Industrywide Issues

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    Natural Gas and Electricity in U.S. Joined at the Hip

    Increasingly natural gas and electricity production in the U.S. are “joined at the hip.” What do we mean by that? In 2015 more electricity was generated from natural gas-fired generators than from coal-fired generators in the months of April, July, August, September, and October (data for November and December not yet available). Wholesale electricity prices at major trading hubs, on a monthly average basis for on-peak hours, were down 27%-37% across the nation in 2015 compared with 2014–driven largely by lower natural gas prices. It’s not a stretch to declare that natural gas has replaced coal as the #1 energy source for creating electricity. That’s what we mean by nagas and electricity being joined at the hip. Our favorite government agency, the U.S. Energy Information Administration (EIA), provides some context…
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    Which Marcellus/Utica Drillers are Part of the “Thousand Club”?

    It’s difficult to compare apples with apples when it comes to evaluating how productive, or profitable, a hydrocarbon-producing well is. We typically think of wells as “oil wells” or “natural gas wells” or perhaps “wet gas (NGL) wells.” While there are some wells that produce almost all natgas or almost all oil, etc., most wells produce multiple hydrocarbons. Oil wells in the Permian Basin or Eagle Ford Shale (in TX) produce natural gas along with the oil coming out of the well. Many Marcellus and Utica wells in southwestern PA and eastern OH produce very profitable quantities of natural gas liquids, a mish mash of ethane, propane, butane, isobutane, and pentane. And don’t forget condensate (natural gasoline). So how do you compare the relative output/profitability/production for different “types” of wells? One way is to convert all of those hydrocarbons into one hydrocarbon–oil. Specifically, barrels of oil. Once you convert all hydrocarbons into barrels of oil, you have a way to compare apples to apples–comparing wells located in the same shale play or comparing wells from one play with wells from another. Recently the sharp analysts at investment firm Sanford C. Bernstein & Co. ran the numbers to convert and compare wells across different plays. They issued a report showing wells that belong to the “Thousand Club”–wells producing at least 1,000 barrels of oil equivalent per day. Where are the most such wells located? The Eagle Ford Shale, the Bakken Shale, and yes, the Marcellus and Utica Shale. Which drillers are in the club?…
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    A Closer Look at GTL Technologies, Benefits for Marcellus

    MDN has written, many times, about companies planning or building gas-to-liquids (GTL) plants. Such plants convert natural gas into other hydrocarbon-based products–like gasoline and diesel fuel. As you can imagine there’s some sophisticated chemistry used in order to make it happen. The process was originally pioneered in Germany in the 1920s and (yes) was used by the Nazis to convert coal to diesel. That method is the most well-known and is called Fischer-Tropsch (FT). There are, however, other methods that have been pioneered since that time. A recent entrant in GTL technology is a process called STG+, created by the company Primus Green Energy, based in New Jersey. Primus CEO Sam Golan, writing for the Marcellus.com website, makes a product pitch for his tech that many in the Marcellus/Utica region could benefit from STG+. One of the primary selling points is that STG+ can be used, profitably, in areas where there are low volumes of stranded natural gas. We’re not interested in giving Primus a free product pitch, but we did find Golan’s description of the various technologies used in GTL, including their own STG+, to be interesting and helpful for our own understanding of how GTL works. We thought you might find it interesting too…
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    Historic Average Price of Oil is $30/Barrel – Who Knew?

    Here’s a bombshell: Did you know that throughout its existence as an energy source that oil has sold at an average of $30 per barrel, adjusted for inflation? There have been a few periods of price spikes, but overall, on average, oil has always sold for around $30/barrel. No, we didn’t know that either. But that’s the assertion of Michael Lynch, president of Strategic Energy & Economic Research Inc. He’s been an economist/researcher in the oil industry for nearly 40 years, so he should know. We often highlight articles by Lynch in our daily “best of the rest” listing of stories you may be interested in reading. Our favorite Pittsburgh Post-Gazette reporter, Anya Litvak, recently spoke to Lynch. Here’s a portion of that enlightening interview…
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    Pipelines – The Safest Form of Transportation in Existence

    Lately we’ve repeatedly seen references in articles about pipelines, especially those planned for New England, that make an implied threat that a pipeline located near a home or business is a threat. In some cases antis throw around reckless language like pipelines are the equivalent of unexploded bombs–just waiting to explode. It is one of the scare tactics used to smear what is, hands down, the safest form of transportation in existence. In fact, a recent announcement from the American Petroleum Institute, in commenting on proposed new rules and regulations for pipelines coming from the Pipeline and Hazardous Materials Safety Administration’s (PHMSA), points out that, “more than 199,000 miles of liquid pipelines [in the U.S.] transport about 16 billion barrels of crude oil and petroleum products per year at a safety rate of 99.999 percent.” That’s for liquids in pipelines. For gas pipelines it’s the same. Can you imagine any form of transportation with a safety rate of 99.999%? That’s like one or two accidents per year–statistically zero. And yet antis continue to create a bogyman of pipeline problems where none exist…
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    Brutal Honesty from OOGA: ‘No Way to Sugar Coat’ the Bad News

    In December we highlighted comments by Shawn Bennett, executive vice president of the Ohio Oil and Gas Association (OOGA), in which he predicts 2016 for Ohio’s oil and gas drillers won’t be pretty (see OOGA Tells Ohio to “Sit Tight” – 2016 Won’t be Pretty). Must be Bennett is on a truth-telling tour. Last week he addressed the first Guernsey Energy Coalition meeting of the year last week in Cambridge, OH. He told the audience he wasn’t going to sugar coat the bad news, and he didn’t…
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    Cali Crisis Being Used to Promote Ban on NatGas Storage

    MDN hasn’t, until now, covered the ongoing disaster near Los Angeles where a well used to store natural gas is leaking and out of control. The well is one of 115 such wells in the Santa Susana Mountains where Southern California Gas Co. (SoCalGas), a division of Sempra Energy, stores natural gas in a vacant oil field about a mile and a half underground. It is the largest such underground gas storage field in the Western U.S. One of the wells began to leak back in October, and SoCalGas says it may take them until March to fix the leak. A University of California at Davis researcher claims his calculations, taken from a specially fitted airplane, show the well is leaking around 1,000 tons of methane per day–or 80,000 tons so far. Some 4,500 residents in the nearby community of Porter Ranch have temporarily moved. Two local schools have moved their combined 1,900 students to different locations. It is a disaster by anyone’s definition. What’s newsworthy and interesting to MDN about this disaster–and how it may affect us in the Marcellus/Utica region–is how the disaster is being used/manipulated/abused in an attempt by anti-drillers to try and ban underground storage of natural gas…everywhere. Let’s keep this in perspective. There are hundreds (thousands?) of such underground storage facilities. A problem at one facility is being used as an argument that every other such facility across the country should be banned. It’s more than silly–it’s insane…
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    Full Speed Ahead for PA O&G Construction Company McCarl’s

    McCarl’s Inc. is ranked among the top fifty industrial contractors in the country. The company specializes in construction for companies in petroleum, chemical, power, steel, water treatment, cryogenic processing and the oil and gas industries. McCarl’s is also a “home grown” business–with its headquarters in Beaver Falls, PA. We love a good story about a local business. Last week McCarl’s announced they’ve hired Jeffrey Hines as executive vice president charged with leading a new phase of growth for the $150 million company. McCarl’s isn’t letting the price collapse of oil and gas hold them back. It’s full speed ahead…
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    Bill Sponsor Says It’s Now or Never for WV Forced Pooling Law

    At 11 pm on the last day of the 2015 legislative session in West Virginia, a session that lasts only 60 days at the beginning of each year, the WV legislature voted down what everyone thought was a sure thing to pass–House Bill (HB) 2688, otherwise known as the forced pooling bill (see The Real Story of Why Forced Pooling Bill Failed in WV). As we reported at the time, it was defeated by Democrats who had their knickers in a twist over another bill they wanted passed that Republicans defeated. So the Dems decided to give as good as they got and voted down HB2688 in retribution. Last March, following the negative vote, we said this: “Forced pooling is a dead issue in WV this year. Will it be back next year? You can bank on it.” And back it is. The Republican chairman of the House Energy Committee, Lynwood “Woody” Ireland believes a new version of the forced pooling bill is as fair as it gets for both landowners and drillers. Ireland also believes if the bill doesn’t pass this year, it is likely a dead issue–period. It’s “now or never” for a forced pooling bill in WV…
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    Marcellus Ethane Sets Sail for Europe Next Month

    We’re almost there! As MDN told you last June, INEOS, one of Europe’s largest petrochemical companies, had commissioned and purchased two tankers to ferry Marcellus/Utica ethane from the Marcus Hook refinery near Philadelphia to Norway and Scotland (see Ineos Gets Ready to Begin Ethane Exports from Marcus Hook, PA). The final leg of the Mariner East Pipeline is ready to go online, and the twin tankers are ready to be loaded. In February, the first shipment of Marcellus ethane will set sail from Philadelphia bound for Norway…
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    Columbia Pipeline Gets FERC Approval for WV Utica Access Project

    Columbia Pipeline Group has just received a green light from the Federal Energy Regulatory Commission (FERC) to proceed with their Utica Access Project. The project will cost Columbia $45 million and involves building five miles of new pipeline and upgrading compressor stations in Kanawha County, WV. When complete, the project, begun under NiSource (before Columbia separated into its own company), will transport 200 million cubic feet per day of Utica Shale gas for Eclipse Resources Corporation to liquid trading points on the Columbia Gas Transmission interstate pipeline system…
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    Columbia Pipeline Files to Build $850M WB XPress Project in WV/VA

    In addition to receiving Federal Energy Regulatory Commission (FERC) approval for the Utica Access Project, Columbia Pipeline Group has just filed their full, official application with FERC for approval of the $850 million WB XPress Project, consisting of two new compressor stations, 26 miles of pipeline replacement located along existing corridors, and 2.9 miles of new pipeline in Virginia and West Virginia. The WB XPress Project will expand capacity of the Columbia Gas Transmission pipeline in the region by 1.3 billion cubic feet per day, linking Marcellus gas supplies to new markets…
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    New Pipelines in the Marcellus Dramatically Improved Prices in 2H15

    What a difference a few pipelines can make. Last week the U.S. Energy Information Administration (EIA) issued their Natural Gas Weekly report (excellent report, great overview of the industry at large). One of the brief articles included in last week’s EIA update was story about the “basis differentials” for the Marcellus, and how they’ve narrowed. Basis differential means “how much does the gas trading at a given location trade above or below the standard Henry Hub price.” For example, last summer gas trading at Transco’s Leidy Hub in the Marcellus was trading for $1.65 million British Thermal Units (MMBtus) BELOW the Henry Hub price. In December, the gap had narrowed and Transco Leidy Hub prices were, on average, trading around 89 cents/MMBtu below the Henry Hub price. That’s a vast improvement in just six months. Why the narrowing in trade price? New pipelines came online in the latter half of last year, carting Marcellus Shale gas to new markets. More demand (i.e. new markets) equals a bump up in price…
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    AWMS Appeals Decision Upholding Trumbull Injection Well Closure

    American Water Management Services (AWMS) owns a wastewater injection well in Trumbull County that supposedly caused a low-level earthquake (that nobody could feel) in 2014. Two wells located at the site, both operated by AWMS, were “temporarily” shut down by the Ohio Dept. of Natural Resources following the quake (see ODNR Temporarily Shuts Down Injection Wells After Low-Level Quake). One of the two injection wells was allowed to re-open, but not the other (see ODNR Clears Trumbull Co. Injection Well in August Quake). However, AWMS can’t open just the one well. They need to open both and operate both. The ODNR is supposedly crafting new regulations that will govern the offending well that may or may not have caused the low-level quake and a year-and-a-half later the ODNR has not released those new regs. Meanwhile, everyone at that operation is out of a job. AWMS appealed the closure and last month a county judge threw out the appeal (see Judge Tosses Appeal to Re-Open Trumbull, OH Injection Well). So AWMS has appealed it to the next level up–the 10th District Court of Appeals…
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    Pittsburgh Plans to Divest from Mutual Funds that Own Fossil Fuels

    Can this POSSIBLY be true? The City of Pittsburgh, which has fashioned itself as “the new Houston” and center of the energy universe, is beginning a program to divest from any investments it has in fossil fuel companies?! It appears it is true. Ever hear the phrase, “Don’t bite the hand that feeds you”? Of course the drive to divest is coming from Democrats–they’re the ones who run city government. If they actually go forward with it, we predict they will rue the day they decided to do it. The plan, as it’s been outlined, would be to divest “gradually,” over a period of years. The real kicker is that Pittsburgh doesn’t invest directly in stocks like CONSOL Energy or EQT or many of the other big independents who call the Pittsburgh region home. But they do invest in mutual funds that own those stocks. It is the mutual funds they plan to shed, over time. Talk about blithering idiots…
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    Dem Media Spins New PA Severance Tax Proposal as “Conservative”

    At least one Republican, Pennsylvania State Rep. Jim Christiana (from Beaver County, PA), is pushing a new severance tax plan he considers kinder and gentler than that proposed by PA Gov. Tom Wolf. Christiana has proposed a tax with a rate of “just” 3%, instead of Wolf’s demand of 5% (see Some PA Republicans Beginning to Cave on Severance Tax). However, Christiana’s tax plan would, in time, increase to 5%–just like Wolf’s. Of course all of these numbers are hocus pocus horse manure. The actual percentage goes much higher when you factor in all of the extras. What’s interesting to us is how Democrat-controlled media organizations like the Scranton Times-Tribune (and its subsidiary the Wilkes-Barre Citizens’ Voice) are attempting to spin this news. They published an article referring to Christiana as a “conservative” trying to imply conservatives are now on board with a severance tax on drilling in the Keystone State. Let us assure you, such is not the case. It is another sterling example of media bias and spin…
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