Category Archives: Marcellus

Natural-gas royalties could top $1.2 billion in Pennsylvania

Private landowners are reaping billions of dollars in royalties each year from the boom in natural gas drilling, transforming lives and livelihoods even as the windfall provides only a modest boost to the broader economy.

In Pennsylvania alone, royalty payments could top $1.2 billion for 2012, according to an Associated Press analysis that looked at state tax information, production records, and estimates from the National Association of Royalty Owners.

For some landowners, the unexpected royalties have made a big difference.

“We used to have to put stuff on credit cards. It was basically living from paycheck to paycheck,” said Shawn Georgetti, who runs a family dairy farm in Avella, about 30 miles southwest of Pittsburgh.

Natural gas production has boomed in many states over the past few years, as advances in drilling opened up vast reserves buried in deep shale rock, such as the Marcellus formation in Pennsylvania and the Barnett in Texas.

Nationwide, the royalty owners association estimates, natural gas royalties totaled $21 billion in 2010, the most recent year for which it has conducted a full analysis. Texas paid the most in gas royalties that year, about $6.7 billion, followed by Wyoming at $2 billion and Alaska at $1.9 billion.

Exact estimates of natural gas royalty payments aren’t possible because contracts and wholesale prices of gas vary, and specific tax information is private. But some states release estimates of the total revenue collected for all royalties, and feedback on thousands of contracts has led the royalty owners association to conclude that the average royalty is 18.75 percent of gas production.

“Our fastest-growing state chapter is our Pennsylvania chapter, and we just formed a North Dakota chapter,” said Jerry Simmons, the director of the association, which was founded in 1980 and is based in Oklahoma. “We’ve seen a lot of new people, and new questions.”

Simmons said he hasn’t heard of anyone getting less than 12.5 percent, and that’s also the minimum rate set by law in Pennsylvania.

By comparison, a 10 percent to 25 percent range is similar to what a top recording artist might get in royalties from CD sales, while a novelist normally gets a 12.5 percent to 15 percent royalty on hardcover book sales.

Before Range Resources drilled a well on the family property in 2012, Georgetti said, he was stuck using 30-year-old equipment, with no way to upgrade without going seriously into debt.

“You don’t have that problem anymore. It’s a lot more fun to farm,” Georgetti said.

SOURCE: http://www.philly.com/philly/business/20130129_Natural-gas_royalties_could_top__1_2_billion_in_Pa_.html

Dominion Resources plans $1.5 billion pipeline and processing deal for Ohio Utical shale gas

RICHMOND, Va. – Dominion Resources Inc., parent company of Dominion East Ohio Gas, is partnering with a Dallas company to build natural gas processing plants and pipelines to the plants from gas wells in Ohio and parts of Pennsylvania.

In a joint statement issued Thursday, Dominion and Caiman Energy II, LLC said they would sign a $1.5 billion joint venture by the end of the month.

Blue Racer Midstream LLC will be an equal partnership between Dominion and Caiman, with Dominion contributing existing equipment and facilities valued at about $800 million and Caiman contributing the additional funding over time, the companies said.

The development is expected to help the state’s gas and oil industry grow more smoothly because it will provide the necessary pipeline capacity and processing plants immediately to market the gas as it flows from the new wells.

The absence of gas processing plants and pipelines to newly drilled remote wells has hampered Ohio shale gas development, say analysts, creating a kind of chicken and egg situation because such expensive projects could not be built without the certainty that the wells would be drilled.

Dominion will also contribute a processing plant now under construction in Natrium, W. Va., just across the Ohio River, as well as a large diameter pipeline already connecting the plant to Dominion East Ohio’s gathering pipeline system. The plant is being built next to an older but similar facility.

Earlier this year, East Ohio converted part of its major north-south pipeline system in Ohio to move gas from Ohio Utica shale fields to the Natrium processing plant. The lines were built decades ago to move gas from West Virginia and southern Ohio to the heavy industries in Northeast Ohio, industries that have either shrunk or disappeared.

Blue Racer Midstream’s initial plan is to convert more of East Ohio’s major pipelines to “wet gathering lines” and feed the unprocessed gas from thousands of wells the industry anticipates will be drilled in the Utica shale to the Natrium plant.

The plant will clean up raw or rich gas from the wells, removing oils and then separating the more valuable industrial gases — butane, propane, and ethane — from the methane that will become heating or natural gas.

The various gases and oils can then be shipped from the plant to multiple markets, said the companies, either by truck, railroad, pipeline or barge facilities.

“The Utica shale has enormous potential to provide jobs and revenues for the local Ohio economy,” said Thomas F. Farrell II, Dominion’s chairman, president and chief executive officer, in a prepared statement.

Jack Lafield, Caiman’s chairman and chief executive officer, said Dominion “brings well-positioned assets and experienced operations for gathering, processing, fractionating and delivering natural gas and liquids produced from the Utica shale field.”

Three other similar projects are also under way.

Earlier this month, a partnership of companies led by M3 Midstream, LLC, of Houston, announced its $1 billion gas processing plant under constructionin Columbiana County is on schedule to open in May 2013. Chesapeake Energy had been part of the group but sold its share.

In early November, two Denver companies, MarkWest Energy Partners, a gas transportation and processing company, and Antero Resources, a gas producer, partnered with a Texas investment company, the Energy and Minerals Group, to build processing plants and pipelines in Nobel County. State officials estimated the initial investment at $500 million.

In July, NiSource, Inc., parent company of Columbia Gas of Ohio, announced a joint venture with Texas exploration and production company Hilcorp Energy Co. to build about 50 miles of pipeline and a gas processing plant in the state. NiSource estimated the initial cost at about $300 million. In this latest announced project, Dominion intends to contribute its existing gas gathering pipeline system with an eye toward expanding its capacity to move at least 2 billion cubic feet of natural gas per day.

SOURCE: http://www.cleveland.com/business/index.ssf/2012/12/dominion_resources_plans_15_bi.html

New Pipeline carrying Marcellus Shale gas

The impact of the Marcellus Shale natural gas boom is about to reach a corner of South Jersey.

Surveyors have started several months of work in Gloucester County as part of a planned major pipeline expansion project to carry gas from northern Pennsylvania to the country’s Northeast and Mid-Atlantic markets.

Dubbed the East Side Expansion project, it is expected to cost $210 million and it had not yet received approval of the Federal Energy Regulatory Commission.

Most of the work would be on right-of-way owned by Columbia Gas Transmission L.L.C., a subsidiary of Houston’s NiSource Gas Transmission & Storage, said Chevalier Mayes, a NiSource spokeswoman.

Construction would begin in early 2015 and end in the fall of that year, the company said.

In Gloucester County, Woolwich Township Administrator Jane DiBella said the pipeline would run along the Columbia Gas right-of-way parallel to Center Square Road, which extends from Logan Township into Swedesboro.

The Gloucester County leg is just a small segment of a project covering four states. The main line is to run from Milford, in Pennsylvania’s Pike County, to Loudoun County, Va.

The Gloucester branch would connect to the main north-south pipeline in Chester County and cross the Delaware River to bring gas to Columbia Gas’ existing redistribution facility in West Deptford, according to a map accompanying a solicitation of bids for the pipeline project.

 A planned Nov. 5 presentation by Columbia Gas officials to the Woolwich Township Committee was canceled because the company was involved in recovery operations related to Hurricane Sandy, DiBella said. The public session is expected to be rescheduled.

SOURCE: http://articles.philly.com/2012-11-17/news/35157753_1_pipeline-columbia-gas-transmission-llc-marcellus-shale

Natural Gas Pipelines to Expand U.S. Supply

 

Natural gas pipelines coming into service by year end may boost deliveries from the Marcellus shale deposit in the U.S. Northeast by 30 percent, extending a supply glut that helped send prices to decade lows.

As much as 2 billion cubic feet of gas a day are set to flow from the lines in Pennsylvania, Ohio and West Virginia, bound for markets along the Eastern Seaboard, based on government and pipeline-company projections. About 1,000 Marcellus shale wells sit uncompleted, mainly because of a lack of pipeline infrastructure, according to the Energy Department.

Gas prices have dropped 60 percent since 2007 as producers used techniques such as hydraulic fracturing, or fracking, to reach supplies trapped deep in tight layers of shale. Gas futures tumbled to $1.902 per million British thermal units in April, the lowest price since 2002, as stockpiles ballooned during a mild winter and record U.S. production.

“There are new pipelines coming up and more Marcellus gas is going to flood storage going into winter,” Phil Flynn, senior market analyst at Price Futures Group in Chicago, said in a phone interview. “Unless you get a really cold winter, prices are going to be in the $2 range.”

Natural gas for October delivery rose 9.9 cents, or 3.4 percent, to settle at $3.023 per million British thermal units on the New York Mercantile Exchange. Prices have gained 1.1 percent this year.

The futures have averaged $2.679 since the April low after rising as high as $3.277. Prices may average $3.20 per million Btu during the first quarter of 2013, when demand peaks, based on the median of 18 analyst estimates compiled by Bloomberg.

Winter Demand

“Higher prices are all predicated on more normal space heating” this winter and demand from power generators burning gas instead of coal, Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a Sept. 21 interview. Viswanath expects first-quarter prices to average $3.60 per million Btu.

Cabot Oil & Gas Corp., which pumps gas from Marcellus deposits in Pennsylvania, has a break-even point that’s “probably below $2,” Chief Financial Officer Scott Schroeder said in a Sept. 14 interview from Houston.

About 4,525 miles of interstate gas pipelines serving consumers from Maine to Virginia have been put into service since 1996, Energy Department data show. About 693 miles of lines in the Marcellus, with a daily capacity of 8.06 billion cubic feet, are planned, under construction or already in service, according to Federal Energy Regulatory Commission data going back to 2006.

Fall Completions

New pipelines can quickly add 1 billion cubic feet a day of Marcellus gas to the market and as much as 2 billion, as projects with 3.5 billion cubic feet of additional pipeline capacity will be completed from September through December, Viswanath said. Marcellus gas output in May averaged 6.85 billion cubic feet a day, according to the most recent Energy Department data.

Shale gas has been key to the country’s move toward energy independence. Production gains helped the U.S. meet 81 percent of its energy demand in 2011, the highest level since 1992, according to U.S. Energy Department data compiled by Bloomberg.

Stockpiles in the week ended Sept. 14 totaled 3.496 billion cubic feet, 8.6 percent above the five-year average, the Energy Department said on Sept. 20. Supplies of gas may rise to a record 3.95 trillion by the end of October, before demand begins to rise with colder weather, according to department estimates.

Mid-Atlantic Lines

Spectra Energy Corp.’s (SE) Texas Eastern Transmission pipeline has a project that will go into service in November to carry 200,000 dekatherms (200 million cubic feet) a day from West Virginia to eastern Pennsylvania to connect to mid-Atlantic points, Brian McKerlie, vice president of business development at Spectra in Houston, said in a Sept. 19 interview.

Spectra is also building a pipeline to ship Marcellus gas to Manhattan by next November and is seeking customers to build a line to Florida, according to the company.

TransCanada Corp. (TRP), based in Calgary, is reversing its Niagara pipeline to start moving Marcellus gas from West Virginia into southern Ontario in November, Karl Johannson, executive vice president of natural gas pipelines with TransCanada, said in a Sept. 19 interview.

“It’s a very large resource and it’s going to change the flow of gas in North America,” Johannson said.

Williams Cos. projected that more than half of its estimated $11.5 billion of capital investments from 2012 through 2014 is in the Marcellus region, according to a Sept. 5 presentation by the Tulsa, Oklahoma-based company.

Rising Production

Kinder Morgan Energy Partners LP (KMP)’s Tennessee Gas Pipeline and a unit of Dominion Resources Inc. also have Marcellus projects under construction.

Marcellus will account for 22 percent of the 79 billion cubic feet a day of U.S. gas output in 2016, or about 17.4 billion a day, according to Goldman Sachs Group Inc. estimates. The region accounted for 5 percent of output last year and none in 2006, the bank’s data show.

Barclays Plc estimates that additional pipeline capacity may boost daily U.S. supplies by 1.8 billion cubic feet by the end of this year and by another 3.4 billion in 2013, the majority of it from Marcellus.

“We will be watching for evidence of a large uptick in production” in November, March and November 2013, Shiyang Wang, a Barclays analyst in New York, said in an Aug. 28 report.

Winter Demand

Laurent Key, a natural gas analyst with Societe Generale in New York, predicts that 900 million cubic feet a day of Marcellus production will come online in the fourth quarter, according to a Sept. 10 note to clients. Key’s first quarter price forecast is $3.07.

Demand for the fuel used by power plants and in home heating peaks in January and February, though last winter’s mildest weather since 2000 has helped keep inventory levels at seasonal records.

The movement of drilling rigs to the Eagle Ford shale in Texas from Haynesville in Louisiana will slow U.S. natural-gas output growth, David Greely, head of energy research at Goldman Sachs in New York, said in a Sept. 24 research report.

The additional capacity in Pennsylvania will cut pipeline costs, Richard Hunter, vice president of investor relations with Carrizo Oil & Gas Inc. in Houston, said in an Aug. 28 interview. Charges in Pennsylvania, where the company has wells, rose as high as $1.40 per thousand cubic feet recently, about double the rate before it started to run up in mid-2012, Hunter said.

“Starting in November of this year to December, that price is going to fall dramatically on new pipeline capacity,” to 50 or 75 cents per thousand cubic feet, he said.

SOURCE: http://www.businessweek.com/news/2012-09-26/natural-gas-pipelines-to-expand-u-dot-s-dot-supply-glut-energy-markets

Gas-products pipeline to advance Marcus Hook refinery’s rebirth

Sunoco announced Wednesday that its shuttered Marcus Hook refinery will be reborn as a facility to process Marcellus Shale natural-gas products, fueling new construction and new traffic through the Delaware River port.

Sunoco’s pipeline subsidiary, Sunoco Logistics Partners L.P., is moving forward with a plan to transport high-value propane and ethane by pipeline from western Pennsylvania to Marcus Hook, where the materials will be processed in a new plant and shipped by sea to domestic and export markets.

State officials hailed the project – which Sunoco calls Mariner East – as a big boost for Pennsylvania’s Marcellus Shale industry by connecting the areas producing natural gas in western Pennsylvania to markets linked to Philadelphia.

“I have long held that the Marcellus Shale is an important resource that over time would benefit the entire commonwealth,” Gov. Corbett said in a statement.

The pipeline project is the latest industrial venture built on confidence that the Marcellus Shale, where full-scale production began barely four years ago, represents a long-term, reliable energy supply.

Sunoco Logistics announced the Mariner East project in 2010 as a way to repurpose an existing, underused Sunoco pipeline that has historically moved refined products from east to west.

Sunoco Logistics and its partner, MarkWest Energy Partners L.P., conceived of reversing the flow of the pipeline to move the abundance of natural-gas liquids derived from the “wet” gas produced in western Pennsylvania. MarkWest, based in Denver, is a leading processor of natural-gas liquids.

The Mariner East project envisions moving ethane and propane from Marcus Hook by sea to petrochemical plants overseas or along the Gulf Coast that value the natural-gas liquids as a raw material for plastics.

Range Resources Corp., the Marcellus pioneer whose drilling operations are concentrated in liquids-rich parts of southwestern Pennsylvania, has signed a 15-year agreement as the anchor shipper. Range has committed to provide 40,000 barrels of the project’s 70,000-barrel-per-day capacity.

Range Resources, based in Fort Worth, Texas, has already lined up a customer for its ethane. It announced Wednesday that it has signed a separate 15-year agreement with affiliates of INEOS A.G., a Swiss petrochemical producer that will take delivery of the material at Sunoco’s Marcus Hook docks. INEOS has plants in Europe, the Americas, and Asia.

SOURCE: http://articles.philly.com/2012-09-26/business/34103609_1_ethane-sunoco-logistics-pipeline-project

Gov. Corbett: Marcellus betters society

PHILADELPHIA — Gov. Tom Corbett on Thursday placed high hopes on the development of the Marcellus Shale to help him achieve his goals for Pennsylvania.

“I’m convinced that we’re beginning a new industrial revolution for the U.S. and especially for Pennsylvania,” he said at the Marcellus Shale Coalition’s annual Shale Gas Insight Conference in Philadelphia.

By the end of his tenure, which he hopes will be in six years, the governor envisions having accomplished three things.

“I want the state on sound financial footing,” he said. “I want the state to be able to say that every Pennsylvanian who wants a job has a job. And I want every person in this state trained and educated for the jobs of the 21st century.”

The gas industry’s economic contribution to the state is furthering those goals, he said.

“The Marcellus boom isn’t simply about advancing business. It’s about advancing society,” Corbett said.

In fact, during recent travels to Germany and France, the governor touted the region’s cheap energy and strategic location for foreign businesses looking to locate in the U.S.

Corbett said the anti-severance tax crowd was vindicated last week when the state received its first round of impact fee payments that neared $200 million.

“We got that right,” he said. “That’s the difference between throwing together a quick fix and planning for real progress.”

A severance tax would have brought in half of that, he said. Last week, the Pennsylvania Budget & Policy Centerdisagreed.

As convention center security kept watch over the planned anti-fracking protests outside of the building, Corbett also fired some shots at those who oppose natural gas extraction.

“We are advancing even in the face or unreasoning opposition,” he said. “Opponents agree that we can land a rover on Mars, but can’t bring themselves to think that we can safely drill a mile into our own soil.”

The governor also credited shale development with saving one of the three Philadelphia refineries that were on the chopping block at this time last year.

On Sept. 19, Philadelphia Energy Solutions announced its plans to process shale gas at the former Sunoco refinery.

Corbett said he can easily see a time when all three refineries will be turning Marcellus gas into liquid fuels and chemical feedstocks.

The governor apologized to the crowd for missing last year’s conference because of flooding in southeastern Pennsylvania and thanked participants for creating jobs in the state. As he walked out to music resembling the theme from Star Wars, Corbett received a partial standing ovation.

SOURCE: http://www.bizjournals.com/pittsburgh/blog/energy/2012/09/corbett-marcellus-betters-society.html?page=all

First deep-shale well drilled in Erie, Crawford

COCHRANTON — Gas wells are a familiar sight here in the rolling farmland of southern Crawford County.

East Fairfield Township Supervisor Bob O’Brien can see a half dozen of them from his kitchen window on Franklin Pike.

But the latest well isn’t like all the others.

Lippert 1H, located at 6321 Pettis Road, was drilled this summer into the Utica Shale to a depth of 7,236 feet, before crews drilled nearly another mile horizontally.

That makes it the first deep shale well drilled in this corner of Pennsylvania, said Gary Clark, spokesman for the state Department of Environmental Protection.

A DEP drilling map shows a heavy band of drilling activity that extends from southwestern Pennsylvania, across the center of the state to northeastern Pennsylvania.

Gas exploration companies continue to drill so-called shallow wells throughout the state.

But until now, the Utica and Marcellus formations were largely untapped in the uppermost corner of northwestern Pennsylvania and a broad swath that included more than 20 counties in the southeastern part of the state.

That changed this summer, at least in Crawford County, when rigs and crews working for Texas-based Range Resources arrived in this rural township of about 850 people.

Range Resources, which developed some of the state’s first successful wells into the Marcellus Shale, drilled the Crawford County well in July.

The entrance to the well site is blocked by no-trespassing signs and by a security building, staffed by a guard.

Horizontal drilling is making it possible to reach the reserves under hundreds of acres from one location.

SOURCE: http://www.goerie.com/article/20120919/NEWS02/309189889/First-deep-shale-well-drilled-in-Erie-Crawford

Pipeline set to link pair of projects – Marcellus Shale

Mike Stice, President of Chesapeake Midstream Development, a subsidiary of Chesapeake Energy, spoke during the Marcellus Midstream Conference & Exhibition in Pittsburgh this week. He said the potential for collecting methane, ethane, butane, propane, pentane and even oil make the Utica and Marcellus shale formations very attractive to companies like his.

“The diversity of the opportunities is where the strength lies,” he said. “We find ourselves on the cusp of a breakthrough for natural gas and oil.”

Chesapeake Energy and its partners will run a 12-inch diameter pipeline to connect the northern and southern portions of its $900 million natural gas processing complex in Harrison and Columbiana counties.

In total, the Oklahoma City-based company plans to lay 200 miles of pipelines across Eastern Ohio in 2012, most of which will be located in Harrison, Jefferson, Columbiana and Carroll counties.

Chesapeake is building the plant with M3 Midstream and EV Energy Partners. Frank Tsuru, president and chief executive officer of M3, also spoke at the conference, highlighting the 12-inch pipeline that will connect the Harrison and Columbiana portions of the major complex.

According to a map on the M3 website, it appears the Harrison County portion of the complex would be built near Scio, while the Columbiana County part would be located near Hanoverton.

The processing facility to be located in Columbiana County will have an initial capacity of 600 million cubic feet per day. Natural gas liquids, via the 12-inch pipeline, will be delivered to a central hub complex in Harrison County that will feature an initial storage capacity of 870,000 barrels. The Harrison County facility also will have fractionation capacity of 90,000 barrels per day, as well as a substantial rail-loading facility, according to Chesapeake.

Chesapeake officials also want to make sure the industry flourishes in Ohio, noting they agree with a comment Gov. John Kasich made during his State of the State speech at Steubenville High School earlier this year.

During the conference, Mark Halbritter, managing director of commercial activities for Dominion Transmission, discussed the company’s $500 million processing complex, which is scheduled to open south of Moundsville by the end of this year. He said a second phase of the plant that would be completed next year could raise the final cost to about $800 million. He said the facility is strategically positioned along the Ohio River so it can process gas derived from the Utica and Marcellus formations.

As for ethane that is derived at the Natrium site, Halbritter said the complex will be able to send ethane to Canada, the Gulf Coast, or to any local ethane cracker, such as the one Royal Dutch Shell plans for Monaca, Pa.

“We expect enough ethane to support both pipelines and up to two crackers,” Halbritter’s presentation states, adding the company anticipates more than 400,000 barrels of ethane will be derived from the Marcellus and Utica shales by 2020.

Jeannie Stell is the editor of Midstream Business magazine, said industry leaders have learned valuable lessons over the past few years of working in the Marcellus and Utica shales.

“It is never too early to start applying for a permit,” she referenced as one of these lessons. A second lesson, Stell added, is that laying pipelines in the sometimes rugged terrain of West Virginia, Ohio and Pennsylvania can be more challenging than doing so in the relative flat country of Oklahoma and Texas.

MATCOR was an active participate and exhibitor at this conference.

SOURCE: http://www.heraldstaronline.com/page/content.detail/id/571616/Pipeline-set-to-link-pair-of-projects.html?nav=5010

Pittsburgh-area site is chosen for major refinery

Shell Oil Co. has chosen a site near Pittsburgh for a major, multi-billion-dollar petrochemical refinery that could create thousands of construction jobs and provide a huge economic boost to the region.

Dan Carlson, Shell’s General Manager of New Business Development, said Thursday that the company signed a land option agreement with Horsehead Corp. to evaluate a site near Monaca, about 35 miles northwest of Pittsburgh.

The so-called ethane cracking, or cracker, plant would convert ethane from bountiful Marcellus Shale natural gas liquids into more profitable chemicals such as ethylene, which are then used to produce everything from plastics to tires to antifreeze.

The plants are called crackers because they use heat and other processes to break the ethane molecules into smaller chemical components. A cracker plant looks very similar to a gasoline refinery, with miles of pipes and large storage tanks. The final complex could cover several hundred acres.

Ohio, West Virginia and Pennsylvania had all sought the plant and offered Shell major tax incentives. Monaca is about 15 miles from both the Ohio and West Virginia borders, so workers in all three states are likely to benefit.

Shell has said that it could spend several billion dollars to build the plant, and that the complex would attract a wide range of industry and suppliers to nearby locations. But actual construction is still years away. The company said the next steps are environmental and design studies and further economic analysis, then permits.

One lifelong resident of the Pennsylvania township almost broke down on hearing the news.

“Oh my God. It makes me want to cry. That’s just the best news,” said Christie Floyd-Gabel, Potter Township’s secretary.

It’s also an unexpected turn for Horsehead’s zinc factory on the banks of the Ohio River, which is currently operating. In September the company announced plans to shut the factory by 2013 and relocate to North Carolina, along with most of its 600 workers.

“That was a major loss,” Floyd-Gabel said of Horsehead’s plans to depart, adding that’s it’s amazing that another major corporation may come in to replace Horsehead.

Ali Alavi, a Horsehead spokesman, said the company would have to vacate the over 300-acre site by April 30, 2014, under the terms of the option agreement with Shell.

Shell said the Horsehead site had the mix of resource and transportation attributes “to accommodate facilities for a world scale petrochemical complex and potential future expansions.”

The American Chemistry Council, in a report last year, estimated the new petrochemical complex could attract up to $16 billion in private investment. Shell estimated the core plant could employ several hundred people and create up to 10,000 construction jobs.

Gov. Tom Corbett said at a press conference that the plant could lead to the “renewal of a significant manufacturing base in southwestern Pennsylvania,” but cautioned that the announcement is “the first pitch in a nine-inning game.”

If the plant is built, Shell would be able to supply it partly with gas from its own wells, giving it more control over supply and costs. The company paid $4.7 billion in 2010 for drilling rights to about 650,000 acres in the region.

That also means that Shell could benefit even from the low wholesale prices that have worried some gas drillers, since a cracker plant’s raw material costs would be lower.

Labor leaders welcomed the announcement.

Frank Snyder, secretary-treasurer for the Pennsylvania AFL/CIO, said it represented “some of the most positive economic news for the working families of western Pennsylvania in over a generation.”

“Indeed, all of Pennsylvania can have hope this spring in the anticipated partnership between a world class workforce and a world class business,” said Snyder.

Shell’s choice may also represent an indication of just how strongly the industry feels about the vast gas reserves in nearby underground shale rock formations, given the multi-billion dollar commitments it has made. Carlson told The Associated Press that any plant must be economically competitive with existing cracker plants in Louisiana and Texas, and even with international plants.

The Marcellus Shale, which lies thousands of feet underground, has attracted a rush of major oil companies, who have drilled almost 5,000 new wells in the last five years. The Marcellus covers large parts of Pennsylvania, New York, Ohio and West Virginia, and drillers have also started to tap the adjacent, deeper Utica Shale formation.

Ohio and West Virginia officials had made all-out efforts to attract the plant. Last year West Virginia Commerce Secretary Keith Burdette said, “We intend to compete with the last breath in our body to attract one or more crackers,” and both West Virginia’s and Ohio’s governor flew to Houston to meet with Shell officials.

West Virginia offered to slash property tax rates for 25 years in exchange for at least $2 billion worth of investment. Pennsylvania offered 15 years of tax breaks and Ohio also reportedly courted Shell with major incentives.

Corbett said he can’t disclose the full details of the tax breaks Shell has been offered because of a confidentiality agreement, and because negotiations are continuing.

George Jugovic, president of the environmental group PennFuture, said it’s still researching the possible impacts of a cracker plant.

Several other companies are also reportedly considering building similar petrochemical plants in the region.

SOURCE: http://www.philly.com/philly/business/20120315_ap_pittsburghareasiteischosenformajorrefinery.html

$520 million Marcellus Lateral pipeline project in doubt

A $520 million pipeline project thought to have the potential to support 2,500 Ohio construction jobs might be dead.

The Ohio Power Siting Board, the body that regulates major utility projects in Ohio, rejected the application for the Marcellus Lateral Pipeline more than a year ago. Kinder Morgan, a pipeline developer, owner and operator out of Houston, has made no official moves on the project since it submitted that application in November 2010.

The 16-inch pipeline was to snake 240 miles under Ohio, from the border with the West Virginia panhandle to a connection with larger pipeline just west of Toledo. It was designed to carry natural gas liquids from the Marcellus Shale formation, a layer of rock rich in oil and gas that sits underneath much of western Pennsylvania, West Virginia and the border counties of Ohio.

Its path would have crossed 15 Ohio counties, including Muskingum, Coshocton, Knox, Morrow, Marion, Crawford and Sandusky.

This past spring, the Bowling Green Sentinel-Tribune and Mount Vernon News quoted a Kinder Morgan spokesman as saying the project still was a go and to expect construction by the end of 2011. The company would first need to get approval from the siting board, which it has not sought, a board spokesman said.

When asked to comment about the project’s status, Kinder Morgan spokeswoman Emily Mir wrote: “We continue to evaluate a number of projects in the Marcellus area but do not have any definite information at this time on the lateral project other than as part of our re-evaluation we are withdrawing our application for the project.”

She declined to answer further questions.

Dale Arnold, director of energy policy for the Ohio Farm Bureau, had been conducting educational meetings with bureau members on pipeline issues in advance of the Marcellus Lateral Project.

He said the wording of Kinder Morgan’s statement suggests it is moving on to something else. Arnold said he has seen alternative energy projects (also governed by the siting board) pulled in the same manner.

“From my experience on work with wind and solar projects, when a company withdraws an application, they are looking at something entirely different,” he said.

The state is “still considering the application active, but just delayed,” said Matt Butler, spokesman for the Public Utilities Commission of Ohio, which oversees the siting board.

As of Friday, Kinder Morgan had made no filing to withdraw its application, which would close the case.

The application was deemed incomplete in 2011 because it failed to include ecological data and enough detail on an alternative route.

Butler said the commission last heard from Kinder Morgan in the fall of 2011. The company relayed it was evaluating options at that point, he said.

Local leaders in the path of the pipeline are curious about Kinder Morgan’s plans.

Jenny Vermillion, a commissioner from Sandusky County, said her office had tried contacting the company in December, but had no success.

Jim Porter and Steve Douglass, commissioners in Muskingum and Guernsey counties, respectively, say they haven’t heard anything new about the project.

“They have not talked to us for a year of maybe longer,” Douglass said.

Douglass said Kinder Morgan had almost daily contact with Guernsey’s county engineer when the Rockies Express Pipeline, a multi-billion dollar interstate pipeline that was built in Ohio in 2009, was in construction.

The pipeline plan was announced by Kinder Morgan in April 2010. At that time, the timeline called for construction to begin in July 2011 and finish one year later.

In a year-end report to investors, filed a month after its application was submitted to the power siting board, Kinder Morgan talked of the need to “continue to pursue commercial agreements with shippers.”

The company, according to an October 2010 investor presentation, was seeking commitments from producers that they would use the lateral. Combined, Kinder Morgan was waiting for a promise of at least 25 million barrels per day for 10 years before it moved forward.

Richard Kinder, chairman and CEO of the company, told analysts during a conference call earlier this month about no fewer than five projects — costing more than half a billion dollars — slated to improve the company’s liquid products transportation. No mention was made of the Marcellus Lateral.

Its biggest investment this year is likely to be the expected closing of a $38 billion deal to buy rival El Paso. El Paso operates a gas pipeline near Glouster that was the source of an explosion that destroyed three homes and a barn and damaged a second barn in November.

SOURCE: http://www.montgomeryadvertiser.com/article/BA/20120128/NEWS01/201280305/-520-million-natural-gas-pipeline-project-doubt?odyssey=nav%7Chead