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Pennsylvania Focused on Attracting More NatGas End-Users

Some of Pennsylvania's leading private and public sector economic development organizations are stepping-up their efforts to expand markets for natural gas in the state as the upstream and midstream booms of years past are increasingly giving way to more downstream opportunities.

The Marcellus, Utica and Upper Devonian shales have helped make Pennsylvania the nation's second largest natural gas producer, churning out 4.6 Tcf in 2015 (see Shale DailyFeb. 22). Public and private officials that spoke at last week's Shale Insight conference in Pittsburgh believe the best has yet to come from the state's shale development. Allegheny County Executive Rich Fitzgerald said the downstream phase of development could be the most lucrative for the state.

Denise Brinley, special assistant to the secretary of the Pennsylvania Department of Community and Economic Development (DCED), said Gov. Tom Wolf's administration "recognizes the sensitive balance of managing the environmental challenges and economic opportunities surrounding shale resource development and the need to promote efforts to enhance Pennsylvania's energy infrastructure." The DCED, she said, continues to strengthen its focus on maximizing the economic opportunities from the state's energy industry.

"To the maximum extent possible, we want to use this natural resource that is in Pennsylvania for the benefit of Pennsylvania first," she said.

Brinley, along with DCED Secretary Dennis Davin, announced a new initiative at the conference to help transform shuttered coal-fired power plants across the state into industrial sites that could consume more natural gas. Using more than $1 million in federal grants, the DCED will work to better identify mothballed coal plants, their geographical and logistical strengths, and draw up "playbooks" for potential developers that would help them understand the liabilities and opportunities of each.

"We've gone to these energy companies that have these shuttered coal-fired power plants and we'll work with them to revitalize these properties," Davin said. "A lot of these coal-fired power plants are on rivers, they're on rail, they're on highways; they're great development sites for what we think is going to happen. We want to be in a position to develop these sites."

Some of the Appalachian Basin's brownfields have already been transformed into logistical and storage hubs for the oil and gas industry. The DCED's work would build off the Wolf administration's Pipeline Infrastructure Task Force, which earlier this year released a final report with 184 recommendations on how to better facilitate pipeline development (see Shale DailyFeb. 18). The state expects 25,000 miles of gathering lines and up to 5,000 miles of transmission lines to be built over the next decade.

Davin added that DCED is also working with private economic development organizations, the Allegheny Conference on Community Development and Team Pennsylvania Foundation, to explore the economic opportunities that could come with Royal Dutch Shell plc's multi-billion dollar ethane cracker (see Shale DailyJune 7). Shell said in June that it would start construction on the facility late next year. Davin said DCED has commissioned a study and implementation plan to take advantage of the cracker.

"We need to know going into the next budget cycle what we need to be prepared to do," he said. "We want to know exactly what type of companies would come as a result of this."

Davin pointed to the larger companies already operating in the state as an example of what shale gas can do for the bottom line. Procter & Gamble Co. has one of the largest manufacturing facilities in the state in Wyoming County, where it's been located for decades. The facility is in the heart of the Marcellus in Northeast Pennsylvania, and Davin said the company has saved $26 million annually by using natural gas for its power needs.

"When we're going around the state and we're going around the country talking about the benefits that Pennsylvania has, when we can talk about a single company saving $26 million a year in operating costs, that gets people's attention," Davin said. "We want to promote that, we want to look at that and talk to other companies about that as much as we can."

Richard Harshman, CEO of Allegheny Technologies Inc., which manufactures parts and materials for the aerospace, defense, energy and chemical industries, said shale gas played a major role in the company's decision to build a $1.2 billion processing facility about 20 miles northeast of Pittsburgh. Harshman said the facility uses anywhere from 9 to 12 MMBtu of natural gas per year, which is important to the global company's bottom line.

"Obviously, a $1 movement in the cost of natural gas has an important impact on our financial statements and cost structure," he said. "We manage that through hedges, but really, from a long-term perspective, our interest is in having a locally competitive, safe, reliable source of energy and natural gas is a very important component of that."

State lawmakers approved a proposal by Wolf in the 2015-2016 budget that provides millions of dollars for a fund to build more natural gas distribution lines for industrial end-users. Davin said DCED is focused on creating similar programs and securing funding to ensure more of the state's shale gas stays at home. 

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