Marcellus Shale Development Continues in PA After Natural Fuel Gas Company Reworks Pact

National Fuel Gas Company logoMarcellus Shale natural gas will continue to be developed in Pennsylvania after Natural Fuel Gas Company announced that a pact with a Texas company has been reworked.

The announcement was made on Monday, June 13th. Marcellus Shale natural gas development will proceed in the north-central Pennsylvania counties of McKean, Elk, and Cameron. The pact is between Dallas affiliate IOG CRV – Marcellus LLC and Seneca Resources Corp. Seneca Resources Corp. is the production and exploration subsidiary of National Fuel (NYSE: NFG), which is based out of Williamsville.

In a news release, the companies stated that an agreement was reached in regards to an amended extension of the joint development agreement the companies have for assets in McKean, Elk, and Cameron counties. So far, 39 joint development Marcellus Shale wells were completed and went to sales or were drilled and are nearing completion. There are a total of 75 joint development Marcellus Shale wells, so 36 will be developed under the amended agreement. In addition, IOG was given the option to partake in a 7-well Marcellus pad to be completed before December 31st, 2017. If IOG opts to take part in the 7-well Marcellus pad, there would be a total of 82 wells under the joint development agreement.

Presently, IOG has an 80% working interest in the joint development wells. The other 20% working interest is held by program operator Seneca. The contract’s royalty structure has also been amended.

The President and CEO of National Fuel Gas Company, Ronald Tanski, issued the following statement regarding the deal, “For National Fuel, it allows us to leverage the competitive advantage of our low cost, fee acreage in the Marcellus and reduce the level of capital investment in our upstream business over the next two years, while maintaining operational efficiencies and providing the throughput necessary to support our pipeline expansion projects. Given National Fuel’s large Appalachian footprint and the alignment of our strategic goals, we think there could be additional opportunities to work with IOG in the future to accelerate value creation for our shareholders.”

On June 10th, National Fuel shares closed at $56.04.

Shell to Build Ethane Cracker Plant in Beaver County, Wolf and Baker Issue Statements

Shell logoShell Chemical Appalachia has decided to build an ethane cracker plant in Pennsylvania, and both Governor Tom Wolf and Representative Matt Baker (R-Tioga/Bradford/Potter) issued statements supporting Shell’s decision.

Natural gas production may increase, and more jobs could become available in the region as a result of the ethane cracker plant being built in Beaver County. According to Shell in a statement, “The complex will use low-cost ethane from shale gas producers in the Marcellus and Utica basins to produce 1.6 million tonnes of polyethylene per year.” Specifically, the plant will be built where the Horsehead zinc smelter used to be in Potter Township. The site was purchased by Shell for $13.5 million in 2014. The cracker will be at the site, as will two units that convert ethylene into polyethylene pellets. Polyethylene is used in automotive components, food packaging, containers, and much more. In addition, there will be a natural gas-fired power plant, a wastewater plant, and a loading dock.

The ethane cracker plant is a multibillion-dollar project. In Beaver County alone, there will be 600 permanent jobs created at 6,000 construction jobs during the building of the plant. The main construction is expected to begin in approximately 18 months. Commercial production should start sometime within the next ten years, Shell said in a statement.

Shell’s decision was five years in the making. In 2012, Shell decided on the Beaver County location. At that time, the then-Governor Corbett (R) worked on a tax break in which Shell would receive a $2.10 credit per barrel of ethane it purchased from gas and oil operators in Pennsylvania. Additionally, Shell will get tax cuts and exemptions for fifteen years due to the fact that the site is a Keystone Opportunity Zone.

Representative Matt Baker (R-Tioga/Bradford/Potter) issued the following statement on Tuesday, June 7th, regarding Shell’s decision to build an ethane cracker plant in Pennsylvania, “With the need for large amounts of natural gas in the plastic manufacturing process, this type business should lead to an increase in production of natural gas from our area… With the natural gas industry taking hits the past couple of years with lower gas prices, we have had some companies move out of the area and others decreasing their job force. I am hopeful the new Shell plant will help put more people back to work and even create new ancillary jobs in our region.”

According to Baker, a third-party study found that as many as 17,500 direct, indirect, and induced jobs could result from the plant. Baker went on to say the following, “This is a business deal that has been years in the making, and thanks to sound business policies we have enacted and our determination to keep business taxes in check, the people of Pennsylvania will benefit from an influx of new job opportunities that will reach well beyond the borders of Beaver County.”

On Tuesday, June 7th, 2016, Governor Tom Wolf issued a statement after Shell told him they are going to build an ethane cracker plant in Pennsylvania. Governor Tom Wolf’s statement may be read in full below:

“Over the past four years, the Commonwealth of Pennsylvania has worked with Royal Dutch Shell to finalize plans to construct an ethane cracker plant in Western Pennsylvania, and this morning I was notified that Shell has taken the final step to move ahead with this game-changing plant and create thousands of jobs in Pennsylvania.

“The commonwealth began its efforts on this project in 2012, and I would like to thank former Governor Tom Corbett and his Secretary of Community and Economic Development C. Alan Walker for all of their efforts to bring the plant to Western Pennsylvania.

“Since first taking office, I have worked in close collaboration with my Secretary of Community and Economic Development Dennis Davin, the Pittsburgh Regional Alliance, local officials in Western Pennsylvania, and Royal Dutch Shell to make the proposed plant a reality. The commonwealth engaged the company with the goal of creating jobs, spurring economic development, and taking the next steps to connect the energy industry with long-term, sustainable economic growth.

“My administration is committed to creating jobs in the energy industry through responsible, well-regulated extraction and long-term, creative industrial growth. We have worked to develop strategies for safe and responsible pipeline development that brings resources to markets and facilities and we have prioritized the Shell plant to show the world that Pennsylvania is a leader in energy manufacturing and downstream production.

“The success of this project is part of a much-needed, longer term plan to translate our abundant resources to make Pennsylvania a leader in downstream production. The commitment of the Shell cracker plant in Western Pennsylvania is an important step toward this goal.

“This critical effort spanned four years, and two administrations, and today I want to congratulate all of those involved, including both Republican and Democratic officials, and thank Royal Dutch Shell for providing this unique and exciting economic development opportunity to the people of Western Pennsylvania.”