American Oil and Gas Reporter - March 2019 - 98

ConventionSection: Pennsylvania Independent Oil & Gas Association

Pa. Operators Overcoming Challenges
CANONSBURG, PA.-Pennsylvania's
winter months would seem to be supportive of heavy calls on natural gas use,
but Gary Slagel, chairman of the Pennsylvania Independent Oil & Gas Association, says the 2019 market has not proved
very friendly so far.
"With all this cold weather, you would
expect to see natural gas prices not necessarily climbing through the roof, but at
least above a solid $3 an Mcf," says
Slagel, government affairs specialist for
Steptoe & Johnson in Canonsburg. "But,
it seems like everyone looks forward to
any forecast for future warming and that
continues to keep prices stagnant."
If natural gas prices do increase and
boost the commonwealth's drilling levels,
Slagel still has concerns that the infrastructure isn't there to move production
to all of the markets. Construction issues
and permit delays continue to plague
midstream developers.
"Of course, even if a project does get
a permit, it seems to stop at the New
York border because New York does not
want pipelines," he says. "The industry
has the resources the Northeast needs to
get off Russian liquefied natural gas, and
yet no one wants to approve the pipelines
coming through. It doesn't make sense:
all this low-cost and plentiful natural gas,
and they don't want it."
PIOGA President Dan Weaver says
pipelines are not the only challenge facing
producers. He recalls hearing from one
operator having trouble lining up a drilling
rig for a Pennsylvania site, with the rig
owner unwilling to relocate from West
Texas. Weaver says several PIOGA members have complained about rig availability,
with service companies perceiving more
certain demand for their offerings in the
Permian Basin.
"A rig could move to Pennsylvania
and drill a couple of pads, but then the
rig owner doesn't know if he has more
work after that. In the Permian, work demand is steady and you know you will
be working for the next couple of months,"
he observes.
Building A Cracker
The last time he drove past the 340acre site in western Pennsylvania where
Shell is building its $6 billion ethane
cracker, Slagel says he could see more
cranes reaching into the air than he could
98 THE AMERICAN OIL & GAS REPORTER

count. He adds the facility is scheduled
be operational in about three-four years,
and when it is, it will have 600 full-time
employees
According to Shell, nearly 3,000 construction workers are on the site, and another
3,000 will work on future phases. "It is an
extremely viable project, and there is lot of
money being spent in the area around the
cracker," Slagel describes. "There is a revolution going on, in terms of expenditures
associated with building that facility as
well as the workforce now in the area."
Shell's facility could be joined by another cracker in southeastern Ohio. PTT
Global Chemical and its partner, Daelim
Industrial Co., have purchased 500 acres
for the site near Shadyside, Oh., and,
they report, the Ohio Environmental Protection Agency issued final air and water
pollution discharge permits in December.
The partnership has not made a final investment decision yet.
Supporting those crackers are plans
to build an ethane storage and trading
hub in the tri-state area, which has received
support from the U.S. Department of Energy, Slagel reports.
"If the hub becomes a reality, that
will be a huge project, and provide for
the underground storage of liquid ethane,"
he details. "This project is necessary if
we going to have a constant supply of
liquids for crackers."
Weaver notes that the Pennsylvania
cracker enjoys widespread public support.
"Most people are welcoming the new facility. I think most of them support it,
even some of the Democrats, if only for
the economic benefits it brings to the region and the state," he says.
Most Pennsylvanians appreciate how
important the Marcellus and Utica plays
are to the Appalachian region, although
Slagel points out that some oppose gas
production as a climate change-related
or environmental impact issue.
"While most of those opposed cannot
point to any specific environmental impact
per se, there were some legacy issues
from the early years of developing resources in Pennsylvania that continue to
haunt the industry," he says. "There were
a few gas migration issues or a few pond
liners that may have leaked, but today's
operators have stepped up and implemented strong and effective environmental
protection policies."

Using Gas Locally
PIOGA continues to promote local
uses of Marcellus and Utica natural
gas, Slagel says, noting that Joyce
Turkaly continues to serve as the association's director of natural gas market
development.
"To assist Joyce, PIOGA has a very
active Market Development Committee,"
he says. "It holds committee meetings
bimonthly, and on the intervening months
the committee usually sets up a tour of
a potential or existing downstream facility, to see how natural gas is being
utilized. It really is a benefit for downstream users, to help them understand
what PIOGA is doing to stimulate downstream natural gas utilization. They see
real value in terms of being involved
with PIOGA."
Weaver says PIOGA's first Marcellus
to Manufacturing program, organized in
2018 by the association's Market Development Committee, was another PIOGA
effort to increase local gas usage. He
adds the association will host a similar
event this fall.
"It really opened a lot of people's
eyes who may not have been in the industry and did not think they were affected by it, but it started them connecting
those lines," he describes. "Marcellus
to Manufacturing makes industry
stronger, all-around, from PIOGA's
standpoint because it gains more advocates and allies while it helps others,
including legislators, think about the
products made by ethane and natural
gas products."
Too many people in Pennsylvania
overlook the fact that they are sitting on
an abundant supply of natural gas that
would allow manufacturers to produce
their products much more affordably in
the Appalachian Basin, Weaver says,
adding "This is a great program, and I
am excited to see it did so well in its
first year. I cannot wait to see what they
come up with this year."
Despite concerns among the commonwealth's producers that include a combination of factors, including proposed severance taxes, infrastructure constraints
and low commodity prices, Slagel sees
reasons for a more positive view.
"The optimism still is here," he insists.
"There is a strong and viable industry in
Pennsylvania and there will continue to

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