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PA Gov Wolf Vetoes Jobs-Creating Petchem Bill – Blames COVID-19
Pennsylvania Gov. Tom Wolf was less than honest when he vetoed House Bill (HB) 1100–a bill that would generate thousands of new jobs and cause money to pour into the PA economy by granting tax breaks (for a limited time) to companies willing to build *brand new* petrochemical plants ($450 million minimum investment) that use natural gas as the feedstock. In vetoing the bill on Friday, Wolf more or less blamed the coronavirus–even though he had promised to veto this bill in February, a month before the pandemic began in U.S. (see Gov Wolf to Veto Bill Attracting Cracker-Type Investment to NEPA)!
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Some 47 drilling rigs were idled last week according to data provided by Enverus Drillinginfo. That’s the biggest single-week drop since the final week of December 2015–more than four years ago. The rig count stands at 766. Of the rigs idled last week, 40 of the 47 were oil drilling rigs. Of the 40 oil rigs idled, half (20) were idled in the Permian Basin. The good news is that the Marcellus Shale and the Utica Shale remain unchanged at 38 and 10 rigs, respectively. Rig counts in each basin have held steady for four weeks running.
What a change just a few weeks (and a pandemic and oil price crash) can bring! One month ago MDN brought you the sobering news that the stock prices for most Marcellus/Utica companies had sunk to new lows (see 
Pennsylvania House Bill (HB) 1100, aimed at attracting new petrochemical investment to the state, was passed by the PA House and Senate earlier this year. The bill provides a tax incentive for companies to build NEW plants in the state that use Marcellus methane gas. HB 1100 was finally delivered to the desk of Gov. Tom Wolf last week (see 
The double shock of less demand for oil because the COVID-19 coronavirus crisis has shut pretty much everything down (worldwide) AND the Saudis and Russians pumping oil to the outer limits, continues to cause the price of oil to remain at historically low prices. The Russians are trying to bankrupt American shale oil drillers by driving prices into the basement. The Saudis are trying to bankrupt Russia for leaving the OPEC+ fold (and the Saudis certainly don’t mind if American shale oil drillers are put out of business in the process). The low price resulting from the double shock is affecting not only big American shale oil drillers but also mom and pop conventional oil drillers too. Particularly small conventional drillers in western Pennsylvania.
It certainly doesn’t feel as though we’ve hit the bottom yet when it comes to the effect of the coronavirus and Saudi-Russia oil price war on American shale companies. We still have a way (down) to go, unfortunately. But all is not lost. There is hope on the horizon. That’s the message we take from comments by an Enverus analyst. According to RBN Energy, we’ve seen this movie before. Maybe this movie has a different storyline, but the plot is the same. Can we predict how it will play out this time based on previous downturns? RBN offers up the five stages a shale play goes through.
Yesterday MDN told you that Shell had not (yet) closed down construction of the mighty ethane cracker plant they are building in Beaver County, PA (see 
As we have often pointed out, if we could have anyone else’s brain in the shale business, it would be our friend Tom Shepstone’s brain. Tom, who writes at 
Drilling, whirring, humming, thumping, grinding, engines running, hammering, back-up warning beeps, banging, clanging. Those are the sounds of progress happening in Chester County, PA. Contrary to the griping and moaning mainstream media reports about those who live near Mariner East 2 (ME2) pipeline construction, the sounds of ME2 construction are music for at least one local resident because he knows about the economic prosperity this project will bring to the region.
One of our favorite Energy in Depth writers, Nicole Jacobs, has just published a great post that outlines the huge impact new natural gas-fired (mostly Utica Shale gas) power plants have had and will have in Ohio. She includes a list of 10 projects either already built and running, under construction, or on the books to get built. When you add up the total capacity for all 10 plants, they will generate an amazing 9,215 megawatts of electricity, enough to power upward of 9 million homes! The companies building those 10 plants are investing $15.9 billion. This is huge for Ohio’s economy.
If you operate a company that sells a product (particularly a commodity product) you only have two ways of making a profit: Sell the product for more money or cut expenses (or both). For oil drillers, the price of the product sold is pretty much fixed. Some drillers have “hedged” their production, pre-selling future production at a specific price. But many don’t hedge. And hedging contracts typically don’t extend beyond a year. In the case of oil, the world market sets the price, and the price this week is about half of what it was last week. That means most shale oil drillers won’t make a profit–unless they can trim costs. One of the ways drillers are attempting to cut costs is by asking the companies that do the actual drilling and perform services for them (oilfield services companies, or OFS) to cut the rate they charge.
According to super-secret sources, The White House is “strongly considering” a federal aid package for oil and gas companies affected by the Saudi-Russia oil price war and lingering effects from COVID-19 coronavirus panic. The proposed federal aid is called by some a “bailout.” But the Trumpsters and the O&G industry reject that label. Reportedly under consideration is a program of low-interest government loans. Regardless of what you call it (bailout or help), the U.S. has a vested interest in ensuring our domestic O&G industry does not get wiped out, plunging us back into dependence on despotic foreigners for our energy.
On Monday there were dueling rallies at the Capitol in Harrisburg, PA, for and against a new petrochemical bill, House Bill (HB) 1100, that promises to bring thousands of new jobs and billions of dollars of investment to the Keystone State (see 
IHS Markit employs more than 5,000 analysts, data scientists, financial experts and industry specialists. Their global information expertise spans numerous industries, including finance, energy, and transportation. Yesterday IHS Markit issued a bulletin to say its analysts expect when the tabulating is all done that world oil demand, due to fear over the COVID-19 coronavirus, fell by some 3.8 million barrels per day over the same quarter from 2019. That would be a new all-time, world record quarterly drop in oil demand. The previous record happened during the worldwide recession of 2009 when demand dropped 3.6 million bpd. Should we be worried that we are about to experience another worldwide recession?
The American Petroleum Institute recently released the results of a study they commissioned that outlines the “dire consequences” of a ban on hydraulic fracturing–the kind of ban being pushed by Bernie Sanders, Elizabeth Warren, and Joe Biden. Here’s how dire it gets: If a frack ban is slapped into place by a Democrat President, by 2022 it will result in 7.5 million lost jobs, and by 2030 a total loss out of the economy of $7.5 TRILLION! You might as well say we will enter a new economic depression, the likes of which we haven’t experienced since the 1930s.