Appalachian executives shared their frustration with an industry audience in Pittsburgh last week, saying that resistance to natural gas throughout the Northeast is shaping up to be a big problem for the basin’s trajectory.
“Part of the problem, one of the challenges we face, is infrastructure,” said Repsol SA’s Walter Hufford, director of government and regulatory affairs in North America. “Restrictions on pipelines have been a critical problem for our business unit in Pennsylvania.”
Hufford reminded attendees that the Spanish company’s Marcellus Shale unit must compete for capital with other divisions operating throughout the world. The company holds about 176,000 acres in Pennsylvania, where it produces 700 MMcf/d, he said.
“We go to Madrid, we have to argue for that money,” and explain to management why the company should invest in Pennsylvania, he told a crowd at the Shale Insight Conference. In the United States alone, Repsol also operates in Alaska, the Gulf of Mexico and the Eagle Ford Shale.
Opposition to natural gas consumption in New England, coupled with a proverbial wall of resistance that has been erected against the industry by New York and broader legal challenges that have stymied a series of infrastructure projects designed to serve Appalachia, such as the Mountain Valley Pipeline and Atlantic Coast Pipeline, have contributed to regulatory uncertainty in the region.
EQT Corp. CEO Toby Rice noted in his remarks before attendees that while there’s still room to grow given current pipeline capacity levels, that situation could change rapidly. There’s about 35 Bcf/d of takeaway available in Appalachia, while producers are churning out roughly 33 Bcf/d across Ohio, Pennsylvania and West Virginia as they slow activity in response to low commodity prices.
Rice warned, however, that the breadth of the resource could be stifled without further political support to get gas into the Northeast.
“I cringe when I see that there are utilities turning away gas customers; they can’t get gas,” he said, noting that his family in Boston still burns fuel oil to heat their home.
In New England, however, where Hufford said he travels regularly to extol the benefits of his company, “they just will not do infrastructure.” New York, he noted, “has a big problem with us as well.”
When Repsol entered the Marcellus in 2014 after it took over Talisman Energy, Hufford said the company had more than 800,000 acres under lease in New York and Pennsylvania. Much of that, he added, is no longer viable. New York banned high volume hydraulic fracturing in 2015. Since then, the state has rejected permits and stopped multiple natural gas pipelines in favor of stronger environmental protections and alternative energy. Utilities in New York City have said there’s a gas shortage as a result and have imposed moratoriums on new service.
Additional political support would allow “us to push our gas on to those customers, who are demanding it,” said Rice, who leads the nation’s largest natural gas producer.
President Trump, during an address on the first day of the conference to tout what he called his “pro-energy agenda,” called out New York’s policies and pledged that his administration would do more to fight Gov. Andrew Cuomo.
It remains unclear exactly what the federal government could do. The Environmental Protection Agency has released guidance on Section 401 of the Clean Water Act (CWA) that provides recommendations to streamline oil and gas permitting. But so far, that’s been Trump’s answer to New York’s pipeline opposition, which has mainly come in the form of permit denials under the CWA.
Pennsylvania House Speaker Mike Turzai, however, said operators in the nation’s second-largest producer behind Texas, have an ally in the statehouse.
“Pennsylvania could be like New York,” he told the conference. “If you did not have public policymakers who understood the economic benefits from the use of natural gas and its byproducts, and what it means to families and their economic opportunities, we could have a ban just like New York.”
Pennsylvania, he boasted, “has been the firewall with respect to holding off bad public policy from energy independence” throughout the Northeast.
Turzai told producers that he would continue to push his “Energize PA” agenda in the Republican-controlled legislature. The initiative was unveiled earlier this year to counter Democratic Gov. Tom Wolf’s “Restore Pennsylvania” proposal, which seeks to implement a severance tax on natural gas production to help fund infrastructure improvements throughout the state.
Energize PA is a package of bills aimed at promoting and incentivizing the use of natural gas in the state to further stoke demand.
Hufford insisted that “fear” is motivating opposition in the Northeast, adding that “there are people who recognize that fear can drive policy decisions.” Like other industry speakers continue to do at podiums across the country, he implored the audience to better communicate with stakeholders “who do not understand our business.”