According to the laws of physics, energy comes in two forms: kinetic, meaning energy that’s in motion or being used; and potential, the type that’s being stored.
A look across the energy spectrum in Western Pennsylvania over the past year shows that energy was definitely on the move in a number of ways.
Marcellus gas a bigger player
Paul Smith, senior director for infrastructure at America’s Natural Gas Alliance, noted that the big news of the year was the release of a study by Denver-based Bentek that concluded that Pennsylvania and the Northeast should be energy independent by 2020 because of the natural gas output of the Marcellus Shale.
For Smith, the Marcellus story has two parts: The increasingly abundant amounts of gas coming out of the ground as production and the need to build out more markets for the gas.
“If demand doesn’t grow in Pennsylvania, there’s a lot of interest in moving this gas out (beyond) Pennsylvania to other parts of the country, and even out of the country,” Smith said in mid-December.
To be sure, Marcellus natural gas of the dry variety found new markets with the completion of pipeline infrastructure this year that is supplying New York and New Jersey.
According to Smith, the supply of natural gas for heating is projected to save residents $350 million a year in each of the two states.
The flow of gas coming from the Marcellus, now estimated at around 10 billion cubic feet per day, has grown more than threefold from the 3 billion cubic feet per day just two years ago.
According to the Bentek report, U.S. Northeast natural gas production:
• Has grown more than 55 percent since 2009 to an average of 12.3 bcf per day today. The region now represents nearly 18 percent of the total U.S. supply.
• Exceeded Southeast/Gulf of Mexico supply for the first time in 2013, and will soon pass western Canada to become the second-largest natural gas producing region in North America behind only Texas.
• Is expected to nearly double over the next decade to an average of 20.9 bcf/d.
Currently, there are an estimated 800 wells in norther Pennsylvania that have been drilled but not completed. At an initial production rate of 4.2 MMcf/d, that is 3.4 bcf/d of natural gas supply, or 5 percent of total U.S. supply, that is ready to be delivered to market and serve expanding and new demand markets.
That output has created a sea change in the way gas is accessed by much of the Northeast market.
In early December, the U.S. Energy Information Administration noted that the quantity of natural gas shipped by pipeline from Southeastern states to the Northeast has plummeted 56 percent since 2008, from 7.9 bcf/day to 3.5 billion.
The steadily growing supply of gas from the Marcellus has also created massive investment in infrastructure to take advantage of the changing supply profile of the Northeast. According to Bentek, at least 40 gas pipeline expansion projects have been announced to either transport gas into the Northeast to serve high-demand areas or to send gas to other regions.
All of those projects make the Northeast the most active infrastructure development market in North America, accounting for more than 35 percent of all new U.S. processing being added from 2013-2018.
And according to an October report from Range Resources, which has more than 1 million acres of leasehold in Pennsylvania, more than half of that amount – about 540,000 acres – essentially doubles “when stacked pay reservoirs across most of our acreage in the Appalachian Basin are considered.”
While the acreage position is anchored by the Marcellus, Range showed “gas-in-place” maps that indicate the company’s Southwestern Pennsylvania acreage is located at the nexus where the largest estimated gas in place exists when considering all three shale horizons – the Marcellus, Utica and Upper Devonian.
Range Chief Executive Officer Jeff Ventura noted that the stacked play also points to an abundance of “wet” gas, which includes ethane, a building block for producing ethylene, which is used to make plastics, fertilizers and other products.
The other key to further developing the output of ethane is Shell Oil Co.’s proposal to build a huge natural gas processing plant in Western Pennsylvania.
As of late November, Shell cautioned that a final decision on whether to build the mutibillion dollar plant in Monaca, Beaver County, wouldn’t be made for several years.
But the Associated Press noted that there are signs Shell continues to seriously consider the project.
It noted that at least one oil and gas producer said it signed a contract to provide Shell with raw natural gas for the project, if it gets built.
The trade magazine Chemical Week also noted that Shell has chosen two multinational engineering firms to do feasibility and pre-project planning.
In the meantime, Smith sees enormous upside for dry gas uses for manufacturing, transportation and power generation.
“There are a half-dozen projects in the 800 megawatt range that are constructing plants right on the wellhead and bidding into the PJM market,” he said.
Coal’s major move
The other major energy story of 2013 was coal, with Consol Energy selling its Consolidation Coal Co. subsidiary, which contained all five of its longwall coal mines in West Virginia, to Murray Energy Corp. for $3.5 billion.
The move impacted 3,722 hourly and salaried employees working in the McElroy, Shoemaker, Robinson Run and Loveridge mines, as well as the Blacksville No. 2 Mine.
Consol said it is retaining coal assets that align with its long-term strategic objectives, including its Pennsylvania operations at the Bailey, Enlow Fork and soon-to-be-completed BMX mines in Washington and Greene counties.
But the transaction also signaled a move for Consol to continue to grow its natural gas production beyond 2014. The company said for 2015 and 2016, it expects 30 percent annual gas production growth.
Consol Energy President Nick DeIuliis said the company expects to spend $14 billion over the next decade on its West Virginia Marcellus Shale natural gas assets. It also expects to spend $8 billion in the next 10 years on its Pennsylvania natural gas assets.
And Consol looked at the remainder of its coal assets as continued export opportunities.
With its retained mines and its 100 percent-owned Baltimore Terminal, Consol said it will continue to participate in the growth of the world’s thermal and metallurgical coal markets.
Nuclear’s 2nd act
While natural gas quickly ascended in 2013 as a fuel source for the regional electric grid, Westinghouse Electric wasn’t resting on its laurels with its nuclear power plants. They were equipped with additional safety features in the post-Fukushima Daiichi nuclear plant disaster caused by a tsunami and earthquake in March 2011.
The company’s AP1000 reactor’s design improvements were part of a list of ways Westinghouse is helping the nuclear industry, including both its customers and operators of other plants, to enhance reactor safety.
Mark Marano, president of Westinghouse Americas, said that while the company’s revenue from domestic projects is down because of Fukushima and the slowly recovering economy, it has recently hired engineers to work on its current project roster. That includes four U.S. plants in the U.S. and another four in China, with agreements in the works that could eventually mean that Westinghouse could build as many as eight more plants in China.
And despite the less than stellar economic performance in the U.S., Marano said other countries, including the United Kingdom, Saudi Arabia, the Czech Republic and Poland, are all considering nuclear power generation additions.
The year also saw the release of “Pandora’s Promise,” a documentary that includes interviews with several longtime anti-nuclear activists who say that they have come to the realization that nuclear power – with its zero carbon footprint – will need to be included as a bigger part of the energy generation portfolio in the future if the world hopes to reverse the effects of global warming.
Following the film’s release, a group of the world’s top climate scientists wrote a letter asking environmentalists to support the development of safer nuclear power as a way to cut fossil fuel production and slow global warming.