WINTER 2015 | vOL. 5 | ISSUE 1
SOLAR SAVINGS Developers turn a one-time investment into monthly savings. // Page 4
WINTER 2015 | vOL. 5 | ISSUE 1
editor’s NoTE
04 // A sunny outlook for businesses
o
ur cover story shows how renewable energy has become commonplace. // Just two or three decades ago, “renewable” was a buzzword that few bought into. Today, it’s part of doing business. i personally benefit from that as a resident of lofts of Franklin, the roof of which you see on the cover of this issue. // lofts on Franklin is a great example of adaptive reuse and new technologies converging. What had been an old warehouse space has been converted into stylish downtown lofts in Scranton. our rents are all-inclusive, which means i write one check per month instead of separate checks for rent, water, trash, sewer, heat and electric. our building manager, lora Hoscald, tells me the developers were able to bundle those costs into one bill because of the solar panels on our roof. // i’m not sure how it all works, but it does. From an end-user standpoint, i’d never know that our building’s powered by a mix of traditional energy and solar power. lights turn on when i flip a switch. Heat kicks on when i use the thermostat. The building is proof-positive that even in cold, cloudy Northeastern Pennsylvania, solar energy can do a lot of good. // — George Spohr
14 // Finch finds opportunity supplying gas fields
18 // Opponents debate benefits of Wolf’s
our TEAm EDITORS George Spohr | 570-704-3989 | gspohr@civitasmedia.com dan Burnett | 570-991-6114 | dburnett@civitasmedia.com REPORTER Eileen Godin | 570-991-6387 | egodin@civitasmedia.com ADvERTISING EXECUTIvES rob reddington | 570-704-3957 | rreddington@civitasmedia.com Krystin Spudis | 570-704-3948 | kspudis@civitasmedia.com A publication of the Times leader media Group
proposed severance tax on drillers
08 // Both sides hope to clear
the air on methane emissions
10 // Supporters push for wind power 12 // Will shortsighted policies and falling energy prices derail fracking?
22 // Gas pipelines proposed to run under river raise concerns
24 // Prepare for the pipeline invasion 27 // Community volunteers aid in gathering air samples
cover photo by Bill Tarutis
2 // NEPA Energy Journal
Solar Savings // 3
A sunny outlook
for businesses BY JOE SYLvESTER | JSylvESTEr@civiTASmEdiA.com
“As long as the sun comes out, which it does every day, it produces energy.” Tony DellDonna, owner of Solar Universe of Northeast PA, Mountain Top
Two years ago, architect Scott Allen and business partner Jeremy Anderson decided to make a big investment in a former warehouse. They previously had converted three of the four floors of the downtown Scranton building into loft apartments and the other floor into commercial space, but they wanted to make it all more energy-efficient. They invested about $300,000 — minus federal and state rebates that covered about 35 percent of the cost — in photovoltaic solar panels and a solar thermal heating system. The investment is paying off. Allen, founder and principal of SDA Architects of Scranton, said the 70 panels on the 6,000-square-foot roof of his Lofts on Franklin project provide about 15 percent of the electricity and hot water, saving about $500 a month in those utility costs. That’s enough to pass the savings along to his tenants and include the utilities in their rent. Allen is among a growing number of busi-
4 // NEPA Energy Journal
ness owners in Northeastern Pennsylvania finding savings in solar energy. Several businesses in Luzerne County, including the Gateway Shopping Center in Edwardsville, are relying on solar power to supplement their electricity usage. The King’s on the Square building in downtown Wilkes-Barre – the former Ramada Hotel that King’s College bought and converted into student housing, classrooms, labs and offices – also will rely more on solar power to supplement its energy supply, thanks to a donation from a local businessman who is an alumnus. Business owners have found value in solar here, despite the clouds that cover the sun more than half of the days of the year in the Wilkes-Barre/Scranton region, which has an average of 70 sunny days and 106 partly sunny days, when clouds cover 40 percent to 70 percent of the daytime sky, according to currentresults.com, a website that features research news and science facts.
“As long as the sun comes out, which it does every day, it produces energy,” said Tony DellDonna, owner of Solar Universe of Northeast PA in Mountain Top, adding that some panels are designed to work in lowlight conditions. TURNING GREEN The conversion to solar might have slowed, though, due to lower energy credits for solar power and the end of state rebates last year, but there are more reasons than money for some, such as Allen, to make the change. Allen is saving energy, which he said was his primary reason for converting to solar — he wanted to integrate some green technology into his building. “If design professionals aren’t the ones who take the lead, then who is?” Allen asked. While the 25-kilowatt photovoltaic solar panels provide electricity for lighting and heat for the lofts, the 30,000-BTU solar ther-
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Architect Scott Allen stands next to 30,000-BTU solar thermal panels that are used to heat water via an ethylene glycol heat exchanger at the ‘Lofts on Franklin’ in Scranton. Bill Tarutis | For NEPA Energy Journal
mal tubes heat water for the tenants. “We have a 500-gallon storage tank in the basement,” Allen said. It includes an ethylene glycol heat exchanger that runs the glycol through a pipe to the roof, where the solar heat collected in the solar thermal tubes heats the glycol, which then returns to heat the hot water in the basement. “Glycol is used a lot in heating systems because it can retain heat very well,” Allen said. “It’s a closed system. (The glycol) is sent through the heat exchanger. The glycol and water never mix.” “We provide heating and electricity included in the the rent,” he said. “Water also is included. Basically, what we tried to do was create a green energy building. The primary reason was to try to reduce energy usage.” ROOFTOP PANELS While Allen is not aware of any other building in Scranton that relies on rooftop
solar panels, there are several in Luzerne County. Joe Amato Properties, which three years ago had solar panels installed on the roof of the Gateway Shopping Center in Edwardsville, had been studying the feasibility of doing the same at the East End Centre in Wilkes-Barre. But owner Joe Amato said he is holding off for now because the tax credits aren’t what they were a few years ago. “When we did it then, the government was giving you a better tax credit,” Amato said. At the time, companies could realize a return on their investment in about five years, he said. “It’s marginal whether it makes sense at the moment,” Amato said. “It’s expensive to put it on, and if you can put a tax credit on it, the way the structure is now, it will probably take 10 years to pay for itself,” he added. Gateway was the first shopping plaza in
the area to install solar panels to light all common areas such as the parking lots, and Amato Properties is adding more lights in the lot. Amato said it cost about $1 million to install the 440 panels. He estimated the company is saving about $100,000 a year. The most well-known solar power conversion in the area, though, is at Pocono Raceway in Long Pond, Monroe County, which installed a 25-acre facility in 2010. The solar installation of 39,960 photovoltaic modules will produce more than 72 million kwh of energy over 20 years. It generates enough power to provide the electricity to power the raceway as well as 300 homes, Pocono officials said. LESS MONEY BACK DellDonna, of Solar Universe, said businesses can save considerably and get a return on their investment in an average of seven to eight years.
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Solar Savings // 5
A 500-gallon water storage tank and ethylene glycol heat exchanger in the basement of the ‘Lofts on Franklin’ in Scranton. Bill Tarutis For NEPA Energy Journal
6 // NEPA Energy Journal
but the overall cost of a system depends on how much power is needed. “We do $3 and $5 per watt and go by kilowatt-hour usage monthly or yearly (to determine a customer’s power needs), DellDonna said. He said, though, only 10 percent of Solar Universe’s customers are businesses. He said he has hundreds of residential clients. “We try to aim toward the residential customers,” DellDonna said. He said he is hoping Pennsylvania Gov.elect Tom Wolf will put more emphasis on incentives for solar than the current governor has. Meanwhile, two other Luzerne County solar panel companies – Keystone Energy Solar Services, Wyoming, and Endless Mountains Solar Services, Wilkes-Barre – have installed systems on businesses and homes in the area. Panzitta Enterprises Inc., Wilkes-Barre, the general contractor for the King’s on the Square project, contributed 214 solar panels
that were installed on the former hotel’s roof to supplement the building’s power. Panzitta purchased the panels and is paying Endless Mountains to install them. Panzitta will maintain ownership of the panels and will donate the generated power to the college. John Panzitta, president of Panzitta Enterprises, said he made the donation because of his and his family’s close affiliation with King’s. According to projections from Endless Mountains, the panels will generate approximately $500,000 worth of electricity during their 25-year lifespan. Panzitta believes the King’s property is the first commercial property in downtown Wilkes-Barre to use solar power, though, he said, the city maintenance garage on Conyngham Street and, of course, Endless Mountains Solar Services on Scott Street, also utilize solar.
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“Yes, it is a large upfront investment, but if you look at it in the long run, it’s a worthwhile investment,” DellDonna said. “The high-efficiency systems we install come with a 25-year panel and inverter warranty, and we also give our customers a 10-year workmanship warranty, which is an industry best.” There is a 30 percent federal tax credit available through the 2016 tax season, but the Solar Renewable Energy Credits, or SRECs, are lower than in the past, DellDonna said. They they are selling in the $30-to-$35 range. A SREC is produced when a system generates 1,000 kilowatt-hours. “An example of how many SRECs a system will produce a year is, if you own a 10-kilowatt system, you would create about 12,000 kilowatt-hours a year, which would be 12 SRECs,” DellDonna explained. He said solar panels range in cost from $150 to $400, depending on the quality,
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Both sides hope to clear the air on methane emissions BY JOE SYLvESTER | JSylvESTEr@civiTASmEdiA.com
8 // NEPA Energy Journal
The figures are based on data reported by the U.S. Environmental Protection Agency’s Greenhouse Gas Reporting Program, EID stated in a news release. The decline in methane emissions occurred even as natural gas production in Pennsylvania increased by nearly 72 percent, according to figures reported by the U.S. Energy Information Administration. “Despite the reduction in methane emissions, environmentalists have been pushing state regulators and the EPA to impose additional and costly regulations on methane,” the release stated. Scott Cannon, a spokesman for the local Gas Drilling Awareness Coalition, responded that, “First, Energy in Depth is a public relations arm of the gas industry whose sole purpose is to take any negative information about the fracking process, and spin it to their advantage, so I certainly wouldn’t take any report from them as a credible, unbiased source of information. They jury is still out on just how much methane is being released by production, leaky well sites and faulty infrastructure. “There is another study by Cornell University researchers that states the EPA’s calculations could be off as much as 50 percent. Meanwhile, researchers from the National Oceanic and Atmospheric Administration’s Cooperative Institute for Research in Environmental Sciences at the University of Colorado Boulder found that measured methane leaks from oil and gas operations in Colorado’s Front Range were three times greater than predicted by emissions inventory estimates, according to a May 7 study in the Journal of Geophysical Research: Atmospheres.” Cannon continued, “The EID report does not give any statistics like how many wells were in service in 2011 verses 2013. In fact, the EID report says ‘that methane emissions from oil and gas development have significantly declined in many of the top producing basins across the country, even as oil and gas production has skyrocketed,’ but a look at the US Energy information website says producing wells in the U.S. are down since 2011 from 514,637 to 487,286 in 2013.” The EPA released its annual Greenhouse Gas Inventory, which also showed a decline
in methane emissions from the oil and natural gas production industry, in February 2014. For natural gas production specifically, the EPA credited the industry for its “voluntary reductions” in methane, specifically through the use of new technologies. Patrick Henderson, former Gov. Tom Corbett’s deputy chief of staff and energy executive, said that “While reducing climate emissions is certainly an important and worthy goal, it is imperative to keep in mind that it is not the only goal. Diversifying our energy portfolio; reducing our dependence on foreign energy sources; reducing costs of energy so more people can afford it, and growing our economy are all critical goals as well. He said Pennsylvania is the first state in the country to require comprehensive leak detection and repair programs for methane emissions from gas development sites. “Great strides have already been made and will continue to be made to reduce methane leakage,” Henderson said. “But it is also important to remember there is a builtin incentive for gas operators to capture all the methane, as methane is, of course, the product that they are extracting and seeking to sell on the market. So any inefficient operation that is seeping methane is doing nothing but seeping money. That is a strong incentive to do all one can to capture leaking methane.” Erica Clayton Wright of the Marcellus Shale Coalition, a natural gas industry advocacy group said, “Pennsylvania and our member companies are at the tip of the spear when it comes to implementing control technologies that improve air quality. “In fact, U.S. EPA data demonstrates that methane emissions have fallen nearly 17 percent since 1990, while natural gas production is at record levels. In fact, Pennsylvania shale producers have implemented EPA’s green completions guidance in advance of the implementation date, which is designed to further reduce emissions, and Pennsylvania DEP Exemption 38 requires operators to perform leak detection and repair at all well sites.”
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Many supporters of natural gas drilling see the fuel as a cleaner answer to coal, saying it is less polluting. But questions about methane leakage have led to claims the methane is actually worse for the air we breathe than coal emissions. “Center-left environmentalist opinion in this state has generally taken the view that growing natural gas market share can be a force for good, because the big short term impact has been to greatly accelerate doom for the coal industry, which heretofore has been thought to be the biggest greenhouse gas villain,” said Andrew Sharp, director of outreach for the environmental group PennFuture. “But a bunch of recent research on this has changed that calculus. It turns out that if we don’t control methane leakage, natural gas extraction is actually worse for the climate than coal. A lot of Democratic politicians are invested in the idea of gas as a ‘bridge fuel,’ and it still can be, but not if we don’t require companies to capture all the methane.” Sharp said the technology to capture it exists and is affordable. “The main missing piece is policy – we have to make all the drillers use it, like Colorado did.” Gov. Tom Wolf plans to work with the secretary of the Department of Environmental Protection to explore new testing and monitoring regulations, according to his spokesman, Jeffrey Sheridan. “Additionally, his administration will work with the private sector to promote the development of new technology that quickly and effectively detects fugitive methane emissions.” He said Wolf recognizes the need to protect the environment and recognizes there is an opportunity to adopt new regulations that address the effects of fracking. But some present evidence stating something already is being done to reduce methane emissions. A report from Energy In Depth — a research and education program of the Independent Petroleum Association of America — shows that methane emissions from oil and natural gas production in the Marcellus Shale and other regions have fallen by 10 percent since 2011.
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Solar Savings // 9
Supporters push for wind power Joe Sylvester | sylvester@civitasmedia.com
Bill Tarutis | For NEPA Energy Journal
Commonwealth Energy Group CEO Louis Evans, center, responds to questions during a news conference on wind power at The University of Scranton’s Loyola Science Center. Looking on are University of Scranton Director of Sustainability Mark Murphy, left, and Lackawanna River Corridor Association Director Bernie McGurl.
Group wants Pennsylvania senators to support tax credits SCRANTON — It was an attempt to clear the air. The PennEnvironment Research and Policy Center, a statewide environmental advocacy group, held a news conference last month at The University of Scranton to promote the benefits of wind power and to nudge the state’s two U.S. senators to support reinstatement of tax credits for wind energy. According to a center analysis, wind power is expected to cut as much carbon pollution in Pennsylvania as there is in the emissions from nearly four coal-fired power plants — or more than 3.6 million cars — by the year 2030. “By 2030, if wind power continues to grow at its current rate nationally, it will be able to supply 30 percent of our nation’s electricity,” said Chloe Coffman, a campaign organizer with the Philadelphia-based
10 // NEPA Energy Journal
group. The news conference was held in the Loyola Science Center, a new building at the university, which promotes sustainable practices, said one of the speakers, Mark Murphy, U of S director of sustainability. PennEnvironment’s report, “More Wind, Less Warming,” comes as the Senate was about to decide whether to reinstate tax credits for wind energy. The House voted to extend expired tax breaks for such businesses as banks and investment firms and for commuters, as well as for wind farms and other renewable energy sources. But those breaks are just good for 2014. The Senate followed suit. Coffman said it was important for Congress to extend tax incentives for at least five years for wind energy. “We need (Sens.) Casey and Toomey to follow through in the Senate.
Global warming Coffman said the tax incentives are needed to reduce carbon-based pollution and reduce global warming. According to the study, wind power sources such as the Mehoopany Wind Farm, which is the largest wind producer in Pennsylvania, produced enough energy in 2013 to power 300,000 homes. The study projects wind energy will expand in Pennsylvania over the next 15 years to produce enough power for nearly 2 million homes. It also will help Pennsylvania exceed the clean energy standards proposed in the U.S. Environmental Protection Agency’s Clean Power Plan. Bernie McGurl, director of the Lackawanna River Corridor Association, said wind power and a diversity of energy sources — such as solar and geothermal —
NEPA Wind power sites Bear Creek, Phase I, Community Energy,nBald Mountain, Bear Creek Township, 12 turbines Mehoopany BP Wind Energy, Wyoming County, 88 turbines Humboldt Industrial Park Hazleton, 2 turbines Waymart NextEra, Canaan and Clinton townships, Wayne County, 43 turbines
Bill Tarutis | For NEPA Energy Journal
Chloe Coffman of PennEnvironment Research and Policy Center talks about the environmental benefits of wind power at a news conference at The University of Scranton’s Loyola Science Center last month.
are needed because carbon fuels are changing the Earth’s climate. “We have a unique geothermal opportunity here with the flooded mines under the (area),” McGurl said. Wind will not only decrease harmful emissions, but it also will benefit the economy through increased jobs, said Louis Evans, CEO of Commonwealth Energy Group in Dunmore, which provides services as energy audits, lighting retrofits and compressed natural gas. He said those jobs would be in engineering and construction, as well as in companies that supply the wind farm industry. “We are a blue collar area,” Evans said. “We need those jobs here. We need to get behind these tax credits (extended) out for five years.” Murphy said steps taken toward sustainable energy goes with the university
Sustainability Office’s motto of “Caring for Creation.” Though wind turbines kill a number of bats and birds each year — 25 bats per turbine per year and four birds per turbine per year in the state, according to the Pennsylvania Game Commission — the industry and the state are taking steps to reduce those fatalities. Acoustic deterrents The Game Commission reported an evaluation of the effectiveness of ultrasonic acoustic deterrents, completed in 2010, found a reduction of bat mortality at turbines where acoustic deterrents were used, compared to control turbines where no acoustic deterrents were used. “Wind (farm) developers are always very cautious (about their impact on wildlife),” Coffman said. “Fossil fuel developers will
always disturb wildlife. The Audubon Society very much is in support of wind power.” According to its website, “Audubon strongly supports properly sited wind power as a renewable energy source that helps reduce the threat posed to birds and people by climate change. However, we also advocate that wind power facilities should be planned, sited and operated in ways that minimize harm to birds and other wildlife, and we advocate that wildlife agencies should ensure strong enforcement of the laws that protect birds and other wildlife.” There are 720 turbines operating on 25 sites in Pennsylvania, with four of them in Northeastern Pennsylvania. Reach Joe Sylvester at 570-991-6110 or on Twitter @ TLNews.
Solar Savings // 11
Will shortsighted policies and falling energy prices derail fracking?
Michael A. MacDowell Guest commentary
12 // NEPA Energy Journal
Two recent events have cast some doubt about the seemingly bright future of fracking in Northeastern Pennsylvania and in other parts of the country. The first has to do with a few voter-driven efforts to eliminate fracking, or hydraulic fracturing. The second is related to the recent plunge in energy prices. While voters and many municipal governments have decided to restrict fracking, few have banned it altogether. That is why shock waves ruminated through those involved in the fracking process when 59 percent of voters in Denton Texas – a state which owes much of its economic success to petroleum – voted to ban hydraulic fracturing entirely. During the campaign to ban fracking in Denton, claims about and the potential for groundwater contamination were taken more seriously because, unlike NEPA, there are many gas wells right within Denton’s relatively small city limit – in fact there are 270 of them. Some wells were drilled within a football toss of North Texas’ football field. Is this any way to treat Mean Joe Green’s alma mater? Many say yes.
in many corners of the world, has driven prices down substantially. Of course, there are winners and losers in this price decline. Chief among the winners are American consumers, who now have more to spend on other goods and services. This in turn stimulates consumer spending and has helped our nation’s recovery from the Great Recession. And, yes, the oil companies and exploration firms are the losers, as many had based their investment decisions on higher gas and oil prices and will now cut back on exploration and employees. There are other losers, as well. Some of the biggest are Russia, Iran and even ISIS, which have financed much of their expansionist actions on oil sales and taxes. Americans do not want to be beholden to these countries and rogue states. There are many examples of American’s desire to have adequate supplies of petroleum. The most recent is exhibited in a USA Today poll that outlines how 60 percent of Americans favor construction of the Keystone XL pipeline, compared to 25 percent being against it. The remainder either didn’t now or refused to answer.
BAN OPPONENTS Property owners in Denton, those with even relatively small plots of land on top of the rich Barnett Shale, are hardly taking the ban lightly. For many, it was a major if not sole source of income. These property owners are not the only ones undone by the ban. Acting on a sense statewide sentiment, Texas Railroad Commission Chairwoman Christi Craddick told the Dallas Morning News that she would continue to issue permits in Denton. The commission, which regulates drilling in Texas, is also seeking an injunction against the ban. The discussions about bans on fracking continue in Denton and elsewhere as energy prices have dropped by more than 30 percent since summer. These price declines make it far less desirable for producers to undertake relatively expensive horizontal drilling and fracking procedures. Falling prices are being driven by recent increases in oil and gas supplies. Throughout the later part of the 20th century, the 12-member Organization of Petroleum Exporting Countries, or OPEC, controlled oil and gas output and, therefore, also prices. Americans found themselves at the mercy of the OPEC cartel. Today, the combination of gas and oil discoveries in the United States and Canada, coupled with weak economic growth
MARKETPLACE VARIABLES Vagaries in the marketplace are inevitable. Today, we enjoy relatively cheap energy because of North America’s new and robust ability to produce gas and oil. As a result, we have seen positive results in job growth. In the longer run, oil and gas supplies will remain a scarce commodity. In a volatile world, our energy supply picture can change almost overnight and impact our country’s economic picture violently. Those who seek to ban or restrict fracking are hard pressed to come up with technically and economically realistic alternatives that meet our energy needs. The key to a stable energy picture is not to limit supply by placing artificial constraints on production, like the fracking ban in Denton and New York State. Rather, communities and states should focus on policies that assure horizontal drilling and fracking is undertaken by reputable firms with adequate oversight by well-balanced regulatory authorities. If local ordinances to ban fracking are adopted widely, they can permanently interrupt the positive energy picture we currently enjoy – and once again make us beholden to countries and rogue movements who would do us harm. Michael A. MacDowell is president emeritus of Misericordia University in Dallas Township, Pa., where he occasionally taught economics, and is the managing director of the Calvin K. Kazanjian Economics Foundation.
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Solar Savings // 13
opportunity
Finch finds opportunity supplying gas fields Jon O’Connell | joconnell@civitasmedia.com
Clark Van Orden | NEPA Energy Journal
Scott Lowry, president of Finch Technology in West Pittston, explains the function of the machine to his right. Finch has developed a device called a portable locomotive wheel lathe to be used repairing train engine wheels without ever pulling them from the tracks.
WEST PITTSTON — There was a little down time one morning at Finch Technology when Scott Lowry stepped through the doorway into the firm’s spacious fabrication room. The muffled sound of workers chatting inside the shop office leaked out onto the shop floor where hulking, well-worn machine equipment — lathes, punches and grinders made for large-scale fabrication — lined the center walkway. A lone machinist watched quietly and intently as a boring machine cut solid steel away from a new large metal wheel creating curly wisps of scrap. It was quiet that morning, but big things are in store for
—>> 14 // NEPA Energy Journal
Clark Van Orden | NEPA Energy Journal
Scott Lowry, president of Finch Technology in West Pittston, stands next to a large steel frame built for an industrial kiln and explains how the local firm is diversifying to service the natural gas industry. Though the kilns make up most of Finch’s business, Lowry said he sees great opportunity in selling to Pennsylvania gas operators.
Finch, the fabrication firm with old roots in the Northeast. Lowry has been developing partnerships with natural-gas industry contractors. He believes his small fabrication firm can save drillers money when it comes to keeping rigs online, he said. “Being a small business, it’s all about having the skill sets that you can respond quickly,” Lowry said. On every natural gas well pad, drillers employ an arsenal of heavy equipment, some of which can wear out quickly and unpredictably. For example, a well pump head costs about $70,000 to replace, or drilling companies can send them to far-away machinists in other states for repairs, Lowry said. A single drilling crew can burn through about 15 of these pump heads in a year, he said. The small business, which now employs 10 machinists, an engineer and a few part-timers, is poised to refurbish these parts on short notice and help drillers minimize down time. Beyond that, Lowry is working with a State College-based tech firm with an invention to predict when these parts will wear out. Together, the companies offer a cost-effective package deal that
helps operators keep these multi-million-dollar operations on schedule. CERTIFICATION In the long-term, Lowry is looking to earn certification from the oil and gas trade group American Petroleum Institute (API), which will open the doors for Finch to offer more fabrication and machine services to drilling and pipeline companies, he said. He’s eying expansion, and hopes with new specialty services, he can bring on more skilled workers after Finch gets certified, he said. Just about every major gas operator working in the Marcellus Shale region requires API’s monogram license for its vendors, API Vice President of Global Industry Services John Modine said. License certification includes a four-day audit and a subsequent stamp Finch can use to mark all of its products. Licensing costs $5,000 annually. “That stamp is a warranty for the manufacturer that they are
—>> Solar Savings // 15
Submitted photo
In September, Finch Technology donated time to refurbish and convert this gas processing unit, a staple on all natural gas well pads, to be used by Lackawanna College’s School of Petroleum & Natural Gas. Cabot Oil & Gas donated the unit, which would cost the school about
FINCH HISTORY Finch was founded in 1855 by Asahael P. Finch in Scranton. A large painting of the late machinist and founder still hangs on the wall in the company’s conference room. Finch’s descendants sold the company to investors in the 1950s. In the late 1960s, its new owners moved the machine shop and fabrication plant into an old train locomotive repair shop nestled in a quiet West Pittston neighborhood and previously owned by the Glen Alden Coal Company. About 65 percent of the company’s current work is geared toward a specific product — industrial rotating kilns built for varied uses,
16 // NEPA Energy Journal
Lowry said. Sandpaper manufacturers use these kilns to dry out carbon grit before it can be applied to paper; and other fabricators use them to pulverize steel before turning it into bullion. Enormous steel frames and platforms lay the shop floor waiting for a few finishing touches. Huge steel wheels called trunnions had been lined up in the far end of the shop awaiting the rest of the apparatus to be assembled and shipped to the customer. Finch is rolling out a new product that Lowry said that also feeds the gas business: an inexpensive lathe that grinds down faulty locomotive wheels in a hurry. The unique product is small, lightweight and simple enough to use so small rail companies can make quick repairs to train engine wheels with imperfections that come about during regular use. With gas drillers shipping more materials and equipment by rail, and with more small rail companies putting trains on Pennsylvania’s tracks, Lowry hopes enough of them will find use for tools like the lathe in the years ahead.
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current, that they are licensed, that they have made this piece of equipment to the highest possible standards,” Modine said. Modine has about 150 auditors working under him in offices around the world. API started writing best practice requirements in the 1920s, which have become the standard in global oil and gas production, he said.
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DEBATE Opponents debate benefits of Wolf’s proposed severance tax on drillers
Joe Sylvester | Jsylvester@civitasmedia.com
“A responsible, reasonable 5 percent severance tax will provide certainty for the industry, will help Pennsylvania’s schools and could go a long way to making sure that the industry has a strong workforce that is grown and educated right here in Pennsylvania.” - Gov. Tom Wolf 18 // NEPA Energy Journal
Even after Pennsylvania’s newly minted governor was sworn in and settled into his office, gas drilling companies in the state’s Marcellus Shale fields continued hydraulic fracturing and drawing natural gas from deep below the ground. And even if Gov. Tom Wolf is successful in imposing a severance tax on the drillers, they will remain at their task, extracting the profitable fossil fuel from its earthen chamber to shoot it to market through miles of underground steel pipes. Those gas companies, which already pay an impact fee and other taxes to the state, might not like a new tax, but they would have to pay. In addition, in keeping with a campaign pledge, Wolf on Jan. 29 signed an order banning new drilling leases on public land, ending a short-lived effort by his Republican predecessor to expand the extraction of natural gas from rock buried deep beneath state parks and forests. The new Democratic governor said the moratorium was rooted in a “deep-seated and profound respect” for state parks. But there’s gold in the hills of Pennsylvania that are on private land. And sharing some of that gold with the state, via a 5 percent severance tax, would raise $1 billion, according to Wolf’s estimate, and he plans to put that money toward education and protecting the environment. “A responsible, reasonable 5 percent severance tax will provide certainty for the industry, will help Pennsylvania’s schools and could go a long way to making sure that the industry has a strong workforce that is grown and educated right here in Pennsylvania,” candidate Wolf wrote in a guest commentary in the NEPA Energy Journal last summer. “Pennsylvania’s natural resources should position the commonwealth to become an energy hub and magnet for investment and job creation,” Wolf’s press secretary, Jeffrey Sheridan, said on behalf of the governor. Sheridan said Wolf also would work to strengthen the rules governing drilling, increase enforcement of the rules, hire more inspectors and create a health registry to monitor health issues. Wolf believes he has the support of legislators on both sides of the aisle for an extraction tax. TAX FALLOUT It’s not likely that if the tax is imposed, drillers will flee the state. But that’s not to say they won’t scale back, according to Patrick Henderson, former Gov. Tom Corbett’s deputy chief of staff and energy executive. “When you tax something more, by definition there will be less of it,” Henderson said. “You’ve increased the cost to do business. Would all drilling and investment stop? No, of course not. But you will change the economics of many individual projects at the margins, where fewer will be viable than before the tax burden was raised.” He said that instead of hiring 100 people, a company might only hire 50. Instead of drilling 100 wells, it might drill 50. “Pennsylvania is currently right in the middle with total tax burden, which is a good place to be,” Henderson said.
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Erica Clayton Wright, a spokeswoman for the Marcellus Shale Coalition, a natural gas industry advocacy group, said Wolf’s proposal would not provide enough funding for schools and environmental protection, while reducing the gas supply. Other critics say the increased cost to drillers would be passed on to consumers. Henderson said Pennsylvania, under Corbett, levied multiple taxes and fees on the gas industry, making it the only state in the nation to implement an impact fee that had generated $630 million since November 2012. Wolf’s take on the issue differs with the Corbett view, a difference that was trumpeted throughout the gubernatorial campaign last year. Wolf’s said his proposal would draw an estimated $1 billion that the new governor wants to use for schools and the environment. But the Associated Press late last year reported that Wolf’s estimate assumes a wholesale price of gas that is much more than Marcellus Shale drillers can imagine. According to the AP, at current prices and production, a 5 percent severance tax would produce only from $525 million to $675 million a year, depending on the extent to which drillers would be permitted to deduct gathering costs. “Wolf relied on an August analysis by the Pennsylvania Budget and Policy Center, a progressive research group, which arrived at $1 billion by using federal estimates of what the benchmark price of natural gas will be in fiscal 2015-16,” the AP reported. “But Marcellus drillers have not been getting anywhere close to the benchmark.” The state’s current impact fee, which is a flat per-well fee, draws about $210 million per year into state coffers. Henderson, in his response to questions in December, said, “Under Governor Corbett – and contrary to the media barrage of the last few months – PA is actually investing more state funds in education than ever before. And under Governor Corbett, funding for the state DEP was increased and the first new funds for environmental grant programs were allocated since 2002. State funding for education and environmental protection are at or near all-time highs under Gov. Corbett.” Whether Wolf’s severance tax could provide enough funding for schools and environmental protection will be in the eye of the beholder, Henderson said. INDUSTRY VIEWPOINT Wright also pointed out, “The industry is already paying its fair share of tax through the impact fee tax and is contributing greatly to the financial health of the commonwealth.” She said the $630 million in industry tax revenue generated has been a lifeline to local governments across the state and has allowed state government agencies to make investments at no cost to taxpayers. She added that based on December gas prices, the impact fee tax was equivalent to a
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“Would all drilling and investment stop? No, of course not. But you will change the economics of many individual projects at the margins, where fewer will be viable than before the tax burden was raised.” - Patrick Henderson, former Gov. Tom Corbett’s deputy chief of staff and energy executive Solar Savings // 19
3.16 percent severance tax. She cited these facts as examples of how the industry already contributes to the state’s financial health: • $2.1 billion in state and local tax revenues. • $630 million of local Impact Fee Taxes being distributed broadly to various communities throughout the state’s 67 counties. • Well in excess of $1 billion in road investments from oil and gas operators. • Nearly 230,000 jobs directly tied to PA’s oil gas industry. • Natural gas utility rates in the commonwealth are less than half of what they were in 2008. • Pennsylvania consumers are enjoying gasoline prices a dollar less then were a year ago due to shale development in the U.S. Wright added that while the impact fee, based on the market price of natural gas and age of wells, has brought in a total of approximately $632.4 million, the 5 percent severance tax proposed by Wolf is a levy on the market value of natural gas removed from the shale formation. However, Pennsylvania natural gas has been and continues to get a significant price “haircut” due principally to regional pipeline constraints. “Yet severance tax proponents, including Wolf and others, have relied on the spot price of gas — not the well head prices that producers in the basin are actually fetching in the market,” Wright said. “As you know, when you increase the cost of doing business, there is an effect on output,” Wright said. “So yes, a new energy tax would curtail development in some areas of the formation where the economics are already tight. The important thing to recognize is that when there is a reduction in activity (rig count), there’s an associated impact on the supply chain. This includes local small and mid-sized businesses such as restaurants, hotels, supply and service companies and gas stations among others.”
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20 // NEPA Energy Journal
“Yet severance tax proponents, including Wolf and others, have relied on the spot price of gas — not the well head prices that producers in the basin are actually fetching in the market.” Erica Clayton Wright, a spokeswoman for the Marcellus Shale Coalition
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Scott Cannon gives a slide show presentation on the similarities between coal mining and fracking during informational meeting at the Pittston American Legion in November. Pete G. Wilcox | NEPA Energy Journal
Gas pipelines proposed to run under river raise concerns jsylvester@civitasmedia.com
When Scott Cannon discovered that there were two proposed pipelines to be drilled under the Susquehanna River, the PennEast in 2017 and the Diamond East in 2018, he became concerned with the environmental impacts of the lines through the farm and wetlands of Luzerne County, as well as the river. “The spot of the cross is just 1.7 miles from (the site of) the Knox Mine Disaster, which basically put an end to the anthracite era of Northeast Pennsylvania when miners lost their lives boring through the bottom of the riverbed,” said Cannon, a spokesman for the Gas Drilling Awareness Coalition. He said the lines are proposed to go through Wyoming near the Forty-Fort Airport, across to the Hudson section of Plains
22 // NEPA Energy Journal
Submitted photo
Photo shows proposed crossing under the Susquehanna River of PennEast Pipeline Co. gas line.
Township through a residential neighborhood, behind the Mohegan Sun casino and down to New Jersey. He said there are 10 layers of of old coal mines under the spot where the gas lines would cross the river, and putting the lines there could create a subsidence
or other problems. Both pipelines are parallel to the Transco Pipeline, which was built 60 years ago. The PennEast is roughly mapped out, but little information about the Diamond East is available, Cannon said. The Gas Drilling Awareness Coalition has joined with other
organizations in Pennsylvania and New Jersey in opposing five pipelines proposed to cross Luzerne County. At a meeting on Nov. 24 on the rights of property owners and how to file comments with the Federal Energy Regulatory Commission, there also was concern about two of the pipelines going under the river. On the Penn East Pipeline Project, Cannon quoted Eastern Pennsylvania Coalition For Abandoned Mine Reclamation CEO Robert Hughes, who said, “I believe that they should be concerned greatly that there could be the potential for mine subsidence, infiltration of surface water into the underground workings through fractured rock, excavation into the mine pool which could cause a new discharge to be created, or a breach into the levee system.”
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Prepare for the pipe
Everything you need to know about five pipelines projects planned for Luzerne County There’s a new superhighway system planned for Luzerne County, but it won’t carry cars and trucks. Five high-volume natural gas pipelines or pipeline modifications — which now exist only on paper and in the imaginations of three national builders — would move gas from the Marcellus Shale wells in Pennsylvania’s northern counties to customers in the South and around the world. The companies Williams, Crestwood Energy Partners and a corporate amalgamation called PennEast Pipeline Company have yet to begin the formal filing process, but these companies have outlined plans to move a combined 5.25 billion cubic feet of
24 // NEPA Energy Journal
gas each day. Estimates show the combined operators in the Marcellus are producing about 16 billion cubic feet per day. Each of these pipelines augments or contributes to an interstate pipeline, so they are beholden to the Federal Energy Regulatory Commission (FERC). FERC has a rigid application process, but once the commission issues a Certificate of Public Convenience and Necessity, it grants the operator the right to enforce eminent domain — meaning a local judge can order defiant landowners to sign real estate easements with builders. Companies typically avoid using eminent
domain; it puts a nasty spin on public perception. So they usually offer higher dollar amounts for the one-time property easement deals to get landowners on board early. Operators also strive to choose routes along existing pipeline rights of way or through low-population areas. Here’s what’s in store: ATLANTIC SUNRISE PROJECT Scope: Williams Transco proposes to build the 180-mile pipeline system from Harford Township in Susquehanna County to Transco’s main route in Lancaster County. Gas producers already have committed
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eline invasion JON O’CONNELL | JocoNNEll@civiTASmEdiA.com
to ship 1.7 billion cubic feet of natural gas each day. Three new compressor stations must be built to pressurize and move the gas — one in Lycoming County, one in Columbia County and another in Maryland. Other compressor stations are to be modified along Transco — which is made up of multiple lines running concurrently — to enable bi-directional flow. Destination: The original Transco, formally known as the Transcontinental Pipeline, was built in the 1960s to pump gas from the Gulf of Mexico region to customers in New York City. As most recent numbers show Pennsylvania outpacing Louisiana as the country’s No. 2 gas producer, operators have enough gas to send it customers down
south. A lot of the gas, about 350 million cubic feet each day, could go to the FERCapproved Dominion Cove Point export terminal in Calvert County, Maryland. Companies in Japan and India already have committed to buying Marcellus Shale gas from Cove Point. Cost: Williams estimates it will cost about $3 billion to build Atlantic Sunrise. In-service date: If approved, Atlantic Sunrise will be ready to go online in the later half of 2017, Williams says in documents filed with FERC, around the same time as the Cove Point Export terminal. PENNEAST PIPELINE Scope: PennEast Pipeline Company, is
made of six energy distribution companies including the Northeast’s own UGI Energy Services, one from Texas and four companies from New Jersey. The 105-mile pipeline is could carry up to 1 billion cubic feet of natural gas daily from where it connects with the existing Leidy Pipeline, a leg of the Transco that cuts through Dallas Township. Destination: PennEast would terminate in Mercer County, New Jersey. A series of interconnects along the way have been discussed, but not locked down. Gas delivered to New Jersey could easily be transported to the customers in New York City and Philadelphia.
—>> Solar Savings // 25
DIAMOND EAST EXPANSION Scope: The Diamond East is Williams’ own version of the PennEast, but the pipeline company based in Tulsa, Oklahoma, already has a jump on the project. Williams plans to expand existing pipelines systems with what are called “loops,” or extra pipe added to current pipeline corridors. Diamond East could add capacity for 1 billion cubic feet per day to the Leidy line. The pipeline improvements are planned for lines in Buck Township, Luzerne County, and southward. Destination: Like PennEast, the Diamond East terminus is in Mercer County, New Jersey, where it can be shipped to the customers in the big cities along the East Coast. Cost: Williams estimates Diamond East will cost between $500 million and $800 million to add about 50 miles of pipeline loop to and compressor station upgrades.
In-service date: Williams estimates, if all goes according to plan, workers will finish the Diamond East expansion by 2018.
30-mile Marc II pipeline, made of 30-inchdiameter pipe, to connect one transmission line in Sullivan County with the Leidy Pipeline in or near Dallas Township. Marc II could send between 700 million and 1 billion cubic feet of natural gas per day from wells in northern regions like Bradford County to into the Leidy system. Crestwood already has built the Marc I line through Sullivan and Bradford counties, which is operated by Central New York Oil & Gas and would feed into the Leidy. Destination: Access to the Leidy opens up huge possibilities for shipping gas to customers up and down the Eastern Seaboard. One Crestwood spokeswoman said, if infrastructure continues on its current path, gas soon may be able to reach New England states like New Hampshire and Connecticut where local utility companies have begun to build out their own infrastructure to feed off Pennsylvania’s gas. Cost: The cost to build the Marc II was not readily available, but one could compare the project’s scope and estimate it likely will cost between at least $1 billion to complete.
LEIDY SOUTHEAST EXPANSION Scope: Like the Diamond East project, the Southeast expansion by Williams is a “loop” project adding a combined 17 miles of pipe to increase Leidy’s capacity by about 525 million cubic feet per day. The 42-inch pipe will be laid in in Buck Township in Luzerne and Blakeslee in Monroe County. Other improvements include a six-mile and a seven-mile loops in New Jersey and compressor station modifications in Luzerne, Lycoming, Columbia and Monroe counties. Destination: Like the other projects, gas that moves through this expansion could serve cities like New York, New Jersey and Philadelphia. Cost: Williams expects the Southeast expansion to cost $610 million. In-service date: December 2015. MARC II PIPELINE Scope: Houston-based Crestwood Midstream Partners proposes to build the
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Cost: PennEast estimates its pipeline will cost about $1 billion to build. In-service date: Like Atlantic Sunrise, PennEast plans to put its pipeline in service in the second half of 2017.
LUZERNE COUNTY: PIPELINE CENTRAL THE BURGUNDY LINE, or the Williams Transco Leidy Pipeline, was built more than 50 years ago and serves as an anchor for several proposed pipelines through the region.
LAKE TOWNSHIP
LEHMAN
WILKES-BARRE
HUNTINGTON TOWNSHIP
UEHAN N A R SQ
ER
DORRANCE TOWNSHIP
SALEM TOWNSHIP
LEIDY PIPELINE ATLANTIC SUNRISE PENNEAST LEIDY SOUTHEAST DIAMOND EAST MARC II
KINGSTON TOWNSHIP
BEAR CREEK TOWNSHIP
IV
FAIRMOUNT TOWNSHIP
ROSS TOWNSHIP
SU
DASHED LINES represent augmentations and improvements to existing pipeline systems in Luzerne County. SOLID LINES are proposed pipelines that have yet to be built but are scheduled, if approved by a federal commission, to be completed within the next five years.
DALLAS TOWNSHIP
HOLLENBACK TOWNSHIP
BUCK TOWNSHIP
DENNISON
BUTLER TOWNSHIP
Source: Pipeline plan documents; Graphic: Jon O’Connell | NEPA Energy Journal
26 // NEPA Energy Journal
Community volunteers aid in gathering air samples Jon O’Connell | joconnell@civitasmedia.com
Trained volunteers found high carcinogen levels in the air around some Pennsylvania natural gas compressor stations Scientists and civilians have put their heads together to gather air-quality samples from gas and oil plants around the country — and what they found is somewhat troubling. In Pennsylvania, civilian volunteers found dangerous levels of cancer-causing substances like formaldehyde and benzene near some compressor stations in Susquehanna County. Using two methods, civilians living amid natural gas production were trained to operate testing devices and then sent out into the field where they gathered air samples to be analyzed and curated into a final report published in Environmental Health, a peer-reviewed journal. Volunteers took samples from production plants in five states: Pennsylvania, Arkansas, Colorado, Ohio and Wyoming. Out of the 10 formaldehyde tests taken in Susquehanna County, six showed levels higher than the EPA’s cancer risk. Out of four grab-style samples for benzene, just one showed exceedingly high levels of the toxin. These samples were taken at varying distances from compressor stations in Susquehanna County. The report is not without its critics. Pro-gas groups have dissected the it and say the test takers were biased at their core. But in the report, lead writer David O. Carpenter of the State University of New York, says the concentrations volunteers discovered at least is cause to investigate further. Community volunteers bring regional
Submitted photo
Scientists and civilians gathered air-quality samples from gas and oil plants around the country. In Pennsylvania, civilian volunteers found dangerous levels of cancer-causing substances like formaldehyde and benzene near some compressor stations in Susquehanna County.
knowledge to sampling, the report says. Volunteers tend to know what families complain gas production has caused them to become ill, what well or compressor sites have frequent problems and also what areas they can get close to without breaking the law. Locals tend to know rig or compressor station routines, too, so they can predict the best time to get out and take samples, the report says. Volunteers sought out places where people reported symptoms contingent with high formaldehyde levels in the air. “Symptoms reported by community members mirror the effects of acute formaldehyde exposure, which causes irritation of the eyes, nose, throat, and skin,” the report says. Volunteers also looked for places of high activity, places where they could hear hissing or clanking sounds, see odd-colored clouds in the air or ailing livestock. “The results suggest that existing regulatory setback distances from wells to residences may not be adequate to reduce human health risks,” the report concludes. It also says state regulators could
take stand to borrow from their playbook and employ the public to find oil and gas sites where dangerous toxins are escaping into the air. But some say the science propping up the research has been called fundamentally flawed. Katie Brown, a blogger for the industry-supported outreach agency Energy in Depth, said the organization that trained the community volunteers, Global Community Monitor, is radically opposed to hydraulic fracturing. “They say things like ‘we opposed fracking, and we want to see it banned,’” Brown said of Global Community Monitor. “And they’ve been doing these little bucket studies for quite a few years now.” The methods’ trustworthiness comes into question considering the wide-swinging inconsistencies in the test results, she said. “Volunteers found high readings in some areas and virtually no readings in other areas,” Brown said. Brown has had run-ins with the selfnamed bucket brigades before. Her agency had written about the Global Community Monitor in 2012 when the organization claimed a Colorado school was rife with carcinogens because a hydraulic fracturing operation was set up next door. “It’s not just us saying there might be problems with their research,” Brown said explaining the federal Environmental Protection Agency has questioned the bucket test method’s viability, too. With so much stacked against its methods, the report should be dismissed entirely, she said. On the other hand, the researchers said the report is not meant to serve as judge and jury, only “Testing informed by human health impacts … contrasts with state efforts, which are limited by access to property, sources of electrical power, fixed monitoring sites and the cooperation of well pad owners and operators,” the report says. “In these ways, community-based monitoring can extend the reach of limited public resources.” Solar Savings // 27
28 // NEPA Energy Journal