The Appalachian Trail in the Blue Ridge Mountains

Letter to Editor of Morgantown Dominion Post, February 4, 2019

Rebecca McPhail of the West Virginia Manufacturers Association, (DP-Jan.17) makes so many false and deceptive claims about the Atlantic Coast Pipeline (ACP), manufacturing in West Virginia and environmentalists, it is hard to know what to correct first.

She claims West Virginia “is sitting on a gold mine of energy and economic prosperity,” but environmental activists threaten this prosperity by blocking “construction of the ACP.” She goes on to claim these activists threaten manufacturing jobs in West Virginia and that 4,500 construction jobs will be lost, if the pipeline is not completed.

First, the ACP was not designed to support manufacturers in West Virginia; it was designed to move Marcellus shale gas out of West Virginia to supply already saturated markets on the Atlantic seaboard and for export. In fact, the Obama administration granted Dominion Energy, one of ACP’s stakeholders, the right to export natural gas to markets such as Japan and India in 2013.

Second, McPhail’s claims about construction jobs are clearly inflated and misleading. ACP provided these numbers, and they are based on a cumulative jobs methodology that counts construction jobs as the average yearly workforce multiplied by the number of project years, in this case six, to complete the work. So, the real number is closer to 750 jobs. Many of these jobs would go to outof-state workers, and in fact the major pipeline construction companies hired by ACP are from Texas, Wisconsin and Oregon.

Third, there is a broad coalition of concerned West Virginians opposed to the pipeline for legitimate reasons. Many landowners in the path of the pipeline contest ACP’s use of eminent domain for private gain, as it takes land from its rightful owners for so-called “public infrastructure.”

It’s time for industry lobbyists like McPhail to stop characterizing criticism of the ACP as “re fl e x ive opposition.” It is clear that the ACP and its supporters make false and deceptive claims to distract from the true cost of pipeline development. Let’s do an honest and impartial assessment of those costs.

John P. Lambertson, Morgantown, WV

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The Pipeline vs. The Trail: How the A.T. Saved the South – for now | Blue Ridge Outdoors Magazine

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ONLINE RESOURCES: AN UPDATE | Dominion Pipeline Monitoring Coalition

CSI VOLUNTEER OPTIONS | Dominion Pipeline Monitoring Coalition

Fracking for oil and natural gas is expensive

From Allied News, Grove City, PA, June 28, 2018

On Saturday, June 2, Marcellus Outreach Butler hosted a presentation by John Detwiler titled “The Financial Threat to Fracking” at the Butler Library.

John, a registered professional engineer, has worked as a business executive and strategic consultant for the natural gas and electric utility industries, and is a former faculty member of Carnegie Mellon University.

His presentation focused on how the fracking industry is slowly driving itself out of business with its reckless habits and exorbitant spending. Using actual data taken from the websites of Range Resources, EQT, and other drilling companies, John laid out the precarious situation that the fracking industry is in, and how its collapse could leave us worse off.

John’s program came in the wake of a hot topic in Butler County: Rex Energy’s recent filing for Chapter 11 bankruptcy.

Many in the area are wondering what will happen if Rex ultimately folds, and if their situation is unique, or emblematic of the entire fracking industry. During the program, it seemed increasingly clear that Rex is not a unique case.

The fracking industry as a whole is in a very precarious financial situation. Driven by an insatiable need for capital investment, these companies keep soliciting loans from lenders, driving themselves deeper into debt.

The process of constructing a well pad and drilling the wells costs several million dollars, and most of that money is acquired from lenders and investors.

Now that the initial gas boom of 2008-2012 flooded the market with a glut of natural gas and drove down prices, many companies are struggling to make sufficient money off new wells to pay back their investors.

Not only has the price of natural gas declined, but production has as well. Unlike other formations, production levels in the Marcellus Shale decline rapidly after the well is drilled.

According to John, the production of an average Marcellus well declines by 50 percent in only four months, and can drop to as low as ten percent of initial production in as little as two years. Due to this downturn, the national active drilling rig count has declined from 1,600 in January 2009 to less than 200 in January 2018, and now much of the gas and its liquid by-products like butane and ethane extracted in our area are destined for export to Europe and Asia.

Are the gas industry’s financial hardships good news for those fighting it? Not necessarily. Like a wild animal, when backed into a corner, the fracking industry also lashes out in desperation. Pittsburgh-based driller EQT, as well as Encana Energy, are in the process of developing half-mile-long “super well pads” that can house up to 60 wells in a single location, tapping multiple formations in every direction. These types of pads may soon be coming to western Pennsylvania, which sits atop not only the Marcellus, but also the Utica and Upper Devonian shales. And if companies do begin to fold, who will be responsible for cleaning up their messes and maintaining their existing infrastructure?

We don’t yet know what the future holds for Rex Energy or other smaller operators in our area, but John Detwiler painted an uneasy picture. In its Oil Patch Bankruptcy report issued on March 31, 2018, Haynes and Boone, LLP, listed 144 North American oil and gas companies that have declared bankruptcy since 2015, resulting in $90.2 billion of secured and unsecured debt, and Rex has just joined their number. It seems that what started out as a boom is, like always, quickly going bust.

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See also: “Millions Own Gas And Oil Under Their Land. Here’s Why Only Some Strike It Rich” : NPR, March 15, 2018

MATRIC, South Charleston, WV

Large petrochemical projects stymied by falling crude oil prices

From an Article by Anya Litvak, Pittsburgh Post Gazette (PowerSource), 9/8/15

For Aither Chemical, the company that strived to blanket Appalachia with small-scale ethane crackers, the past was prologue.

Technology that promised to drastically reduce the amount of energy required to turn natural gas liquids into a building block for chemical production was conceived in the 1980s at Union Carbide. The innovation was supposed to displace expensive crude oil with cheaper natural gas, but it was shelved after an oil glut sent the commodity’s price plunging.

Cut to 2010. Oil was around $80 a barrel and climbing. Development of the Marcellus Shale, with its pockets of natural gas liquids like ethane, was ramping up.

The rights to Union Carbide’s invention were transferred to a West Virginia technology nonprofit called Matric. There, scientists dusted it off, hired an executive team and began to gather attention and funding for their first cracker. They named the effort Aither.

But once again, an oil glut has dissolved both the promise and the company, a story that is repeating itself across the industry.

Crude oil dipped below $40 per barrel last month and while it has since recovered by a few dollars, the long-term outlook doesn’t forecast anything close to 2010 prices for another six years, according to the Energy Information Administration’s Annual Energy Outlook released in April before the most recent oil price collapse.

That makes the proposition of building new ethane crackers less compelling than feeding naphtha, a crude oil product, into existing crackers to make ethylene.

And Aither has joined the graveyard of other once-hyped projects vying to capitalize on the price spread between expensive oil and cheap gas before that spread narrowed to a sliver. All that’s left is some intellectual property that its overseer and largest investor, the West Virginia Jobs Investment Trust, is trying to either license or sell off.

The oil glut has also tempered the drive to build gas-to-liquids plants whose end products are meant to compete with traditional gasoline and diesel or oil-based lubricants.

Three such plants planned for Pennsylvania have been canceled.

In 2012, Calumet Specialty Products Partners, an Indianapolis chemical producer, said it would build a small gas-to-liquids plant at its Karns City refinery in Butler County to convert the region’s plentiful Marcellus bounty into lubricants and specialty liquids.

Calumet spokesman Noel Ryan said the company tabled the project two years ago, opting instead to buy into a gas-to-liquids joint venture in Louisiana where “the economics were more attractive.”

Marcellus GTL, a spinoff from an unrealized coal-to-liquids effort by Gilberton Coal Co. in Schuylkill County, made a splash by announcing a $200 million facility in Altoona that would manufacture gasoline and propane from natural gas. That, too, did not materialize.

Neither did an effort by Canadian company EmberClear to build a $1 billion gas-to-liquids near Reading, PA. That was scrapped earlier this year, according to the Reading Eagle.

Deeper pockets needed

As with all large projects, it isn’t just one turn of the market that scatters opportunity. Efforts that aim to bank on the volatility between oil and natural aren’t naïve to the general volatility of commodity arbitrage.

But while large multinationals such as Royal Dutch Shell, which has pumped millions of dollars into preparing a Beaver County site for a potential cracker that has yet to be greenlighted, can afford to ride out this wave, startups may not.

Aither was looking for somewhere between $200 million and $800 million for a small-scale plant, but it couldn’t secure even $12 million for a pilot facility, said Andy Zulauf, executive director of the West Virginia Jobs Investment Trust, the state’s Charleston-based venture capital arm. “We had a national energy company express an interest in acquiring the technology to the degree that a term sheet was issued,” he said.

But in the end, financing proved elusive.

“Economies of scale are really important in the ethylene production space,” said Steve Lewandowski, senior director at IHS Chemical. “Small crackers cost a lot more per ton of ethylene than large ones. “So whoever is financing the small crackers will need even more margins to cover higher capital cost and, in a lower margin market, this is much more risky.”

Large companies call the shots using their own pocketbooks, he said, while smaller projects depend on the confidence of investors. In today’s commodity environment, that confidence is wobbly at best.

See also: www.FrackCheckWV.net