HARRISBURG – Negotiations over a state severance tax on natural gas showed some signs of life Wednesday as Gov. Ed Rendell offered encouragement about a private round of leadership talks.

The governor said discussions will continue in coming days to find a compromise tax on natural gas produced by deep wells in the Marcellus Shale formation. He said the tax rate is still a sub-ject of debate, while informal agreement has been reached on specific language to exempt traditional shallow gas wells from the tax.

The governor’s tone was different than on Tuesday when he and legislative leaders of both chambers voiced recriminations over the failure to enact a severance tax by the Oct. 1 target date. Both House Democratic and Senate Republican leaders declared their intent to pass a tax under a provision of the state fiscal code enacted in July.

“Color me optimistic today,” said Mr. Rendell.

It appears that any passage of a severance tax, even if an agreement is struck, is still days or even weeks off.

Senate GOP leaders are cooler in their view of progress. But they have agreed to add session days in advance of the Nov. 2 election if they get a compromise bill from the House. House Democratic leaders have already indicated they will return to vote on a compromise bill.

Mr. Rendell said his compromise offer to phase in a severance tax rate starting at 3 percent and reaching 5 percent by the third year put the talks in gear. But Senate Republicans see things differently.

“It would still be one of the highest (severance) taxes in the nation,” said Senate President Pro Tempore Joseph Scarnati, R-25, Jefferson County. “Unless the governor is willing to negotiate that rate down, I don’t see any progress in getting things done.”

The GOP caucus wants to phase in the tax at 1.5 percent during the first five years’s of a well’s production before a 5 percent rate kicks in.

Mr. Rendell’s proposal would exempt up to 10 percent of some production and distribution costs from the tax, while Senate Republicans want to exempt 100 percent of production costs.

The governor said agreement has been reached on exempting so-called stripper wells producing less than 90,000 cubic feet of gas per day from the tax and progress made on exempting shallow well drillers from a self-reporting requirement.

“A major concern that has emerged in this debate is that small, independent producers that do not drill in the Marcellus Shale would be subject to the proposed tax or be forced to spend millions to prove they qualify for an exemption,” said Louis D’Amico, president of the Pennsylvania Independent Oil and Gas Association.

Contact the writer: rswift@timesshamrock.com

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Copyright:  The Scranton Times

HARRISBURG – Natural gas drillers will have to use stronger cement in wells and publicly disclose more information about chemicals used in fracking fluids under a rule approved Tuesday by a state board.

The well-construction rule approved 14-1 by the Environmental Quality Board aims to prevent gas from migrating into water supplies as a result of drilling operations and establishing notification procedures in the event of spills or water-pollution problems.

The well-construction rule is one of several being implemented by the Department of Environmental Protection in response to the drilling boom under way in the Marcellus Shale. But key well-casing provisions would apply also to established shallow-gas wells in Northwest Pennsylvania.

DEP first proposed the well rule last year, but it added requirements in the wake of a well blowout in June in Clearfield County. The focus on preventing gas migration gained priority after the well-publicized contamination of drinking water wells in Dimock Twp. due to faulty or overpressurized casing in Marcellus Shale wells.

Key provisions would:

– Require greater use of well blowout prevention equipment.

– Require drillers to report water pollution or water-loss problems within 24 hours instead of by the current 10 days.

– Require drillers to publicly disclose chemicals, chemical additives, volume of fluids and sources of water and recycled water used in hydraulic fracturing operations. Drillers can designate some information such as the concentration of chemicals as proprietary trade secrets. In that case, public release of that information would be governed by the state right-to-know law, DEP officials said.

– Contain new requirements for driller notification in the event of gas-migration problems.

– Set guidelines for exploration of deeper gas deposits in the Onondaga and Utica formations.

“These rules now are as strong as any in the country,” said DEP Secretary John Hanger who predicted that gas-migration problems will decline as a result.

However, the Environmental Defense Fund, a Washington D.C.-based nonprofit that works on environmental issues, said the rules would be stronger if they were to include four proposals it suggested. These include more monitoring of the pressure between a well casing and rock formation, a requirement to keep well-cementing records on permanent file instead of just five years, giving DEP authority to take the lead in investigating well problems and a clearer definition of protected water supplies.

The well-construction rule now faces review by the House and Senate environmental resources committees and a final vote by the Independent Regulatory Review Commission before it takes effect.

rswift@timesshamrock.com

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Copyright:  The Citizens Voice

Gas ‘pooling’ law unlikely this year

Measure expected in next session

A controversial provision natural gas companies are looking for is unlikely to become state law just yet, because the legislative year is coming to an end – but discussion on the subject is far from over.

“Forced pooling,” or “fair pooling” as the natural gas industry calls it, would allow gas companies to drill beneath the properties of holdout landowners in a drilling block.

Although there was talk of including forced/fair pooling in the natural gas severance tax that passed in the House and is now being considered in the Senate, Senate Republican President Pro Tempore Joseph Scarnati, R-25, Jefferson County, has indicated it isn’t likely to happen this term.

Thursday will be the Senate’s last voting day this year and, “We in the Senate have made a commitment not to go into lame-duck session after the election for voting,” State Sen. Lisa Baker, R-20, Lehman Twp., said.

Lackawanna County landowner Leslie Avakian, founder of ProtectMyRightsPA .org, who has participated in rallies at the Capitol in Harrisburg to oppose forced pooling, thinks it’s “terrific” the subject is off the table.

“I’m glad things are moving forward,” she said. “But I don’t think this issue has died. One of my concerns is they are pushing it into the next legislative session.”

Won’t let it drop

The natural gas industry is not about to let it drop. Fair pooling “dramatically reduces above-ground disturbance” and allows gas to be collected in an orderly manner, Marcellus Shale Coalition spokesman Travis Windle said.

“It’s an absolute environmental winner, and that’s why virtually every other energy-producing state in the nation has this on the books,” he said.

Mr. Windle said fair pooling is good for landowners – “Everyone’s compensated for production, whether they have a lease or not, under a pooling statute” – and for consumers, who would benefit from more supply in the market.

New technology allows companies to drill underground for a mile horizontally, which can be far away from a landowner who does not want a drilling rig on his or her property, he said.

And Mr. Windle said pooling would not hurt landowners’ ability to negotiate a lease.

“I don’t think it takes away their negotiating power in any way,” he said. “I think it increases their ability to leverage.”

Ms. Avakian disagreed.

“It kills negotiating power, absolutely,” she said. “How much negotiating power do you have if you know that in the end, they can take your gas anyway? It kills the free market.”

Ms. Avakian said forced pooling means savings for the gas industry because of the landowners’ reduced negotiating power, and also because companies don’t need to drill on every property – they only need limited surface access. Once they can take all the gas from beneath a property without a lease, the gas companies could drill without giving landowners an up-front payment, and the only way the owner would be compensated is if the gas is withdrawn, she said.

‘Not a fair trade’

“That’s money that comes out of the pockets of Pennsylvanians,” Ms. Avakian said. “That’s not a fair trade at all.”

Although some property owners do favor pooling because, as Mr. Windle pointed out, their minerals may not be developed otherwise and they would miss out on royalties, others are more leery of the concept.

“Pro-gas, anti-gas, Republican, Democratic – this is bad for all of us,” Ms. Avakian said.

Gary Ide, president of Citizens for Cleaner Energy, said members of his group want to learn more.

“Not all people in this pro-gas drilling group are convinced that this forced pooling is a good idea,” he said. “‘Forced pooling’ doesn’t sound like a very friendly thing, and I don’t even like the term ‘fair pooling.’ ”

Mr. Ide wants to see how forced/fair pooling works in other states, and notes that it is premature for the state Legislature to make a determination on whether it is right for Pennsylvania.

“I just think that now is the wrong time to try to take a permanent position, because I think we need to learn a little bit more about how this affects the leaseholders, the gas companies and the people who oppose drilling,” he said.

Mr. Ide’s concern is that “the wrong people,” such as gas companies, the legislature, a coalition of some sort, would write the law in a way to benefit one particular group.

“There may be a much simpler way of doing this than something we don’t understand, and have to deal with once it’s passed,” he said. “This is one of those situations where it’s more important to be right than to be popular.”

Similar thoughts

Ms. Avakian has similar thoughts.

“I really believe this can be solved a different way,” she said. “We need to look at some creative solutions.”

Local lawmakers, sensitive to constituents’ concerns, have taken stands. Ms. Baker has stated her opposition to forced pooling.

So has her fellow Back Mountain lawmaker, state Rep. Karen Boback, R-117, Harveys Lake, who stated, “I remain firmly against any efforts to infringe on a landowner’s right to decide what happens on and under his or her property.”

State Reps. Mike Carroll, D-118, Hughestown, and John Yudichak, D-119, Nanticoke, also oppose forced pooling.

“I’m very sensitive about taking power away from local property owners, local leaders. I think they need to weigh in on these issues,” Mr. Yudichak said. “We need to protect them.”

Other local lawmakers didn’t support the idea of including pooling in the severance tax bill, either.

“My position is, I was not willing to discuss forced pooling or any other aspects of the gas industry until we had voted on and made into law a severance tax,” said state Rep. Eddie Day Pashinski, D-Wilkes-Barre.

Mr. Windle denies the industry group was seeking a quid-pro-quo for a severance tax.

“Not in exchange, as part of a comprehensive modernization. It’s not just an ‘I’ll-give-you-that-if-you’ll-give-me-this,’” he said.

Mr. Windle noted, “A lot of proponents of the severance tax in Harrisburg say we need one because every other state has one. If you follow that logic, doesn’t Pennsylvania need a fair pooling statute because every other state has one?”

Contact the writer: eskrapits@citizensvoice.com

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Copyright:  The Scranton Times

LAKE TWP. – Before natural gas drilling even started in Lake Township, many property owners had some form of contamination in their private water wells.

Geologist Brian Oram revealed at Monday’s meeting of the pro-drilling Citizens for Cleaner Energy that of 220 private wells tested near the drilling site, more than half had detectable – though not dangerous – levels of methane gas, and nearly half had high levels of bacteria.

“For a pro-drilling crowd, the first two subjects we talked about are fresh drinking water and how to (protect the environment) as we proceed,” Citizens for Cleaner Energy President Gary Ide noted to the more than 60 people attending the meeting at Outlet Free Methodist Church. “Everybody wants responsible drilling.”

Encana Oil & Gas USA Inc. started drilling on the Zosh Road property of Paul and Amy Salansky a few weeks ago, after wrapping up drilling on Edward Buda’s property off Route 118 in Fairmount Township. Amy Salansky said Encana finished drilling about 7,000 feet down and started drilling horizontally on Monday.

Before drilling started, Encana had the wells of property owners within a one-mile radius of the drill site tested. Oram said 247 samples were taken: 220 from private wells, 12 ponds, 10 streams and five springs.

Wilkes University, which Oram is affiliated with, established a database that allows people to share their well water test results so it can be compiled, analyzed and put to use.

“I work for absolutely no gas companies. I never had,” Oram informed the group.

Of the private wells near the Salansky site, 45 percent had coliform bacteria levels and 5 percent had E. Coli bacteria counts that exceeded drinking water standards, Oram said.

There were 131 wells with detectable traces of methane, but only one of them – an unusually deep well – had a high level, he said. He said it is not gas from the Marcellus Shale, but from the shallower Catskill rock formation.

All 220 wells had detectable amounts of sodium, chloride, lead and naturally-occurring radioactive substances. But 25 wells had high lead levels, eight wells had high levels of arsenic and four wells had radiation levels above the standard.

“This should be important to all of us,” Ide noted of the test result findings.

Two representatives of the SCE Environmental Group, President Jody Cordaro and Principal Geologist Joseph G. Casey also spoke about some of their natural gas-related environmental cleanup work and what gas companies can do to minimize the risk of accidents, such as taking measures to contain stormwater runoff.

Afterwards, Cordaro, Casey and Oram answered questions from the audience.

In answer to questions about the potential for contamination of water supplies such as the Huntsville and Ceasetown reservoirs, Oram said this is the time to pay more attention to water protection, no matter what source the pollution could come from.

Cordaro said he would be more concerned about the possibility of contamination from a 1,000 gallon fuel tank at a drilling site than from the process of hydraulic fracturing.

The goal of Citizens for Cleaner Energy is to encourage natural gas drilling to proceed in a “responsible, environmentally-sensitive way that protects our water sources,” Ide said.

To show its support for the industry, the organization, which already has had “Welcome Encana” signs made up, now has “I’m a Friend of Marcellus” yard signs for members to display.

eskrapits@citizensvoice.com, 570-821-2072

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Copyright:  The Citizens Voice

DYBERRY TWP. – The constitutionality of the Delaware River Basin Commission’s role in regulating the burgeoning natural gas industry in Wayne County came into question Saturday afternoon at a gathering of drilling advocates.

“Our nemesis is the Delaware River Basin Commission,” said Bob Suhosky, a member of the Wayne County Oil and Gas Task Force who holds a lease individually in Cherry Ridge Twp. “They’re taking a certain amount of constitutional rights from us.”

Mr. Suhosky was addressing the Northern Wayne Property Owners Alliance’s annual meeting and barbecue at the Wayne County Fair Grounds. He said he feels the commission’s permit moratorium on natural gas drilling in the Delaware River watershed effectively robs landowners in the area of their right to develop their property.

“We have the rights down below, and we have the right to reap the fruit of that,” Mr. Suhosky said.

The commission is developing draft natural gas regulations in response to the industry’s drive to exploit natural gas reserves in the Delaware River watershed. The agency is responsible for protecting water quality for the multistate watershed, which provides drinking water to an estimated 15 million people. The draft regulations are expected to be published this month.

Marian Schweighofer, executive director of the Northern Wayne Property Owners Alliance, concurred with Mr. Suhosky’s views.

“In America, we own the property. We own it from here to China,” Ms. Schweighofer said. “If there’s a taking, you’re supposed to be compensated for it.”

According to Ms. Schweighofer, the Delaware River Basin Commission entered into the natural gas arena shortly after the Susquehanna River Basin Commission did so in 2008. The difference is that the SRBC established regulations within the year, whereas the DRBC has yet to produce a draft of its own regulations.

“It’s definitely a delay in developing our well potential,” Ms. Schweighofer said. “We can’t get past step one.”

David Mandelbaum, legal counsel for the Alliance, confirmed he expects those regulations soon.

“The likely outcome of this is there will be regulations that are reasonable and will allow substantial natural gas drilling,” Mr. Mandelbaum said.

Still, that may only be the opening salvo between pro- and anti-drilling factions.

“I expect to get a draft this month and then a war to start,” he added.

Contact the writer: domalley@timesshamrock.com

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Copyright:  The Scranton Times

DYBERRY TWP. – The constitutionality of the Delaware River Basin Commission’s role in regulating the burgeoning natural gas industry in Wayne County came into question Saturday afternoon at a gathering of drilling advocates.

“Our nemesis is the Delaware River Basin Commission,” said Bob Suhosky, a member of the Wayne County Oil and Gas Task Force who holds a lease individually in Cherry Ridge Twp. “They’re taking a certain amount of constitutional rights from us.”

Mr. Suhosky was addressing the Northern Wayne Property Owners Alliance’s annual meeting and barbecue at the Wayne County Fair Grounds. He said he feels the commission’s permit moratorium on natural gas drilling in the Delaware River watershed effectively robs landowners in the area of their right to develop their property.

“We have the rights down below, and we have the right to reap the fruit of that,” Mr. Suhosky said.

The commission is developing draft natural gas regulations in response to the industry’s drive to exploit natural gas reserves in the Delaware River watershed. The agency is responsible for protecting water quality for the multistate watershed, which provides drinking water to an estimated 15 million people. The draft regulations are expected to be published this month.

Marian Schweighofer, executive director of the Northern Wayne Property Owners Alliance, concurred with Mr. Suhosky’s views.

“In America, we own the property. We own it from here to China,” Ms. Schweighofer said. “If there’s a taking, you’re supposed to be compensated for it.”

According to Ms. Schweighofer, the Delaware River Basin Commission entered into the natural gas arena shortly after the Susquehanna River Basin Commission did so in 2008. The difference is that the SRBC established regulations within the year, whereas the DRBC has yet to produce a draft of its own regulations.

“It’s definitely a delay in developing our well potential,” Ms. Schweighofer said. “We can’t get past step one.”

David Mandelbaum, legal counsel for the Alliance, confirmed he expects those regulations soon.

“The likely outcome of this is there will be regulations that are reasonable and will allow substantial natural gas drilling,” Mr. Mandelbaum said.

Still, that may only be the opening salvo between pro- and anti-drilling factions.

“I expect to get a draft this month and then a war to start,” he added.

Contact the writer: domalley@timesshamrock.com

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Copyright:  The Scranton Times

Yellow signs welcoming Encana Oil & Gas USA Inc., the first natural gas company to start drilling in Luzerne County, are starting to pop up around the Back Mountain.

They’re the handiwork of a newly formed pro-gas group, Citizens for Cleaner Energy, which consists of people who have leased their land – or who want to – and who feel it’s time to speak out in favor of what they believe will be the region’s most important resource.

Unlike natural gas drilling opponents, who have been highly visible and vocal, natural gas drilling proponents have been largely silent.

“I understand other people see this differently, and that’s fine, that’s the American process,” Citizens for Cleaner Energy President Gary Ide said. “But if we sit back and say nothing, I think everyone assumes we have nothing to say, and we do.”

The signs are symbolic, according to Ide: they are meant to welcome Encana specifically, because many of the group’s members have leases with the company and they have heard good things about it, but they’re also meant to welcome responsible natural gas exploration in general, which is one of the group’s goals. The others are to protect personal property rights and educate people about natural gas and the drilling process.

In addition to Ide, the group’s organizers are Russ and Mary Lansberry, Larry Lansberry and Gene Janiczek, whose properties in Lehman Township were to be the site of a vertical natural gas well until Encana withdrew its application to drill.

At later meetings the group decided on a name and appointed officers: Ide as president, Mary Lansberry as vice president, Barbara Mikielski as secretary and Janet McCarroll as treasurer.

But the group’s first meeting on Aug. 13 in the Lehman Township fire hall was to determine if others had similar concerns, according to Ide.

They did: “It was clear that all were frustrated about how they were being portrayed by those who oppose gas exploration,” he said.

However, Ide said the group was not formed to counter anti-drilling groups such as the Gas Drilling Awareness Coalition. Members of Citizens for Cleaner Energy are also sensitive to environmental issues, he said.

“People have a reason to be concerned. This is not oxygen we’re trying to find, it is a combustible substance and it is potentially dangerous,” Ide said. “That’s why many people who have signed (leases) signed with Encana – there seems to be some real thought about how they are going to drill and produce. We think there’s a responsible way of doing this and a safe way of doing this.”

Members of Citizens for Cleaner Energy want people to know a lot of thought goes into making the decision to lease, Ide said.

“Of course economic reasons are why we’re all doing this,” he said. “But I think the considerations of all the things you might think we would worry about are there.”

Members also want to help people learn about all the components of natural gas drilling – the main problem he sees is that people are not familiar with the entire process.

“My biggest beef is probably the people who are just flat-out opposed because something might go wrong, and in the case of Dimock, did go wrong,” Ide said, referring to the Susquehanna County township where some residents are experiencing water well contamination. “I think it’s OK to be concerned and make sure they’re doing the best job possible. I don’t think it’s OK to frighten needlessly.”

Things can go wrong, he acknowledges. But, he noted, “The opportunity for economic growth for the entire area is just a little more powerful than the potential for these huge catastrophic environmental messes.”

Much needs to be proven to an unsure public, Ide said.

“I want to hopefully engage people who think they have nothing, that they have something to gain,” he said. “It’s not just good for a handful of people. … I think we’re all going to benefit.”

Some people think just because they don’t have land they won’t get anything, but that’s not true, Ide said.

“I don’t think there’s a business that could be brought in that can stimulate the economy more than this can. I can say that, but I think in time that will be proved.”

For the past six weeks Ide has been talking to as many people as possible, to learn what they had to say, find out what they were frustrated about, make sure everyone was on the same page.

So far Citizens for Cleaner Energy has about 120 members, Ide said. There are no dues or membership fees, but people do make voluntary contributions to cover costs.

Lehman Township resident Carl Kern, who does trucking for natural gas companies, was the group’s first speaker. His trucks are leased to Mountain Energy, which provides water for Chesapeake Appalachia LLC.

Ide said Kern explained how stringent the rules are for collecting and transporting water, and he made an impact on the group “by saying these are not fly-by-night outfits.”

“Most of the companies are good companies. They’re honestly trying to do things the right way,” he said.

Kern said he talked about what he is seeing in the field and how the natural gas industry is producing jobs.

He said he is just as concerned as anyone else that the gas companies do things right, but said people need to give the state some credit for enforcing regulations.

“I understand where some of these people are coming from, but everybody has to sit down and weigh it all out. I think in the long run, the pluses are going to outweigh the negatives,” Kern said.

He supports Citizens for Cleaner Energy and believes more people will join the group.

“I’m right with them. I’m going to fight as hard as I can to make this work,” Kern said.

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Copyright:  The Citizens Voice

eskrapits@citizensvoice.com, 570-821-2072

Encana Oil & Gas USA Inc. recently started drilling on Zosh Road in Lake Township, the second of its two exploratory natural gas wells in Luzerne County, after wrapping up drilling at its first.

Encana Community Relations Advisor Wendy Wiedenbeck said via e-mail that “drilling is under way at the Salansky location and activity is going as expected.” She estimates the drilling activity will last for about 30 days.

Prior to starting work in Lake Township, Encana finished drilling operations at its first exploratory site, the Buda well behind the Ricketts Glen Hotel on Route 118 in Fairmount Township. Wiedenbeck said the well was drilled 7,000 feet deep and 4,400 feet horizontally.

Since April, the state Department of Environmental Protection has made eight site inspections at the Buda well, and found no violations. Additionally, DEP has issued permits for Encana’s two Kent North horizontal wells, which are planned just down Route 118 from the Buda well site in Fairmount Township. Encana is still awaiting DEP permits for three more wells in Fairmount Township and five more in Lake Township.

A schedule has not been set to complete the first two wells, including hydraulic fracturing to break up the shale and release the gas, according to Wiedenbeck.

She stated it is “just a matter of all the business needs aligning at the same time: specialty contractor availability, equipment availability and water resources. We anticipated that completions activities wouldn’t take place immediately following drilling.

Exploratory projects are by nature limited in scope and as such needed services and supplies compete with already full schedules.”

Wiedenbeck said Encana anticipates completing both wells either later this year or early 2011.

A potential headache for natural gas companies, including Encana, is that dry conditions are leading to a growing scarcity of the large quantities of water needed for hydraulic fracturing.

Last week, DEP declared most of Pennsylvania’s counties to be either in a state of drought watch or the more severe drought warning.

The Susquehanna River Basin Commission, which monitors water levels and controls large-scale water withdrawals, has temporarily shut down some of Encana’s sources in Wyoming County.

“The drought does impact our ability to access water,” Wiedenbeck confirmed.

Drilling starts in Benton

Another exploratory natural gas well is under way in Benton, in neighboring Columbia County.

Williams Production Appalachia LLC has drilled other wells in Pennsylvania’s Marcellus Shale, but this is the company’s first in Columbia County, Williams Spokeswoman Susan Oliver said.

The drill site is part of acreage originally leased to Citrus Energy Corp. In April, Citrus sold leases for 10,000 acres in Columbia County and several hundred acres’ worth of leases in Fairmount Township to Williams.

Williams representatives met with about 250 community members in the Benton High School on Tuesday to talk about the company and its plans. She said questions ranged from the economic development effects of natural gas drilling to what hydraulic fracturing is.

“We’re very open to meeting with landowner groups and other organizations,” Oliver said.

eskrapits@citizensvoice.com, 570-821-2072

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Copyright:  The Citizens Voice

The Marcellus Shale wells Citrus Energy Corp. is drilling for Procter & Gamble near its Wyoming County plant are so productive there’s enough natural gas left over to send to market.

UGI Energy Services Inc., the midstream and energy marketing subsidiary of UGI Corp., forged an agreement with Citrus to use the pipeline that once brought gas to the Procter & Gamble plant to instead move the extra gas out of the plant and into the Tennessee interstate gas pipeline in Susquehanna County.

“This gas we’re talking about here is that which is over and above the requirements of Procter & Gamble at their Mehoopany plant,” said Peter Terranova, UGI vice president of midstream assets and services.

UGI Energy Services plans to acquire and construct facilities to handle up to 120,000 dekatherms – 120 billion British thermal units – of gas per day. Service could begin as early as next spring.

“We’re happy about them (UGI) becoming a transporter-gatherer,” said Steve Myers, Director of Land and Legal Affairs for Citrus. “We have acquired quite a bit of capacity on that line. That was the game plan from Day One when we first walked in the door and started talking to Procter & Gamble. That was how we saw this thing developing.”

Procter & Gamble spokesman Alex Fried said UGI had been providing gas to the company for 45 years.

“They connect to the Tennessee Pipeline in Auburn Center in Susquehanna County about eight miles north of us. From there it can flow to a number of other customers, both residential and commercial,” he said. “UGI gets to re-use a good existing pipeline, and Citrus gets to continue developing wells within the Wyoming County region and not have to stop once they hit P&G’s needs. This provides a much bigger market to the area.”

Last October, Citrus started drilling under an agreement that gives Procter & Gamble minority ownership of the wells with an option to buy them. So far Citrus has drilled six wells for the company, not all of which are producing because they are in various stages of preparation, Myers said.

But at least one has been exceeding expectations. Well production data recently released by the Department of Environmental Protection shows that Citrus’ PG2-1H well for Procter & Gamble ranks fifth in the state, with an average daily production of more than 10.04 million cubic feet of gas each day for the 22 days of the fiscal year reported.

Fried noted that it will take until the next report to determine exactly how the well is producing, since gas flows tend to be high at the start and can decline.

Anything above what Procter & Gamble consumes would be considered “stranded gas” because there is no way to get it to market, Myers said. It is expensive to lay pipeline – and why duplicate a line that already exists, and that has become valueless since it is no longer supplying gas to Procter & Gamble.

“Ostensibly it should help the (UGI) ratepayers in that this will be a piece of pipeline that produces income,” Myers said. “Otherwise it’s just a piece of steel in the ground because nobody’s paying to move gas through it.”

Fried noted, “It’s very logical for UGI to make existing infrastructure available to Citrus. It’s a win-win all around.”

 Terranova said the project is the first UGI Energy Services is undertaking to “provide Marcellus producers multiple avenues to serve high value markets efficiently and bring plentiful, competitively priced, locally produced natural gas to consumers.”

He said he is glad to see how well everything is working out.

“We’ve worked very closely with Procter & Gamble and Citrus to make this happen,” Terranova said.

eskrapits@citizensvoice.com, 570-821-2072

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Copyright:  The Citizens Voice