Sunoco LP Building 2 Pipelines for Mariner East 2 Project
We’ve known for the past couple of years that Sunoco Logistics Partners, owner and builder of the Mariner pipeline projects, wanted to build not one, but two Mariner East 2 pipelines–ME2 and ME2X. We wrote about their hope to build two pipelines back in June 2015 (see Mariner East 2 Giving Birth to Twin Pipelines). At the time, Sunoco said the plan to add two more Mariner 2s was still tentative–that they would need to conduct an open season to be sure they can sell contracts for the second pipeline before they would fully commit. True to their word, Sunoco ran an open season for the second Mariner East 2 pipe in September 2015 (see Sunoco LP Launches Open Season for Second Mariner East 2 Pipeline). Since that time, we’ve not head much about the second Mariner East 2 pipeline (2X). Last week the PA Dept. of Environmental Protection (DEP) issued the final permits needed to begin construction on the ME2 project (see Finally! PA DEP Issues Final Permits for Mariner East 2 Pipeline). The new news is that on a conference call yesterday to discuss the latest earnings report, Sunoco’s top brass said that yes, they ARE building TWO pipes for Mariner East 2–and they’re doing it right now, from the beginning of construction…
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As politicians and analysts begin to dig into one of the centerpieces of Pennsylvania Gov. Tom Wolf’s proposed 2017 budget–a 6.5% severance tax on Marcellus/Utica drilling–new details begin to emerge. Like this: Most lease contracts contain a provision that says any taxes paid, including severance taxes, are a post-production expense and deducted from landowner royalties. So if Wolf’s severance tax were to pass, the people paying it will be landowners. That’s $200 million or so coming out of farmers’ pockets. Wolf & co. knew that situation would not earn them any votes, so they include a provision in the budget disallowing severance taxes to be deducted from royalties. Overturning existing contracts is illegal and sure to be challenged in court, but if somehow that provision gets upheld and the tax passes, it’s easy to predict Marcellus drilling will mostly cease. Wolf’s proposed 6.5% severance tax would put the state at, or near the top of, all states in severance tax rates. Some of the biggest drillers in the state have recently leased acreage in other plays and have no problem with shutting down new drilling in the Marcellus, moving on to other plays where the economics make more sense. Let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions not being allowed, and win. Landowners then fund the severance tax out of their pockets (the drillers are the “bad guys” and Wolf says “don’t look at me”). Now let’s assume the tax passes and drillers sue to remove the clause about severance tax deductions and lose. Drillers simply walk away from PA. Either way, the Wolf severance tax proposal is a hot, stinking mess…
This is one of those stories that illustrates so beautifully how liberals always operate: all talk, no action. Form a committee, say lots of things, bluster, argue, look like you’re addressing a really important issue–and then do nothing. In this case that’s a good thing! We’re talking about the pomp and circumstance surrounding then newly-minted Pennsylvania Gov. Tom Wolf and his so-called Pipeline Infrastructure Task Force. In May 2015, Wolf and his underling Dept. of Environmental Protection (DEP) Secretary John Quigley (who has since been fired) created a “Task Force on Pipeline Infrastructure Development” (see 
Third time’s the charm? The Pennsylvania General Assembly convenes for two-year sessions. Almost six years ago during the 2013-2014 session of the General Assembly, PA Rep. Garth Everett introduced “minimum royalty” legislation that would guarantee PA landowners would get minimum royalty payments of 12.5%–regardless of any kind of post-production expenses. It was called House Bill (HB) 1684 and it failed to even come to the floor for a vote (see 
We appear to be in the final death throes of radical environmental efforts to block the construction of Mariner East 2–a $2.5 billion, 306-mile natural gas liquids (NGL) pipeline that will run from eastern Ohio through the state of Pennsylvania to the Marcus Hook refinery near Philadelphia. Last week the Pennsylvania Dept. of Environmental Protection (DEP) gave its final approval for the project (see 
Yesterday Chesapeake Energy provided a glimpse into their plans for 2017. In Chessy’s “gudiance” for 2017, we learn that the company plans to up the number of active drilling rigs (nationwide) from 10 to 17. We also learn that last year Chessy spent ~$1.75 billion to drill 213 new wells, and place 428 wells into production–the difference between the two numbers being they finished up already-drilled wells, or DUCs. This year? They will spend ~$2.5 billion to drill ~400 new wells–essentially doubling the number of wells drilled–and place ~450 into production. The only problem (from our perspective) is that most of the drilling will happen in places other than the Marcellus/Utica. Of the new wells they plan to drill, only 10-15 new wells will get drilled in the Marcellus, and 40-50 new wells in the Utica. Chessy says they will complete and turn into production 50-60 Marcellus wells in 2017, and 70-80 Utica wells. Translation: Not a lot of new drilling in our neighborhood, with more of an emphasis on completing already-drilled wells…
We want to alert you to an upcoming webinar that will be worth your time. On Feb. 27 at 2 pm, NGI (Natural Gas Intelligence) will host a webinar titled, “Cracking the Ethane Code in Appalachia,” all about the Shell ethane cracker. NGI’s ace reporter Jamison Cocklin (MDN editor Jim Willis knows Jamison and has the highest regard for his reporting and writing) will moderate. On the call will be an all-star cast: Don Rush, VP of CONSOL Energy; Jim Cooper, American Fuel & Petrochemical Manufacturers; Denise Brinley, PA Department of Community and Economic Development; and Danielle Sandusky, Level 2 Energy. The webinar will help answer questions about the size and scope of the cracker, whether (and how) the cracker will impact drilling decisions, what about competition from other crackers along the Gulf Coast, and more. Below is more information, and a 
In December the Pennsylvania Dept. of Environmental Protection (DEP) unveiled new regulations to clamp down on methane emissions and other other air pollution that allegedly comes from shale drilling sites (see 
Some farms not only produce products like milk, meat, eggs and/or crops–some farms produce energy. Would it surprise you to learn that in 2014 (the most recent year with stats available), energy companies paid farmers a staggering $2.9 billion for the energy extracted from private farms? The U.S. Dept. of Agriculture posted a brief blurb from their Amber Waves magazine yesterday, recounting stats from a report released last November. The report, “Trends in U.S. Agriculture’s Consumption and Production of Energy: Renewable Power, Shale Energy, and Cellulosic Biomass” (full copy below) points out it’s not just oil and gas extraction that farmers receive income from. Some farmers lease their land for solar and wind generation. Some biomass. However, it was one particular chart and stat that caught our attention: About 9.6% of Pennsylvania farms received energy income in 2014. The average amount received, per farm? $157,000! Almost all of that revenue came from the Marcellus Shale…
Paul Sidorek, an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling, is also a landowner himself. In 2009 Sidorek leased 145 acres, a lease that was eventually sold to Chesapeake Energy. Because of the troubles encountered by others, Sidorek wrote into his lease a 20% royalty and made sure the lease explicitly stated that no expenses could be deducted from the sale of the gas produced on his property. That is, NO post-production expenses could be deducted. And yet, Chesapeake disregarded the lease and deducted as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year (see 
In August 2013 an extensive investigative article about a then-director for the Pennsylvania Game Commission, William A. Capouillez, appeared in the Philadelphia Inquirer (see 
For those of us in a certain generation, you will recognize this: Fred, Daphne, Shaggy, Velma…and of course, Scooby-Doo! If you were raised watching cartoons on Saturday morning, and you watched Scooby-Doo, do you remember the name of the van they traveled around in? That’s right, the Mystery Machine! An image of the Mystery Machine is what floated through our brain as we read about the latest venture in researching air quality in Pennsylvania near drilling sites. Researchers from Drexel University (in Philadelphia) set out across Marcellus territory in “Drexel’s Mobile Laboratory, a Ford cargo van equipped with all the equipment necessary for measuring concentrations of chemicals and particles in the air at 1-10 second intervals while driving.” The Mystery Machine! And what, pray tell, did our intrepid Marcellus sleuths find be-bopping around the countryside? In the recently published study, “Analysis of local-scale background concentrations of methane and other gas-phase species in the Marcellus Shale” (full copy below), researchers say they found that even though the number of Marcellus wells being drilled has slowed quite a bit over the past few years, the amount of fugitive methane in the air has increased. And the increase can’t be explained by a general global increase in fugitive methane. The increase in fugitive methane in the Marcellus is due, our methane sleuths say, to the “increased production of natural gas from the region which has increased significantly over the 2012 to 2015 period.” The researchers conclude that “because everybody knows how evil and nasty fugitive methane is for global warming” (our words), this study is yet more evidence that Marcellus shale drilling (and pipelines, etc.) leak so much methane as to make any benefits we get from extracting and burning methane, over say coal, muted–even lost. Because we can’t put a cork in it, by extracting and using methane we’re making poor old Mom Earth even sicker. Which is, of course, total bunkum…