February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Transcript of February 2015 Gas & Oil Magazine-Pennsylvania Edition

Page 1: February 2015 Gas & Oil Magazine-Pennsylvania Edition

FEBRUARY 2015 • A FREE MONTHLY PUBLICATION

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Page 2: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Page 4: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Subscriptions Now Available!Fill out the form below and mail to:

Gas & Oil Magazine212 E. Liberty St. • Wooster, OH 44691

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Table of Contents

EXECUTIVE EDITOR

Ray Booth9)VV[O'KP_JVT�JVT

CONTRIBUTING EDITOR

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“Gas & Oil” is a monthly publication jointly produced by Dix Communication newspapers across Ohio & PA. Copyright 2015.

Pete Kiko72PRV'[OL�KHPS`�YLJVYK�JVT

ART DIRECTOR

Andrew S. Dix(:+P_'KP_JVT�JVT

PUBLISHER

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Christy Penland(JJV\U[�,_LJ\[P]L

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ADVERTISING

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DIGITAL CONTENT MNGR

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Elizabeth Horne,OVYUL'[OL�KHPS`�YLJVYK�JVT

LAYOUT DESIGNER

AMERICANS SUPPORTS NATURAL GAS

THE BIG PICTURE: PENNSYLVANIA’S FOCUS

COMMONWEALTH RULES AGAINST GROUP

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API CREATES MIDSTREAM DEPARTMENT

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BETTER HEALTH CARE IN SHALE FIELDS

SHALE GAS FUELS PENNSYLVANIA JOB GROWTH

ZINKAN PRODUCTS FOR GREEN DRILLING

ILLINOIS MOVING FORWARD ON SHALE DEVELOPMENT

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A new poll released by Honeywell finds an over-whelming majority of Americans agree economic growth in the United States is being driven by the

development of natural gas. Accordingly, the poll also finds majority of Americans supporting the development of addi-tional of infrastructure in order to expand the use of natural gas in the country.

Conducted by Ipsos Public Affairs for Honeywell’s UOP business, the poll surveyed more than 2,000 adults. Honeywell UOP supplies technology and equipment to natural gas pro-ducers.

A “supermajority” of 75% believes natural gas exploration and development is providing economic resurgence in the na-tion, specifically in sectors including manufacturing, according to the survey. 56% of respondents supported expanded de-velopment of infrastructure, including processing facilities to clean natural gas and transportation pipelines to bring that gas to consumers.

“The survey results demonstrate that most people recog-nize the importance of natural gas to the U.S. economy and support investment needed to expand its use,” said Rebecca Liebert, senior vice president and general manager of UOP’s Gas Processing and Hydrogen business. “We continue to see robust demand for our technology both here in the U.S. and globally as natural gas becomes a greater solution to energy and other needs.”

ADDITIONAL HIGHLIGHTS FROM THE SURVEY:• When asked about the two most appealing reasons to

use natural gas, respondents most frequently said that it reduces energy dependence on other countries (48 per-cent), while more than one-third (35 percent) agreed that it costs less than other sources of energy fuels. Nearly one-third (30 percent) said it is better for the environment than other energy fuels. Almost one quar-ter (23 percent) said it is more abundant and accessible

than other fuels, and nearly one-fifth (19 percent) said creates jobs and powers economic growth.

• Nearly 6 in 10 (57 percent) of respondents said that natural gas is the most cost-effective way to heat homes, eclipsing electricity (20 percent), wood stoves (19 per-cent) and fuel oil (3 percent).

• Across all categories, interest in using natural gas out-paces current usage. A majority of adults report being very interested or somewhat interested in natural gas for either heating the home (63 percent) or for cook-ing (58 percent). Nearly half (46 percent) report interest in acquiring a natural gas-powered clothes dryer, while more than one-third indicate interest in natural gas for a BBQ hook-up (40 percent) or to power a car or vehicle (36 percent). The greatest interest in new uses for natu-ral gas comes from people who already use it.

• Currently, 6 in 10 adults report they use natural gas for at least one household task, with home heating the most common at 49 percent. Nearly 4 in 10 (37 percent) re-port using natural gas for cooking, with either a stove or oven. One-fourth (24 percent) report using natural gas for a clothes dryer, and 1 in 10 (11 percent) use it as barbecue hook-up.

With an influx of industry related jobs, capital investment and tax revenues generated from the continued development of shale formations across the Appalachian Basin – and in de-veloping areas across the country – the results of the poll are encouraging to industry advocates.

“Americans understand the benefits of natural gas and sup-port greater access to this clean and abundant domestic re-source,” said Erica Bowman, vice president of research and policy analysis for America’s Natural Gas Alliance. “It’s en-couraging to see that people by and large know that natural gas offers intrinsic environmental and economic benefits,”

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Adam Pope Bravo Group

For decades the United States has relied heavily on foreign energy, specifically oil and natural gas. The discovery of Mar-

cellus Shale in Pennsylvania created an opportu-nity to change that and revamp our energy policy. In 2014, the state of affairs in Pennsylvania made this development fea-sible: citizens continued to support enhanced energy security in a post 9/11 world, and legislators recognized the Marcellus Shale as a potential revenue enhancer during the recession, and its ability to affect almost every corner of government and industry in the Commonwealth.

If done correctly, Pennsylvania has the opportunity to be-come an energy powerhouse.

In 2015 Pennsylvania finds itself embracing development of all its resources, including natural gas and natural gas liq-uids. The outgoing governor’s administration made an effort to streamline the regulatory process and implement strict operating guidelines to create certainty for the energy indus-try. The legislature created an impact fee that allows funds to support the most affected areas with active development, but also allows the non-affected areas of the Commonwealth to benefit. These policies and legislative actions were an effort to create a social license for companies to operate in a state that was stricken with fear over natural gas development.

Because energy costs are low as a result in Pennsylvania, the ability to attract new industries given our natural resources is high. Unemployment is the lowest it has been in years, at 5.1%. Natural gas industry companies -- along with those in the chemical and plastics industries such as DOW Chemical, pharmaceutical companies like Sanofi-Pasteur and Merck, and building trades and labor organizations -- recognize the assets available in the Commonwealth. But if the energy cli-mate changes here we stand to lose those benefits and thus the ability to compete with other states in the economic develop-ment arena.

Creating prohibitive policy or policy that adds downward pressure to a market that is already stressed is not in the best interest of Pennsylvania.

Concern is growing, given the current oversupply of natural gas, the 12-month estimated cost of natural gas at $3.08 per

MMBTu at the Henry Hub terminal, the U.S. Energy Informa-tion Administration’s report from the first week of January indicating production slowed to under 70 Bcf/d, and the fact that rig counts are dropping around the country, especially in liquid rich locations like the Bakken and the Eagle Ford.

Couple this with concern among the industry about poten-tial regulatory and policy changes in Pennsylvania, and there’s a real chance of huge losses in capital investment. Factors that could further cripple our appeal to investors are the price of natural gas in Appalachia, where some companies are selling natural gas for as low as .60 cents, which creates a significant gap. We have seen a trend start for companies like Rex En-ergy, Range Resources and Alpha Natural Resources, which are all reducing capital expenditures. Less investment means less wells drilled, which means less money for the impact fee and ultimately, less revenue for Pennsylvania.

Then there’s the most devastating potential blow: a chance that the incoming governor’s administration could re-write the regulatory handbook on operations in Pennsylvania.

But there are steps we can take to make sure 2015 continues the energy boon Pennsylvania. If the state allows demand to increase by utilizing our home grown energy within the Com-monwealth, even a decrease in crude prices will keep natural gas competitive. This competitive edge means ability for the Commonwealth to keep capital in the state, for companies to continue to invest billions, and for Pennsylvanians to continue to directly benefit.

In order for this positive trend to be sustained, the new ad-ministration must look at the big picture and not be singularly focused on a severance tax. Pennsylvania has a long and vital history of developing its natural resources -- in fact, our econ-omy was built upon it -- and this development must continue if we are going to gain a true economic advantage.

Adam Pope is a Senior Director at Bravo Group and a well-respected and versed member of the energy industry. Prior to joining Bravo Group, Adam served as the Community Liai-son Officer for EXCO Resources, a leading natural gas and oil company. In this role, Adam managed all government and public relations for the company.

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Dan Garcia - AttorneyKyle A. Webster contributing

A Pennsylvania court ruled in favor of the oil and gas industry… sort of. On January 7, 2015, the Com-monwealth Court, one of two intermediary courts

for this state, ruled against the Pennsylvania Environmental Defense Foundation (“PEDF”), a non-profit organization that states its mission as, “educating the citizens of Pennsylva-nia about state and federal environmental laws, and enabling citizens to use these laws to protect and improve the environ-ment.”

In the case, PEDF brought suit against the Governor and the Commonwealth, alleging, among other things, that using funds from the lease of oil and gas rights under state-owned lands in order to balance the state budget was a violation of the state constitution. The primary argument lies in Article I, Section 27 of the Pennsylvania Constitution (“The Environ-mental Rights Amendment”), which declares that “Pennsyl-vania’s public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and main-tain them for the benefit of all the people.”

PEDF’s argument is that the royalties collected from drill-ing under these public lands must be a part of the Public Trust. The particular laws that PEDF challenged vested the power to distribute these funds solely in the General Assembly.

The Commonwealth Court ruled that these provisions were not unconstitutional. Further, the Court ruled that the 1995 Conservation and Natural Resources Act exclusively vests the power to lease public lands in the Department of Conserva-tion and Natural Resources (“DCNR”), and the Governor does not have authority to usurp this power.

What makes this case so odd to most observers is not the outcome of this case, but how the court got there. Also, on most points, this was a unanimous decision by seven judges of the Commonwealth Court, which makes the rationale a bit more puzzling. In analyzing the Environmental Rights Amendment, the Court did not turn to what most would view as the precedent on such matters, the 2013 Robinson decision that overturned parts of Act 13, the 2012 Oil and Gas Act. Rather, they held that, because only three Justices agreed to it, the test set forth in that decision was not precedential, and instead relied on a forty-year old case, Payne v. Kassab. This

test was explicitly criticized and assumed to be overruled by the Robinson decision.

The Payne test puts forth three questions in assessing whether a government action violates the Environmental Rights Amendment that basically ask if environmental im-pacts have been considered and then balances the environ-mental impacts to the benefits of the action. This decision ef-fectively puts this test back in play, seemingly replacing the far more rigid Robinson test.

While this seems like a win for oil and gas companies, there are two concerns here. First, seeing the entire Commonwealth Court reinstate a constitutional test most legal observers as-sumed had been overturned by the Supreme Court is both startling and dangerous precedent. Granted, the way the Court justified this was not without finesse and rationale, but it still is concerning. It also leaves in limbo what test actu-ally does stand, something the Pennsylvania Supreme Court is likely to decide on appeal. Secondly, the largest owner of land in Pennsylvania is the Commonwealth. Vesting that en-tire power in one administrative department without room for much oversight (beyond the legislature’s ability to change the law, an unlikely prospect at this point) seems problematic and against the best interests of the people of the Commonwealth, including the oil and gas industry. Really, this was a win for bureaucracy and removed any possibility of a constitutional challenge to the powers of the legislature and the DCNR as above all other citizens, including oil and gas companies, when it comes to making decisions regarding state-owned lands. At the end of the day, oil and gas companies may not care where the royalties from drilling under state-owned lands end up, but they do care who gets to make these decisions and what voice they, and other citizens, have on such matters.

There is much more to this case worthy of analysis, but for now the outcome is likely in the hands of the Supreme Court. There are currently two vacancies on the bench, so where this ends up could very well be decided by the next election. Let’s just hope the Supreme Court comes to a similar decision, but by better means.

Dan Garcia is an attorney with Leech Tishman Fuscaldo and Lampl in Pittsburgh, PA and can be reached via email at [email protected]

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Pennsylvania and Ohio occupy enviable positions at the forefront of America’s shale energy revolution. And membership on the list of shale energy producing

states definitely has its privileges.In Pennsylvania, the energy industry supports 339,000 jobs,

contributes $34.7 billion annually to the state economy, and saved school districts over $45.5 million on energy costs be-tween 2012 and 2013 -- enough to employ over 480 teachers.

Economic benefits extend beyond the energy sector to en-compass businesses of all sizes up and down the larger oil and natural gas supply chain.

A recent American Petroleum Institute survey identified 1,347 businesses -- many of them small and midsized – involved in Pennsylvania energy development, supplying the industry with everything from transportation and uniforms to account-ing services and environmental consultations.

In Ohio, employment in core shale industries, such as pipeline construction and well drilling, increased 88 percent from 2011 to 2014, according to the Ohio Department of Jobs and Family Services Quarterly Shale Report. Those jobs paid $25,000 more annually than jobs in other Ohio industries. Similar to Penn-sylvania, the state’s public school districts could employ 700 teachers with the $60 million in energy savings they enjoyed due to the affordable supply of shale energy unlocked through hydraulic fracturing and horizontal drilling.

Polls show Ohio and Pennsylvania residents appreciate the connection between energy development and economic growth. Strong majorities of registered voters (90 percent Ohio; 94 percent Pennsylvania) agree that increased produc-tion of domestic oil and natural gas resources could lead to more U.S. jobs.

Job creation, wages, economic growth, and taxpayer savings – every key economic indicator has benefitted from shale energy development in Ohio and Pennsylvania.

Yet potential tax increases in both states could quickly stifle energy-driven economic growth. Any proposal to impose new or increase existing severance taxes on the shale indus-try threatens the significant value-added economic investment that has generated revenue under the states’ current, successful tax structures.

Pennsylvania’s shale energy industry has generated over $2.1 billion in state and local taxes. Additionally, the state has a local impact tax in place for every shale drilling site in the state, and it’s distributed more than $630 million to communities since 2012- including more than $224 million in just 2014.

Meanwhile, unconventional development in Ohio generated nearly $1.5 billion in federal and state revenue in 2012 alone. This includes more than $910 million in state and local taxes or the equivalent of about 3.6 percent of the state’s $25 billion in 2011 revenues.

State legislators considering increasing taxes on shale devel-opment should be mindful of the maxim “if you want less of something, tax it.” Higher taxes on energy would undermine all the direct and indirect benefits that shale development pro-duces, including private investment and job creation that has provided such a shot in the arm to each state’s economy.

Leaders in Ohio and Pennsylvania should focus on policies that encourage energy-driven economic growth and reject tax proposals that could stifle energy production and the jobs that go with it.

Stephanie Catarino Wissman - Executive Director Associated Petroleum Industries of PAChris Zeigler - Executive Director Associated Petroleum Industries of Ohio

Page 13: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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WASHINGTON – The American Petroleum Insti-tute has announced the creation

of a Midstream Department that will focus on issues related to energy infrastructure and the trans-portation of oil and natural gas. Harry Pefanis, president and COO of Plains All American, will chair the commit-tee made up of API member company representatives that will oversee the work of the Midstream Department.

“In order for America’s oil and natural gas renaissance to continue, we need a world class infrastructure system to deliver that energy to consum-ers,” said API President and CEO Jack Gerard. “Creating a division within our organization focused on midstream issues will enable the industry to address the critical issues around energy infrastructure.”

The Midstream Department will encompass API’s policy work on the transportation of oil and natural gas by pipelines, rail, ship and other methods. These areas were previously split between API’s Upstream and Downstream departments. Robin Rorick, who has nearly 20 years of experience in the oil and natural gas industry, will lead the department as Group Director of Midstream and Industry Operations.

“American families and businesses rely on oil and natural gas every day, and it takes a strong and diverse sup-ply chain to meet America’s needs,” said Rorick. “Every method of transportation that we use has an important role to play in the safe, reliable and efficient movement of oil and natural gas from the wellhead to consumers.”

Rorick joined API in 1996 and for the last five years has worked as API’s Director of Marine and Security, with respon-sibility for maritime transportation issues and emergency response. A graduate of the College of William and Mary and then later Johns Hopkins University, Rorick lives with his family in Fairfax, Virginia.

API represents all segments of America’s oil and natural gas industry. Its more than 625 members produce, process, and distribute most of the nation’s energy. The industry also supports 9.8 million U.S. jobs and 8 percent of the U.S. economy.

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Page 14: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Rep. Mike Turzai, Speaker of the House, Pennsylvania

The ongoing impact of career-creating natural gas from the Marcellus and Utica Shale plays has had on Pennsylvania fam-

ilies can never be repeated enough.During some of Pennsylvania’s darkest economic days, the

natural gas industry brought more than 50,000 families depend-able paychecks through leasing their private property, resulting in what today brings more than $800 million annually to these residents.

Overall, nearly 240,000 Pennsylvanians are now working in or supporting shale development at incomes well above our state average while the industry supplies more than $2billion annu-ally in revenues to local and state government. The benefits to energy consumers, school districts and infrastructure are nearly immeasurable.

But Pennsylvania’s leaders would be remiss in stopping to admire what has already been done. To truly fuel a 21st cen-

tury Pennsylvania that makes the Keystone State a destination for job creators and career seekers, both political and industry leaders must develop, articulate and push a shared vision for our future.

It starts by recognizing that more than double that many jobs and far greater revenue could be created by allowing gas compa-nies to continue to invest in the Marcellus and Utica plays here.

Ultimately, creating more jobs and contributing further to the budding Pennsylvania manufacturing renaissance doesn’t magi-cally happen in a vacuum. It requires the right policies are put in place, including a commitment from state government to allow the industry grow without fear of unique or punitive taxation and regulation.

Policies like the 2012 Pennsylvania Resource Manufacturing Tax Credit were created to help industries associated with our natural gas industry grow and create stable jobs and career op-portunities.

This program can help secure Shell’s planned ethane cracker plant in Beaver County, which has the potential to reindustrial-ize an entire region of the state by producing ethylene used for manufacturing a variety of products, including footwear, tires, diapers and detergent, and a wide variety of other goods.

To secure more job-creating programs like these, the Pennsyl-vania energy revolution must be extended directly throughout the entire state, especially the Philadelphia region.

Philadelphia’s unique and robust railway and port infrastruc-ture make it an ideal gateway to the world, factors not lost on the North Dakota Bakken oil formation industry that are already using it as a main transit point.

With policies to allow renewed private investment in the Philadelphia region’s extensive railway network and aging infra-structure, there should be little doubt natural gas can help turn the region into a global energy hub.

Already in the works is Sunoco Limited’s pipeline that will fun-nel nearly 300,000 barrels per day of natural gas liquids (NGL) to Philadelphia’s Marcus Hook Industrial Complex. And that’s just the beginning.

From Beaver to Bradford and Pittsburgh to Philadelphia, a vision of extending Pennsylvania’s Marcellus and Utica Shale plays into the global economy will ensure Pennsylvanians every-where in the state benefit from our vast natural resources.

It is now up to state’s leaders to decide whether we will build upon that vision to fuel a 21st century Pennsylvania.

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Page 15: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Joe MassaroEnergy in Depth - PA

It’s been long known that in today’s world, physical and mental health is much more related to money and income than any-

thing else. This is largely because of our ability to treat disease and illness – given you have, or can afford health care. That’s why a recent study conducted in Pennsylvania showed that since the shale industry began developing in the Common-wealth, more Pennsylvanians have been able to afford quality healthcare thanks to the well-paying jobs provided by the oil and gas industry.

The health study, which was released by the Center for Ru-ral Pennsylvania looked at the impact of Marcellus Shale de-velopment on public health in the northeast and southwest regions of Pennsylvania – Specifically: Bradford, Lycoming, Greene and Washington Counties. Overall the study found nothing definitive to link drilling with negative health impacts. However, as previously stated, the study found that more peo-ple had access to health insurance due to the higher paying jobs across the state, which positively impacted public health in the regions studied.

The study itself focused on trends, and then supplemented the quantitative data with information obtained from regional focus groups held with health, housing and human service pro-fessionals. One of the participants in the northeastern focus group explained how Marcellus shale development has led to more individuals in their community having health insurance:

“…They’ve been great for business. When you speak to our director of occupational health, he will tell you that they are very good payers, that they hold to their standards very

tightly, that initially one of the concerns about this developing industry in our areas was these horrendous trauma injuries, but they have not found that to be the case because safety is such a primary concern of the industry. …I was interviewing people within the health system before today and they said that there is a positive trickledown effect when it comes to our payer mix. With the natural gas industry developing and gain-ing a foothold here, people who were locally employed here and other industries, they are moving into higher paying jobs, which is opening up their old jobs, which typically—employer based health insurance. We’re seeing an improvement in our payer mix. As people then move into their jobs, it’s the shell game, but more people are gaining employer based healthcare as a result.”

Years of other research has also supported the link between employment and improved health. For example, the Robert Wood Johnson Foundation’s “Health Policy Snapshot” series recently showed that “a stable, well-paying job leads to better health.” It also noted that employment enables individuals to provide their families with “nutritious foods,” “quality child-care,” and “educational opportunities,” all of which help im-prove health. According to RWJF, laid-off workers are “54% more likely to have fair or poor health” than those who are employed.

Since the first successful well was drilled into the Marcellus shale a decade ago this industry has been a blessing to resi-dents of the Commonwealth and as more development takes place we’ll continue to see these benefits ripple through com-munities.

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Page 16: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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-QD�*TQYVJNathan Benefield Commonwealth Foundation

For decades, Pennsylvania has been plagued by slow eco-nomic growth. The Keystone State lags the nation—rank-ing 49th, 45th, and 48th, respectively—in job, income, and

population growth since 1970. “Brain drain,” a trend of work-ers leaving the state to find employment elsewhere, continues to plague the commonwealth. Just last year, Pennsylvania lost a net 31,400 in state-to-state migration, according to the Census

Gas&Oil14

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But recently, there has been a bright spot with the rise of natural gas extraction in the Marcellus shale formation.

It’s indisputable that where there is Marcellus shale drill-ing there has been robust economic growth. Over the past six years, Pennsylvania counties with Marcellus shale drilling led the state in job growth along with growth in workers’ wages.

The most recent data from the Bureau of Labor Statistics shows that counties with more than 200 Marcellus shale wells dwarfed the rest of the state in job and wage growth from 2008 to 2014.

• Marcellus shale counties had, on average, 8.7 percent em-ployment growth. Counties with no Marcellus shale activ-ity had 0.6 percent job growth

• Marcellus shale counties averaged 29.9 percent growth in total wages. Counties with no Marcellus shale activity had less than half that amount.

• Average weekly wages among all jobs grew in Marcellus shale counties by an average of 20 percent, compared with 11 percent wage growth in non-Marcellus counties.

4See graph on page 15

This boom has been apparent in the Northeastern and Southwestern parts of the state, where the Marcellus shale formation lies. Susquehanna County in the Northeast led the state in both total wage growth and average weekly wage growth, while neighboring Sullivan County led in employment growth. Greene County in the Southwest ranked second in all three measures of economic growth.

Some—including Pennsylvania’s Governor-elect Tom Wolf—see this boom as an opportunity for government to cash in and solve some of the state’s looming fiscal challenges. Advocacy groups are calling for new severances taxes on nat-ural gas, on top of a recently enacted impact fee.

Such a severance tax will make Pennsylvania less attractive for gas drillers. This tax increase will not only hamper jobs and wages in the industry, but will victimize Pennsylvania landown-ers whose royalty checks will shrink and small business owners who provide products and services to gas drilling industry.

Pennsylvania has already lost ground to other states. In the 2013 Fraser Institute’s Global Petroleum Survey the state ranked 58th in attractiveness to invest, down 24 spots. When West Virginia increased its severance tax drilling, activity de-clined, according to the Pennsylvania Independent Oil and Gas Association. Such a policy in Pennsylvania would dim one of the few bright spots in our state’s economy.

Much of the push for a severance tax is based on a myth that gas companies aren’t paying their “fair share,” and that Penn-sylvanians aren’t truly benefiting from the industry. In reality, gas companies paid an estimated $810 million in royalties to landowners in 2013, have contributed $500 million to road re-pairs, and have paid billions in existing state taxes.

Gas drillers face the same tax climate common to every other Pennsylvania business, including the highest effective corporate income tax rate in the industrialized world.

Despite these facts, special interests lobbying for govern-ment handouts continue their calls for new taxes and fees. These interest groups neglect to mention the real harm that will come as a result of punitive taxes.

For starters, shale gas has reduced energy costs dramatically, saving Pennsylvania families thousands of dollars every year. Excessive taxation would effectively raise energy costs across the state, as those costs are passed on to consumers.

Natural gas taxes would also hurt small businesses, like New Pig Energy in Blair County—a company that manufacturers well pad containment products. New Pig Energy vice presi-dent Beth Powell says, “Marcellus Shale is 100 percent of our business. Our employment has more than doubled since we started. We are up to 23 employees.” But if a natural gas tax stifles drilling, New Pig’s employees could lose their jobs.

Unfortunately, the threat of a job-killing energy tax looms over all Pennsylvania—workers in the drilling industry, busi-nesses that provide related products and services, landowners, and families struggling to make ends meet while heating their homes.

Throwing cold water on an industry fueling Pennsylvania’s economic growth is not only unfair, but will do far more harm than good.

Nathan A. Benefield is vice president of policy analysis for the Commonwealth Foundation (CommonwealthFoundation.org), Pennsylvania’s free market think tank.

Marcellus Counties

(More than 200 wells)

Marcellus Shale Impact on Job and Wage GrowthPercentage Growth, 1st Quarter 2008 to 2nd Quarter 2014Average Weekly Wage

20.10

13.84

10.77

Minor Marcellus Counties

(Less than 200 wells)

Non-Marcellus Counties

Source: Bureau of Labor Statistics Get the data http://cf.datawrapper.de/Q9bPQ/1/#0

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Page 18: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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TWINSBURG, OH -- Zinkan Enterprises, a North-east Ohio company since 1981, has released a line of WellREADY™ biocides, friction reducers and pipe-

line/well pipe scale inhibitors to be used by the oil and gas in-dustry during every phase of the hydraulic fracturing process.

Throughout its history, Zinkan Enterprises has manufac-tured chemicals for use in water treatment, coal mining, and other industrial and commercial endeavors. Headquartered in Twinsburg, Zinkan has manufacturing and distribution loca-tions across the United States as well as in Europe and China.

Biocides are sophisticated antiseptic solutions that kill bac-teria in the water used during the fracturing process. Jerry Willnecker, Market Segments manager for Zinkan, explained, “When you pump the water and sand far down into the earth, you are trying to create pressure fractures that allow the re-lease of natural gas held in the shale. The conditions a mile or more down into the earth are ‘anaerobic’ – meaning there is no oxygen. However, there are bacteria that can live in the earth in these conditions by feeding off minerals such as iron, nitrates, and sulfur as well as old organic material. Water pumped into the well environment can trigger these bacte-ria to multiply. Under certain conditions, many air-breathing (aerobic) bacteria can also become anaerobic, which means that even if no bacteria are in the wellbore beforehand, this proliferation of bacteria can be triggered by pumping in water

that contains these types of bacteria. These changeling bacte-ria may exist naturally in the lakes, streams, and ponds sup-plying the source water. If all these bacteria are allowed to thrive, detrimental effects can occur in the well and result in well souring. Adding the sand used to support the “fractures” also provides a large total surface area on which these bac-teria can grow. Such a newly contaminated well very rapidly loses productivity since the resultant slime and scales form a barrier to the free flow of the gas.”

Fortunately, Zinkan Enterprises has extensive experience in determining the biocides that work best for any particular well and collaborates with well operators to determine which of the company’s range of biocides will have the greatest effi-cacy. The conditions considered when choosing a biocide, are the mineral content in the water, the nature of the other fluids used in the fracturing process, the type of sand used, the depth of the well and the nature of the layers of rock or ground be-ing drilled through.

“Most companies doing the drilling understand their own needs,” Willnecker said, “but our process engineers consult closely with them. We also gather water samples at various times and from various locations at the well site to ensure the bacteria and well remain in a controlled condition. We are able to prescribe the right formulations for individual condi-tions. Some of the biocides are quick acting, while others are longer-acting.”

Nearly all of the biocide products supplied by Zinkan for downhole use are in liquid form and require no mixing or complex gas-to-liquid generating systems. They are ready for immediate on-site use by the well operator. WellREADY™ 006 VigorOX is an example Zinkan biocide that has been ap-

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Page 19: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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proved by the FDA and used for years in other industries for sterilization, such as in the meat processing industry. Unlike bleaches and many other biocides, properly applied, it fea-tures an extremely effective rapid-kill formulation that has the desirable “GREEN” environmental characteristics of very low persistence and no residual toxic byproducts.

Besides the biocides, Zinkan supplies other products that contribute to safe, efficient wells.

“We carry a line of friction reducing chemicals,” says Will-necker. “These help ensure the water and sand that fracture the well flow smoothly. The smoother the flow, the more ef-ficient the hydraulic pumps can work, and the less fuel need-ed to power them.” Another problem that can reduce the efficiency of the well’s production is the formation of scale. “Most of the water in Ohio naturally contains sulfates,” says Willnecker. “The sulfates combine with minerals in the earth such as barium or iron or calcium to create barium sulfate, iron sulfate, or calcium sulfate and other mineral scales. Scale can be a hard, insoluble mass that can plug up a well.”

Experience has shown that a 10 % or lower scale coating-plug can cause up to an 80% reduction in well productivity. Producers can ameliorate this type of problem by using the scale inhibitors Zinkan manufactures.

All of these products help to improve the integrity of the hydraulic fracturing process. Zinkan’s family of biocides, fric-

tion reducers and scale inhibitor products help a well to be more productive and also safer for the environment.

“The best practices used in the drilling process are continu-ally being updated and revised as we gain a better understand-ing of the fluids involved in that process,” says Willnecker. “We expect the oil and gas production in eastern Ohio to continue at least 50 or more years, and at Zinkan, we are constantly working to better understand the value propositions we need to offer: first, before the wells are drilled; then, at drilling and hydraulic fracturing; again, at day-one of production; and fi-nally, for the well’s entire life to keep these wells productive and safe.”

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Page 20: February 2015 Gas & Oil Magazine-Pennsylvania Edition

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Seth Whitehead Energy In Depth - Illinois

The shale development outlook in the Land of Lin-coln is finally looking up.

That might seem to be an odd statement consider-ing there still hasn’t been be a single high volume hydraulic fracturing treatment conducted in the state more than 500 days after the Illinois Hydraulic Fracturing Regulatory Act was signed into law.

But it’s at least a possibility now.The Joint Committee on Administrative Rules approved fi-

nal HVHF regulatory rules in November, ending more than a year and a half of waiting and frustration.

After former Gov. Pat Quinn signed the IHFRA into law in June 2013, month after month of legislative limbo pushed fracking proponents’ patience to the limit. First the Illinois Department of Natural Resources’ initial draft of regulatory rules drew the ire of environmentalists. The IDNR took near-ly a year to release a second draft, using the excuse that it had been “flooded” with more than 35,000 public comments, most from fracking opponents. Then, once the second set of rules were finally released, industry leaders deemed them so cumbersome and unworkable that some speculated a HVHF permit would never even be issued in Illinois should the rules be approved as drafted.

Fortunately, JCAR convinced IDNR to steer the rules back toward the legislative intent of a law already believed to be the toughest and most prescriptive in the nation. Workable rules were approved just a few days after pro-energy candi-date Bruce Rauner unseated Quinn for the governor’s seat.

For the first time in a long time, the fracking future was bright in a state in which the potential for 47,000 jobs and $9.5 billion in economic development via shale development had been put on hold for 16 months.

Then oil prices plummeted more than 50 percent.Predictably, producers have gone the cautious rout since. So

far, no HVHF permits have even been applied for, much less granted. And only once company has registered with IDNR, the first step of the permitting process.

But although things are quiet on the fracking front in Il-linois, it sure beats the alternative.

Illinois could have very easily found itself in the same boat as New York, a state it shares much in common, with one no-table exception: fracking is now permanently banned there.

Unlike New York, Illinois industry leaders wisely rejected talk of a moratorium when regulatory talks began more than three years ago and instead chose to negotiate with main

stream environmental groups.

Granted, the tradeoff for Illinois’ strategy wasn’t always pleasant. A brutal and drawn-out negotiation process ensued, a process about which each party involved was ultimately left unhappy.

Mark Denzler of the Illinois Manufacturers Association called the negotiations “easily” the most technical and de-tailed he’s been involved with in 20 years in Springfield. They were historical negotiations as well, as labor, industry, main-stream environmental groups and agricultural leaders joined in support of HVHF legislation. The GROW-IL coalition, Il-linois Farm Bureau, Illinois Attorney General Lisa Madigan, Gov. Pat Quinn, Sierra Club, the Natural Resources Defense Council and the Illinois Environmental Council were all in-volved.

Not exactly a group that runs in the same social circles, which is a major reason why the negotiations took three years to finalize. But the result was “by far” the toughest, most com-prehensive set of regulations in the country, according to Den-zler.

With those regulations finally in place, it’s now up to state officials to get serious about maximizing on Illinois’ vast shale potential. And for the first time, they appear to be doing so.

A group of Illinois leaders from the private and public sec-tor – including former Gov. Jim Edgar and former Obama administration Chief of Staff Bill Daley – recently sent Gov. Rauner a list of recommendations for his first 100 days in of-fice. At the top of that last was “jump-starting” fracking in Il-linois.

One of the group’s suggestions for doing so is to sufficiently staff the IDNR to respond more quickly to fracking permit applications, as there are currently not enough staff members to oversee the process. Expediting the permitting process to resemble neighboring Indiana would go a long way toward repairing Illinois’ growing reputation as a place that is difficult to do business in.

Considering business-savvy Rauner, a former private-equi-ty investor, is inheriting perhaps the worst financial situation in the nation, he is expected to heed that recommendation and many others.

Ultimately, shale development continues to move along slowly Illinois – as many things tend to due in the Land of Lincoln. But at least there is now a path forward.

Seth Whitehead is a spokesman for Energy in Depth – Illinois

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Bentley’s in Canonsburg is now Barnes Bros. Motorcycles & Off-Road!Under New Ownership and Management – Same Location for More than 20 Years

Sales, Service, Parts & Accessories Experienced, Knowledgeable Staff

724-746-7100 589 West Pike St. Canonsburg, PA 15317www.BarnesBrosMotorcycles.com

The Best Off-Road Vehicles Are Available At

BARNES BROS. MOTORCYCLES & OFF-ROADConveniently Located 1 Mile from I-79 and Less Than 3 Miles from Southpointe

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