Marcellus Shale Update

Transcription

1 Marcellus Shale Update Twitter.com/marcellusgas Facebook.com/marcelluscoalition Wyoming County Chamber June 10, 2015

2 MARCELLUS SHALE COALITION About Us 250 diverse members strong. Producers, midstream, oilfield services, manufacturers, consulting and downstream users. Our Focus Protecting and enhancing our environment. Addressing landowner and public issues. Maximizing benefits for our region.

3 PA s History of Energy Discovery & successful residential use of coal 1790 / 1808 Oil Edwin Drake Titusville, 1859 Natural gas well 1878 Nuclear reactor 1957 More than 350,000 oil and natural gas wells since PA > 60,000 active natural gas wells and ~ 20,000 active oil wells Unlike electricity, gas can be stored 3 MARCELLUS SHALE COALITION

4 PRODUCTION

5 Shale Development in Pennsylvania Land Leases Layers vs Mineral Rights 5 MARCELLUS SHALE COALITION

6 Drilling Deeper.. Production Report Period Active Wells Reported Production Change Producing SPUD Wells Not Online Percent Producing June % Dec % June % Dec % June % Dec % June % Dec %

7 Drilling Deeper..Wells Not Online (As of December 31, 2014) Wells not online 2,325 Drilling started 867 Shut-in 514 Regulatory inactive status 506 Plugged 74 Observation Well 3 Other, No comment 356 Best guess wells available to go online = 1354 Current PA Rig Count 46 Off of a high of over 110+

8 Billion Cubic Feet PA Production & Consumption July - December 2010 Production Consumption January - June July - December January - June July - December January - July July - December January - July July - December 2014

9 Infrastructure is Critical Marcellus-area prices steadily declined in all trading locations through the week by Tennessee s Zone 4 decreased from $1.35/MMBtu last week to 98 /MMBtu Dominion South, which portions of PA, Ohio, MD, WV, and VA, decreased by 24%, from $1.55/MMBtu to $1.18/MMBtu. Transco Leidy Line, prices declined by 41, from $1.48/MMBtu last week to $1.07/MMBtu

10 Trillion Cubic Feet 2014 Top NG Producers TX PA OK LA WY

11 Operator Production - Gas (BCF) H2013 2H2013 1H2014 2H Chesapeake Cabot Range Resources Southwestern EQT Anadarko Talisman

12 County Production - Gas (BCF) H2013 2H2013 1H2014 2H Susquehanna Bradford Lycoming Washington Greene

13 County Cumulative County Production (BCF) Production Bradford 2,463 Susquehanna 2,384 Lycoming 1,266 Washington 1,090 Greene 1,038 Total (All Counties) 10,768

14 Royalty Earnings (Millions) County Earnings Bradford $1,014 Susquehanna $1,007 Lycoming $525 Washington $477 Greene $427 Total (All Counties) $4,509

15 ECONOMIC IMPACT

16 THANK YOU! MarcellusCoalition.com

17 IMPACT FEE TAX REVENUE ALLOCATIONS Impact Fee Tax Allocations = $630M+ Local Government $3,000,000 $3,000,000 $3,000,000 $15,000,000 $18,000,000 $20,000,000 $2,250,000 $2,250,000 Marcellus Legacy Fund Natural Gas Energy Development Program Department of Environmental Protection County Conservation Districts & Conservation Commission Fish and Boat Commission $226,373,600 $339,560,400 Public Utility Commission Department of Transportation PA Emergency Management Agency State Fire Commissioner

18 Wyoming County & Townships Wyoming County Impact Fee Tax 2011 $2,403, $2,039, $3,219, $3,627, Source: PUC Total $11,289,

19 Wyoming Townships BRAINTRIM TOWNSHIP $45, CLINTON TOWNSHIP $43, EATON TOWNSHIP $79, EXETER TOWNSHIP $11, FACTORYVILLE BOROUGH $28, FALLS TOWNSHIP $69, FORKSTON TOWNSHIP $33, LACEYVILLE BOROUGH $9, LEMON TOWNSHIP $321, MEHOOPANY TOWNSHIP $132, MESHOPPEN BOROUGH $12, MESHOPPEN TOWNSHIP $238, MONROE TOWNSHIP $54, NICHOLSON BOROUGH $17, NICHOLSON TOWNSHIP $136, NORTH BRANCH TOWNSHIP $68, NORTHMORELAND TOWNSHIP $27, NOXEN TOWNSHIP $31, OVERFIELD TOWNSHIP $48, TUNKHANNOCK BOROUGH $41, TUNKHANNOCK TOWNSHIP $154, WASHINGTON TOWNSHIP $460, WINDHAM TOWNSHIP $238,310.67

20 REGIONAL ECONOMIC IMPACT More than 8,000 wells drilled between A 2014 API study found that the natural gas industry contributes $34.7 billion to Pa. s economy, making up 5.8% of the state s total economic activity projection: $13.5 billion o Leasing and bonuses o Exploration o Drilling and completion o Pipelines and processing o Royalties $2.4+ billion paid in various tax revenue; in addition to the $850+ million from the impact fee tax. Source: Survey of Marcellus Shale Coalition Board Member Companies

21 WORKFORCE DEVELOPMENT

22 PA Jobs, PA Workers PA Department of Labor and Industry 243,033 employees in Marcellus and related industries as of 2014 Q2* Core industries were up 15,331 (+96.7%). $93,000 average core industry wage ($43,200 higher than PA average)* $66,000 average ancillary industry wage ($15,600 higher than PA average)* *Source: Marcellus Shale Fast Facts, PA Department of Labor and Industry

23 PA Emerging Sectors & Growth Areas

24 Distribution of New Hires

25 LOCAL WORKFORCE

26 SHALE ECONOMIC SPECTRUM

27 Natural Gas Uses

28 SAVINGS FOR CONSUMERS Electricity generation & heating EIA: Family of four in an 1,800 sq. ft. home can save about $1,500 a year, or 60%, by switching to gas. Natural gas vehicles Consumer products Combined heat and power applications Feedstock for industries and other liquids use e.g. fertilizer Exports A bitter cold snap has furnaces working overtime and heating bills climbing, but Western Pennsylvania residents will pay less than they would have five or 10 years ago as Marcellus Shale production has fortified natural gas supplies. - Pittsburgh Post-Gazette, 1/25/14 Marcellus Shale has had a tremendous impact on UGI and its customers. Over the past five years, customer bills have dropped more than 30 percent and UGI has experienced record conversions. - Release, 2/18/14

29 PA Power Plants Panda Liberty & Patriot & Freedom- 829 Megawatts; power up to 1 million homes in Northern Pa. approx $5.9 billion to the area s economy during construction and the plant s first ten years of operation Create 500 construction jobs; 27 direct jobs to operate & 45 indirect jobs for support IMG to build 9 mini $20 million power plants in Bradford/Tioga/Susquehanna/Wyoming Counties Proposed Sunbury Plant + UGI LNG plant - $60 million total capital investment Invenergy 1,300 Megawatt in Jessup 600 jobs during the two-year construction phase image tva.com 29 MARCELLUS SHALE COALITION

30 CHP Attracting Public Sector Attention Combined heat and power (CHP) plant: A plant designed to produce both heat and electricity from a single heat source. The term is being used in place of the term "cogenerator". Commonwealth Recycled Energy Economic Development Alliance Promoting Marcellus Shale Gas Fired Combined Heat & Power (CHP) 30 MARCELLUS SHALE COALITION

31 NGV Market Penetration Avg cost per gallon equivalent $2.11 Locally: Verrastro, Dandy Mini Marts, Clean Fuels Energy, Commonwealth Energy Group, Neman Marcus, Waste Management, UPS, FedEx

32 Air Emissions Bejing vs NYC Cleaner-burning fuel requirements - 69% drop of sulfur dioxide since Soot pollution dropped 23% since The cleaner air prevented 800 deaths 2,000 fewer ER visits and hospitalizations from lung problems, compared with 2008 EIA US CO2 emissions at 20 year low EPA toxic air pollutants across Mid-Atlantic region down nearly 14%

33 FEEDSTOCK: WET GAS REGION Wet Gas Btu per Mcf Dry Gas <1200 Btu per Mcf Legend Marcellus /Utica Formation Wet Gas Region

34 COMPOSITION IN WET GAS REGION Mol% Propane, 5.5% Iso Butane, 0.7% Methane, 74.2% Liquids, 25.3% Ethane, 15.6% Normal Butane, 1.4% Iso Pentane, 0.5% Normal Pentane, 0.5% Hexanes+, 1.1%

35 GAS PROCESSING Gas Dehydration, Separation & Fractionation Northeast Marcellus is dry, Southwest is wet (contains more NGLs). Gas processing is required to condition production gas to proper pipeline quality for end users. Dehydration removes saturated water entrained in production gas (typically to below 7 lbs/mmcf). Cryogenic processing separates the NGLs from the production gas lowering the BTUs to proper levels ( BTU/cf). Fractionation separates the NGLs into individual marketable products (ethane, propane, natural gasoline).

36 36 MARCELLUS SHALE COALITION The Ethane Factor

37 SHALE & MANUFACTURING About 1/3 of all of the energy used in the USA consumed by manufacturing Lower feedstock and energy costs could reduce energy costs by $11.6 billion annually through 2025 Price Waterhouse Coopers (Dec. 2011) "Shale Gas: A renaissance in US manufacturing?" Companies returning to USA: 1. Dow Chemical 2. Formosa Plastics 3. Chevron Phillips Chemical Co 4. Bayer Corp 5. Westlake Chemical 6. Shell Oil; CF Industries 7. Santana Textiles $100 billion projects that take advantage of low-price natural gas Local Plastics Cluster - Greiner Packaging Of Germany 125 jobs 37 MARCELLUS SHALE COALITION

38 INTERNATIONAL INTEREST

39 Cove Point, MD FERC approves 4 th LNG export facility 5.75 million metric tons of LNG / year Built in 1970 to import LNG from Algeria Approx. $3.6 billion for new construction Fully subscribed w/ 20 year agreement to Japan & India Atlantic Sunrise, $3 billion by

40 FUTURE FORECAST

41 DECOUPLING OF OIL & GAS PRICES

42 ENERGY CONSUMPTION OVERVIEW Natural gas consumption grows by about 0.8%/year from 2012 to 2040, led by increases in natural gas use for electricity generation and in the industrial sector. Growing production from tight shale keeps the price of natural gas to end users below levels through Source: EIA Annual Energy Outlook, 2014

43 U.S. POWER GENERATION *Monthly coal- and natural gas-fired generation equal for first time in April 2012.

44 ½ of US use gas to heat homes 44

45 Technology Improvements Research Collaborative Improving Industry access to needed technologies Cross-fertilization: engaging the members of the MSC with key stakeholders in academia and economic development Annual Competition Changing Technology 2008 production: days per well with average 2,000-3,000 foot laterals Today: days with 6,000-7,000 foot laterals Fracking is only a 3-5 day process in the estimated 35 year life of the well Walking rigs Recycling water = lower costs and less environmental impact Field gas diesel to natural gas = $6,550 to $585 / day

46 Energy Independence US is now #1 Natural Gas & Oil Producer in the World & has highest reserves Nat Gas imports lowest since Complete independence by 2020 Source - EIA

47 ECONOMIC UNCERTAINTY

48 Severance tax Prohibits any deductions before calculating the gross value upon which the tax is based (e.g. gathering and processing costs) Levies tax only on gas from unconventional formations, raising uniformity issues which may violate the PA constitution Violates the PA and U.S. constitutions by impairing contracts and invalidating existing leases whereby landowners pay their proportionate share of any new tax, and by seeking to prohibit any such provisions in future leases Requires Department of Revenue to calculate average market price of dry natural gas within the Commonwealth on a quarterly basis, and establishes minimum price of $2.97/mcf - current price of $1.07 Uses $1.65 billion in severance tax revenues over 30 years to pay debt service on a new $675 million bond issuance to subsidize projects such as wind and solar

49 PA vs WV

50 The severance tax is 5% with no deduction for treating and gathering Plus.047 per McF (1,000 cubic feet of gas) Higher Taxes = Fewer Jobs Plus a floor of $2.97/McF - even if the realized price is less Current realized price is approximately $1.07 Caps distribution of municipalities at $225 million Does not actually allocate any revenues to education Equals an effective tax rate of approximately 19% Highest in Nation

51 If the Governors severance tax is passed, your community. Regardless of any new wells, your community will NOT see any new or increased local impact money, the tax freezes spending at 2014 levels. Capital available for investments in your community will be reduced, causing a loss of jobs and other revenue streams. Operations cut by 40% Prices for heating and electricity are at new lows thanks to high production, utility prices will go up if companies produce less gas. Despite statements to the contrary, land owners will pay the tax if their leases share future taxes proportionally with the operator under Federal and State Constitutional provisions. PSATS is very concerned about the loss of these local impact fee revenues, which are invaluable to our townships and their taxpayers. The natural gas industry has helped and should continue to help communities with this economic development opportunity. (Release, 2/11/15)

52 What Can You Do? Sign up for USA Contact your Legislators Inform your neighbors Tell the Governor NO to job & revenue killing taxes!!