The Eternal State of Confusion Surrounding American Natural Gas Development

"Environmentalists" - MarkindDaniel B. Markind, Esq.
Weir and Partners, LLP

 

Dan Markind offers a candid assessment of the confusion surrounding American natural gas development as political demagogues and industry problems aggravate.

The eternal state of confusion surrounding natural gas development in America continues unabated.  As events play out domestically and internationally, the absurdities manifest themselves.

Despite enormous obstacles and the inexplicable missteps of the gas industry, the pipeline buildout continues.  One measure of this is that the discount at which gas is sold at Henry Hub in Louisiana has dropped to its lowest level in five years when compared to the price at the Dominion South hub in Western Pennsylvania.  So far in 2018 it has averaged 49 cents.  For 2017 the differential was 85 cents and in 2016 approximately $1.

natural gas development

Gas sells at a premium in Pennsylvania because of the difficulty in getting the gas from the ground to market.  With more pipelines being built, more gas can flow in Pennsylvania and the price differential decreases.

The premium is larger for gas coming out of Northeastern Pennsylvania, which actually is where the best wells are located and which is closest to gas-starved New England, because the pipeline system from the Northeast is even more spotty.  Hopefully, as Atlantic Sunrise gets completed that differential also will lessen.  Thanks to the pipeline buildout, in February the industry produced 27 bcfd of gas from the Marcellus/Utica region, representing a third of entire national output.

The price differential will continue to drop as Mariner East 2 comes on line, but before that happens the natural gas industry has to get out of its own way.  Sunoco Logistics, which is constructing the pipeline, has antagonized practically everyone with its operations, including Pennsylvania state regulators and legislators.

At an extraordinary hearing last Thursday at the Pennsylvania State Senate, Senators from both parties took shots at Sunoco Logistics.  After a spokesman for the Marcellus Shale Coalition stated that pipelines are the safest way to move energy,  Democrat State Senator from Andy Dinniman of Chester County responded:

“I don’t disagree that pipelines are the safest way, but if you want it to be a reality, your companies need to tell Sunoco ‘you’re screwing it up for the rest of us.  And you’re hurting the people of Pennsylvania.’  And that’s what any trade group needs to do to protect its own interests and in the process also protect the interests of the citizens.”

It sounds like everything I’ve been saying in this column over the last year.

Pipeline advocates don’t need to look far for enemies.  On Friday the new Murphy Administration in New Jersey filed in Federal Court to prevent the taking by eminent domain of 149 parcels of land needed to complete the Penn East pipeline from Northeastern Pennsylvania to Central New Jersey.

New Jersey’s Attorney General asked the Court to deny the eminent domain request, and a spokesman for the Eastern Environmental Law Center said that the public entities that own these lands “have spent significant funds preserving these lands for their critical environmental values, not to create a green path for a dirty pipeline.”

That’s lovely sentiment, but Governor Murphy, who originally is from Massachusetts, might want to do a reality check first.  Governor Murphy might ask how the reliance on “renewable energy” sources is working in the Bay State?  Has he heard that due to its failure to provide a reliable energy supply, New England now is importing gas from Russia?

Has he heard that Massachusetts Attorney General Maura Healey has gone on record as saying that importing gas from Russia during cold snaps is preferable to building pipelines from the Marcellus to New England?  That buying Russian gas drilled in the Arctic eco-system is better for the environment than taking it from the Marcellus?  Does Governor Murphy agree with her?

Thanks to New England (and now possibly New Jersey), Vladimir Putin is in a stronger position as he faces the hostile reaction of the West following the assassination in England of former Russian spy Sergei Skripal.  The UK has responded very harshly, expelling 23 Russian diplomats, and President Trump just expelled 60 Russians and closed the Russian consulate in Seattle.

Natural gas development

Of course, there is a limit to the pressure the West can put on Russia, and Putin knows it.  Western Europe remains remarkably dependent on Russian gas.  That gives Putin more incentive for his international adventurism and increases the chances that soldiers from places like Fort Dix, New Jersey will be sent overseas to counter further Russian aggression.  Should that happen, I am skeptical that either Attorney General Healey or Governor Murphy will take “credit” for their deployment.

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2 thoughts on “The Eternal State of Confusion Surrounding American Natural Gas Development

  1. Certainly there is no shortage of insanity in the N.E. blue bloods. Perhaps though a question has to be asked ,” how long can natural gas drillers run on such low to negative margins? Is this the plan to give away our natural gas as an unwanted byproduct of drilling? I hear one driller say Wall Street hates natural gas. I can see why when the same storage numbers today equal $2.68 gas compared to $7.68 gas with the same storage years ago. It is an industry hellbend on its own extinction.

  2. There is also no shortage of ineptitude with the gas and pipeline companies. How often have they cluelessly played into the hands of the anti’s? Think back 10 or 15 years ago in the “Wild West” of sloppy drilling, the epic mishandling of the Dimock fiasco. Did any of the MBA’s in the gas industry ever study Johnson & Johnson’s handling of the Tylenol problem? How many years before the Constitution pipeline was being permitted did Kinder Morgan know Cuomo was going to try to do everything to frustrate them?

    How many years have the ant’s spread their out of date info, innuendo and outright lies with no push back from our “friends”. I’m hoping there will be some industry comments to DRBC Proposed Draft Regulations Addressing Hydraulic Fracturing. But just in case they don’t, follow the link and leave one yourself.

    http://dockets.drbc.commentinput.com

    The landowner association I’m in has tried for years to refute the anti’s and spread responsible facts about the fairy tales the anti’s use to cloud the issue and it has been a lonely, frustrating job. Have you heard anything more about the spike in energy prices in New England lately? Me neither. At this point I don’t care whether the gas and pipeline companies can’t, won’t or don’t do anything about creating a regional market for gas; it’s all crickets from them.

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