M-U’s Next Mega Project: $10B Appalachian Storage Hub

In May 2016, MDN brought you the news that a researcher at West Virginia University believes a natural gas liquids (NGL) storage hub is what the Marcellus/Utica region really needs (see WVU Researcher Says Marcellus/Utica Needs an Ethane Storage Hub). According to Brian Anderson, director of WVU’s Energy Institute, without ethane storage (and pipelines) the Marcellus/Utica region risks seeing its abundant ethane leave the area, mostly heading to the Gulf Coast. We need that ethane here, in our area. Kevin DiGregorio, executive director of the Chemical Alliance Zone, has also taken up the cause, writing an opinion article in which he says West Virginia, Ohio, Pennsylvania and Kentucky need to band together to build such a project (see WV, OH, PA, KY Should Cooperate on $10B NGL Storage Hub). You mean, set aside their competitive natures and cooperate? Yes! Why? Such a project will cost an estimated $10 billion–far more than a single ethane cracker project. No one state can do it on its own. It will take all our states cooperating to pull it off. It’s time to turn the spotlight on this project. The Appalachian Storage Hub Conference is coming on June 15 in Canonsburg, PA (Pittsburgh). The conference will take a stab at moving the ball down the field in making this critical project happen…
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EIA Drilling Report: New Production Highs Again Coming in May

Yesterday MDN’s favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report–the Drilling Productivity Report (DPR). The DPR is the EIA’s best guess, based on expert data crunchers, as to how much each of the U.S.’s seven major shale plays will produce for both oil and natural gas in the coming month. This latest report shows that an upswing in production–for both natural gas and oil–will continue over the next 30 days. In fact, get ready to break new records! Output in the Marcellus/Utica region is set to once again reach new highs. In the Marcellus, output will come within striking distance of 19 billion cubic feet per day (Bcf/d). Astonishing! In the Utica, output will hit 4.2 Bcf/d. Shale oil output across all seven major plays is set to hit 5.2 million barrels per day, with almost all of the increase coming from the Permian and Eagle Ford plays in Texas. Buckle up and get ready for another wild ride in the coming month…
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Southwestern Energy Refocuses from Fayetteville to Marcellus/Utica

Did you know that the second largest U.S. natural gas exploration and production (E&P) company as measured by how much natural gas it produces is Southwestern Energy? Chesapeake Energy is #1, and Southwestern is #2. Who woulda thunk? And did you know that just five years ago Southwestern’s name was synonymous not with the Marcellus/Utica where they operate today, but with the Fayetteville Shale play in Arkansas? Over the past five years Southwestern has refocused its drilling efforts here in the Marcellus/Utica. Like most drillers across the country, 2016 was a rocky year for Southwestern. They idled their rigs during the first part of the year and ended up losing money (see Southwestern Loses $2.8B in 2016, Ramps Up Utica Drilling “Early”). However, the company is jazzed about 2017 and beyond. We spotted an extensive article on the Seeking Alpha investor website that takes a close look at Southwestern’s history, their refocus on the Marcellus/Utica, and look at what’s ahead for this drilling giant. We found it interesting and think you will too…
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Nuke the Nukes: Harrisburg Battle to Prop Up Failing Nuke Energy

As MDN reported last week, the battle lines have been drawn and both sides have come out swinging in a battle over whether ratepayers should bail out economically failing nuclear power plants (see Battle Lines Drawn in PA to Prevent Nuke Energy Special Treatment). Five nuclear power plants in PA provide 37.5% of all electricity used in the state. There are no “greenhouse gas” emissions from nuclear power, making it attractive for some green radicals–but nuclear waste is a big problem because it never goes away, at least not for thousands of years. You have to store it. The biggest problem with nuclear energy today is that it costs more to produce electricity from nukes than it does from cheap natural gas-fired plants. Nukes can no longer compete. So in a couple of corrupt states–New York and Illinois–the nuke lobby convinced regulatory bodies and the legislatures to pass laws favoring nukes–forcing ratepayers to pay more to keep the nukes going. That battle has now come to Pennsylvania. One of the lobbyists hired by the nuke industry is John Hanger–former Secretary of the PA Dept. of Environmental Protection (DEP) under Ed “fast Eddie” Rendell. Hanger briefly ran in the Democrat primary for governor (losing out to Tom Wolf). Hanger ran on a platform of legalizing marijuana–hence our moniker of “pass a joint for John” (see Pass One Last Joint for John Hanger). After he dropped out, Hanger went to work in the Wolf Administration for a period of time, as Wolf’s Secretary of Policy and Planning. But after a year of that Hanger quit and moved out of PA–to be with his wife and daughter in Massachusetts (see John “Severance Tax” Hanger Quits Tom Wolf Administration – Why?). Hanger is back–“advising” (i.e. lobbying) for the nuclear industry in Harrisburg…
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Hearings Scheduled for Proposed Duke Pipeline in Cincinnati

Duke Energy Ohio, an LDC or “local distribution company” serves some half a million customers with natural gas in Ohio. The company has a 12-mile pipeline to flow the gas it needs, to move it from one point to another in Hamilton County (Cincinnati), in the southwest corner of the state. The Duke pipeline has been in service since the 1950s. Duke needs to replace that pipe or some of those half million Duke customers won’t get natural gas any more. Because anything to do with “fracking” or “pipelines” has been so thoroughly bastardized by the media and anti-fossil fuel protesters, there has been, of course, opposition to Duke’s plan. So Duke “listened” and has scaled back their plans. Instead of building a 30-inch gas pipeline running at 600 psi (pounds per square inch), the revised plan calls for a 20-inch pipeline running at 400 psi (see Duke Energy Modifies/Scales Back Plan for SW OH Pipeline). Duke proposed two potential routes, both of which are opposed by antis, including a group calling themselves NOPE–Neighbors Opposing Pipeline Extension. We call them DOPEs–Dummies Opposing Pipeline Extensions. Will the DOPErs volunteer to shut off the natural gas to their homes and businesses if the pipeline doesn’t get built? Not on your life! Two public hearings have now been scheduled–one for June 15 and the other July 12. The DOPErs are gearing up to fight…
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Nuverra Environmental 2016 Update – Red Ink Slows, Some

Nuverra Environmental Solutions is one of the largest companies in the United States that handles transportation and disposal of shale drilling wastewater and leftover rock and dirt from drilling. The company has major operations in the Marcellus/Utica region. In January the company, going through tough economic times, was de-listed from the New York Stock Exchange (see Nuverra Environmental Delisted from NYSE, Now a Penny Stock). At last check-in in December, we noted that the company continues to struggle (see Nuverra Environmental Line of Credit Expanded, Payback Extended). Although it’s a bit later than others, Nuverra has just released its full year 2016 update. What do the numbers show? While Nuverra lost $195 million in 2015, it narrowed the loss in 2016–losing “only” $169 million for the year. Still not great, but better than it was. Here’s the update…
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FERC State of the Markets Report 2016 – Pipelines to the Rescue

Late last week the Federal Energy Regulatory Commission (FERC) released its annual “State of the Markets Report” for 2016 (full copy below). Among the choice tidbits we found this statement: “Natural gas production from the Marcellus and Utica shales accounted for 30 percent of the U.S. total in 2016, due to the prolific nature of these formations, relatively low production costs, and proximity to the large Northeast markets. In addition, new pipeline infrastructure reduced bottlenecks allowing additional gas to reach the demand centers.” We also spotted this interesting factoid: “In 2016, 7.1 Bcf of FERC jurisdictional pipeline capacity went into service, with 43 percent designed to move natural gas from Appalachia to markets in the Northeast and Midwest. Staff expects the new natural gas pipeline capacity to continue contributing towards shrinking price differentials between regions throughout the U.S., and help keep natural gas prices relatively low.” Translation: hang in there Marcellus/Utica drillers–prices are going to rise soon because of these new pipelines. Here’s the update from FERC…
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Williams Sells Gulf Coast Cracker Plant to NOVA Chemicals

Williams Geismar Olefins facility – click for larger version

Midstream giant Williams has been on a mission to make the company economically stronger AND produce cash that can be used for various purposes. In August, Williams announced they would sell their Canadian assets for $1 billion (see Bold Move – Williams Selling Canadian Assets). In September, Williams announced another potential asset sale–the company’s 88.5% ownership interest in the Geismar, Louisiana olefins petrochemical plant (see Williams Considers Selling its Gulf Coast Ethane Cracker Plant). The Geismar olefins plant is an ethane cracker by another name. It uses either ethane or propane and chemically “cracks” it into ethylene and propylene–raw plastics used by manufacturers. What does the Geismar plant have to do with the Marcellus/Utica? Directly, not much. There may be some Marcellus/Utica ethane flowing to that plant for processing, although we haven’t heard that. We’re interested in the story because Williams is one of the major midstream companies operating in our region. Anything that affects the company and its ability to continue operating, including asset sales in other regions, interests us. So it was with keen interest that we noticed Williams has now done the deal. They’ve agreed to sell the Geismar plant to Canada-based NOVA Chemicals, for $2.1 billion. Williams plans to use the money from the sale to pay down debt and fund capital investments…
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Survey Predicts Shale Drillers Will Borrow & Spend More in 2017

Lately we’ve noticed a plethora of stories in mainstream media about the oil and gas industry spending more money this year. That certainly seems to jibe with our own anecdotal observations. In reporting 2016 results and drillers’ comments about what to expect in 2017, almost all of the companies we’ve reported on have said their spending this year will go up. And that’s a good thing. We now have something better than just anecdotal evidence. Energy law firm Haynes and Boone recently completed a survey of oil and gas borrowers and lenders–drillers, service companies, and banks–to gauge their predictions about “borrowing base redeterminations” and spending in 2017. What is a borrowing base? A company’s borrowing base is the value of its assets. In the case of drillers, it is the value of the leases and oil/gas wells they own. Those assets are used as collateral to back up loans and IOUs. A lower borrowing base means they must borrow less money, and they will pay more in interest for the money they do borrow. Lower borrowing base = bad, higher borrowing base = good. Each spring and fall (twice a year) banks take a look and “redetermine” or reevaluate the value of those assets. What did the Haynes and Boone survey find about bankers’ and drillers’ predictions on spring redeterminations of borrowing bases? That the borrowing base for most drillers will either stay the same, or increase slightly. The survey also found a vast majority of drillers plan to spend more money this year (89%). Here’s the encouraging results…
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Big Green’s Game Plan for Fighting a Trimmed Down EPA

Big Green is a big business. Radical enviros have worked hard over the eight years of Obama’s reign of terror to build and expand the Environmental Protection Agency far beyond its originally intended purpose. The Obamadroids’ abuses via the EPA were breathtaking–many of which were chronicled here on MDN. Things like the odious and misnamed Clean Power Plan, the fruity Waters of the United States (WOTUS) regulation. Capturing every last molecule of so-called fugitive methane from oil and gas operations. The EPA became the modern day environmental equivalent of the Gestapo. So no wonder the environuts are apoplectic over President Trump’s mission to put the EPA on a diet and shrink it back to its pre-regulatory-obese size. But don’t think for a minute that the radicals will just stand by and watch it happen. They are fighting and fighting hard to prevent the enormously bloated agency from shedding budget, people, and regulations. We stumbled across their game plan for how they intend to fight Trump every inch of the way…
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Marcellus & Utica Shale Story Links: Tue, Apr 18, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: PA rig count stays same in April; Amercian Rivers “most endangered” scam; natgas buses coming in Florida; GE debuts first battery-gas turbine hybrid; soaring sand costs; USGS latest gas resource estimates decimates notion of “peak gas”; natgas to hit $4 this summer?; turning green grass into green gas; and more!
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