jobs get attention

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Gov. Tom Corbett paid an election-season visit to an Altoona-area manufacturer on Thursday to highlight the energy sector’s role in creating jobs.

Promoting such jobs has been a common theme of his campaign against York County Democrat Tom Wolf, a proponent of higher taxes on the gas industry.

A report this week from the U.S. Department of Commerce shows the burgeoning energy industry helped boost the state’s economy at the end of last year.

In Hollidaysburg, Corbett showed off a business that makes equipment to handle frack sand used to extract oil and gas from shale, and mining equipment. A news release identified a “highlight” of his tour of the McLanahan Corp. plant: seeing  a piece of machinery used in the oil sands of Northern Alberta, Canada.

McLanahan, whose chairman serves on Corbett’s Manufacturing Advisory Council, has added 93 jobs since August and employs more than 300 people.

This mineral-rich stretch of the Alleghenies seems to be getting lots of attention from the candidates recently. Last week, Wolf talked workforce development during a campaign stop in Johnstown and opened a field office for that region.

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August 20, 2014
by David Conti


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News of various magnitudes

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Few words induce more dread in the energy industry than “earthquake.”

Tangential connections to gas drilling have led to headlines declaring that “fracking causes earthquakes.” I know I could never cross a hydro-dam without picturing the one crumbling apart in “Superman” when the San Andreas Fault comes alive.

The jury is still out on whether nuclear power will ever recover from the quake that led to the tsunami that caused the Fukushima disaster. If the Japanese can’t design a quake-proof reactor, who can?

Westinghouse, maybe.

In June, the Cranberry company said it was pursuing federal approval of a “seismic option” for its marquee AP1000 reactor, a slightly modified version for use in earthquake-prone countries and the West Coast.

And Utah, maybe.

Blue Castle Holdings said today it wants to use the AP1000 in its proposed double-reactor plant along the Green River in the Beehive State. Blue Castle isn’t sure it will need the added seismic protection, but would be happy to have that option as it looks for final approvals and a license to start building in a few years.

At a starting price of about $5 billion per reactor, a signed deal with Blue Castle is nothing to shake a stick at for Westinghouse.

Meanwhile, gas drillers got some good news to counter that fracking=earthquakes line. A USGS researcher found so-called induced earthquakes caused by human activity are generally weaker than what Mother Nature produces.

(Again, I say what Lex Luthor caused by putting that missile in the fault and making Superman spin the world backward to bring back Lois torpedoes this research, but we’ll continue.)

The study is directed at the tremors linked to injection wells, into which companies pump drilling wastewater for disposal. Pennsylvania has few, though a proposal to start one in Indiana County has legal rumblings stretching all the way to Erie.

Pennsylvania General Energy Co. sued in federal court there to block Grant Township leaders from stopping their injection well with an ordinance. The township has to decide whether to fight to save an ordinance that’s likely barred by federal law.

We’ll have more on that movement next week.

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August 19, 2014
by David Conti


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Pumped for Labor Day

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Gas pumpNeed a reason to start thinking about the next holiday? Just in time for the Labor Day travel weekend, drivers are catching their biggest breaks in six months at the gas pumps.

Average gasoline prices fell nearly 6 cents last week in the Pittsburgh area to $3.60 a gallon, according to GasBuddy.com. The online monitor’s PittsburghGasPrices site showed stations in the suburbs with deals of $3.44 a gallon or less. It might be worth the drive to Midland, West Mifflin or Zelienople.

The auto club AAA reports Pittsburgh petrol is averaging $3.57, a 19 cent drop from a month ago, when some observers worried about potential $4 gallons in these parts.

If you’re driving over the river or through the woods for the holiday, the return trip might cost even less. Outside Western Pennsylvania, pump prices are lower, as the national average hovers around $3.45.

GasBuddy senior petroleum analyst Patrick DeHaan said today’s national average is at its lowest since February, and post-Labor Day, some cities will have averages below $3. “Areas of Tennessee and South Carolina are already getting close,” he said.

Looks like a long weekend at Dollywood is in order.

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