Adverse Pipeline Impacts Very Expensive

Report-released-on-economic-impact-of-atlantic-coast-pipeline in VA

From Staff Reports, WVIR NBC 29 News, February 15, 2016

Charlottesville, VA – A new report details the potential economic impact Dominion’s proposed Atlantic Coast Pipeline could have on the counties it passes through. Opponents of the natural gas project say the costs to property owners and communities far outweigh its benefits.

The report says the annual cost to those counties would range from $96 million to $109 million. Pipeline opposition groups raised donations to hire Charlottesville-based Key-Log Economics to do this study. They released the 62 page report Tuesday.

The report covers Augusta, Nelson, Highland, and Buckingham Counties. It estimates $277 million in property value is at risk for landowners in the proposed path of the pipeline.

In Nelson County alone, the report identifies $75 million worth of scrapped investments if the pipeline is built, including a new resort. The report also says 200 to 300 employees would not be hired in Nelson County.

“Augusta County and Nelson County are the two counties impacted the most by this. Nelson County with tourism and the property values and the really excellent economy that’s been going on there for the last five years, we’re looking at the likelihood that could all turn around and go south. That’s terrible,” said Ernie Reed of Friends of Nelson.

A spokesman for the Atlantic Coast Pipeline released a statement in response to the study. It says in part, “This report lacks factual basis and credibility. All you have to do it look at the experience of neighboring counties here in Virginia to see that. Albemarle, Augusta and many other counties with pipelines thrive. There is no substantiated reason to think Nelson County will be any different.”

“It also ignores decades of credible research and the real-world experience of communities, not only in Virginia, but elsewhere around the country.”  Dominion points to California’s Napa Valley, which it says has hundreds of miles of natural gas pipelines running beneath its successful wine country.

Pipeline opponents plan to submit this report to federal regulators who are reviewing the need for the pipeline.

Allegheny-Blue Ridge Alliance Press Release:

Dominion says that it would cost approximately $5 billion to build its 594-mile high pressure natural gas transmission line through West Virginia, Virginia, and North Carolina. That number pales in comparison to the costs and economic impacts of the pipeline that will be incurred across just a four-county area of western and central Virginia according to an independent economic study released Tuesday examining the true costs to individuals, communities, and local governments through the construction and operation of the Atlantic Coast Pipeline (ACP) and compressor station.

Five groups concerned about the pipeline’s short-term and permanent impacts

Highlanders for Responsible Development, Augusta County Alliance, Friends of Nelson, Friends of Buckingham, Virginia, and Yogaville Environmental Solutions commissioned Key-Log Economics, a Charlottesville-based research economics firm, to conduct the exhaustive in-depth study.

The eye-opening analysis found that up to $141 million in lost property value and services, such as water and air quality, would occur across the four-county study area just during construction. Further, the pipeline will depress area economies, contribute to job loss, reduce quality of life, and lower personal incomes in perpetuity to the tune of up to $109 million annually.

Those estimates are conservative, notes Spencer Phillips, founder of Key-Log Economics. Putting the stream of costs into present value terms and adding the one-time costs, the total estimated cost of the ACP in Highland, Augusta, Nelson, and Buckingham Counties is between $6.9 and $7.9 billion, he said.

The recently announced re-routing of the ACP through the southern portion of Highland County, into Bath County, and back through Augusta County was announced after the Key-Log study was completed. While the re-routing would reduce to some extent the economic impact on Highland, the negative economic impact resulting from the re-routing into northern Bath County would increase the total impact on the immediate region due to the higher property values of affected property and businesses in Bath. Further, the additional dozen or so miles added to the Augusta County route will only serve to increase the final economic impact to that community.

The uniqueness of the counties in the study mean that the specific impacts within each area vary. However, the underlying result, as pointed out in the study, is that the four counties will be deeply impacted in a very negative way.

“In Highland County annual costs to the local economy are estimated to be $7 million or higher, much larger than the projected benefits that would come to the county, including tax revenues paid by the pipeline. Adverse impacts on property values, which have already been negatively affected by the prospect of the project, will be significant. Also negatively impacted will be travel and tourism, which account for one-fifth of the county’s employment,” said Lewis Freeman, Chair of the Allegheny Blue Ridge Alliance and President of Highlanders for Responsible Development.

For Augusta County, through which Dominion proposes to run more than 50 miles of the pipeline route, the negative impacts to people?s lives and property is enormous, according to the report. Total property value lost would be approximately $44.5 million, resulting in an annual reduction to the county coffers in excess of $209,061. Those figures, while conservative and not inclusive of the new route through the Deerfield Valley, are based on loss of subdivision and development potential, loss of property value and property marketability because of proximity to the pipeline, damage to water resources, and a reduction in agricultural production to name just some of the factors that went into the calculation, noted Nancy Sorrells, Chair of the Augusta County Alliance.

The Atlantic Coast Pipeline would cost Nelson County up to $43 million dollars per year, with additional one-time costs of up to $41 million according to the report. Individuals and businesses would lose up to $25 million in property value outright, while annual losses would include $18 million in recreation tourism dollars and $1.2 million in personal income. The annual loss to the county government would be $526,000 in tax revenue and $144,000 in property tax revenue, far exceeding the local annual tax payment promised by ACP, LLC.

The communities in Buckingham County, the eastern-most county in the study, are faced with the double whammy of the massive pipeline and a gigantic compressor station that will be in operation 24/7. According to the study, the ACP would cost Buckingham as much as $20.8 million in one-time costs and annual losses of as much as $7.1 million.

“I would encourage every Buckingham resident to become familiar with Key-Log’s findings,” noted Chad Oba, Chair of Friends of Buckingham. This report uncovers previously undisclosed costs of Dominion’s mega-industrial project for our county. No one wants to live near a toxin-belching compressor station nor a 42-inch pipeline, both of which bring many health hazards, and threaten Virginians property rights. As to the purported tax revenue promised by Dominion to the county, she added, “No amount of tax revenue can buy off citizens who are sincere about protecting their community and their beautiful surroundings.”

The pipeline impact study was spearheaded by local citizens groups and property owners who were frustrated at the inaccurate information being distributed by Dominion in regard to the purported benefits of the ACP. Not only were those benefits, such as large numbers of jobs during and after pipeline construction and promised tax payments to the counties, generally understood to be greatly inflated, they were also not balanced with information on what the negative effects of the pipeline could be in these central and western Virginia communities.

A study released in June of 2015, that was conducted by Synapse Energy Economics, Inc. and commissioned by the Southern Environmental Law Center, has already shown that Dominion’s rosy projections of jobs, economic development, and lowered energy prices because of the ACP were flawed.

It has fallen on us to analyze the costs to our communities should this pipeline come to pass, said Ernie Reed of Friends of Nelson, the lead group that commissioned the study. This report demonstrates not only how economically dangerous the pipeline is but how our four counties would bear a huge share of the costs of this project at the hands of Dominion. Further, while the use of the pipeline is measured in years, the costs to the region are forever.

Economic Impacts from the Atlantic Coast Pipeline in the four-county region:

>>Lost ecosystem service value during construction $16.9-61 million
>>Lost ecosystem service value annually in perpetuity $4.9-17.8 million
>>Total property value lost $55.8-80.2 million
>>Annual loss in property tax revenue $281,000-408,400
>>Annual loss in recreation tourism expenditures $41.3 million (387 jobs/$7.4 million payroll)
>>Annual loss of personal income $8.2 million
>>One-time costs during construction (property value & ecosystem services) $72.7-141.2 million
>>Parcels touched by the right-of-way 521
>>Parcels within a half mile of the compressor station  87
>>Parcels in the 1.4-mile evacuation zone 6,148
>>Residents and homes in the evacuation zone 15,128 people and 8,762 homes

Utica shale wells are very deep & expensive

Looking at the WVU Assessment of Technically Recoverable Gas in the Utica Shale

From an Article by David Hughes, Post Carbon Institute, July 21, 2015

Last week, members of the media breathlessly reported—based on a new study published by West Virginia University (WVU) entitled A Geologic Play Book for Utica Shale Appalachian Basin Exploration—that the Utica Shale could hold more recoverable gas than the Marcellus, the largest shale gas play in the country.

The “Play Book” provides an interesting roundup of geological data on the Utica and associated shale units. However the sensational claim that these units contain a mean resource of 782 tcf (trillion cubic feet) of “technically recoverable” gas, 1947% higher than the USGS estimate of 38.2 tcf made in 2012, has little credibility.

Of course, one can get any “technically recoverable” resource numbers one wants, depending on input assumptions. Critical assumptions for the gas estimate are:

• Area assigned to sweet spots and non-sweet spots.
• Drainage area of individual wells.
• Estimated Ultimate Recovery (EUR) of wells.
• Success ratio of wells.

Typically these are expressed as a range. In the case of the USGS assessment they are characterized as “minimum”, “mode”, “maximum” and “mean”, and in the WVU assessment variably, when they are stated, as “minimum, medium, maximum” and “minimum, mode, maximum”.

Given that “sweet spots” comprise 99% of WVU’s purported technically recoverable resources, only the sweet spot assumptions are reviewed below in a comparison between the USGS and WVU assessments.

Area assigned to sweet spots

Whereas the USGS assessment provides a quantitative estimate of prospective area, the WVU assessment provides only a map, with a much larger proportion of the total area assigned to “sweet spots” than the USGS.

Drainage area of individual wells

The USGS assessment provides estimates of well drainage area which allows the calculation of the number of wells required (a mean of about 4.3 wells per square mile). The WVU assessment provides no information on its assumptions.

Estimated Ultimate Recovery (EUR) of wells

For the oil part of the WVU assessment, WVU at least provides some cumulative recovery curves to back up its oil EUR calculations. For the gas assessment the WVU assessment provides nothing more than a map of cumulative recovery of wells drilled to date, none of which have recovered more than 5 bcf (billion cubic feet) and most of which have recovered considerably less than 2 bcf.

The WVU study then assumes every successful well will have a “medium” expectation of recovering 7 bcf over the entire area it calls a “sweet spot”, and a “maximum” expectation of 30 bcf (25 times the USGS “maximum” estimate). Although there are certainly a few very good wells, this is wildly optimistic and unfounded based on production data to date.

Success ratio of wells

Similarly the WVU assessment is optimistic on the success ratio of wells compared to the USGS, 95 percent compared to 85 percent.

Conclusions

The WVU assessment of technically recoverable resources in the Utica is incomplete as presented and wildly optimistic compared to the earlier USGS assessment and compared to likely well performance. Although the WVU report does provide a valuable roundup of pertinent geological data, its assessment of technically recoverable resources should not be viewed as credible.

Note:  The USGS has indicated that after examining the WVU study, they stand by their own work.]

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Reaction to Utica Shale Study Mixed

From an Article by Jesse Wright, WV Public Broadcasting, July 16, 2015

A study released earlier this week about the potential of the Utica Shale formation was met with praise from the Consumer Energy Alliance. But the West Virginia Sierra Club doesn’t share that enthusiasm.

The Utica Shale Play Book Study says there may be 20 times as much recoverable gas and twice as much recoverable oil in the Utica Shale formation as was previously thought.

Brydon Ross was very excited to hear the news. “And it’s great news, it really is. It’s fantastic news, even if it’s 50 percent right,” he said. Ross is the vice president of state affairs with the Consumer Energy Alliance, a nonprofit group that bills itself as an advocate for energy consumers with ties to the energy industry.

“For companies and industries that are looking to invest in the Utica Shale area and all through Appalachia as well, I mean you’re talking about areas that really need the money and need the investment is right where a lot of this resource potential is, so we see this as nothing but positive,” he said.

The Utica Shale runs under parts of five states, including northern West Virginia and Kentucky, eastern Ohio, Pennsylvania and New York.

Some Sierra Club Concerns

Not everyone agrees that looking for more fossil fuels is the way to go. Jim Kotcon deals with energy issues for the West Virginia chapter of the Sierra Club. He says the emphasis on hydro-carbon extraction is misplaced.

“We cannot use all of the reserves we’ve already found without very serious adverse affects from climate change. And so if we’re going to control the increase in temperature from climate change, then finding more gas won’t help us,” Kotcon said.

Fracking Potential

The West Virginia Geological and Economic Survey in Morgantown was one of four state geological survey groups that contributed to the Utica Shale Play Book Study.

Michael Hohn is the Survey’s director. He said that eastern Ohio and western Pennsylvania could see new hydraulic fracturing well pads developed as a result of the new Utica Shale study. But because many fracking wells can be drilled on one pad and the fact that the Utica Shale formation lies below the Marcellus Shale in West Virginia, Hohn says companies can use existing well pads to tap into the Utica. “So, more wells in West Virginia, but the footprint will be similar to the Marcellus,” Hohn said.

But more fracking activity isn’t a good thing, according to Kotcon. He said the government isn’t doing a good enough job of regulating existing fracking operations. “As a result, many of the local communities, although they benefit financially, are seeing some very significant adverse effects,” Kotcon said. He said those effects include things like air and water pollution, increased truck traffic and the resulting damage to roads.

Ross disagrees. He said the fracking industry is being regulated properly. “You can have economic development, energy security without harming your environment. We think this study is nothing but good news for the people of the Utica Shale area as well, who frankly need the investment and need the jobs and the money,” Ross said.

Either way, it appears the energy industry is quickly moving toward natural gas. SNL Financial issued a report earlier this week that shows natural gas overtook coal as the top source of U.S. electric power generation for the first time ever in April.

See also: www.FrackCheckWV.net

Whither Shale Gas? Certainty and Uncertainty Abound!

Commentary by S. Tom Bond, Retired Chemistry Professor & Resident Farmer, Lewis County, WV

What can be said about projections for natural gas from shale? Other than generally over-estimated, a more accurate statement cannot be made – yet. The first item to consider is the reserve. Perhaps the most accurate figures are available from research done for the Post-Carbon Institute by David Hughes. His article in Nature, one of the two top scientific journals of the world, titled Natural Gas: The Fracking Fallacy, published December 3, 2014, is a further development of the theme and is a classic. It compares estimates by the U. S. Energy Information Agency and smaller, more limited but more detailed estimates. The EIA was found wanting, which was verified by their own publication, cited in the Nature article, published the 14th of October in 2014.

The article by Hughes referred to above is titled “Drilling Deeper“, subtitled “A Reality Check on U. S. Government Forecasts for a Lasting Tight Oil and Shale Gas Boom,” is a further development of the theme. It lists EIA reductions in reserve estimates and gives reasons to doubt they have it correct yet. Page 5 shows graphics of reductions of estimates of one of the Marcellus which estimate has been reduced from 410 Trillion cubic feet to 84 tcf, a factor of 80% by 2011. The same graphic shows reduction of Poland’s shale gas by 99%. The estimate of oil availabe from the Monterey Tight Oil was reduced by 96%.

Hughes survey involves seven tight oil plays and seven shale gas plays, involving 89% of current oil production and 88% current gas production from shale. The primary source of data for this analysis is Drillinginfo, a commercial database of well production data widely used by industry and government, including the EIA. Hughes concludes ” Tight oil production from major plays will peak before 2020. (That’s 5 years.) Also “Shale gas production from the top seven plays will likely peak before 2020.

He makes estimates of production for 2040, based on present drilling methods and without regard for price – essentially what can be, rather than what will be (see more below). His average first year field decline rate for Marcellus is 32% and average 3-year well decline rate is given as 74-82%. See page 11, where all seven fields are listed.

Hughes’ implications for the future of gas are hugely important, i.e. the EIA’s rosy forecasts have led policymakers and the American public to believe a number of false promises:

• · That cheap and abundant natural gas supplies can create a domestic manufacturing resurgence and millions of new jobs over the long term.
• · That abundant domestic oil and natural gas resources justify lifting the oil export ban (imposed 40 years ago after the Arab oil embargo)and fast- tracking approval of liquefied natural gas (LNG) export terminals.
• · That the U.S. can use its newfound energy strength to shift geopolitical trends in our long-term favor.
• · That we can easily limit carbon dioxide emissions from power plants as a result of natural gas replacing coal as the primary source of electricity production.

David Hughes report is chosen here because of that author’s expertise and because the analysis is more “fine grained,” it uses data from individual wells.

Hughes deals with the characteristics of individual wells and fields based on them. There are other influences he cannot deal with, however. I shall address some of them here. One is the decline of production as the drilling is forced out of “sweet spots.” These are areas of relatively high production. They were actively sought out at the beginning of production, because they bring the highest return on money and effort invested. That is the way all mineral development is done. It is sometimes expressed as “the easy stuff is taken out first.”

Because of rapid decline of shale wells, new wells must be drilled constantly. How available will the necessary capital be? That depends on the availability and the attitude of potential investors. Availability depends on the general economy. A crash would tighten up investment money. It also depends on the perception of reward (magnitude of profit), which will certainly be declining due to the fact these wells do not last; to increased public opposition and active campaigns of disinvestment from fossil fuels; to the continuing increase in efficiency of solar and wind; and to the inevitability of failures of companies due to low oil prices.

I think fracking will become less popular with the public as time passes by and the devastation it causes becomes better known – that is certainly the trend now, witness the extensive advertising the industry must put out to influence public opinion.

The biggie is how will the price of oil affect the demand for fracked gas. There is a world-wide slowdown in the economy, while the over-production of oil and gas in the U. S. is a factor, but decline in demand, is often forgotten.  Lower growth than expected has occurred in Europe and Asia.

More about this here and here. To paraphrase some college textbooks, “The Author leaves as an exercise for the reader,” the resolution of this video which shows both Senator Shelly Moore Caputo (R – WV) and Martin J. Durban, President of America’s Natural Gas Alliance, saying or implying the reserve estimates are increasing.

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The Bureau of Business and Economic Research at West Virginia University has released a study of the economic benefits to the State of the Marcellus Shale natural gas industry, according to an article in the Charleston Gazette. In 2009, the study shows, West Virginia’s natural gas industry generated more than $12 billion in business, created more than 24,000 jobs in the state and paid more than $550 million in wages.

The economic impact of the Marcellus Shale development in the state in 2009 was calculated to be $2.35 billion of business volume and accounted for the generation of 7,600 jobs. Marcellus Shale is believed to hold trillions of cubic feet of natural gas thus the development of the Shale is expected to continue to have a significant economic impact on the state in the future. This report examines these impacts for 2010 to 2015 in addition to the legal, regulatory, and environmental considerations.

Titled “The Economic Impact of the Natural Gas Industry and the Marcellus Shale Development in West Virginia,” the study is available at  www.bber.wvu.edu.

West Virginia severance taxes are now 5 percent of the gross value of natural gas production – higher than the other states. However, the new report adds, “For overall state and local tax burden, West Virginia’s general tax policy climate is relatively more conducive to natural gas industry operability than other states with significant Marcellus Shale deposits.”

West Virginia legislators are now considering whether to regulate fracking. The U.S. Environmental Protection Agency is examining the fracking process to determine whether it endangers supplies of drinking water, as many critics argue. Environmental groups, such as the Natural Resources Defense Council, believe Marcellus Shale drilling could have long-term negative environmental impacts.