Energy Day: The State of Natural Gas in PA and Nationally
Energy Day took place last week in Scranton, Pennsylvania. The event was organized by America’s Natural Gas Alliance (ANGA), the Associated Petroleum Industries of PA (American Petroleum Institute, API), the Marcellus Shale Coalition (MSC) and the Pennsylvania Independent Oil & Gas Association (PIOGA). The event was attended by over 300 individuals and representatives of 13 different Chambers of Commerce. We will be highlighting information from the event in a series of posts.
Energy Day in NEPA was an incredibly successful and informative event which touched on all aspects of the natural gas industry and how to become involved with it as a local business. This panel offered information beneficial to those just learning about the industry through seasoned affiliates touching on processes, regulations, impacts and even the export potential.
Energy Day Sponsors From Across the Marcellus
Energy Day was truly a collaborative event, and not just among the natural gas industry. The list of sponsors represented organizations seeing first hand the tremendous positive impacts this industry is having on their local communities and those eager to learn new ways to help businesses and local workers become involved in the opportunities it provides.
There were 13 different Chambers of Commerce from across the Marcellus Shale region which participated in the event:
The event was also sponsored by various economic development partners:
Ben Franklin of NEPA, CANDO, NEPA Alliance, NEPIRC, Northeast PA Manufacturers & Employers Association, NEPA Technology Institute/GVTA, Northern Tier Regional Planning & Development Commission, Penn’s Northeast, Scranton SBDC, and ShaleNet
Local Insight and Welcoming Remarks
Scranton Mayor Chris Doherty
Mayor Doherty offered the welcoming remarks at Energy Day, including a look at how Scranton has benefitted from the Marcellus Shale industry operating nearby.
“Our city is on the right track, just as the shale industry is moving on the right track and has had a great impact on our city. This event is a great example of that. (2:10)
PA Department of Community & Economic Development (DCED) Secretary C. Alan Walker
Secretary Walker addressed the Energy Day attendees over lunch, describing the tremendous economic impact the Marcellus Shale industry is having on Pennsylvania and the state’s rich energy history.
I recognize and the governor recognizes the importance of developing our state’s energy resources. Low cost domestic energy is key to growing the Pennsylvania economy and creating new industry clusters in the state. (8:24)
Energy Day Panel: The State of the Natural Gas Industry
Lou D’Amico, President & Executive Director of PIOGA, Shares Some Natural Gas 101
Lou D’Amico is the President and Executive Director of PIOGA, the “largest and most diverse association of oil and gas producers in the state” (0:20) with about 900 members. For his presentation, D’Amico described the long history of oil and natural gas development in Pennsylvania, how the technology was developed to extract resources from shale, the process of doing so, and why we should care about natural gas.
Why do we even care? Natural gas is the cleanest burning fuel of the hydrocarbons…it has virtually no other bi-products [other than CO2]…it has allowed the U.S. to meet the demands of the Kyoto Protocol that the U.S. didn’t even sign. (2:50)
Comprehensive research over the past two years, published in 2011 by a bi-partisan legislative agency said, “Statistical analysis of the post drilling,” after the well is drilled, “versus pre-drilling water chemistry did not suggest major influences from gas well drilling or hydrofracing on nearby water wells.” Forty percent of our private water wells here in Pennsylvania do not meet federal or state water drinking standards and the reason for that in most cases is chloroform bacteria. Twenty percent of these water wells contain pre-existing methane. Methane does exist in aquifers. (6:34)
Stephanie Catarino Wissman, Executive Director of API of PA, Discusses Natural Gas Regulations
Stephanie Catarino Wissman, who’s family is from Scranton, is the Executive Director of the Associated Petroleum Industries of Pennsylvania (API-PA) which was established over 100 years ago and is “the only national trade association which represents all aspects of the oil and natural gas industry(0:43),” with over 500 members. They are also ANSI certified to set standards for the industry, which the public is able to provide input on. Wissman described the many regulations, both federal and state, which govern the natural gas industry in Pennsylvania.
There are key federal regulations governing shale development that include: the Clean Water Act; the Clean Air Act; Safe Drinking Water Act; the National Environmental Policy Act; Resource, Conservation and Recovery Act; Emergency Planning and Community Right to Know Act; Endangered Species Act; and the Occupational Safety and Health Act. (5:23) …These regulations support safe and responsible development, and many of these regulations actually give the state the responsibility of applying the federal laws in ways that meet the specific needs of the state. (6:00)
In addition to federal laws we have many state specific laws that hold oversight jurisdiction over the oil and natural gas industry in Pennsylvania. They include: the review and approval of permits; the well design, location and spacing; drilling operations; water management and disposal; air emissions; wildlife impacts; surface disturbance; worker health and safety; and inspection and enforcement of day to day oil and gas operations.
So, it’s very important to note that we have a very rigorous, robust and comprehensive regulatory scheme here in Pennsylvania. (6:15)
Katie Klaber, Executive Director & President of MSC, Discusses Natural Gas Impacts
Katie Klaber is the Executive Director and President of the MSC, which has been operating for just over 3 years and in that time has grown to over 300 members under her leadership. “Over 96 percent of the gas that came out of Pennsylvania in 2012, was from [MSC] board of director companies and a significant amount of the pipeline has also been laid by MSC members” (1:43). Klaber’s presentation discussed the economic impacts the industry is having in Pennsylvania.
The Marcellus and associated Utica Shale are the biggest, from a footprint perspective, in the country right now… and we here are so close to some of the biggest markets in the nation that use gas, not just for homes and businesses, but use it for manufacturing and other downstream opportunities. Marcellus Shale is very close to the East Coast in an area that has not been nearby development of oil and gas resources for a long time. (3:48)
Of all the shale plays, the Marcellus is the one expanding the most quickly. In fact, in 2012, Pennsylvania produced about 10 percent of the nation’s natural gas. That’s a lot of natural gas when you consider a few years ago we were a net exporter of natural gas. (5:17) …2.2 trillion cubic feet (9:14).
What’s the economic impact? These are some really big numbers with more than 4500 wells being drilled in the last few years. There are estimates of well over $30 billion that have come into Pennsylvania for this. That’s across a whole lot of different areas: all the companies that have benefited by contracting and sub-contracting with the industry; a lot of the additional effects that happened in the community because of leasing and bonus payments. Landowners in this part of the country are able to participate in this business and it’s also helped the state for revenue purposes. This is a compendium of a lot of the different revenue sources that have come to state and local governments as a result of the shale development here in Pennsylvania; overall taxes, the sales tax, corporate net income tax, personal income tax; road construction…royalty payments, landowners having additional resources to invest the way they see fit…$11 million in additional fees that has allowed the Bureau of Oil & Gas to open two new offices, as well as put over 100 inspectors and permit engineers on the job. With a current impact fee increase pending right now there will be additional dollars. And then with the impact fee that was paid in 2011 and early 2012, a new line item topping $400 million just in that short amount of time. (9:35)
Paul Smith, Director of Business Development for ANGA, Discusses Natural Gas Export Potential
The last speaker for this panel was Paul Smith, the Director of Business Development for ANGA, which was formed in 2009 by the “largest independent shale producers” (0:40). They have 26 members who “collectively produce about 35 percent of the natural gas in the United States and about 8 trillion cubic feet a year” (1:00). Smith’s presentation centered on U.S. capability for natural gas export and economic impacts occurring on a national level.
Overall, demand right now is about 63 billion cubic feet per day and is expected to grow to about 73 billion cubic feet a day by 2040. So that’s about a 15 percent increase across the board. But that’s just in the traditional sources; the r & c market, the industrials, and power generation. But when you layer on the transportation market, natural gas vehicles and high powered equipment…and then when you add LNG exports, you’re looking at a market that’s starting to approach 80 billion cubic feet a day. What we’ve been saying about these new markets as they grow, is there is plenty of supply here in the United States to supply these markets and it’s nothing to fear.Demand growth is a good thing. More gas production is a good thing for the economy. (2:35)
Our position is the global markets and free trade are really going to determine how much of this exporting we end up doing. I think Katie mentioned, there’s plenty of projects out there that have been proposed to do exports. I was around in the early 2000s working with El Paso Energy and had a hand in a couple of the projects that got built for import. So sort of the history lesson, back then there were I think 46 projects proposed to import natural gas back in the days when we were running out of natural gas…of those 46 applications, only eight got built…So now you’ve got about 26 plus applications at the DOE [for export]. If you apply that ratio on it, you’ve probably got about four and I think that’s probably going to be about right. (4:48)
Smith also covered some myths versus reality when it comes to export.
Myth #1: All of these projects are going to get built.
All of these projects are not going to get built and the free market is going to kind of determine which ones do. (6:05)
Myth #2: It will lead to high domestic gas prices and it will bring back volatility.
You’ve heard from some of our speakers this morning on just the vast supplies of natural gas that we have in the United States, and you know a lot of these gas plays today are really more like storage fields. Because we have such great knowledge about the amount of gas that’s in these plays now, I almost don’t call it exploration and production anymore. Natural gas now is almost a manufacturing process.
Myth #3: They’ll be a diversion of investment and job losses.
There have been a number of studies about economic impacts of exports and what we’ve seen is the tremendous benefit for the U.S. economy. From a trade perspective, from an investment perspective, these are really big projects. A lot of people don’t realize how capital intensive LNG exporting is…Most of the projects you’ve seen proposed are in the $5-10 billion range. So these aren’t small projects. (7:13)
The panelists were also asked some great questions from the audience on a variety of topics as you can see in the following videos.
Rig Counts and Production
Efforts in New York
LNG, Port Cities, and Energy Markets
As one can see just from the first panel of speakers, Energy Day was packed with information relevant to understanding and working in or with the natural gas industry in Pennsylvania. Keep an eye out this week for additional Energy Day posts on the other panel topics of Supply Chain, Natural Gas Usage, and Midstream/Pipelines.