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November 18, 2015
by David Conti

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Oil-gas hookup


This probably isn’t the type of merger or acquisition that analysts have been predicting would become commonplace in the oil and gas sector as companies struggle with low prices.

But there still could be some shared basis for this marriage.

The industry’s biggest national lobby, the American Petroleum Institute, is swallowing America’s National Gas Alliance, the Washington-based groups announced Tuesday.

“There is a natural synergy between our organizations,” API CEO Jack Gerard said in a statement. “As a single organization, the combined skills and capabilities bring an enhanced advocacy strength to natural gas market development – ANGA’s primary mission – and the combined association’s expanded membership will provide additional lift to API’s ongoing efforts on important public policy issues.”

ANGA, which formed in 2009 just as shale gas production was starting to increase, has partnered with API. Now it will be part of it.

Combining in January will help the groups focus on “how best to organize for maximum effect,” said ANGA President Marty Durbin, who will become executive director of market development at API.

Looking for maximum effect has become more important for those worried about dwindling resources in the industry. Money is expected to remain very tight in the shale fields for at least the next year as prices remain low, and there has been speculation that prices and industry cutbacks were fueling the trade groups’ courtship.

In September, Politico reported some companies were complaining (privately) about having to pay dues to two organizations with the same shared mission.


November 16, 2015
by David Conti

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The gift of gas


Don’t expect a visit from the Ghost of Polar Vortex Past this winter.

Federal officials predict milder temperatures across most of the United States will leave utilities and power plants with plenty of very cheap natural gas to burn.

“High natural gas inventories and expected warmer weather will lead to lower natural gas prices this winter, which could reduce the heating expenditures for households that heat primarily with natural gas by an average 13 percent compared to last year,” the Energy Information Administration said in its November short-term energy forecast.

Meanwhile, PJM Interconnection, the Valley Forge company that runs the electrical grid for Pennsylvania and 12 nearby states, promised to keep homes well-lit and warm through the next few months’ coldest days.

Despite the warmer forecast that some people are blaming on El Nino, PJM said it will have enough power plants online to put more than 177,000 megawatts of electricity on the grid, nearly 24 percent more than was needed at last winter’s peak.

“PJM has taken many steps to reinforce generator readiness and to continue to improve coordination with natural gas pipelines, a key source for a large portion of the generation fleet,” said Michael Kormos, its executive vice president and chief operations officer.

The need for those steps made themselves painfully clear two winters ago when a deep freeze that became known as the polar vortex settled in over the Northeast at a particularly bad time for power plants. Natural gas storage levels were low, coal piles froze, space on pipelines heading into big population areas was scarce, and many plants couldn’t fire up.

The prices for both natural gas and electricity went through the roof, leaving a trail of utility customers on variable-rate plans holding monthly bills that were three times their normal level.

This year, however, gas storage has hit a multi-year high, pushing prices to multi-year lows. Although companies complain that a lack of pipelines is contributing to a glut in this region, there’s a lot more room on expanded pipelines today than there was two years ago.

More gas-fired plants will have access to more gas. That will translate to lower energy bills, the EIA said.

Those who use heating oil or propane to warm their homes also will catch a break, as prices for both are forecast to come in lower than last year.

The crash in gas and oil prices over the past year has certainly hurt energy companies, prompting some Scrooge-like cuts to payroll and laying off workers.

The down market could be the gift that keeps on giving for consumers, though, with prices not expected to rebound for at least another year or two.


October 19, 2015
by David Conti

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Short cycle?


In a room full of dialects ranging from West Virginia hill ’n holler to Texas twang, Nigel Hearne’s voice stands out.

It’s not just his smooth Welsh accent, though that certainly adds to the level of engagement as he talks of the days when oil, steel and ore trades dominated the upper Ohio Valley. Those industries made Appalachia a center of commerce, he said, a feat shale gas could repeat.

“We can do this again and do it better this time around,” Hearne, head of Chevron Corp.’s Appalachian unit, said last week in Morgantown, W.Va., at the first Tri-State Shale Summit on regional collaboration.

Some of the two dozen panelists and speakers at the daylong event sounded a note of concern over the region’s fragmented approach to business and workforce development around the shale formation that runs beneath Pennsylvania, West Virginia and Ohio.

The states haven’t worked together to attract the petrochemical complex and infrastructure found on the Gulf Coast, so related investments go south instead. Ethane is selling for pennies a gallon without plants here to convert it to plastics. Supply has greatly outrun pipeline capacity.

West Virginia Gov. Earl Ray Tomblin, while speaking of the opportunities that gas-related development brings for adding jobs, had to acknowledge that low gas prices have put his state in a bind. He announced spending cuts this month because low gas prices, coupled with a slumping coal market, cut into severance tax revenue.

“Obviously it’s causing a strain on our budget,” Tomblin said.

Hearne wouldn’t be blamed for singing a sad song of shale. Chevron announced hundreds of layoffs this year, including many at his unit’s Moon offices, because of persistently low oil and gas prices. His company put $20 million into an education initiative aimed at training a generation of gas industry workers, just before the industry stopped hiring amid a drilling slowdown.

Instead, though, he offered a confident reply when asked if this was the right time to push further investment in the industry.

“This is a relatively short cycle,” Hearne said with a wry smile, predicting that a “natural balance” is forthcoming to the high supply and disconnected demand regime that has driven prices down.

The jobs targeted by training programs such as Chevron’s Appalachian Partnership Initiative are needed by all of the region’s energy sectors, so new grads won’t go unemployed, he said.

As for competing with the Gulf Coast, this region has an advantage to sell to companies that could use shale gas and its liquids to make their products here, instead of paying to ship components back and forth hundreds of miles. Planners just need to seize that “generational opportunity,” he said.

“If we can’t put together a value proposition based on that, we should be ashamed of ourselves,” Hearne said.


October 7, 2015
by David Conti

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More on (less) methane


The Obama administration has clearly targeted greenhouse gas from energy sectors in its environmental push.

Look no further than the Clean Power Plan to cut carbon emissions from power plants and the revamped methane rules for oil and gas operations, both of which have driven a loud debate between industry leaders and environmental advocates over their need and potential impacts.

Just a week after that debate came to Pittsburgh during EPA hearings on the methane rule, one would think a release of data that could inform the discussion would warrant a little coverage.

But it hasn’t. And it probably won’t. And that might be a good thing, given this report’s scope.

The EPA on Tuesday put online new 2014 data from its Greenhouse Gas Reporting Program with little fanfare. As of the following afternoon, there was no sign of even a news release.

Advocates on each side seized on data that they say prove the points they’ve made for months. Methane emissions from oil and natural gas systems dropped again and are down 13 percent since 2011, the numbers show.

“With study after study, including EPA’s own data, finding low and dramatically declining emissions, it only becomes clearer that regulations are a solution in search of a problem,” Katie Brown of the pro-industry Energy in Depth wrote in a blog post.

Add in carbon dioxide, though, and overall greenhouse gas emissions from those systems appear to have gone up 6 percent in that time.

“Industry continues to claim that leaving them alone to pursue voluntary methane standards is the answer, but as this report confirms, there is no Oz behind the curtain,” Rob Altenburg of PennFuture wrote on his group’s blog.

Precisely the arguments from both sides that we heard during the hearings on rules that would seek to cut methane leaks from wells and increase the amount of equipment that included in emissions reports.

One might say this report’s conflicting results give credence to both sides’ points. But that’s a hard argument to swallow.

This report has some interesting features, including a map that allows computer users to zoom in and see details on individual sources. But in looking at, say, Washington County, you might notice something is missing.

Like the nearly 1,000 producing shale wells there.

This report only reflects data covering the 2,400 largest sources of greenhouse gas from this sector. As the EPA says: “There is a reporting threshold and the reporting requirements do not cover certain emission sources, and therefore the data does not represent the entire universe of emissions from Petroleum and Natural Gas Systems.”

A truer picture of all emissions might be found in the EPA’s U.S. Greenhouse Gas Inventory, though even that is based on estimates and not real measurements. That report has shown a big drop in methane emissions from oil and gas systems since 2010. New 2014 data for that report is set to be published in the spring.

Just watch for the news release.


October 5, 2015
by David Conti

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CNG speed bump


Sitting atop the most productive natural gas deposit in the world, many Pennsylvania government and industry leaders have looked for ways to use more Marcellus in our motors.

Powering more vehicles with compressed natural gas is cheaper, greener and helps wean us off foreign oil, supporters say. Switching to CNG derived from Pennsylvania shale taps a homegrown resource, cutting down on the need for refining and additional transportation of crude and fuel.

“We’re sitting on the mother lode. We should be using this,” said Sen. Camera Bartolotta, R-Monongahela, who last week attended a state hearing in Washington County on the use of natural gas vehicles. “Imagine the millions of dollars that would save for school districts that convert their buses.”

It’s why the state Department of Environmental Protection has given out $20 million in grants since 2013 to companies and groups making the switch to CNG and similar alternative fuels. As more trucking fleets, municipal motor pools and transit agencies embrace CNG, the thought goes, more fueling stations will crop up to serve the resulting critical mass of drivers.

Don’t expect Port Authority of Allegheny County to add to that mass soon, though.

The agency recently dropped $38 million on new buses from Gillig Corp. to replace a portion of its 720-bus fleet. Of the 90 new coaches purchased, 90 run on diesel.

CNG just wasn’t in the cards, er, contract.

Six years ago, when Port Authority put out the call for proposals that resulted in its most recent contract with Gillig, CNG “wasn’t really on the radar at the time,” said agency spokesman Adam Brandolph. So the recently expired five-year deal didn’t include that option.

The authority will soon solicit another multi-year contract that could include CNG or diesel-electric hybrids.

“It will allow us to buy either if we decide to go down that road,” Brandolph said.

But that appears to be a big “if.”

“While we’re continuing to contemplate it, the benefits of CNG, I don’t think we’re completely sold on that,” he said.

Making the switch would represent an expensive undertaking for an agency that has cut routes because of funding issues over the years. Before a single CNG bus could roll under the Port Authority banner, the agency would need to spend tens of millions up front on converting garages and building fueling stations.

“The retrofitting is the biggest obstacle,” Brandolph said.

The authority’s newest buses are arriving equipped with a filter and other technology to help the diesel burn more cleanly than older models.

It might take some time before we see whether additional routes include trips to CNG stations.


September 24, 2015
by David Conti

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Air warning for Tuesday


Pittsburgh will host a gathering of some very unhappy people on Tuesday.

The Environmental Protection Agency again will hold a public hearing at the Moorhead Federal Building, Downtown, on one of its most controversial regulations aimed at the energy industry. Next week’s 11-hour meeting gives regulators a chance to hear testimony on a plan to cut methane emissions from oil and gas operations by about 45 percent by 2025.

They won’t likely hear anything that hasn’t been said loudly since the Obama administration first proposed the reductions, part of a suite of environmental rules from this White House.

As with the Clean Power Plan addressing carbon emissions from power plants, a move to further limit ground-level ozone in the air and a bulked-up stream protection rule for coal mines, reaction has generally fallen along the following lines:

Environmentalists: Yes, please.

Industry: No, thank you.

This proposal has garnered an extra level of backlash, though, in making both sides unhappy.

The oil and gas industry has called the regulation unnecessary and has some data to prove it. Methane emissions have plummeted in recent years during the industry’s buildout as new, less-leaky equipment becomes the norm and gas-fired generation replaces coal-fired plants. Both trends are expected to continue.

“Methane is natural gas, and our industry has voluntarily led the way in its pursuit of improved operations to safely maximize the recovery and capture of these valuable oil and gas resources,” Tracee Bentley, head of the Colorado Petroleum Council, said in testimony prepared for the first public hearing on the rule in Denver this week.

Environmental groups insist the industry wouldn’t participate in that pursuit if it weren’t chased by regulators, making such rules necessary. But this particular set of rules won’t accomplish what they want.

“While the rule is a step in the right direction, it only addresses new and modified sources of emissions, leaving thousands of existing wells in Pennsylvania – the bulk of the problem – not covered by the rule,” environmental advocacy group PennFuture said in announcing its intention to speak out during Tuesday’s hearing in Pittsburgh.

Their voices will join choruses on both sides of the debate. The Philadelphia-based Clean Air Council is organizing bus trips to the hearing from State College, Harrisburg and Washington.

Signups are going on through Friday, but this week’s hearing in Dallas drew a list of more than 130 names to speak in two meeting rooms.

It will be a long day Tuesday.

But there’s no sign so far that it will be a disruptive day for Downtown, as we saw last summer during the hearing on the Clean Power Plan, when thousands of coal mine union marchers clashed with hundreds of environmentalists on the street in front of the federal building.

Those wishing to add their voices can sign up here.


September 21, 2015
by David Conti

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Risky business


PHILADELPHIA — Industry gatherings such as the annual Shale Insight conference that took place here last week often include sessions that serve as pep rallies for advocates.

It’s especially helpful for an industry struggling with market pressures or criticism, as shale gas is. Speeches and workshops at the conference hosted by the Marcellus Shale Coalition included an appearance by Rudy Giuliani, who called industry critics “irrational,” and a patriotic address by retired Army Capt. James McCormick, state director of Vets4Energy.

“The good news is no one does it better than the people in this room,” said Randy Nickerson, executive vice president at midstream company MarkWest Energy Partners, when talking about how a “cavalry” of pipeline builders would alleviate low prices.

The panel discussion on cyber risks to the oil and gas industry and those pipelines was far from a cheerleading session, though.

“You can’t build a wall high enough or build your defenses deep enough to keep the bad guys out,” Donald French, chief information security officer for Columbia Pipeline Group, said during a talk that would terrify anyone with concerns about threats posed by cyber criminals.

Energy industry leaders can take steps to limit only the threat and potential damage, he and other speakers said. But they can’t stop the intrusions by hackers who evolved from computer geeks working from their parents’ basements and looking for bragging rights to what French called “people who used to be drug dealers or arms dealers that are now in criminal syndicates. …

“They don’t get shot at if they just steal data, so it’s a much better deal for them,” he said.

The threats are real, whether they’re coming from hactivists, fracktivists or terrorist nation-states.

Changing a line of code in an industrial control system could send “an instruction to a pump or an instruction to some type of device to act different than it should in a normal situation, and therefore disaster occurs,” said Gary Leibowitz, director of business development for Israel-based cyber security firm ICS².

Whole neighborhoods are vulnerable as smart utility meters become more common, said David Andrejcak, deputy director of the Federal Energy Regulatory Commission’s Office of Energy Infrastructure Security.

“A simple command could break every meter in a certain region, like New York City,” he said.

Recommendations for limiting the threats followed two themes: Take them seriously, and work together. Companies must treat cyber risk as an operational issue — like they do health and safety concerns — and not just an IT issue, several speakers said.

“Cyber security is a people problem. It’s not just the technology,” said Cozen O’Connor attorney Ryan Blaney.


September 17, 2015
by David Conti

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Shale’s cavalry call


PHILADELPHIA — If one word was mentioned more than any other during this year’s Shale Insight gas industry conference this week it was pipelines.

Speeches and sessions over two days here in the Pennsylvania Convention Center revolved around where, how and mostly why to build the pipes necessary to connect the still-growing number of shale wells to consumers willing to pay big bucks for the gas and related liquids they produce.

“In order for us to really get the benefits of the Marcellus shale, we know we have to focus on expanding the pipeline infrastructure and getting that gas to market,” said state Department of Community and Economic Development Secretary Dennis Davin, echoing an oft-stated sentiment.

A glut fed by insufficient pipelines in the Appalachian basin will keep prices in the cellar until more pipelines are built, according to nearly all the speakers this week. (Mark Brownstein from the Environmental Defense Fund, who spoke about methane, might have been the sole dissenter on that topic. We quoted him in this story on … pipelines.)

Some speakers employed by or connected to midstream companies boasted of their efforts to fix the problem. Randy Nickerson, executive vice president at MarkWest Energy Partners, nearly rode onto stage atop a white horse.

“The title of the discussion this morning is … the cavalry is on the way,” he said Thursday morning before spending about 30 minutes outlining efforts to process and move natural gas liquids such as ethane and propane through its plants.

Many of the speakers and panelists that preceded Nickerson talked up the Philadelphia region’s role in this charge. Sunoco Logistics is set to accept at its Marcus Hook terminal many of the NGLs MarkWest is processing in the shale fields.

“We need to make sure that happens,” state Chamber of Business and Industry head Gene Barr said about adding to the site with manufacturers and other big users.

Efforts such as that will bring balance to the liquids markets in a year and a half, Nickerson said. But it will be short-lived. To maintain balance, more projects are needed, he said. And they need to connect with places other than the Delaware River.

That means the Gulf Coast, a destination most other speakers did not promote this week. While promoting the Appalachian basin as the nation’s top producer — bigger than the Gulf — Nickerson made clear his company’s support for pipeline builder Kinder Morgan’s Utica Marcellus Texas Pipeline project that would take “huge amounts” of product to end-users and exporters there.

Nobody in the crowd booed — at least not loudly — probably because they all realize the necessity of finding customers and ways to deliver to them, which Nickerson said is happening, thanks to the pipeline cavalry.

He predicted that by the 2018 conference, “We’re going to be saying, ‘It doesn’t matter where you produce gas in the best play in the entire world. It’s going to be at good market prices.'”

The top choice among many of those attending the conference seemed to be pursuing customers here, getting manufacturers to build plants that would use anything and everything coming from shale wells.

But there was a quieter sentiment among some that it didn’t matter where the gas and liquids go, as long as demand increases.

“There is too much gas in this play just for Pennsylvania,” said Public Utility Commissioner Robert Powelson.


September 10, 2015
by David Conti

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Gas money delay


Pennsylvania communities and groups hoping to get a piece of gas well impact fee money for their environmental projects will need to wait a few months.

The Commonwealth Financing Authority, a state board under the direction of the Department of Community and Economic Development that doles out grants from money collected through the Act 13 impact fees, did not do so Wednesday.

“Act 13 Project Recommendations” was among the action items on the seven-member board’s printed agenda, but DCED spokeswoman Lyndsay Kensinger said that action was taken off the table the day before.

“The CFA received 428 applications requesting more than $83 million for the $17 million in grant funding available. It was determined that more time was needed to for project consideration,” she wrote in an e-mail to the Trib.

She did not answer a question about who made the determination.

“The 428 applications submitted yielded many good projects for consideration and it was determined (Tuesday) afternoon that staff needed additional time to review the projects in greater detail to provide recommendations for voting consideration to ensure that the limited funds available are invested effectively,” she wrote.

The $17 million is part of the $223.5 million collected in per-well fees for 2014. Under Act 13 of 2012, much of the larger total goes to counties and municipalities that host drilling. Some goes to state agencies. The rest goes to the Marcellus Legacy Fund, from which the CFA awards grants for trails, flood control projects, water treatment and watershed protection.

The impact fee has featured prominently in much of the debate over taxing the shale gas industry, with Wolf arguing since last year’s election that companies should pay more. Lack of agreement between Wolf and lawmakers over an additional severance tax on gas is part of the budget impasse that has entered its third month.

CFA board member John Verbanac said the impasse did not play a role in this week’s inaction on the Act 13 grants.

“The staff had been working to review those applications and place a recommended list before the board,” Verbanac, a Pittsburgh developer, told the Trib. “We were informed the work was not completed.”

Other board members, including Michael Karp of Philadelphia, Marc Little of Pittsburgh and Wolf’s budget secretary, Randy Albright, could not be reached.

The CFA’s next scheduled meeting is Nov. 10.

**** UPDATE ****

Wolf spokesman Jeff Sheridan said Friday that Albright was unavailable to speak, but issued a statement on his behalf that mirrored Kensinger’s:

“After the Commonwealth Financing Authority received 428 applications requesting well over the amount of funding available, it was decided that more time was needed to review the applications in order to make final decisions.”


September 8, 2015
by David Conti

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Showing the love


Alex Epstein was preaching to the choir last week at Seven Springs.

The author of “The Moral Case for Fossil Fuels” spoke to a room filled mostly with people engaged in the business of mining, moving or selling such fuels. The Pennsylvania Coal Alliance’s annual meeting and summer celebration at the resort in Champion might seem like a waste of Epstein’s breath.

Yet leaders and workers in a coal industry suffering from a one-two punch of tough economics and rapidly increasing environmental regulations are the target audience for Epstein, 35, founder of the Center for Industrial Progress think tank.

He’s looking to “create champions” for his drive to change how people view fossil fuels. “I want to motivate you to get armed with the right resources,” he said.

It requires turning on its head the prevailing world view of energy use, that fossil fuels only have only a negative impact on the planet and people, and that we should be striving to limit all impacts on our surroundings.

“We survive by taking our environment and changing it to meet our needs,” he said, calling that a humanist view that his audience should espouse.

“What’s wrong with us having an impact on the climate?” he asked. An uncontrolled climate can kill people through famine, heat, cold or floods. Burning fossil fuels to heat or cool our homes protects life, he said. “Energy helps us cope with climate.”

With views like those — and comments such as “renewables” should be called “unreliables” — Epstein didn’t hear from many voices of opposition during his keynote speech, as he does elsewhere.

As his talk began, he showed a video from last year when he confronted demonstrators at New York’s massive People’s Climate March wearing an “I Love Fossil Fuels” T-shirt similar to the one he had on beneath his blazer. “We’re still looking for scientists,” he said between video clips of arguments with environmentalists. “Right now it’s like looking for Bigfoot.”

Whether he made any champions in Champion remains to be seen. In addition to getting beaten up by low prices and high government scrutiny, the coal industry suffers from some self-abuse, dinner attendees admitted.

When Epstein asked for a vote on how well the industry stands up for itself — on a scale of 5 to minus 5 — most raised their hands as he counted down below zero.

“Why have we allowed people to identify fossil fuels as evil?” he asked.

Even those whose lives depend on coal have bought into the argument that using fossil fuels is just a “temporary necessary evil” until those unreliables come around.

“The industry tries to succeed by agreeing with that ideal but arguing policy,” he said. “You need to challenge the ideal.”

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