Thursday, May 24, 2012
Pipelines serve as harbingers of shale gas development Major projects quietly taking shape in New York, Pa.
Notably, a network of projects are taking shape to get shale gas from under the rural countryside of the Twin Tiers of New York and Pennsylvania to markets in Boston, Albany, New York City, and cities in New Jersey. The Laser Pipeline is a midstream line connecting gas fields being developed in Susquehanna County, Pennsylvania to the Millennium Pipeline, a major transmission line that bisects New York’s Southern Tier.
Both the Laser and the Millennium are key to development plans for a rich section of the Marcellus in New York, and both will be able to accommodate connections to infrastructure serving conventional and unconventional gas fields in upstate New York. Additionally, the Millennium, which runs west to east, intersects with previously developed well fields in western New York. These depleted conventional wells, including the Stage Coach field and others, serve the economics of shale gas development in the northeast by providing a place close to markets to store gas when prices drop and ship it when they increase.
Late last year, the Laser line was bought by Williams Partners, a Houston company that has since partnered with Cabot Oil & Gas to build another line called the Constitution. Like the Laser, the Constitution will extend from Susquehanna County into upstate New York through the prime part the shale gas drilling fairway. But rather than ending at the Millennium, it would continue north and then east to the Capitol Region, where it would connect to a hub distributing gas to New England, as well as points north and south.
Not surprisingly, these pipeline routes cross some of the richest sections of the Marcellus Shale along New York’s border with Pennsylvania. And while the mechanics of securing land for pipeline development differs somewhat from leasing land for gas wells, there is a familiar theme: Surveyors, landman and prospectors need to acquire rights to the land, and landowners need to be educated about the consequences dealing with pipeline representatives. Land holds on and around pipeline routes are strategically critical for any party seeking to control access to the market.
Infrastructure for gas wells varies from the local gathering lines, to midstream lines, to transmission lines, each following different jurisdictional protocols and policies regarding easements and rights of way. Land for interstate projects may be acquired through eminent domain. Routes for smaller projects are typically (but not always) subject to contracts with landowners. There are exceptions, loopholes, complications and interpreations, and the industry has plenty of lawyers and experience to navigate them.
Jim Worden is a dairy farmer from Windsor, New York, a community in the heart of the shale gas fairway with stakes in both the Laser and the Constitution pipelines, as well as regional drilling prospects. Worden formed a coalition of landowners to leverage bargaining power with drilling companies seeking rights to the land, and he is now advising landowners to consult with each other and with informed parties before allowing pipeline crews or surveyors access. Worden is among those who see shale gas development as inevitable, and he is urging residents to stick together to protect their interests. “There will be a lot of pipelines, in our lifetime and our children’s lifetime, as this gets developed,” he said. “How we go about it is very important.” Landowners can call Worden’s at 607-760-9459 for more information.
The pipelines are a key strategic element to shale gas production that are often under the radar of the mainstream press and overshadowed by the contentious issues of the merits and risks of hydraulic fracturing. But the feasibility of shale gas development will depend on a robust expansion of pipelines, big and small, throughout New York and Pennsylvania.
Williams, working with Cabot, is investing $750 million in the Constitution project -- a sign of their bullish outlook. Even if prices remain low and shale gas remains off limits in New York, due to a market glut and strong opposition from those concerned about environmental and health impacts, the pipeline will provide more avenues for gas in Pennsylvania to get to the substantial energy markets in the northeast. Ensuring a product in steady and cheap supply is one way to increase demand, especially for electric generating power plants now burning coal. Increasing demand is one way to increase political pressure to open up new shale gas frontiers in upstate New York that continue to be off limits.