Chief Oil & Gas Wednesday said it has entered into a long-term agreement to supply natural gas to “multiple” IMG Midstream power generation facilities in northeastern Pennsylvania, serving local facilities with Marcellus gas. The power plants will take up to 4,100 Dth/d for each project.

“With this agreement, a portion of the gas we produce in northeastern Pennsylvania will stay in the local area. That was important to us,” said Chief Senior Vice President Sam Fragale.

The agreement covers facilities in a “specific area of mutual interest in Northeastern Pennsylvania” served by the midstream systems of Access Midstream Partners LP and PVR Partners.

Under the agreement, the parties will work together to identify additional gas-fired project opportunities to complement Chief production positions in the region. “This arrangement effectively adds IMG to Chief’s local gas origination efforts and adds business process and scale efficiencies to IMG’s business model,” the announcement said.

Joining with Chief and IMG in the project development are Access and PVR partners, said IMG Midstream Management Director Ron Kiecana. “We are excited to construct projects that will use locally produced gas, create new local gas markets and satisfy local electricity needs.”

IMG Midstream, which owns and operates small-scale generation projects, said it anticipates that it will begin construction of up to five new power generation facilities this year, several of which are expected to be in service by the end of the year.

The facilities would be fully enclosed and minimize environmental impact through the use of advanced emission control technologies and closed loop cooling systems to minimize water consumption. The environmental footprint also would be mitigated by the location of the facility close to the fuel source and to connections with existing electric power transmission, and a compact design disturbing less than two acres of land.

The power generated by these facilities will be sold into markets managed by the PJM power grid or will be sold to third parties such as commercial and industrial users directly through bilateral agreements.

Bregal Investments, a private equity investment firm, founded IMG Midstream to carry out its idea that market creation is a critical part of the energy revolution underway in North America. Rather than transporting fuels, the core principle behind IMG is location of gas-fired power generation as close as possible to fuel supply and electricity demand, improving overall market efficiencies and being an important part of the midstream solution.

IMG Midstream (formerly known as Iron Mountain Generation) develops, owns, and operates small-scale natural gas generation projects. It is currently focused on the PJM and NYISO market areas in the Northeast. The company has multiple projects under development in Pennsylvania, West Virginia and Ohio, with each typically 20 MW in size.

Access Midstream, formerly part of Chesapeake Energy Corp.’s midstream business, has an extensive pipeline network in the Marcellus Shale, as well as in a number of other shale plays (see Shale Daily, Aug. 5). PVR Partners also owns and operates gas pipelines and processing facilities in Pennsylvania, Texas and Oklahoma (seeShale Daily, Oct. 3, 2012).

Dallas-based Chief currently is operating in four Pennsylvania counties: Bradford, Susquehanna, Sullivan and Wyoming, where it operates 73 wells.The arrangement effectively adds IMG to Chief’s local gas origination efforts.

“‘Finding additional markets, such as the clean and efficient gas-fired power generation facilities that IMG is providing, will be instrumental in the continued success and prosperity of new U.S. gas supply basins, such as the Marcellus Shale in northeast Pennsylvania,” said PVR’s Mark Casaday, who is COO of the midstream business.