New Study Says Petchem Investment in M-U Better than Gulf Coast
This week representatives from Shale Crescent USA are in Houston, TX attending the 33rd Annual World Petrochemical Conference–and they have in hand a dynamite study that shows it’s more cost effective to build a petrochemical plant in the Marcellus/Utica region than it is along the Gulf Coast. Which is heresy if you live along the Gulf Coast. “Benefits, Risks, and Estimated Project Cash Flows: Ethylene Project Located in the Shale Crescent USA versus the US Gulf Coast” is an independent report by IHS Markit commissioned by Shale Crescent USA to evaluate and compare the financial returns and risks of a major petrochemical and plastics investment in the region with an identical investment in the US Gulf Coast. The numbers don’t lie. Here’s one juicy statistic from the newly released study: ethane (the feedstock used to make raw plastics) in our region costs 32% less than it does in the Gulf Coast region. One more factoid from the report: If the Marcellus/Utica were its own country, it would be the #3 natural gas producing country, IN THE WORLD! Our region produces more natural gas than the countries of Saudi Arabia, Iran and Qatar. Last year the Shale Crescent folks were the new kids at the World Petrochemical Conference. They were just about laughed out of the event. We have a feeling this year is going to be a lot different…
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In January 2017 the Federal Energy Regulatory Commission (FERC) granted final approval for the $452 million Atlantic Bridge expansion project (see 
Last Thursday the Federal Energy Regulatory Commission (FERC) held an open meeting during which the commissioners “took significant action” to address the Trump tax cut legislation enacted last December. FERC wants to be sure the tax cuts coming to electric companies and pipeline companies are passed on to consumers and pipeline shippers. We are still trying to make sense of it all and frankly, we still don’t fully understand it. What we can tell you about what FERC did last week is this: The agency proposed new solutions to eliminate “tax loopholes” for natural gas pipelines. Closing these so-called loopholes will eliminate certain tax benefits for MLPs–master limited partnerships. A good many pipeline companies (most) are organized as MLPs, which allows tax advantages to flow to investors. With certain tax benefits for MLP unitholders on the chopping block, all of a sudden some (most?) MLPs don’t look like such a hot investment anymore, at least on paper. Which has caused pipeline companies, many of them with operations in the Marcellus/Utica, to issue a flurry of public announcements to say “FERC’s actions won’t impact us all that much.” The stock market certainly didn’t share that sentiment with shares (called “units”) in MLPs taking a hit since FERC’s announcement. Below is a collection of stories–bits of stories–that we’ve pieced together in an attempt to shed light on what is happening, and how it may change the pipeline business in the future…
The “best of the rest”–stories that caught MDN’s eye that you may be interested in reading: Indiana company buys Pittsburgh pipe company; OH Democrat lawmaker proposes frack ban in state parks; Appalachian Storage Hub is WV’s foundation for future investment; feds lighten up on bird & bat rules, extend tree-cutting windows; oil drillers look to Oklahoma for cheaper prices; Wisconsin frac sand industry roars back; FERC’s Powleson lectures New England to learn from PA; big data in big oil is big business; and more!
In early March MDN reported that Sunoco Logistics’ underground horizontal drilling (HDD) work on its massive Mariner East 2 NGL pipeline near Philadelphia had resulted in several sinkholes developing (see 
“Hey Jim, what’s happening with Cove Point LNG? Didn’t you say a ship was on the way to pick up the very first cargo of Marcellus molecules?” Great question. Cove Point did see its first cargo set sail in early March (see 
On Feb. 15, XTO Energy was drilling a Utica Shale well on the Schnegg well pad near Captina Creek (York Township, Belmont County, OH) when they “lost control” of the well and it exploded and caught fire (see 
CIG Logistics is a company in the business of moving sand used in fracking from point A to point B. CIG owns and operates a series of transloading terminals, along with trucks to deliver sand to well sites. A transloading terminal is a place where sand arrives via one form of transportation, say on a rail car, and leaves via another form of transportation, like a truck. U.S. Silica is the country’s largest sand producer. U.S. Silica also owns some of its own transloading terminals. CIG announced yesterday it has cut a deal to buy three U.S. Silica transloading facilities–two in Texas and one in the Marcellus, in Marshall County, West Virginia. CIG claims that with this deal they have become the “preferred transload provider to U.S. Silica” in the Permian Basin and Eagle Ford in Texas, and the Marcellus Shale via the facility in WV. Terms of the deal were not disclosed…
We have to confess this story is a bit complex to understand. We will take a stab at making the complex understandable. Blue Racer Midstream has a subsidiary called Blue Racer NGL Pipelines LLC. The subsidiary operates the G-150 pipeline system, which provides batched propane and butane service. G-150 currently, located in West Virginia, connects a Natrium, WV processing plant to the TE Products Pipeline Co. (TEPPCO). The G-150 pipeline will also have a connection to the Mariner East 2 Pipeline when it goes into service, theoretically in June of this year. Currently the G-150 is flowing about 6,300 barrels per day of product through it–only 20% of its capacity. When the connection with ME2 is up and running, Blue Racer says it can handle 30,000 bbl/d through the G-150. However, Blue Racer itself signed up for most of the capacity (27,000 bbl/d). Blue Racer recently asked the Federal Energy Regulatory Commission (FERC) to allow it to have two different rate structures–a lower rate for “committed” shippers (Blue Racer itself with its 27,000 bbl/d) and a higher rate for uncommitted shippers. FERC rejected the request pointing out that existing shippers with contracts–namely Chesapeake Energy–would be left out in the cold in favor of Blue Racer moving its own volumes at lower prices. Yes, it’s complicated. Bottom line, Blue Racer can’t do what it wants and has to go back to the drawing board…
Dominion Energy’s $6.5 billion Atlantic Coast Pipeline (running from West Virginia through Virginia and into North Carolina) is supposed to get built this year. ACP began to cut trees along the pipeline’s path in late January (see 
The Pennsylvania Dept. of Environmental Protection (DEP) has just shut down further drilling for the Mariner East 2 Pipeline project at Snitz Creek in Lebanon County, PA because of a 50 gallon spill of non-toxic drilling mud. This isn’t the first time the DEP has stopped underground horizontal directional drilling (HDD) work at Snitz Creek. Last November they did the same thing for a piddly 1 gallon spill (see 
Anti-fossil fuel nutters have been on a holy mission to stop a 3.5-mile, 8-inch pipeline from being built under the Potomac River by Columbia Gas (see 
In April 2016, three Obama-appointed Federal Energy Regulatory Commission (FERC) commissioners approved the $116 million Williams Transco Garden State Expansion pipeline project (see