More pipelines the next phase of Marcellus Shale drilling boom – themorningcall.com

More pipelines the next phase of Marcellus Shale drilling boom

The need fuels debate on whether to institute a severance tax.

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By Laura Olson and Steve Esack, Of the Morning Call

9:44 p.m. EDT, August 8, 2014

The Marcellus Shale is growing up, and the growing pains aren’t over.

After years of cautionary comments that the natural gas drilling boom was in its infancy, the industry is showing signs of moving to a different stage.

With more than 8,000 shale wells drilled in Pennsylvania, the conversation has shifted from leases and well pads to the need for more — and bigger — pipelines to get all that gas to where it’s going.

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Currently, hundreds of wells can’t get their product to market. But companies such as Williams Partners and Sunoco are working on major pipeline projects to beef up capacity.

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The $3 billion Williams transmission line, which would run south from Susquehanna County to Lancaster County, is in its early stages, yet already has drawn push-back from farmers and environmentalists upset by the proposed pathway through wooded and agricultural areas.

Regulatory approval of the routes for those gas pipelines primarily falls on the federal government.

But the next governor, be it incumbent Republican Tom Corbett or Democrat Tom Wolf, could play a role in clearing the public relations pathway among reluctant residents in portions of the state who, until recently, have had little contact with the shale industry.

The projects also could give new momentum to the severance tax debate. The Corbett administration credits the lack of a Pennsylvania levy on gas production with the industry’s continued growth here. But Wolf sees a new argument for a tax in the pipeline proposals.

“A severance tax makes it clear something like a pipeline is a public good,” Wolf said in an interview. “If all we are doing is allowing one interest [group] to make money for itself, that would not be a persuasive case for a pipeline.”

Projects in the pipeline

Gas production continues to reach new highs in the Marcellus region, where the shale rock formation runs from New York south through sections of northern and western Pennsylvania to West Virginia.

The entire basin accounts for almost 40 percent of U.S. shale gas production, according to new data from the federal Energy Information Administration, which says gas output from Marcellus wells exceeded 15 billion cubic feet per day in July.

That’s 10 times as much gas as the region was producing five years ago. The EIA report, however, noted that the gas gush has outpaced growth in pipeline capacity, “which has resulted in multiple pipeline expansion projects focused on removing bottlenecks in the Marcellus region.”

In Pennsylvania, of the 8,000 wells that have been drilled, about 3,000 are idle, said Patrick Henderson, Corbett’s deputy chief of staff and energy executive. About half of the idle ones are under construction and another 1,000 to 1,500 could be turned on today if the pipeline infrastructure existed to get the gas to the market, he said.

Roughly half of the gas pipeline being constructed nationally is influenced in some way by the Marcellus, with those projects moving local gas north, south and to the coast for export overseas, said Tom Murphy, co-director of Penn State’s Marcellus Center for Outreach and Research. Pending projects represent $10 billion of investment annually over the next 10 years.

“The shale play within the Marcellus is maturing and becoming more of a well-known development within the U.S. and internationally,” Murphy said. “To some degree, it’s becoming better understood and the infrastructure needs are becoming better understood as well.”

That’s where the proposal from Oklahoma-based Williams comes in; it would serve as a superhighway of sorts for the Marcellus Shale gas. Williams spokesman Chris Stockton said gas consumers up and down the coast want access to the region’s low-priced gas.

But first the project must get approval, primarily from federal regulators. The company has made preliminary filings with the Federal Energy Regulatory Commission and says it plans to submit a formal application early next year, starting a review process that likely will take at least a year.

The project also will require permits from the state Department of Environmental Protection for sections that are near waterways, Henderson said.

The Corbett administration has told Williams that any eminent domain proceedings along the pipeline path — which involve the federal government, not the state — should be a last resort. It has also urged the company to openly and honestly address concerns about the environment and impacts on south-central Pennsylvania’s thriving agricultural industry, he said.

Copyright © 2014, The Morning Call

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