OGA 2: Panel Discussion – Marcellus/Utica Midstream Update

Panel I: Marcellus/Utica Midstream Update – 2014 and Beyond

  • Discussing how much infrastructure is actually needed in the Marcellus/Utica region and the current balance between supply and demand?
  • Targeting methods for managing pricing variation, overcoming takeaway chokepoints in areas with depressed prices
  • Detailing NGL takeaway issues and the cost/benefit analysis for pipeline expansion
  • Addressing the impact of ethane crackers on the Marcellus/Utica midstream
  • Assessing midstream investment in the northeast, looking ahead to the major projects for 2014
  • Offering insight to the challenge of sourcing skilled labor with understanding of the midstream sector, highlighting the impact of the midstream sector on the Northeast labor market
  • Comparing the differences/unique requirements between wet gas & dry gas gathering infrastructure

Moderator: Michael L. Krancer, Energy, Petrochemical and Natural Resources Practice Group Leader, Blank Rome LLP
Speakers: Brent Breon, Vice President Business Development, Blue Racer Midstream
Tony Blando, Vice President Marketing, NiSource Midstream Services, Columbia Pipeline Group
Aubrey Harper, Vice President Business Development, IPS Engineering / EPC
Brett Nixon, Director of Business Development, PVR Partners
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Happy Ending? ULS Awarded $24.3M from PVR for Unpaid Invoices

In March MDN brought you the story that Utility Line Services Inc. (ULS), a construction company that works for utility companies–like digging trenches and laying pipeline–sued PVR Marcellus Gas Gathering in a Delaware County, PA court (see ULS Says PVR Marcellus Bankrupted Their Company by Not Paying). ULS says PVR owes them more than $17.7 million in unpaid invoices and another $7.8 million in lost profits–and that the unpaid invoices caused the company to declare bankruptcy, closing their doors. A sad story.

Good news (?) for ULS. In what is believed to be the biggest jury award of its kind in PA, the court ruled in favor of ULS and awarded them $24.3 million to be paid by PVR. The problem remains that ULS had to go out of business and 600 jobs were lost and they had to liquidate their equipment. So although this is good news, it’s small consolation after the company had to declare bankruptcy…
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ULS Says PVR Marcellus Bankrupted Their Company by Not Paying

Utility Line Services Inc. (ULS), a company that does construction work for utility companies–like digging trenches and laying pipeline–is suing PVR Marcellus Gas Gathering in a Delaware County, PA court. ULS says PVR owes them more than $17.7 million in unpaid invoices and another $7.8 million in lost profits. The lawsuit stems from work done by ULS for PVR in laying 17 miles of pipeline in Lycoming County. Like all lawsuits, this one is a bit complicated, but essentially ULS says PVR slowed and then stopped payments, even though the pipeline was completed and gas now flows through it.

Both companies are pointing the finger at the other saying the other company was responsible for obtaining certain permits, and lack of those permits caused delays and increased costs in overtime and project overruns. Unfortunately PVR’s lack of payments to ULS has bankrupted ULS. They’ve closed their doors, laid off 600 workers and sold their equipment at auction. Not a happy ending. Here’s the story behind the lawsuit just getting under way and expected to run for at least three weeks in Delaware County Common Pleas Court…
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PVR Partners Marcellus Pipeline Flows Increase 60% in 1 Year

Midstream company PVR Partners issued an update yesterday to brag about their Marcellus operations–and well they should. Average throughput on the PVR “Eastern Midstream Systems” increased 60%, from 1.1 billion cubic feet per day average in December 2012 to 1.8 Bcf/d in December 2013. They also completed a total of 101 well connections in 2013 for the Eastern Midstream area.

PVR’s Eastern Midstream includes operations in Lycoming, Wyoming, Bradford and Greene counties in Pennsylvania, and Preston County in West Virginia. Here’s the full PVR update with more details:
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Marcellus/Utica Midstreamer PVR Bought by Regency Energy for $5.6B

bigger fish smaller fishPVR Partners, formerly known as Penn Virginia Resource Partners, will now just be formerly. Period. PVR is a major midstream company (pipelines and processing plants) with big operations in the PA Marcellus Shale after buying Chief Gathering last year (see PVR Buys Chief Gathering/Marcellus Pipelines for $1B). They also announced last year that they would spend $380 million to expand pipelines in NE PA (see PVR Announces $380 Million Investment in NE PA Marcellus), and very recently PVR announced a deal with Hess to build a pipeline system in eastern OH (see PVR Partners to Build $150M Utica Shale Pipeline System for Hess).

Yesterday Texas-based Regency Energy Partners and PVR announced that Regency will buy out PVR for $5.6 billion. Regency, also a midstream company, owns some assets in the Marcellus/Utica, but most of their operations are in the Southwest and West, so this purchase gives them a major presence in the rapidly-expanding midstream sector of the Marcellus/Utica. After the buyout is completed, the PVR name will be no more…
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PVR Partners to Build $150M Utica Shale Pipeline System for Hess

Midstream company PVR Partners has been selected by Hess to construct 45 miles of gathering pipelines in eastern Ohio’s Utica Shale region. In an announcement issued today, PVR said the new pipelines will be built to cover Belmont, Jefferson and Harrison Counties where Hess holds a substantial acreage position. The new pipeline project will end up costing somewhere in the neighborhood of $125-$150 million and will be completed in 2015.

The PVR announcement:
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Chief Strikes Deal to Provide Marcellus Gas for Electric Plants

Chief Oil & Gas announced yesterday they have crafted a deal to supply some of the Marcellus Shale gas they produce in PA to IMG Midstream. You may think IMG is a pipeline company because of the word “midstream” in its name–but you would be wrong. IMG Midstream (formerly known as Iron Mountain Generation) develops, owns, and operates small-scale electric generation plants powered by natural gas. As part of the new deal, Chief will use pipelines from Access Midstream and PVR Midstream to get the gas from their wells to IMG’s new electric plants (to be built) in northeastern PA.

With that explanation to clear up who the players are, here’s the (somewhat confusing) press release announcing the deal…
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PA DEP Slaps PVR Gathering with $150K Fine for Illegal Discharges

PVR Marcellus Gas Gathering, a PA-based midstream company, was fined $150,000 this week by the PA Dept. of Environmental Protection for four episodes of “discharge violations” that happened while PVR was constructing the Coal Mountain pipeline in Lycoming County, PA in 2011. The DEP slapped them hard because, says the DEP, the company kept repeating the same violation–discharging bentonite (impure clay) into a local creek. PVR Marcellus Gas Gathering is a subsidiary of PVR Partners (formerly Penn Virginia Resource Partners).

The DEP announcement:
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PVR Sells Pipeline in East Texas, Concentrating on Marcellus

Penn Virginia Resource Partners (PVR), a midstream company, yesterday announced it’s selling off a small natural gas gathering system and processing plant in east Texas to DCP Midstream Partners for $63 million. The reason? To concentrate more on the Marcellus Shale region (and to focus more on PVR’s other area of focus—the panhandle of Texas and Oklahoma).

From the PVR press release:

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PVR Announces $380 Million Investment in NE PA Marcellus

kick it up a notchPenn Virginia Resource Partners (PVR) is kicking up its commitment to the Marcellus Shale in northeastern PA a notch. Yesterday they announced they would invest $380 million on Marcellus Shale pipeline projects including a new extension to its natural gas pipeline in Lycoming County, PA. The announcement also reveals that they have commitments from Shell, Southwestern, Range and Inflection for the extra capacity and services. Yesterday PVR completed a previously announced deal to acquire Chief Gathering.

From the PVR press release:

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New Water Pipeline Coming for Drillers in Northeast PA

Aqua America Inc. and Penn Virginia Resource Partners (PVR) announced they have formed a joint venture, Aqua – PVR Water Services, to construct and operate a private pipeline system to supply fresh water to natural gas producers drilling in the Marcellus Shale in north-central Pennsylvania. The 12-inch diameter steel pipeline will largely parallel the trunkline of PVR’s gathering system in Lycoming County and will share PVR’s existing rights-of-way.

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PVR Midstream Building New Pipeline and Compression Facilities in Wyoming County, PA

From a Penn Virginia Resource Partners press release issued today:

The midstream division of Penn Virginia Resource Partners, L.P. (NYSE: PVR), PVR Midstream, announced today that it has entered into an agreement to construct and operate gas gathering pipelines and compression facilities servicing a private firm’s Marcellus Shale natural gas production in Wyoming County, Pennsylvania.

PVR Midstream will construct a 12-inch gathering pipeline and compression facilities with 25 million cubic feet (MMcf) per day of throughput capacity. This system is expected to become operational during the second quarter of 2010, with the potential for additional system extensions.

PVR Midstream’s 2010 capital investment in this system is anticipated to range from $6 to $7 million, with potential future system extensions costing up to $10 million. PVR Midstream expects its investment to be accretive to distributable cash flow once the system is operational.

See the full press release (Mar 16): Penn Virginia Resource Partners, L.P. Announces Gathering and Compression Agreement with Private Producer in the Marcellus Shale

New Pipelines Coming to Lycoming, Tioga and Bradford Counties in Pennsylvania

PVR Midstream, a division of Penn Virginia Resource Partners, has signed an agreement with Range Resources to construct and operate pipelines and compression facilities for Range’s drilling in the Marcellus shale in PA.

According to the press release:

PVR Midstream and Range have agreed to an area of mutual interest (AMI) that covers parts of Lycoming, Tioga and Bradford Counties in north central Pennsylvania, in which Range currently holds a substantial acreage position. Within this AMI, PVR Midstream will construct approximately 16 miles of 24- and 30-inch gathering trunklines, smaller-diameter field gathering lines and compression facilities required to gather Range’s production from the AMI. The gathering system will have over 700 million cubic feet per day (MMcf per day) of throughput capacity, and the initial phase is expected to become operational in the fourth quarter of 2010. The agreement provides Range significant firm gathering capacity in the system, and PVR Midstream will be compensated for the gathering and compression services provided to Range through a combination of volumetric fees, with no direct commodity exposure. Excess capacity on the system and the location within a core area of Marcellus Shale development should allow PVR Midstream to develop additional revenue by providing gathering and compression services to area producers.