Update On Natural Gas Hook-Ups In New England -- February 27, 2019

This story seems to becoming a recurrent theme in New England. 

From Chesto over at The Boston Globe:

The municipal utilities that serve Holyoke and Middleborough just imposed separate moratoriums on new natural gas hookups, citing supply constraints. Is your community close behind?

Probably not. The two biggest gas providers in Massachusetts, National Grid and Eversource, say their supplies are adequate for now.

But some in the industry speculate that we’re approaching a major inflection point, as the region’s strained pipeline system shows signs of failing to keep up with demand. Pipeline expansions get more difficult to build politically every year. To the anti-gas forces in the environmental community, the moratoriums reaffirm their arguments about the need to wean Massachusetts off the fossil fuel.

That won't be easy. Natural gas remains a dominant fuel source for New England’s power plants. It also remains the preferred heat source for any new developments -- except in the growing list of communities with moratoriums in place.

These bans on new hookups started popping up in Western Massachusetts about four years ago. Berkshire Gas imposed moratoriums in an eight-town region stretching from Greenfield to Amherst; Columbia Gas did the same next door, in Easthampton and Northampton.

Northeast Energy Direct, the controversial Kinder Morgan pipeline proposal, could have helped ease the pain there. But resistance was too strong, and Kinder Morgan nixed it. Berkshire informed its waiting list of 300-plus potential new customers last fall that no help would be coming soon.The capacity issues in that area eventually caught up with Holyoke Gas & Electric, which imposed its own moratorium on new service on Jan. 28. Columbia Gas is pursuing projects to increase circulation in the Springfield area. But those, too, face formidable opposition.

The Middleborough Gas and Electric Department moratorium this month was more of a surprise, the first true supply-related ban in the eastern part of the state. General Manager Jackie Crowley told utility commissioners that a lateral pipeline that feeds Southeastern Massachusetts has been at capacity for some time. The utility’s system load has continued to grow, but there are no new projects on the horizon to address its need for more gas. Crowley says she wanted to get the word out before the spring construction season starts, so builders could seek alternatives.

As a small utility, it’s difficult financially for Middleborough to build liquefied gas storage tanks, to sock away gas for cold days when it’s in short supply. Crowley says she is talking to Algonquin pipeline owner Enbridge about increasing capacity, but a long-term solution could be years away.

Several Cape Cod towns already face similar bans on hookups, but a National Grid spokeswoman says those were imposed a few years ago to ensure system reliability while the company upgraded a mid-Cape pipeline. They are on track to be lifted this spring. But she also concedes the company could face challenges serving new natural gas customers given how hard it is to get a pipeline expansion approved.

Tamara Small, chief executive of developer group NAIOP Massachusetts, can’t help but feel the chill. NAOIP members already suffered through a lockout by National Grid of union workers and a state-imposed, safety-related moratorium last year. Those are over, but the backlog is considerable. The emergence of new moratoriums, she says, sends the wrong message to businesses looking to expand here.

The natural gas industry’s foes see these moratoriums as a sort of vindication. Environmental advocates say it’s time to get more serious about other, greener options: rolling out heat pumps for warmth, and turning to cleaner sources of electricity such as Canadian hydropower and offshore wind. Maybe the industry is indeed reaching an important tipping point. But which way it will tip depends on who you ask.

Incredible, Isn't It, How Activist Environmentalists Can Slow-Roll The Country; When Is A Moratorium A Permitorium?

The story out of Delaware down below just goes to show how fortunate "we" are in North Dakota. I am not aware of many votes / studies / decisions taking decades to complete/make by North Dakota government agencies. The NDIC is making decisions and the commission is about as transparent as one could expect / hope for.

On the other hand, the story is completely different in Delaware. It's now been three years of study and the Delaware River Basin Commission still hasn't set rules for drilling in the Marcellus. Incredible. Even if they said "no" folks could get on with their lives, knowing they won't be getting royalties from their minerals. Which is probably what will happen anyway.

Oil & Gas Journal is reporting.

Pennsylvania Gov. Tom Corbett has asked the Delaware River Basin Commission (DRBC) to remove a 3-year moratorium on natural gas drilling from the Marcellus shale.

In a letter to DRBC last month, Corbett said the agency has had more than enough time to implement regulations that would allow gas drilling from the Marcellus shale while protecting water quality in the Delaware River and its tributaries.

DRBC has published draft drilling regulations in 2010, but the agency cancelled a 2011 vote on the rules. That vote has not been rescheduled.

Back To That Marcellus Story

The other day I posted a link regarding new estimates of the Marcellus, and said I would get back to it.

One of the reports adds that the Marcellus reserves that lie below parts of Pennsylvania, West Virginia, Ohio and New York are far larger than recent government estimates, while another said the powerful combination of resource, cost and location is altering natural gas prices and market trends across the nation.

The Marcellus could contain “almost half of the current proven natural gas reserves in the U.S,” a report from Standard & Poor’s issued this week said.

And more:

The Marcellus is a gas-rich formation thousands of feet below much of the four states, but current production is centered in Pennsylvania and West Virginia.

Earlier this year, the federal Energy Information Administration sharply lowered its estimates of Marcellus reserves, from 410 trillion cubic feet down to 141 trillion cubic feet. That adjustment was widely reported, including by The Associated Press. [Hmmmm.]

But that lowered estimate doesn’t correspond with actual well production, said Nikhanj. He said their analysis shows that the Marcellus contains about 330 trillion cubic feet of gas, more than double the size of the next largest field in the nation, the Eagle Ford in south Texas.

Some financial firms and critics of gas drilling had suggested that the EIA estimates supported theories that Marcellus production might decline more rapidly than expected, and thus be far less profitable for energy companies. But Nikhanj said a review of actual Marcellus well data shows that on average they’re producing more gas than expected, not less.

This goes back to that "bogus" NY Times article posted back on June 25, 2011, in which was written:

But the gas may not be as easy and cheap to extract from shale formations deep underground as the companies are saying, according to hundreds of industry e-mails and internal documents and an analysis of data from thousands of wells.

In the e-mails, energy executives, industry lawyers, state geologists and market analysts voice skepticism about lofty forecasts and question whether companies are intentionally, and even illegally, overstating the productivity of their wells and the size of their reserves. Many of these e-mails also suggest a view that is in stark contrast to more bullish public comments made by the industry, in much the same way that insiders have raised doubts about previous financial bubbles. [Wow.]

“Money is pouring in” from investors even though shale gas is “inherently unprofitable,” an analyst from PNC Wealth Management, an investment company,  wrote to a contractor in a February e-mail. “Reminds you of dot-coms.”

It turns out natural gas companies may be challenged but not for the reasons the NY Times suggested. (The Times did subsequently try to "walk back" that story.)

Anyway, enough of this.

Bottom line: the Marcellus is changing the dynamics of the natural gas industry far more than anyone realized. It's an incredible story. RBN Energy has been ahead of the curve reporting this and links have been provided at MDW on a regular basis.

Even the environmentalists are noting the obvious:

Even critics of gas drilling should accept that it isn’t going away, said the head of one leading Pennsylvania environmental group.

“We should realize by now this is not going to be a short play. It’s going to be here, probably for generations, because it’s so productive,” said George Jugovic Jr., president of PennFuture.

That’s a mixed blessing for environmental groups, Jugovic said.

“It lengthens the horizon. It means that we have time to get it right because they’re not going to be in here and out,” Jugovic said of drilling companies, yet “at same time that it raises the imperative of getting our regulations in order.”

Ironically, the vast production coming out of Marcellus wells in Pennsylvania and West Virginia may have given some breathing room to New York, where residents, government officials and gas drillers are engaged in an extended debate over whether to allow the new gas production method known as hydraulic fracturing, or fracking. 

Fracking is under moratorium in New York until the debate is resolved.

The governor of New York is considering letting local municipalities make their own decisions to allow fracking or not. Wow. Hmmm. Local governance. What a concept. 

North Dakota Could Surpass Alaska in Oil Production

When the AP broke a story on January 2, 2011, that North Dakota could surpass every state in the union in oil production except for Texas, someone wrote in to say that North Dakota would never surpass Alaska in oil production. I countered.

Today there is a story that environmentalists have stymied Shell Oil once again in its goal to drill in Alaska.

Yes, North Dakota could indeed surpass Alaska in oil production.

Meanwhile, oil closed down today, to around $88 but still on a trend suggesting we will see $100 oil by Memorial Day, the start of the summer driving season. The moratoria on off-shore drilling continue.

Oh, by the way: here is an update on the legal status of the polar bear.

[January 13, 2011: Bloomberg's chart of the day.]