Natural-gas industry confident of ‘restart’ in Pennsylvania

Marcellus Shale Coalition (MSC) President David Spigelmyer is confident planned meetings with Pennsylvania Governor Tom Wolf will lead to a “restart” in relations between the natural-gas industry and the state government.

The Marcellus Shale runs through western Pennsylvania (Image credit: Marcellus Shale Coalition / Chesapeake Energy)

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MSC representatives were due to meet Wolf the day after FC Gas Intelligence’s Natural Gas to Power Generation Summit in Philadelphia in May. Spigelmyer told the summit the meeting was “a chance to work together for the benefit of Pennsylvania, get the infrastructure built so we can help generate the jobs necessary to fuel our economy.”

Adding that Wolf was open to a separate one-on-one meeting with Spigelmyer at a later date, the MSC president said: “Seeing I’m not on his Christmas card list, I’m sure he wants to give me a little medicine – and that’s okay.”

The Marcellus Shale Coalition represents 220 natural-gas producers and midstream and supply-chain partners in the Marcellus and Utica Shale regions. Although a significant portion of the Marcellus Shale runs through western Pennsylvania, the Philadelphia region in the eastern part of the state receives almost all its natural gas from the Gulf Coast.

A consortium of energy industry, public sector, labor and academic leaders has proposed creating a new Energy Hub around Philadelphia which would see the city’s pipeline infrastructure expanded to receive lower-cost natural gas from the Marcellus and Utica reserves. The Greater Philadelphia Chamber of Commerce estimates the plan would save residents and businesses $888 million each year and support more than 5,000 jobs.

The MSC has criticized Gov. Wolf for a proposed 6.5% severance tax on natural-gas extraction. The tax, due to come into effect on July 1, will see natural-gas producers pay a combined $217.8 million in the 12-month period forecast in the 2016-17 budget. According to Pennsylvania’s Independent Fiscal Office, the tax will effectively be 8.5% on the wellhead price, which excludes an estimated $0.80 per million-cubic-feet in post-production costs. The tax was found to be 87% higher than in neighboring Ohio, and and higher too than that in the other states surveyed – West Virginia, Arkansas, Louisiana, Oklahoma and Texas.

Educating from the beginning

Several opponents of the Energy Hub proposal stormed the conference floor on day one, briefly holding up proceedings. The summit ended the following day with Mike Krancer, former state Secretary of the Department of Environmental Protection, interviewing Spigelmyer. The MSC chief spoke of the importance of educating the community – from politicians to grade-school students – about the benefits of natural gas.

“A lot of folks don’t realize that we’ve gone from producing a quarter of Pennsylvania’s supply in 2008, about 180 bcf [billion cubic feet], to today producing 23% of America’s natural gas, 4.6 tcf [trillion cubic feet]. That’s an incredible journey in a short period of time,” Spigelmyer said.

Convincing the public on natural gas is “a real challenge”, Spigelmyer said, arguing that the dollars used to fund New York State’s ban on hydraulic fracturing, or fracking, had shifted south to Pennsylvania where they were threatening plans for midstream expansion.

“You saw some of the activism today,” Spigelmyer told the audience. “I would bet if you checked their drivers’ licenses, many of them would be out-of-state participants in the protest.”

Krancer pointed out that a recent report by the non-profit State Review of Oil and Natural Gas Environmental Regulations (STRONGER) emphasized the importance of allowing states to regulate fracking. In its 2015 guidelines, STRONGER argued that state agencies should provide for dissemination of educational materials on contingency planning, spill response, permitting, operating, monitoring and other requirements.

Spigelmyer recommended focusing education efforts on grade-school, high-school and college, where he said not enough was being taught about energy and its power to transform communities.

“We’ve spent the bulk of our time focused on the media to try and hit broader numbers. I would tell you it’s got to be much more granular than that now. We’ve got to get into our universities. We’ve got to get into our grade schools and our middle schools where youth are so impressionable,” he said.

“We’ve seen books that are coming out of grade schools and middle schools where the idea of the oil industry as a duck covered in oil – that’s not representative of what this industry’s trying to accomplish, trying to do from an environmental standpoint. We’re trying to make sure that we’re producing in an environmentally responsible fashion, and we need to educate folks about what hydraulic fracturing means."

Driving down emissions in PJM

Through the use of natural gas in power generation, the United States is one of the few countries in the world that has lessened carbon-dioxide emissions, Spigelmyer said in a nod to the recent US Energy Information report that CO2 emissions from electric generation hit a 22-year low in 2015.

Gary Helm, Lead Market Strategist at PJM Interconnection, the independent system operator that services all of Pennsylvania and all or part of 12 other states in the eastern US, showed in a separate presentation to the conference that CO2 emissions from PJM generation fell from almost 1,300 lbs per megawatt hour in 2005 to a little more than 1,000 lbs/MWh in 2015. In the same period, natural gas’s share in the PJM electricity mix has risen from less than 10% to almost 25%, the share of renewables and nuclear has also risen slightly, and coal’s share has fallen from about 55% to about 35%.

Spigelmyer said natural gas has created about 243,000 jobs for Pennsylvania since 2008, and “there’s a lot of the ballgame yet to play” with exploration in the Appalachian Basin set to change the domestic outlook for natural gas and natural-gas liquids. Pennsylvanians have “a long history of working with their hands”, he said, noting that natural gas creates indirect opportunities through its role in bringing manufacturers back to the state. In the natural-gas industry specifically, he said, college graduates are making $80,000-plus and quickly jumping into six-figure salaries.

“I think about my own start in the industry [34 years ago],” he said, “and it sure as hell didn’t start like that.”