Shell Seeks to Horse Trade Air Pollution Credits for Cracker Plant

In June 2015, a full year ahead of Shell’s final investment decision (FID) to build a multi-billion dollar ethane cracker plant complex in Beaver County, PA, the PA Dept. of Environmental Protection issued the project air quality permits–which was a “critical” requirement for Shell before making their decision (see Shell Receives Air Quality Permit from PA DEP for Cracker Plant). Two months later, two litigious Big Green environmental groups with deep pockets–the Philadelphia-based Clean Air Council and the Washington, DC-based Environmental Integrity Project–tried to scuttle the project by appealing the DEP’s issuance of the air quality permits (see Big Green Groups File to Block Shell Cracker Air Quality Permit). Fortunately the DEP blew off the Big Green appeal. However, the issue of air pollution is not yet totally resolved. In order for Shell to build the plant–a plant that will have a fair amount of emissions–they need to buy pollution credits from other plants. That is, if other plants are installing new air pollution controls, or shutting down, Shell can buy their emissions allotments, and use them for the cracker project. In the end, it’s all about controlling how much of the nasty stuff, like volatile organic compounds (VOCs) gets pumped into the air in a given region. But there’s a problem. Shell can’t find enough VOC credits to buy, so they’re proposing a deal with the DEP to buy a different kind of credit instead–NOx or nitrogen oxides. Will the DEP allow Shell to horse trade NOx for VOCs? That’s the billion dollar question…
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REX Pipeline Adds Yet More Capacity, Now Flowing Extra 450 MMcf/d

Last Wednesday MDN (via a story from NGI) brought you the good news that the Rockies Express Pipeline (REX) had begun to flow an extra 200 million cubic feet per day (MMcf/d) of natural gas from East to West along the pipeline–moving more Utica and Marcellus gas from Ohio to places like the Chicago area (see Reversed REX Pipeline Goes from 1.8 Bcf to 2.0 Bcf). REX previously filed a plan with the Federal Energy Regulatory Commission (FERC) to add another 800 million cubic feet per day (MMcf/d) of capacity along the reversed portion of the pipeline. In late November, FERC gave REX the go-ahead to start additional compressors added at three locations along the route. The plan is to have all of the extra 800 MMcf/d flowing by the end of this year. On Wednesday, as we noted, 200 MMcf/d of additional capacity kicked in. Then on Friday, NGI reported another 250 MMcf/d was added, meaning 450 MMcf/d was added to REX’s capacity in a single week. That’s another 450 MMcf/d of yummy, clean-burning fracked Utica/Marcellus shale gas flowing to the Midwest that wasn’t a week ago. We love it when a plan comes together…
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PA Drillers Don’t Have to Plug Old Wells Before Fracking, For Now

On Oct. 8, after five years in the making, Pennsylvania adopted new shale drilling regulations (see PA’s New Chapter 78a Drilling Regs Go into Effect Oct 8). Although the regs were ready at the end of the Gov. Tom Corbett Administration, Corbett fumbled the ball and the regs didn’t get adopted, which left them vulnerable to the incoming left-leaning Tom Wolf. Wolf’s people mangled the regulations under the Dept. of Environmental Protection Dictator/Secretary John Quigley, who got fired over unethical collusion with Big Green groups (see Smoking Gun: Copy of the Email that Got John Quigley Fired). Some of the good stuff remained, but onerous new elements were introduced. One of the onerous new regulations has to do with abandoned and orphaned wells. PA is dotted with hundreds of thousands of oil and gas wells drilled since the first well drilled in 1859. The problem is that the state has only mapped and is aware of under 10,000 of those wells. If a driller happens to horizontally drill through one of those old wells, water and chemicals (more likely methane) can take an express elevator to the surface and come out where it shouldn’t–perhaps contaminating water supplies, among other unfortunate outcomes. The new Chapter 78a regulations attempted to handle the situation by requiring drillers to map and plan for how they will avoid that outcome–by avoiding and plugging any abandoned or orphaned wells up to 1,500 feet away. The problem for drillers is that they often do not own the lease rights and have no legal right to enter land up to 1,500 feet away to conduct surveys and plug wells–a catch 22 situation. And plugging a well isn’t cheap. Should drillers today have to pay for something someone else did decades ago? The Marcellus Shale Coalition (MSC), on behalf of its shale drilling members, sued to stop abandoned well provision (along with several other provisions), which a judge agreed to do, at least for now until a full trial can decide the issue (see PA Judge Temporarily Blocks Some DEP Chapter 78a Drilling Regs). The judge put a temporary order blocking the abandoned/orphaned well provision in November, and upheld that block again in December. For the time being, Marcellus drillers do not have to map and plug old wells that don’t belong to them…
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Analyzing Gulfport’s Decision to Diversify Away from the Utica

Last week MDN told you about Gulfport Energy’s deal to buy 85,000 acres of leases with 48 horizontal wells in Oklahoma’s SCOOP shale play in a $1.85 billion deal (see Gulfport Energy Expands into SCOOP, New Stock & IOUs to Pay $1.85B). At the time we said, “we jealously wish they were investing that money here [in the Utica] and not there.” Looks like we’re not the only ones questioning Gulfport’s strategy of “diversifying away from the Utica.” None other than energy analyst Richard Zeits, our favorite Seeking Alpha author, did a deep dive into the deal. He found that Gulfport paid $27,000 per acre and although they paid for it with a fair amount of equity, they also increased their debt load “significantly.” Zeits said, “The move into a new core area raises questions with regard to the company’s macro outlook for the Utica/Marcellus region.” Hmmm. Here’s what else the oracle of energy had to say about Gulfport’s SCOOP deal…
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Radicals Plan “Civil” Disobedience Against FL Marcellus Pipeline

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Have you noticed what was entirely predictable (and predicted by MDN) with respect to pipeline projects in the east? Suddenly they’re all bosom buddies and first cousins of the Dakota Access Pipeline. The hew and cry goes out from fossil fuel haters that ANY new natural gas pipeline project–even those that have been years in the planning and are now being constructed–must suddenly stop because the mob desires it. We have another such mob-opposed project to add to the list–a Marcellus gas pipeline Florida. Wait…what? Florida?? You read that right. Spectra Energy (and partners NextEra Energy and Duke Energy) are building a $3.2 billion, 515-mile interstate natural gas pipeline in Florida, Georgia and Alabama to deliver Marcellus gas to the southeast. The project, called Sabal Trail Transmission, has been underway for the past three years and is already half built and due to be completed and online in June 2017–six short months from now. Sabal Trail will connect to Williams’ Hillabee Expansion Project, which is a new pipeline spur built off the huge Transco pipeline system (see Williams Building Alabama Pipeline with Marcellus Connection). Williams is reversing a portion of the Transco to bring Marcellus gas south. And all of a sudden a bunch of anti-fossil fuel dunderheads have woken up in Tallahassee and they don’t want that nasty Sabal Trail pipeline after all. Oh gee, let’s just shut it all down and go home. The radicals are planning an act of (un)civil disobedience in January to express their mob rule displeasure with the project…
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Indians No Friends of the Pilgrims (as in Pipeline)

In November 2015, MDN told you about Pilgrim Pipeline Holdings, developing an East Coast pipeline to carry refined petroleum products such as gasoline, diesel, heating oil, and jet and aviation fuel northbound from Linden, New Jersey to Albany, New York (178 miles). In addition, a second Pilgrim pipeline will carry crude oil from Albany south to NJ and other locations. Two pipelines, side by side, liquids flowing through them in different directions (see Will Pilgrim Pipeline be Allowed to Settle in the NY World?). The oil that would flow south from Albany comes from trains delivering crude from the Bakken Shale play–a double evil in the sight of radical anti-fossil fuelers. So they turned up the pressure on the spineless Andrew Cuomo (see NY Antis Hope Gov. Cuomo Will Halt Pilgrim Pipeline’s Progress). The pressure worked (he’s so predictable). In September the state Dept. of Environmental Conservation and the state’s Thruway Authority, working together, informed Pilgrim they will need to submit to a detailed anal exam, called a full environmental review, before obtaining approval. Anti-fossil nutters rejoiced that the project has been slowed (gives them a chance to kill it). But Pilgrim spun the news as a good thing–saying they welcome the full environmental review to prove the safety and righteousness of their proposal. We’ve seen that movie before–remember the Constitution Pipeline? At any rate, fossil fuel haters are still worked up about the possibility that those rascally Pilgrims will slip across the continent, laying a pipeline in their wake. So, just like other projects (see today’s story about the Sabal Trail Pipeline), antis are invoking the sacred name of the great Dakota Access Pipeline killing gods to rain down death and destruction on the innocent Pilgrims…
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Antis Reveal True Motivation for Opposing Access Northeast Pipe

A bunch of wacko New England liberals get together at a local high school to bad mouth the proposed Spectra Energy Access Northeast Pipeline project. That describes just about any town or hamlet in Massachusetts just about any night of the week. These New England libs, who are intolerant of the very fossil fuels that allow them to exist, are actually kind of funny (and sad) when you listen to them. We read yet another such story, about a group of antis in Grafton, MA, and thought you might enjoy our reading our appended comments to the story. Hey, you’ve got to have fun with this stuff–or you’d just get depressed at how obtuse some people can be…
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24 States Ask Incoming Trump Admin to Dump CPP on ‘Day One’

We’ve written plenty about President Obama’s so-called Clean Power Plan (CPP), introduced last summer, a plan to force electric generators to convert to using more “renewable” sources of energy–and less fossil fuels (see Obama Stabs Natural Gas Electric Plants in Clean Power Plan). The CPP outright assassinates coal powered generation, and wounds (but doesn’t kill) natural gas. It is Obama’s attempt at picking winners and losers in who and how we get our energy. Earlier this year 29 states and state agencies, including Ohio and West Virgina, filed an application with the U.S. Supreme Court seeking an immediate stay of the CPP (see 29 States Ask Supreme Court to Stop Obama Clean Power Plan ASAP). In a shock decision, the Supreme Court did just that. In September, the enormously complex CPP got its day in court–in the Court of Appeals for the District of Columbia Circuit (see Obama’s Disastrous Clean Power Plan Goes to Court Today). Last week the attorneys general from 24 of the states opposed to the CPP wrote a letter to President-Elect Trump, RINO Senate Majority Leader Mitch McConnel and RINO House Speaker Paul Ryan. The letter (copy below) asks Trump to dump the CPP with an Executive Order on Day One when he takes office, and asks Congress to adopt legislation to prevent the EPA from such an egregious overreach ever again…
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LSE Study: Fracking has Made US Manufacturing More Competitive

The London School of Economics recently released a research study that prominently features the Marcellus/Utica. In “On the Comparative Advantage of U.S. Manufacturing: Evidence from the Shale Gas Revolution” (full copy below), the authors find America’s shale revolution is revitalizing American manufacturing. If we could vastly simplify the research in just a few words, it is this: While we have enough shale gas to export plenty of it, exporting it is not as economic as exporting oil due to the elaborate processes to liquefy and regassify natural gas–therefore a lot of the gas stays right here at home, making the U.S. one of (if not the) cheapest places on the planet to establish manufacturing plants, especially for manufacturers that use natural gas and NGLs (natural gas liquids). Therefore, manufacturing, especially in the petrochemical sector, is ramping back up in the U.S. The authors cite a study that says for every two jobs created by the fracking industry, another one job is created in the manufacturing sector. The paper also concludes that the shale revolution saved Obama’s bacon by creating hundreds of thousands of jobs. Without shale drilling we would not have recovered as quickly as we did from the economic near-collapse of 2007/2008. Here’s a summary of the research, followed by a full copy of the published paper…
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Société Générale Questions OPEC Oil Cut Agreement; Russia Lying?

Two weeks ago MDN editor Jim Willis attended the “Platts Global Energy Outlook Forum 2016” held in New York City (see Harold Hamm Talks About Trump, OPEC, and Global Warming). Our previous report focused on the keynote address and Q&A with Continental Resources CEO Harold Hamm. However, there was a second keynoter–for lunch–that riveted the attendees’ attention. That person was HE Abdalla Saem El-Badri, the former Secretary General of OPEC. While the audience munched away on salmon and Cornish game hen, John Kingston, director of S&P Global Market Insights sat on stage with El-Badri and peppered him with questions, mainly about the recent OPEC agreement to cut production among member states by 1.2 million barrels per day, and a follow-on agreement by non-OPEC members (like Russia) to cut another 600,000 barrels per day. At one point Kingston grilled El-Badri about those cuts, recounting that several speakers during the day had voiced the opinion that there would be perhaps 70-80% compliance with the proposed cuts by OPEC and non-OPEC countries. El-Badri voiced his opinion that “there must by 100% compliance” with the stated cuts–otherwise the price of oil will not hit and remain at the target of $55-$65 per barrel. Kingston was, understandably, incredulous, and continued to hammer El-Badri on the point–but El-Badri did not relent from his position that all participants “must” adhere to the cuts in the plan. Kingston is not the only skeptic when it comes to the cuts. The analysts at banking giant Société Générale maintain (in so many words) that Russia, in particular, is lying and will not cut 300,000 barrels per day of production as promised. Here’s SG’s best thinking about what will happen with the OPEC and non-OPEC cuts, and their prediction that the price of oil in 2017 will not hit $55-$65, but instead stay in the $50-$60 range…
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Marcellus & Utica Shale Story Links: Mon, Dec 19, 2016

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Catholic deacon brings his faith, experience to Range Resources; why does the Heinz family despise working Pennsylvanians?; divestment movement populated with know-nothing college kids; natgas will stay connected to Mexico and Canada, even if NAFTA gets changed; latest climate conspiracy theory; and more!
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