MARCELLUS/UTICA REGION: ATI lands $45M pipeline contract, plans to hire workers in Harrison; Wolfs supports studying petition to cap greenhouse gases; Natural gas pipeline proposal concerns area residents; Our View: Severance tax seems hopeless; PennEast challengers rehash nixed claims, DC Circ. hears; OTHER U.S. REGIONS: The Permian Basin is now the world’s top oil producer; NATIONAL: NETL, Dedicated to fossil energy research; Low storage, prices equals bad news for U.S. gas producers; Is fracking out of gas as a hot?button Democratic issue?; Chesapeake Energy Corp. – an interesting outcome to debt refinancing; Mueller’s ‘foreign agent’ prosecutions may lead to probes of green groups; INTERNATIONAL: Environmental groups to sue Shell over climate change; Canada’s natural gas industry really needs LNG.
MARCELLUS/UTICA REGION
ATI lands $45M pipeline contract, plans to hire workers in Harrison
Pittsburgh (PA) Tribune-Review
Allegheny Technologies Inc. secured a $45 million contract for a pipeline project in South America, and it comes at a time when the company is hiring new workers in the Alle-Kiski Valley. The specialty steelmaker’s $1.1 billion hot rolling mill and processing facility in Harrison played a key role in ATI landing the contract, according to Jeff Thompson, vice president of sales for ATI’s Flat Rolled Products. The local facility enables the company “to produce materials with proven corrosion resistance in the demanding subsea oil production environment,” Thompson said in a statement. Melting work for the job will occur at ATI’s Latrobe facility, while the coil hot rolling and finishing will be done at the Harrison mill and another ATI plant in Louisville, Ohio, according to company spokeswoman Natalie Gillespie. ATI will be recruiting new employees in Pennsylvania throughout the year. The company is looking for employees to fill more than 50 positions in the region, including salaried and hourly positions, according to Gillespie. The openings will include a “significant number of well-paying production and skilled maintenance positions, as well as engineering and operations management roles,” she said. Applicants should apply online on ATI’s website: https://www.atimetals.com/careers/Pages/default.aspx Todd Barbiaux, president of U.S. Steelworkers Local 1196 in Brackenridge, said he expected openings throughout the year given the anticipated increase in production as well as scheduled retirements. The union local represents about 520 workers at the Harrison steel mill. “It’s a good time to get into the company,” Barbiaux said. “It’s probably the best place in the Valley to work, especially with the demand for specialty steel.” ATI declined to provide many details about the South American pipeline contract, but said it would begin shipping its products for the project in the second quarter and is scheduled to complete the job by the end of the year. [MDN: We found this article interesting because it makes us think, Why couldn’t Shell have used a company like Allegheny Technologies to manufacture the 97 miles of pipe needed for the Falcon ethane pipeline? We know, we know…likely a different kind of pipe, different diameter, construction, etc. than that manufactured by Allegheny. But still, our American-made pipes are good enough for South America, why aren’t they good enough for North America?]
Wolfs supports studying petition to cap greenhouse gases
Associated Press
Gov. Tom Wolf supports allowing his administration to formally study a petition that calls for Pennsylvania to impose a cap-and-trade program to make Pennsylvania carbon neutral by 2052. Friday’s statement by Wolf’s office, however, says the Democrat isn’t taking a position on the petition itself. The roughly 400-page petition is scheduled for a preliminary vote April 16 before a 20-member environmental rulemaking board that includes several Wolf appointees. A positive vote would allow Wolf’s Department of Environmental Protection to study it and decide whether to recommend it for a rulemaking process, which requires another vote. A coalition of business associations is urging board members to take no action until they’ve studied its implications for Pennsylvania’s economy. The petition seeks to require polluters to buy permits for each ton of carbon they release. [MDN: One of the stupidest things Wolf has ever done (and that’s saying something, he’s done a lot of stupid things). Cap-and-trade results in violent protests. Just look at France and their yellow jacket protests. That’s what happens when the government implements insane taxes on everything in an attempt to control the substance that comes out of your mouth every time you breathe out–carbon dioxide.]
Natural gas pipeline proposal concerns area residents
Albany (NY) WNYT
A proposed natural gas pipeline that would travel through Albany and Rensselaer counties is causing controversy. The line would start in Bethlehem, and go through East and North Greenbush. National Grid says it’s necessary, but others are worried about leaks and explosions. National Grid officials say they want to be open and transparent in this process. That’s why they’re hosting open houses for residents and officials to come and ask questions, look at maps and share their concerns. Leaks and explosions were definitely among the biggest concerns NewsChannel 13 heard on Thursday. The plans also drew criticism from East Greenbush Town Supervisor Jack Conway. He says East Greenbush residents would be directly impacted by the line, but wouldn’t see any direct benefits from it. National Grid says the project would have regional benefits. The 7.3 mile, 16-inch natural gas pipeline would close a loop between two existing pipelines that serve the Capital Region. National Grid officials say closing the loop will ease a supply constraint on the East Gate, it would alleviate potential disruptions for customers and it would allow the company to bring in more diverse sources of natural gas. Patrick Stella, a spokesperson for National Grid, says that they did look at alternatives, like compressed and renewable natural gas projects, but ultimately decided that this project would impact residents the least. Stella says they’ve also invested in award-winning energy efficiency programs, but there’s still a growing need for gas in the area. [MDN: This is what happens when lies are not vigorously exposed and countered. Mainstream media has lied so often and so much about pipelines, that ANY pipeline anywhere, even a tiny 7 mile pipeline, is now treated with suspicion by the general population. At least here in NY state. Simply because it flows a (gasp) “fossil fuel.” This is insanity on parade. Just 10 years ago nobody would have thought twice about such a project. And do these people not get it? Do they not see a few miles down the Hudson River in Westchester County that Con Ed has stopped accepting new natgas customers from lack of pipelines like this one? Are they that obtuse?!]
Our View: Severance tax seems hopeless
Beaver (PA) Beaver County Times
Gov. Tom Wolf has been busy promoting his Restore Pennsylvania initiative across the state, a $4.5 billion plan that would fund infrastructure, technology and other development projects over the next four years. Unfortunately, the revenue for the initiative would come from a severance tax on natural gas extraction, and the Legislature continues to send signals that there is no chance for its passage. Wolf was in Hopewell Township last week to talk about flood-mitigation projects that could be funded by the plan, and other state officials were promoting it during a visit to Aliquippa in February to discuss blight and redevelopment issues. The Democratic governor has pushed for a severance tax since first taking office more than four years ago. He initially proposed it as a funding mechanism for public education. The Restore Pennsylvania initiative broadens the target areas for funding, and there are certainly worthwhile proposals in the plan that deserve attention. At this point, however, it seems highly unlikely that the Republican-controlled Legislature will consider any parts of the plan if they are tied to a severance tax. Last week, the Pennsylvania Chamber of Business and Industry, the Pennsylvania Manufacturers Association and the Associated Petroleum Industries of Pennsylvania — all staunch supporters of the natural gas industry — launched an attack on the Restore Pennsylvania plan as just another attempt to approve a severance tax. Their contention is that the natural gas industry already pays a tax in the form of the impact fees that go to local municipalities. They claim the impact fees have generated $1.5 billion through 2017 and a further tax would harm the state’s natural gas industry. Wolf has maintained that 80 percent of the severance tax would be funded by residents or businesses in other states or in Canada who purchase the natural gas extracted in Pennsylvania. Perhaps the real discussion that needs to take place is whether the amount the natural gas industry pays in impact fees is a fair reimbursement for the benefit gained in harvesting the state’s natural resource. Everyone seems to agree that some sort of payment should be imposed; the question seems to be just how much. In the meantime, as much as we might agree with concepts of the Restore Pennsylvania plan, we don’t see much hope for passage in Harrisburg’s current political climate. [MDN: We find solace and good cheer in this editorial–because it means the forces of killing the Marcellus in PA via a severance tax are waking up and realizing it’s not going to happen. Wolf has been running around the state like Santa Claus claiming a tax on a single industry, i.e. theft of money from one group of people, will magically fix all the problems in the state. Lead paint in Philly schools? Money from a severance tax will fix it. Flooding problems in Lycoming County? Severance taxes will fix that too. Just about everything under the sun will get funded and fixed by a severance tax–until such a tax is passed, drillers stop drilling, and the money never materializes. How do otherwise smart people not get it?]
PennEast challengers rehash nixed claims, DC Circ. hears
Law360
Developers of the proposed $1 billion PennEast gas pipeline in Pennsylvania and New Jersey told the D.C. Circuit Thursday that arguments raised by challengers to the Federal Energy Regulatory Commission’s approval of the project have already been rejected by the appeals court in prior pipeline cases. New Jersey state agencies and environmental groups led by the Delaware Riverkeeper Network claim FERC didn’t adequately evaluate the project’s impacts and necessity and is trampling over the rights of landowners along the pipeline’s 116-mile path. But PennEast Pipeline Co. LLC said in a brief that the D.C. Circuit found such arguments unpersuasive when it upheld FERC’s approval of the $4.6 billion Mountain Valley pipeline in February. “Indeed, less than two months ago in Appalachian Voices v. FERC, this court rejected the core legal contentions also advanced by petitioners in this case, including the issues related to the commission’s assessment of market need, return on equity and eminent domain,” PennEast said in its brief co-authored by New York utility Consolidated Edison Inc., which is a shipper on the proposed pipeline. New Jersey has argued that market need cannot be shown if the agreements for the pipeline’s supply come from PennEast’s affiliates and that FERC approved too high a rate of investor returns for the project. But PennEast argued that the D.C. Circuit rejected those exact same arguments in the case of the Mountain Valley pipeline, which had even a larger percentage of its shipping capacity subscribed to affiliates. [MDN: It’s hard to be patient when the same disgusting groups bring the same charges over and over, trying them in different courts. We’ve had enough. Time for the judges to swiftly dispense with these frivolous lawsuits. And it’s time we sued these groups to recoup the cost of delay and attorneys fees for having to defend against such lawsuits. Time to bankrupt these colluding Big Green groups.]
OTHER U.S. REGIONS
The Permian Basin is now the world’s top oil producer
Forbes/Robert Rapier
Last week Saudi Aramco — the national oil company of Saudi Arabia and the world’s largest oil company — lifted a veil of secrecy around the company’s operations. For the first time in decades, operational details for Saudi Aramco were revealed in a bond offering. The immediate takeaway — which I covered in the previous article — was that the breakeven costs for Saudi Aramco were higher than the numbers that are frequently reported. However, other news stories have focused on an apparent bombshell around production at the Saudi Ghawar oilfield, which is the world’s largest conventional onshore oil field. Conventional wisdom held that Ghawar has been producing 5 million barrels per day (BPD) of crude oil for decades. The prospectus notes that Ghawar has produced more than half of the Kingdom’s cumulative oil production to date, but it reported that 2018 production was only 3.8 million BPD. That number resulted in several stories that suggested that Ghawar production has peaked and is falling fast. I don’t believe this number alone supports such conclusions. I think it is an example of confirmation bias, which refers to a person’s tendency to interpret information as confirmation of existing beliefs. There is another possible interpretation. Saudi Arabia has long played the role of the world’s swing producer in the oil markets. They maintain spare production capacity. This has allowed them to raise and lower production according to their views of market demand and agreed-upon OPEC quotas. So, it is quite possible that Ghawar is simply not operating at full capacity. Given the information from the prospectus, one can just as easily make this conclusion as to conclude that Ghawar production is in decline. I don’t know which interpretation is correct, but we shouldn’t make hasty conclusions based on limited information. But the second conclusion may be of more immediate interest to Americans. Last December I wrote Why The Permian Basin May Become The World’s Most Productive Oil Field. In the article, I listed three reasons that I thought the Permian Basin would eventually push Ghawar for the title of the world’s top-producing oil field. We don’t know for certain the reasons, but we now have this report from Saudi Aramco that Ghawar produced 3.8 million BPD in 2018. The Energy Information Administration reports that the Permian Basin is now producing 4.2 million BPD. For all of 2018 the Permian Basin averaged 3.4 million BPD, but production during the year increased by 1.1 million BPD. Production hit the 3.8 million BPD mark in October and has risen in every month since then. So, we can reasonably conclude that right now — regardless of the reason — the Permian Basin has overtaken Ghawar as the world’s top oil-producer. That may not last if Saudi is constraining production in Ghawar, or if Permian production slows down anytime soon. But it marks the first time in decades that Ghawar wasn’t the top-producing oil field in the world. [MDN: Congrats to the Permian for displacing the Saudis as the top-producing oil field! This is big news indeed.]
NATIONAL
NETL: Dedicated to fossil energy research
Lab Manager
The National Energy Technology Laboratory (NETL) was established more than 100 years ago as an experimental station devoted to developing new technologies and safety procedures for the coal mining industry. Over the past century, its expertise and responsibilities have continued to expand. Today, NETL is known as the U.S. Department of Energy’s dedicated national lab focused on fossil energy research. The current mission of the lab is broader and more complex than it was at its inception—the main goal each and every day is to “discover, integrate, and mature technology solutions to enhance the nation’s energy foundation and protect the environment for future generations.” “Every day, our team implements a broad spectrum of energy and environmental research and development programs that enable domestic coal, natural gas, and oil to economically power our nation’s homes, industries, businesses, and transportation while protecting our environment and enhancing our energy independence,” said Brian Anderson, PhD, director of NETL. NETL encompasses multiple sites throughout the country, comprising hundreds of buildings and thousands of employees. The sheer size of NETL makes being its director sound like an intimidating task, but Anderson says that, just like any other laboratory director, he relies on the high-quality talent and skills of a wide range of experts to help execute projects and conduct hands-on research. “We are organized for success and for advancing science in the fossil energy research arena. That means regular communication and an open door dictate how we approach challenges,” explained Anderson. [MDN: Nice article about NETL, one of the few government agencies worth funding. WV (Morgantown) is one of the primary locations where NETL work gets done. Pittsburgh is another location.]
Low storage, prices equals bad news for U.S. gas producers
Wall Street Journal
A trillion certainly sounds like a lot. In all but the most depreciated currency, it would be a tremendous fortune. Even before the fracking boom transformed the American energy landscape in the last decade, though, a trillion cubic feet of natural gas laying ready to send to customers wasn’t all that much. This week saw the start of “injection season”—the seven months when producers typically pump more gas into pipelines than gets consumed by all end-users combined. The excess is injected into underground storage, which already has a cushion left over from the just-ended heating, or “withdrawal,” season that begins in November. The 1.1 trillion now in storage, as reported by the U.S. Energy Information Administration, is paltry—almost 31% below the five-year average for the same calendar week. The winter of 2016-17 ended with almost twice as much stored. In other words, in addition to all the gas users who will burn it or turn it into chemicals, an extra trillion cubic feet has to go into storage to start next heating season as well-prepared as in 2017. Yet energy-futures traders are sanguine about the ability to do so, with futures fetching just $2.66 per million British thermal units on Friday. By contrast, the last time storage sank so low, back in 2014, futures spiked to a multiyear high above $6.00 during the winter. The low price reflects faith in U.S. energy producers’ ability to tap massive reserves and meet growing demand from exports, electricity generation and industry while finding enough to survive the coming winter comfortably. It isn’t enough to make much money, though. At such an inventory level, this is a testament to U.S. energy producers who have become too efficient for their own good. [MDN: The mighty WSJ bemoaning the new way of things–lower natgas prices for longer, because production is now the new storage. We live in a new (shale) age.]
Is fracking out of gas as a hot?button Democratic issue?
E&E News – Energywire
As the nation’s natural gas production booms, Democrats eyeing the White House may find themselves in a fracking fight. The fossil fuel has been called a “bridge” that could wean the nation off coal and help curb climate change. But wells and pipelines can leak methane, which is much more potent then carbon dioxide, and fracking has been tied to water and health issues. With the Green New Deal now a leading issue heading into the presidential election, Democratic contenders may face increased pressure to clarify where they stand. And the issue could split Democrats as hydraulic fracturing splits rock. Already pushing potential White House seekers is independent Sen. Bernie Sanders of Vermont. Last month the Oregon Legislature advanced a bill to ban fracking for 10 years. Sanders immediately praised the move. “Fracking pollutes water, degrades air quality and worsens climate change,” he tweeted on March 19. “When we are in the White House we are going to ban fracking nationwide and rapidly move to renewable energy.” Sanders is aiming to pull his primary challengers to the left on the issue — as he did in 2016. He and his supporters forced the Democratic National Committee to debate “fracking,” the politicized buzzword for hydraulic fracturing, in the party platform and on the campaign trail. Sanders ripped the Obama administration after federal agencies in June 2016 found it was unlikely that offshore fracking would damage the environment. Several of the Democratic candidates have avoided specifying their positions in the past — with the exceptions of Sanders and John Hickenlooper, former Colorado governor and presidential candidate who supports fracking that is regulated. Former Texas Rep. Beto O’Rourke also has a record on the issue, but his precise position is murkier. While House Speaker Nancy Pelosi (D-Calif.) recently lauded him as an “environmentalist,” he also has close ties to the oil industry. Last fall, he told the Midland Reporter-Telegram that natural gas production in Texas is cleaner than coal-fired plants in India and China. “I’d much rather they burn natural gas from Texas that’s connected to jobs here,” he said. [MDN: Most of the Dem candidates are against fossil fuels and fracking, although they use fossil fuels every day of their miserable lives. Crazy Bernie is one of the more extreme. Thank God he’ll never make it as the nominee. Hickenlooper would be a much wiser choice for the Dems, although we doubt he’ll get traction (not radical enough for many in the party). We’ll enjoy watching them turn on each other in the coming months.]
Chesapeake Energy Corp. – an interesting outcome to debt refinancing
Seeking Alpha/Daniel Jones
Last month, the management team at Chesapeake Energy Corp. (CHK) announced a rather pricey tender offer, giving some near-term bondholders the ability to give the company back their notes in exchange for new notes, bearing a higher interest rate, and at a premium. The benefit to Chesapeake was that it would be able to kick the can down the road a few years in terms of paying off or otherwise refinancing its debts, but the premium and interest rate changes were slated to be painful. On April 2nd, the company revealed, officially, the results of its tender. On one hand, the pain for shareholders will still exist, but on the other, we saw what can only be described as a market inefficiency to save shareholders from the full brunt of this pain. Chesapeake’s tender offer, issued on March 5th, made for a big move by management in an attempt to push the debt can for the business down the road. You see, despite billions of dollars in asset sales last year, and the merger with WildHorse Resource Development Corporation, the cash and debt picture at the oil and gas E&P (exploration and production) firm is anything but great. In an attempt to stave off fears of a bad ending for shareholders, management has taken a multi-faceted approach that involves combining its assets with WildHorse, selling off non-core properties, and now refinancing well in advance of when the company must pay off the debts in question. [MDN: Investors aren’t going for the kick-the-can-down-the-road strategy. Interesting. What this article fails to mention is the radical (in our opinion) change in strategy Chessy is undergoing–from the country’s premier natural gas producer to throwing it all away to chase oil production. That’s what the WildHorse deal was all about. It appears investors are not (so far) impressed with that strategy.]
Mueller’s ‘foreign agent’ prosecutions may lead to probes of green groups
The Daily Signal
By invoking a law regulating foreign agents to pursue prosecution of former Trump campaign officials, special counsel Robert Mueller opened the door to more intense scrutiny of some U.S. environmental groups, according to legal analysts who say China and Russia use such groups to influence America’s energy policy. But these legal analysts said they also see a danger that Mueller’s Russia investigation could set a precedent for the Justice Department to “selectively enforce” the Foreign Agents Registration Act in a manner that undermines the rule of law and potentially jeopardizes national security. The Trump administration, they say, should closely examine the relationship between environmental advocacy groups and foreign governments that are considered strategic competitors of the U.S. “If the Mueller probe has any real benefit, it is that it opened the door for the Justice Department to employ FARA as a basis to investigate green groups that are undermining our country and aiding socialist/communist regimes,” lawyer Mark Fitzgibbons told The Daily Signal. Because these same environmental groups persistently lobby for policy changes to restrict U.S. energy use and the projection of U.S. military power, the groups may operate at the direction and encouragement of hostile foreign actors, Fitzgibbons and other reform proponents argue. [MDN: An interesting take on some unintended consequences (for the left) as a result of Mueller’s two-year witch hunt to try and destroy President Trump. In the end, it may blow back and hurt the left itself. Perhaps something good will come of the Mueller probe after all!]
INTERNATIONAL
Environmental groups to sue Shell over climate change
AP/Pittsburgh (PA) Tribune-Review
Climate activists are planning to deliver a court summons to Shell in a court case aimed at forcing the energy giant to do more to rein in carbon emissions. The summons is being delivered to Shell’s headquarters in The Hague on Friday afternoon. The move comes a year after the Dutch branch of Friends of the Earth sent a letter to Shell’s CEO Ben van Beurden accusing the company of “breaching its legal duty of care” by causing climate damage across the globe. Shell says in a statement that it agrees climate change action is necessary and that the company is “committed to playing our part.” The case follows a groundbreaking ruling by a Hague court in 2015 that ordered the Dutch government to cut the country’s greenhouse gas emissions. [MDN: We find this amusing, and maddening. On Friday we brought you a brief that said Shell is dropping its membership in the American Fuel & Petrochemical Manufacturers because the group doesn’t believe in man-made global warming enough, like Shell does (see Energy Stories of Interest: Fri, Apr 5, 2019). And now Big Green colluding mobsters are suing Shell in the Netherlands because, they say, Shell is causing man-made global warming. Which should tell Shell something–no matter what they do, they will NEVER do enough to satisfy the loony (and very radical) left.]
Canada’s natural gas industry really needs LNG
Forbes/Jude Clemente
Two key advantages for potential Canadian LNG are low-cost domestic supply and short shipping distance to gas-hungry Asia. For example, drastically cutting transport costs, it takes just 10 days for an LNG cargo to get from British Columbia to Asia, versus as many as 30 days for projects along the U.S. Gulf Coast. Last fall, Shell and partners green-lighted the $31 billion LNG Canada export project, the first of its kind in the country. Interestingly enough, LNG Canada made a final investment decision without first securing the usual long-term off-take contracts that have typically been used to underpin projects, instead being a joint venture with five participants and an equity financing structure. With PetroChina a partner, the U.S.-China trade row has also been bolstering hopes in Canada. And the government of British Columbia has offered a variety of incentives, such as exempting LNG Canada from carbon tax hikes if it can maintain the cleanest possible standards. There are a variety of issues, however, that will be challenging for Canada’s LNG exports. Let me just mention a few. As greenfield (i.e., developed from scratch), LNG export projects will be more expensive in Canada than in the U.S., where many are simply retrofitted to export. Pipeline bottlenecks and pushback will make supplying west coast terminals even more challenging. In addition, the potential Jordan Cove LNG export project in Oregon will be strong competition for Canada. Canada’s other key natural gas problem has also been that gas is mostly a forgotten commodity as compared to oil, a higher revenue generator. Canada’s oil producers have also faced such destructive price discounts for their product that Alberta’s Premier Rachel Notley had to step in and demand nearly a 10% reduction in output to lift unsustainable prices. We do know that Canada’s LNG projects must move more quickly to be primed to ship when a global supply deficit materializes in less than five years. Looking forward, Canada’s National Energy Board (NEB) forecasts around a 30% increase in output to 21 Bcf/d by 2040, or what the Permian and Eagle Ford plays in Texas produce today combined. The NEB projects a 130% boom in the Montney to 12.1 Bcf/d by 2040. I would argue that a strong LNG buildout would prove these as very conservative estimates. And an expected boom in Canada’s tar oil sands development – which uses natural gas as a key input for operations – would also help encourage more gas production in the western region. [MDN: This is the end of Clemente’s longer (excellent) article on Canada’s precarious position now that the U.S. produces so much of its own natural gas. Clemente posits that Canada would benefit from an LNG export industry, but there are certain problems standing in the way.]
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