GOP moves to boost Pennsylvania natural gas production unlikely to succeed, analysts say

  • By Jon Hurdle/Stateimpact Pennsylvania

(Harrisburg) — Renewed attempts by Pennsylvania House Republicans to boost natural gas production by ending a ban on new drilling on public lands, among other measures, are unlikely to succeed because the industry already owns many unused leases on those lands, and because it lacks the pipeline‘s ability to bring any new gas to market, even if it was produced, analysts said.

In early March, GOP members introduced a series of bills and resolutions aimed at increasing gas production and thereby reducing the nation’s dependence on imported energy at a time when Russia, a major energy exporter, invaded neighboring Ukraine.

The measures seek to halt Gov. Tom Wolf’s moratorium on new drilling in state forests; urge the Delaware River Basin Commission to end its ban on hydraulic fracturing in the basin; ask the governors of New York and New Jersey to authorize the construction of pipelines so that more gas from Pennsylvania can be brought to market; and boosting domestic natural gas consumption by halting Pennsylvania’s plan to join the Regional Greenhouse Gas Initiative.

But all the initiatives risk missing their targets and represent another Republican attempt to enact familiar measures at the behest of the natural gas industry, analysts said.

“All of these things have been suggested on behalf of the natural gas industry for years,” said David Hess, who served as Secretary of the Department of Environmental Protection from 2001 to 2003 under Republican Governors Tom Ridge and Mark Schweiker. “It’s not new.”

Hess said that even if the Legislature approves the plan to open state lands to new drilling, it would not result in the desired increase in production because about two-thirds of the leases already held by drillers are not used, which shows that it is not the ban on the opening of public lands that is hampering production.

In fact, he said, drillers avoided developing many leases due to low market prices, at least until mid-2021. More recently, expansion has been slowed by a labor shortage. labour, supply chain issues and even a shortage of fractionating sand.

“It would be kind of silly to open more land for rental when they didn’t develop what was considered prime rental land in 2008,” Hess said.

Cindy Adams Dunn, secretary of the Department of Conservation and Natural Resources, told lawmakers at a Senate Budget Committee hearing on March 2 that 65% of existing shale gas leases in state forests had no been developed.

Citing data from the nonpartisan Pennsylvania Independent Fiscal Office, Hess noted that the industry produced gas from 10,322 wells in the fourth quarter of 2021, compared to 13,395 drilled, showing that more than 3,000 wells are closed.

“Right now, today, they have several options if they want to increase production there,” he said. “So far they have shown no interest in doing so.”

Despite Republican calls for higher gas production, IFO figures show it actually rose 6.7% in the fourth quarter of 2021 from a year earlier, suggesting downward pressure on the costs.

Natural gas futures prices reached around $5.50 per million British thermal units at the end of 2021, their highest in more than a decade, after years of abundant production from the Marcellus Shale of the State kept the price at around 3 dollars. On Tuesday, the New York futures price closed at $5.33.

Prior to the recent spike, the market crash deterred energy companies from adding new production, even from some wells they had already drilled, and led some investors to withdraw support for the Pennsylvania industry. after returns fell short of their expectations.

“Investors in these companies want their money out,” Hess said. “They learned their lesson. The financiers who invest in these companies hold them more firmly than before. »

House Majority Leader Kerry Benninghoff (R-Center/Mifflin) said the United States should use Russia’s invasion of Ukraine as an opportunity to wean itself off energy imports from countries like Iran and Saudi Arabia, and instead increase domestic production from places like Pennsylvania.

Crews are shown welding a pipeline to a natural gas well in northern Pennsylvania.

“Gas-producing regions must do their part to scale up; and as President Biden and other world leaders look to countries like Iran and Saudi Arabia – countries that don’t share our values ​​– to ramp up production and make up the difference, they really should be looking to places like Pennsylvania,” Benninghoff said at a March 8 news conference.

Legislation allowing new drilling on state lands was passed by Rep. Clint Owlett (R-Bradford/Tioga/Potter) who said production from these areas could be increased without disturbing the natural environment by siting well pads outside the preserved area and by extracting gas by underground horizontal drilling.

Revenue generated from renting underground rights “would mostly put us on a path where we, as a country, are not dependent on Russian gas,” Owlett said in a March 7 statement.

The next day, President Joe Biden signed an executive order banning the import of oil, liquefied natural gas and coal from Russia into the United States.

Jason Gottesman, a spokesman for House Republicans, denied that Biden’s order undermined the GOP proposals. He argued that the order does not have the force of law and could be changed by the current executive or the next. He said Pennsylvania is a victim of years of federal energy policy that has “deprioritized” national energy production, but the state now has the potential to fill a gap.

“Pennsylvania now has the ability to invest in and export freedom again by being a leader in American energy independence, making our country and our allies more secure by no longer needing to depend on countries like Russia and other geopolitical players who do not share our values ​​to heat our homes and power our cars,” Gottesman said.

Wolf accused the GOP of trying to use the Ukraine crisis to meet long-standing demands from the gas industry. Although he supports bipartisan moves to cut Pennsylvania’s financial ties to Russia, he released a statement dismissing plans to boost gas production as “merely giveaways from the natural gas industry.”

The Marcellus Shale Coalition, a gas industry trade group, did not respond to a request for comment.

Other measures proposed by lawmakers include Rep. Jonathan Fritz (R-Wayne/Susquehanna) highlighting a bill urging the Delaware River Basin Commission to end its ban on fracking in the basin. which covers parts of four states, including eastern Pennsylvania. The DRBC is a federal/state government agency responsible for managing water resources in the 13,539 square mile river basin.

And Rep. Stan Saylor (R-York) introduced a resolution that would urge the governors of New York and New Jersey to authorize the construction of pipelines so that gas from Pennsylvania can reach markets in New England, which, according to Saylor, were “walled off”. by anti-pipeline policies in these two states.

Analysts said New York and New Jersey are unlikely to allow new gas pipelines, given their pursuit of clean energy goals, a ban on fracking from 2014 and the decision last year by the company PennEast to end a controversial plan to build a gas pipeline from Luzerne County to central New Jersey. This project ran into strong community opposition, particularly in New Jersey, and was withdrawn after seven years of consideration.

“I don’t think a resolution urging New Jersey and New York to change their own energy policy that they’ve adopted for whatever reason will have an impact,” Hess said. And he argued that any policy change by the DRBC would require the unlikely approval of the governors of the four Basin states – all Democrats – as well as the federal government.

Matthew Bernstein, senior analyst for shale exploration and production at Rystad Energy, a Norway-based research firm, said lifting the ban on new drilling under state land would do nothing to boost production as production is constrained by a shortage of pipeline capacity.

“The main problem surrounding increased production in Pennsylvania is not the lack of land to drill, but rather the lack of transportation capacity needed to bring the gas to market,” he wrote in a statement. E-mail. “No material increase, with or without lifting the ban, is possible in the short term, and then depends on the commissioning of future gas pipelines coming out of the basin.”

Rystad expects Pennsylvania gas production to remain stable in 2022, as drillers are already producing as much as they can, regardless of the market price, given transmission constraints.

John Walliser, senior vice president of the nonprofit Pennsylvania Environmental Council, said current gas production is limited by the industry itself, not by a shortage of land to drill on.

“There was so much gas being produced that it drove the prices down,” he said. “There were questions on the investment side of whether they were getting the return they wanted. Personally, I don’t think what’s holding the industry back right now is regulation.

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