IMG Midstream, builder of small-scale natural gas-fired power generation facilities, has signed a long-term agreement for Chief Oil & Gas to supply the natural gas to power “multiple” generation projects in four northeastern Pennsylvania counties.

IMG Midstream said it expects to begin construction of up to three power generation facilities (totaling 20 MW) by the end of the year. The company has eight generation projects in development, which would have a combined output of 100 MW. The company said its projects typically run up to 20 MW and use up to 4 MMcf/d of natural gas.

The Yardley, PA-based company is seeking to establish markets for upstream natural gas production, and to reinvest the energy created by local gas production back into the community through power generation.

Chief Oil & Gas will supply gas to five of the projects and is expected to expand its toehold in the generation market beyond that, said Ron Kiecana, managing director of IMG Midstream. He said he hopes to attract the interest of other Marcellus producers. The IMG website touts the power plants’ ability to use high Btu gas, offering “a market alternative for ethane and NGLs [natural gas liquids].”

IMG’s focus has been on small-scale generation projects because “we feel we can strategically locate smaller generation facilities and provide generation where it’s needed most,” Kiecana said. The Marcellus Shale region lacks the infrastructure to support larger generation plants, he said.

IMG Midstream plants will receive low-pressure gas, 150 lbs or less, at the inlet to their facilities and connect with lower-voltage transmission lines, which enables IMG to place facilities where it thinks they would be needed most.

Despite the size of its projects, Kiecana said they can compete with the big boys in the power market. “Our power is competitive with the broader market,” he said.

“With this [Chief-IMG] 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 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 companies said.

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

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 the 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. IMG said the long-term deal with Chief was “at a pre-determined price” for the gas.

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 under way 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) is currently focused on developing projects in the PJM and NYISO market areas in the Northeast. The company has multiple projects under development in Pennsylvania, West Virginia and Ohio.

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 (seeShale Daily, Aug. 5). PVR Partners also owns and operates gas pipelines and processing facilities in Pennsylvania, Texas and Oklahoma (see Shale Daily, Oct. 3, 2012).

Dallas-based Chief currently is operating in four Pennsylvania counties: Bradford, Susquehanna, Sullivan and Wyoming, where it operates 73 wells. There is a strong likelihood that at least one generation facility will be built in Bradford County, where Chief has a number of gas wells.

“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.