Republican Senator Plans Opposition to Democratic House Passage in PA

A top Pennsylvania Republican rejected a Democratic-sponsored plan for taxing natural gas production on Wednesday, vowing to stop a bill that he said would drive energy companies out of the state.

The opposition will force Governor Ed Rendell, a Democrat, to seek a compromise between Democratic and Republic plans.

Sen. Joseph Scarnati said a bill proposing to tax gas drillers 39 cents per 1,000 cubic feet of gas produced was "totally unacceptable" and that it would not even go to the Senate floor for a vote.

"We are not going to entertain a tax rate here in the Senate that is punitive to this industry," Scarnati told reporters the day after the bill was approved by the Democratic-controlled House. "It's absolutely ridiculous."

The Democratic plan would raise revenue of $307 million in its first full year and impose a much heavier tax burden on the booming industry in the Marcellus Shale. The Republican proposal would tax at 1.5 percent of the market price for the first three or four years and is favored by the industry.

Lawmakers agreed during this year's budget talks to settle details of the so-called severance tax by Oct. 1, following pressure from Rendell, who has been calling for the tax for two years to boost state revenue and help pay for the environmental costs of gas drilling.

Alaskan Pipeline Discussion Continues

The major oil companies have never wavered from their statements that the state needs to make stronger commitments on future tax rates before a gas pipeline is going to be built.

The tax question is one of the uncertainties facing the project. An even bigger one is that shale gas developments in the Lower 48 may provide lots of natural gas at a cheaper rate than any Alaska project could match.

The Parnell administration and most legislators have declined to focus on long-term taxes  before the election, suggesting that it would be better to do so next year when the full results of the open seasons may be clear.

Part of the reluctance stems from the near certainty that fiscal certainty is not going to be universally popular in Alaska.

And in some quarters, a new round of negotiations between the state and the oil companies will lead to questions about whether the Alaska Gasline Inducement Act process backed by Gov. Sean Parnell  will work.

In any event, Jim Mulva, the chief executive of ConocoPhillips, tells the Financial Times that his company is going to have to reassess the economics of the pipeline project to Canada.

"The decision will be based on the fiscal certainties provided by Alaska and how competitive the gas will be against that being produced in the Lower 48 states through shale and other unconventional extraction methods," the newspaper said.

The newspaper said there is so much gas now that Conoco has shut down production in parts of the Lower 48, awaiting higher prices.

 “We’d rather keep it in the ground for when it will have a greater financial impact,” he said.

Low Gas Price Shuts Wells

According to a report from Reuters, ConocoPhillips (NYSE:COP) CEO Jim Mulva revealed at an industry conference Monday that the company has shut-in some onshore North American natural gas production due to low prices. 

"We've had a small amount of production that we've shut in because we feel it's not that economic to produce," the executive told Reuters. "And so we'd rather keep it in the ground for when we can produce it at a later date." 

Natural gas is currently trading on the Henry Hub at about $3.75 per mmbtu. 

While the company is stopping some natural gas production onshore the US and Canada, ConocoPhillips is looking to increase investments in “liquids rich” shale plays, such as the Eagle Ford in South Texas, Mulva added. 

Investments in the Eagle Ford Shale play of South Texas and the Bakken Shale play of North Dakota have skyrocketed because these formations include both natural gas and oil, allowing operators to profitably produce oil while natural gas prices are low and wait to produce natural gas until prices creep back up. 

There has been a marked increase in natural gas production in the continental US with improvements to drilling and recovering techniques that have tapped the vast shale plays across the nation. The Marcellus Shale play in northeastern US is estimated to be the second largest natural gas field in the world. 

Because of the increased natural gas production – and the great possibility for more production – the US may become a natural gas exporter, via LNG. Three LNG receiving terminals have already petitioned the US government to be able to switch to export. 

Should that happen, the natural gas production in the US and prices should rebound substantially. As it is, many of the major producers are heavily invested in natural gas exploration and development, not only in the US shale plays, but also in the vast natural gas resources being developed offshore Western Australia.

New Transport Technology for LNG

CALGARY - Seaborne natural gas pipelines could make their maiden voyages as soon as next year, if everything goes according to plan for a Calgary company.
Sea NG Corp. — a play on the acronym for compressed natural gas — says it has found a way to transport large quantities the fuel around the world by ship, without the costly task of liquefying it first.
"It's really a floating pipeline," chief financial officer Mark Behrman said in an interview.
Sea NG's technology, called Coselle, was developed more than a decade ago, and has since been deemed safe by the American Bureau of Shipping.
It has also won the backing of Japanese investment company Marubeni Corp., Vancouver shipping giant Teekay Corp. and, most recently, pipeline heavyweight Enbridge Inc. (TSX:ENB).
Coselle — another play on words that combines "coil" and "carousel" — uses up to 21-kilometres of 168-millimetre steel pipe wound inside cylindrical frames. The modules, filled with high-pressure gas, are then loaded on specialized ships.
Sea NG is working on deals to transport natural gas from more than a dozen projects around the world.
"We think one or more of them is going to result in firm contracts in 2011," said Behrman.
He declined to say which companies are developing those gas fields, but hinted that they are hefty names.
"The large international (exploration and production) companies that would come to mind are likely the ones that we're talking to," he said.
Interest has picked up since Enbridge joined Sea NG's global alliance in late August, Behrman added, declining to disclose exactly how much money the Calgary pipeline giant had committed.
"Many of our potential customers are current customers of Enbridge," he said.
Natural gas currently makes its way around the world by sea, but it has to be liquefied in ultra-cold temperatures first, and then converted back into a gas at its final destination.
Liquefied natural gas, or LNG, requires big, pricey terminals to be built at both the origin and end points. And communities living near proposed LNG sites have not always been keen on having those facilities in their backyard. Public outcry forced TransCanada Corp. (TSX:TRP) to nix its US$700-million Broadwater LNG plant off Long Island Sound.
"The one thing where I think we compare very favourably to LNG is that our shore based facilities are very small," said Behrman.
"They have a very small footprint compared to an LNG facility, and I think that actually gives us an advantage over LNG in situations where there are local community concerns about the facilities."
Natural gas fetches considerably higher prices in Europe and Asia than it does in North America, which is flush with the commodity thanks to drilling in emerging shale gas formations, said Ralph Glass, vice-president of operations at AJM Petroleum Consultants in Calgary.
While gas prices here are languishing below US$4 per 1,000 cubic feet, they're up to US$7 in the U.K., for instance, he said.
"Be it CNG or LNG, the market is definitely Asia-Pacific and Europe, not North America," Glass said.
It doesn't make sense to build a large, expensive LNG facility in smaller markets, which may not be near land pipelines.
Sea NG's fleet includes ships of varying sizes, allowing for more flexibility. The firm sees its best opportunities in the Mediterranean and Caribbean regions, where many countries continue to rely on polluting fuel oil to generate electricity.
"With oil prices continuing to move up, and looking like they're going to sustain high levels, it's a great drain on the hard currency of many of those nations," said Behrman.
"Replacing that expensive liquid hydrocarbon with a cheaper natural gas shipped by Sea NG makes a lot of sense for them."

Consumers Reap Benefit of Low Gas Price

What consumers want from their utilities is pretty basic: a reliable supply at a good price.
So Americans are more satisfied with their natural-gas companies, as one might expect.
Natural gas is almost completely free of the outages that plague electricity (which seem to have increased in the past couple of years).
And natural gas prices have dropped and stayed low since 2008, resulting in lower bills simply because the utilities are paying less for wholesale natural gas.
J.D. Power’s annual survey of residential customer satisfaction with gas utilities found it increased for 70 of the 75 companies ranked. The average score rose from 616 to 629.
That’s pretty remarkable for a year in which consumers are suffering the effects of the worst recession since the Depression.
Southern New Jersey residents seem especially pleased with their natural gas providers.
South Jersey Gas and New Jersey Natural Gas each were the highest-rated utilities in their size categories in the East.
South Jersey Gas scored 634 in the survey by J.D. Power and Associates, which is based on more than 61,000 responses nationwide. The average score for such midsized gas utilities was 617.
New Jersey Natural Gas did even better, with a score of 649, compared to 615 for fellow N.J. utility Public Service Electric & Gas and the average for large utilities of 612.
J.D. Power cited favorable prices and fewer expected price increases as customer-pleasing factors.
Natural gas wholesale prices are less than half what they were earlier in the decade.
It may be hard to believe now, but in 2002 it cost twice as much to heat with natural gas as it did with oil. Even propane — propane! — was 40 percent cheaper than natural gas then.
That all changed in 2007 when a big new pipeline started bringing natural gas from the Rocky Mountains eastward and the clean-burning fuel once again became less expensive than its rivals.
That year also began a remarkable increase in U.S. natural gas supplies as vast reserves were found in shale formations and production jumped 9 percent. The next year, output grew even more.
As a consequence, natural gas prices are expected to remain low relative to other forms of energy for a long time.
That’s good news for customers hooked up to gas lines, and also for those who have been given that opportunity for the first time by expansion of the service area of South Jersey Gas, particularly in Cape May County.
The other big driver of increased satisfaction with gas utilities is related to costs, with an environmental component as well.
The survey said the average score for corporate citizenship jumped 11 percent from last year, with 28 percent of respondents saying they were familiar with their utility’s energy savings programs, up from 21 percent in 2009.
The study also measured companies on billing and payment, communications, customer service and field service.
There’s not much to be happy about in the economy these days, but natural gas is giving consumers a break — at least those who can connect to it.

US Natural Gas Stockpile Increases

Natural gas futures fell for the first time in four days on signs that Tropical Storm Matthew will avoid energy pipelines and platforms in the Gulf of Mexico.
The storm was about to come onshore near the Nicaragua- Honduras border with winds of 50 miles (80 kilometers) per hour, the National Hurricane Center said in a 2 p.m. advisory. Matthew has a 10 percent chance of becoming a major threat to Gulf energy production, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland.
“The storm is staying a lot farther south than people thought it would,” said Phil Flynn, an analyst with PFG Best in Chicago. “It’s not a concern for gas traders, who are taking the hurricane premium out of the market going into the weekend.”
Natural gas for October delivery settled 13.8 cents lower, or 3.4 percent, at $3.881 per million British thermal units at on the New York Mercantile Exchange. Futures dropped 3.6 percent this week.
Matthew is no longer likely to become a hurricane, according to the Hurricane Center. The storm may move into northern Honduras tomorrow, the center said.
About 10 percent of U.S. gas output will come from federal waters in the Gulf of Mexico this year, down from 17 percent five years ago, according to Energy Department data.
U.S. Supplies
Gas stockpiles rose 73 billion cubic feet in the week ended Sept. 17 to 3.34 trillion cubic feet, 6.2 percent above the five-year average, an Energy Department report yesterday showed.
Inventories will peak at 3.687 trillion cubic feet before cold-weather demand prompts utilities to pull gas from storage, the department predicted in its monthly Short-Term Energy Outlook on Sept. 8. Stockpiles rose to a record 3.837 trillion cubic feet last November.
U.S. gas production in May totaled 1.92 trillion cubic feet, the highest level since 1974, according to department data.
Gas traders seem to “be inclined to see a perpetual state of oversupply, even though storage levels are 5 percent lower than a year ago,” wrote Tim Evans, an energy analyst with Citi Futures Perspective in New York, in a note to clients.
Temperatures in the eastern half of the U.S. may be mostly normal from Sept. 30 through Oct. 4, according to WSI Corp., a forecasting company in Andover, Massachusetts. The high temperature in New York on Oct. 1 may be 71 degrees Fahrenheit (22 Celsius), compared with an average high of 69 degrees.

Business Posturing for Natural Gas

DENVER, Sept. 23 /PRNewswire-USNewswire/ -- Background: America's Natural Gas Alliance (ANGA) Executive Vice President Tom Amontree issued the following statement on the meeting being held by the Colorado Utilities Commission to take public comments as the next stage in the consideration of Xcel Energy's plan in compliance with "Clean Air-Clean Jobs." This meeting is being held today in Denver, CO.
"We applaud Xcel Energy for its efforts to advance clean air and clean jobs in Colorado. We are proud of the role that abundant and cost competitive Colorado natural gas will play in the state's clean energy future.
"The natural gas community stands ready to continue working with Xcel, the PUC and other stakeholders as the process moves forward. We believe Xcel set a good marker and that it may even be possible to accelerate timelines for transitioning to greater use of clean Colorado natural gas.
"This innovative work to clean the air, create jobs and improve Colorado's economy will pay off handsomely for Colorado. Xcel, Governor Ritter and the many other local leaders involved in this effort are to be commended. Thanks to their collective vision, natural gas can play a growing role in improving the quality of the air we breathe, adding to the 137,000 jobs already supported by the natural gas industry and protecting the state's majestic outdoors. We hope that other states will follow Colorado's lead and boost local economies and improve air quality with clean natural gas."
America's Natural Gas Alliance (ANGA) represents 34 of the nation's leading independent natural gas exploration and production companies. ANGA members are dedicated to increasing the appreciation of the environmental, economic and national security benefits of clean, abundant, American natural gas. Learn more about ANGA at www.anga.us.
SOURCE America's Natural Gas Alliance

ONGC India into US Shale

NEW DELHI: State-owned Oil and Natural Gas Corp (ONGC) on Wednesday said it has ventured into Shale Gas exploration by spudding the first Shale Gas well RNSG-1 in Ichapur village near Durgapur in Burdwan District of West Bengal. 

The well is targeted to a depth of 2000 meters and will be assessing the Shale Gas potential of about 700 meters thick shale of Permian age which is about 250 to 300 million years old, the company said in a statement here. 

ONGC plans to drill three more wells in Damodar Valley by end of XIth Five Year Plan in March 2012. 

Shale gas is natural gas contained within sedimentary rock formations. Shale gas exploration and production around the globe in general, and US in particular, has witnessed a surge in activity in the recent times and is making substantial contribution to gas production to the extent that Shale gas is often regarded as 'a game changer' in the hydrocarbon industry. 

In the US, Shale gas production contributes to nearly 17 per cent of their total gas production. 

In the Indian context, Damodar and Cambay basins were identified as priority areas for shale gas exploration. 

ONGC said the contract for spudding the shale gas well has been awarded to Schlumberger and the results of this well are expected by end October.

Marcellus Shale Legislation Sponsored by GOP Pennsylvanians

The clock is ticking for lawmakers to levy a severance tax on natural gas extraction for Marcellus Shale.

On Tuesday, as the four caucuses inched closer to their intended Oct. 1 deadline, House Republicans unveiled a plan to change the state fleet of vehicles to use natural gas instead of gasoline.

State Rep. Stan Saylor (R-Red Lion) said the plan is not a House G.O.P. statement against a severance tax. Each member will decide whether to support a tax if it comes to a vote.

Now, it's up to everyone to come to an agreement on a tax in just a few weeks.

"No state has taken up the challenge T. Boone Pickens put out there, as he has talked about other states using our natural resources to clean and up and create jobs, somebody has to be first," said Saylor, who is also the Republican policy chairman.

Surrounded by a dozen House G.O.P. Members, Saylor thinks Pennsylvania should start the trend. The conversion of the state's 16, 000 car fleet to natural gas would cost about $10 million and take about three years to see the savings.

The move to natural gas-powered vehicles is part of the Republican plan dubbed "Marcellus Works."

Because the Republicans are in the minority in the House, they can't call a vote on the bills. However, their votes remain important to the House Democrats looking to pass a severance tax.

At this point, House Democrats want the most expensive tax of its kind in the nation. It's a drastic difference to the Senate Republicans' plan to have a 1.5 percent tax that, after five years, would gradually reach 5 percent.

"It's a complicated and complex area. Taxes are a part of it," said state Sen. Jay Costa (D-Allegheny).

Costa is negotiating the tax and said they need to find a middle ground, especially on other concerns besides the tax, like the environment and how they will drive resources.

"We need those resources to be able to drive back into the general fund and make sure to have the appropriate resources to protect roadways ... and protect waterways," said Costa.

Gov. Ed Rendell has said all along that he wants a 5 percent tax, hoping to generate $288 million. Without a tax in place, it will leave a hole in the budget.

Some are doubting that legislators will come to an agreement this session.

Statoil Bullish on Natural Gas

September 20, 2010

Source: Statoil

Demand for natural gas is growing in all the major European, American and Asian consumer regions, and the market forward curves show rising prices in coming years.

This was a key message at a press seminar in Oslo today, where Rune Bjørnson, executive vice president for Statoil’s Natural Gas business area, presented.

Statoil (NYSE: STO) is today the second largest supplier of natural gas to Europe, marketing about 75% of all produced gas from the Norwegian continental shelf.

The main part of these volumes – about 80-90% – is sold under long-term contracts concluded in the 1980s and 1990s with large European buyers.

The bulk of these contracts gas have an oil indexed pricing, and developments in the oil price are accordingly significant for the export value of Norwegian gas.

Additional gas volumes are typically sold in the spot market. “Spot-market prices are relatively high in an historical perspective, even though prices have declined from the 2008 peak,” Bjørnson said.

He also pointed out that the forward price curve is currently pointing upwards.

Price growth forecasts build in part on expectations that total global demand for gas will increase by about 30% during the next two decades, largely driven by an increased gas demand for electricity generation.

In Europe alone, which is Statoil’s core market, consumption in the power sector is expected to grow around 20% up to 2030.

Statoil has additional gas for sale over the coming decade as volumes in some of its existing sales contracts start to decline and other contracts will expire.

“We’re now assessing a number of sales alternatives for this gas with a view to achieving better prices than we can get by simply selling all at European liquid hubs,” said Bjørnson.

These include new long-term contracts with new or existing customers, increasing direct sales to distributors and industrial end-users, and increasing the sale of gas to the power sector.

“We expect that large proportions of our gas will continue to be sold under long-term contracts to large energy companies,” said Bjørnson.

“But market liberalisation in Europe also gives us access to new customer segments, such as large end-users.”

The power segment is regarded as an interesting sales channel. Over 30% of European power capacity is more than 40 years old and needs to be replaced.

According to Bjørnson, gas represents a very competitive option compared to alternative energy sources and gas does not require subsidies.

Gas is also attractive from a climate perspective, with carbon emissions declining up to 70% if an old coal-fired power station is replaced by a modern gas fired power station.

“We’re well positioned,” said Bjørnson. “Prices are relatively high, demand is expected to grow in all markets and we can access several alternative channels when marketing new volumes.”

Marcellus Shale Natural Gas Pipeline

MANSFIELD, Pa. Just as truck-laden highways transport goods and supplies to and from marketing centers, the natural-gas industry relies on a network of pipelines, compression stations and storage areas to get its product from the producing wells to the market.

Pipeline siting and regulation were the topics at two meetings sponsored by Penn State Cooperative Extension, each drawing a crowd of more than 50 people to hear presentations by pipeline company representatives as well as members of the Federal Energy Regulatory Commission.

Pipelines to transport and distribute natural gas have crisscrossed the nation for more than 50 years. The Tennessee Gas Pipeline, a 14,000-mile segment of ElPaso Corp. s 42,000 miles of interstate pipeline, has been an extensive part of this network and is being used to move the gas harvested from the rich Marcellus shale deposits that lie beneath several states in the Northeast.

We re a pipeline company, said Mark Hamarich, ElPaso Corp. representative and project manager for the Tennessee Gas Pipeline. Our business is to transport natural gas.

As natural gas production increases, supply-line space is at a premium, creating a need to expand capacity. Currently, ElPaso Corp., through its Tennessee Gas subsidiary, maintains a 24-inch line and is working to improve and expand the pipeline infrastructure.

The 300-line project is aimed at the Northern Tier of Pennsylvania and will increase capacity by installing seven looping segments totaling 127 miles of 30-inch pipeline. The project includes installation of two additional compression stations and upgrades to existing compressor stations.

We re proposing to build loop lines adjacent to the existing line, Hamarich said. Those lines are like passing lanes on the highway. They allow for more gas to pass through the system.

The new pipeline that would be installed can, in most circumstances, be contained within the current pipeline right of way. However, the company is seeking an additional 25 feet of right of way for the pipeline plus 100 feet of work space.

Pipeline representatives are actively seeking permission from landowners for the additional right of way, and are carefully following all state and federal guidelines, according to Hannarich.

This work space right of way is temporary and will revert back to the land owner when the project is complete, he said.

The right of way, on the other hand, will extend to the life of the pipeline, making the easement 75 feet wide.

The depth of the pipeline varies from 2 feet in solid rock, to 3 feet in other areas. In agricultural areas where deep tillage may occur, the pipeline can be buried up to 5 feet deep.

According to Hamarich, land-moving practices are carefully monitored to separate the top soil from the subsoil and to follow all Department of Environmental Protection erosion control and sedimentation guidelines and inspections.

Agricultural land, wetlands, water bodies and streams, cemeteries are all things we deal with, said Hamarich, There s a lot of investigating that goes into this.

After construction, the land is re-seeded and restored.

Crop damages are paid according to the market value of the specific crop.

We ll work with the farmers to make sure the crop land is brought back, Hamarich said.

As long as the pipeline is in existence, the pipeline company will maintain the right of way to keep the area clear of trees that might damage the pipeline itself.

If a right of way cannot be negotiated, the pipeline company is authorized to employ eminent domain to secure the necessary land rights, although this is used as a last resort.

Once the pipeline is in place, the biggest challenge facing the pipeline companies is to prevent damages.

Do not dig near the pipeline, Hamarich said. Our biggest challenge is to control excavation near a pipeline.

A second project proposed by ElPasso Corp., that has yet to receive federal approval, is the Northeast upgrade project, which will substantially increase capacity from Pennsylvania s 300 line to New Jersey. That project is now in the proposal stages, with anticipated start date of spring 2011.

When both the 300-line project and the northeast upgrade are completed, pipeline capacity will be increased by 1 billion cubic feet.

All interstate pipelines are under the watchful eye of the Federal Energy Regulatory Commission (FERC).

FERC regulates interstate pipelines, said Berne Mosley, deputy director with the Office of Energy Projects.

There are many other pipelines that, because they do not cross state lines or do not tap into multistate pipelines, do not fall under federal regulation. These lines include lateral lines that extend from the well head to the collection site, gathering lines that form a network between the well sites, in-state transmission lines and smaller distribution lines.

Those are monitored and regulated within the state, Mosley said.

Pipeline companies must follow strict procedures when proposing a new project or when updating infrastructure. All applications are subject to internal review for environmental impact and nonenvironmental considerations, according to FERC representatives.

Nonenvironmental considerations include engineering specifications, costs and conditions of service, and other policies related to the completion of the project.

The environmental review takes a close look at biological, cultural and socioeconomic impacts. It also reviews land use, soil and geologic structures, air and noise impacts, and system alternatives.

Lauren O Donnell, director of FERC s Division of Gas Environment and Engineering, oversees the environmental side of the equation.

Companies are required to submit to us an environmental report, she said. Members of the staff read the report and send letters back asking for clarifications. All of the information is available for public review.

After projects are FERC approved, companies can move ahead with the process. In Pennsylvania, that means moving more of the natural gas recovered from the Marcellus shale deposits to market.

Things are going great guns in Pennsylvania. People here understand the value and are eager to see it developed, Mosley said.

Petroleum Strike Avoided in India

The Federation of All India Petroleum Traders (FAIPT) has withdrawn its strike call for Monday, after the government decided to form a committee to examine the demand of a change in dealership commission, based on a fixed percentage of invoice value.The committee, under the chairmanship of Apurva Chandra, joint secretary (marketing), Ministry of Petroleum and Natural Gas, will submit its report in three months. According to FAIPT Secretary Ajay Bansal, the strike has been ‘deferred’ for three months till the committee report is submittedThe committee will also look into FAIPT’s demand for rationalising the growth of retail outlets in the country.

According to a decision taken at a meeting, chaired by petroleum minister Murli Deora, today, the committee will arrive at a set of guidelines on the basis of which public sector oil marketing companies will proceed while planning and operationalising new retail outlets.

The government also decided that dealers would have the option of depositing money for real time gross settlement with public sector oil marketing companies through demand drafts, in addition to the cheque facility allowed to some select dealers as of now.

Deora had earlier asked the federation not to proceed with their “no purchase, no sale” campaign from Monday in view of the ensuing Commonwealth Games.

Several rounds of discussions were held between the ministry and the representatives of FAIPT over the last week.

Natural Gas Has Its Supporters

U.S. utilities, which are under pressure to use more environmentally friendly fuel sources, are increasingly betting their future of natural gas at the expense of coal.

As Bloomberg News notes, the U.S. Department of Energy estimates that gas-fired electricity will climb 31 percent of U.S. power generation in 2010 from five years ago, while coal use will fall 6.5 percent. This comes amid a continuing public relations blitz by advocates of coal, which advocates argue has a smaller environmental footprint than it used to thanks to the $90 billion has invested in new technologies in recent years. That message is not resonating with some.

General Electric Co. CEO Jeff Immelt and Microsoft Corp. co-founder Bill Gates are among the business leaders calling for the U.S. government to triple its spending on clean energy research and development to $16 billion in the wake of the BP disaster in the Gulf of Mexico.

Natural Gas Price Effects Williams

rough 2012, and will pull back on spending over the same time period.

Still, the company continues to expect steady earnings growth during the period, despite lower expected natural gas prices and lower expected natural gas liquid margins.

By trimming capital expenditures over the next two years, the company anticipates a slower rate of natural gas production growth.

"We are adjusting our outlook and earnings guidance to reflect the current state of the economy and commodity markets. Despite the lower expected natural gas and NGL margins, we are still projecting steady earnings growth in 2010-12," President and CEO Steve Malcolm said in a statement.

The company said it now expects adjusted earnings for 2010 in a range of $1.00 to $1.20 per share. On average, 12 analysts polled by Thomson Reuters expects full-year 2010 earnings of $1.31 per share. Analysts' estimates typically exclude special items.

The company also currently projects adjusted earnings of $0.85 to $1.65 per share for 2011 and $0.95 to $2.00 per share for 2012. Analysts currently project earnings of $1.48 per share for the full-year 2011.

In late July, William's had projected recurring adjusted earnings of $1.00 to $1.45 per share for 2010. For the years 2011 and 2012, recurring adjusted earnings were earlier projected in the range of $1.15 to $2.50 per share and $1.40 to $3.35 per share, respectively.

The company also trimmed its capital expenditures guidance for 2010 to $3.45 billion - $3.95 billion from prior outlook of $3.47 billion - $3.97 billion. Capital expenditures for 2011 is now projected between $2.07 billion and $3.20 billion and for 2012 between $2.13 billion and $3.58 billion.

Earlier, 2011 and 2012 capital expenditures were forecast in the range of $2.40 to $3.70 billion and $2.60 to $4.55 billion, respectively.

"We have demonstrated over the years that we are capable of seizing growth opportunities in a variety of commodity environments. There are opportunities for growth across all of our businesses, and we will continue to pursue them with the same discipline that we always have," Malcolm added.

WMB closed Wednesday's regular trading session at $19.10, down $0.03 on a volume of 4.90 million shares, lower than the three-month average volume of 6.07 million shares. In the past 52-week period, the stock has been trading in a range of $16.57 to $24.66.

New Yorks Waits to Frack

Natural gas has been hiding in New York's share of the Marcellus shale -- anywhere from 1,000 feet to about a mile and a half into the ground -- for several hundred million years. It will be there five, 10, 50 years from now. There's no cost crisis. Natural gas for a residential customer in New York currently retails for $16 per thousand cubic feet (19th most expensive in the country), and the wholesale price has been dropping steadily. Forecasts for the near future do not indicate any pending price surges.

Natural gas drilling has a hundred-plus year history in New York. More than 75,000 wells have been drilled since the late 19th century, with more than 13,000 still active. Forty-five billion cubic feet of gas were produced in New York last year, worth several hundred million dollars.

So why all the excitement over gas drilling in the Marcellus shale?

In a word, hydrofracking, the controversial technique whereby, for each well, drillers blast a million or more gallons of high pressure water, sand and chemicals to force gas out of rock. The industry claims the process is environmentally safe, creates jobs and generates tax revenues.

But that's what it said about deep water oil drilling in the Gulf of Mexico.

Opponents worry about dangers posed to water quality, and cite fracking problems across the country's shale formations. Conflicting claims fly over an alleged loophole -- engineered by Dick Cheney for Halliburton -- exempting the process from the requirements of the Safe Drinking Water Act.

Many Pennsylvanians unconnected to the gas industry now regret their state's gas rush. Common sense dictates New Yorkers deliberate thoughtfully before permitting fracking. TheEPA is in the midst of its second study of hydrofracking (the first in 2004 was embarrassingly pro-drilling, even by Bush administration standards). The state Department of Environmental Conservation is cataloging comments received on its draft supplemental generic environmental impact statement on the technique.

But regardless of the studies' results, if hydrofracking is the only means by which to get the gas to flow, that same common sense should have us leave it in the ground for the foreseeable future, perhaps forever.

Pass up a once-in-a-lifetime chance to play Qatar for a few years? Yes. Although it's twice as clean as coal when burned, natural gas still contributes mightily to climate change.

Hurrying to exploit Marcellus shale gas will not enhance energy security as claimed by the industry. The opposite is true. Energy security is burning other countries' gas while leaving ours in the ground for possible future use, while moving swiftly at the same time toward renewables.

The fact that natural gas is a fossil fuel, nonrenewable by definition, ensures that the price will rise over time. As we go over the inevitable hump of peak gas -- that point where half of all available natural gas has been pumped -- the price will rise ever more rapidly, and stay high. Leaving gas recoverable only by hydrofracking in the ground is like money in the bank, with interest.

Because it worsens climate change, natural gas can only be a transitional fuel anyway. We'll have to find other means by which to heat our homes and cook our meals. The sooner, the better. Happily, solar thermal and heat pump (geothermal) technologies are already proven alternatives for heating.

Perhaps we will genuinely need Marcellus gas some day, and the only way to get it is hyrofracking. Peak gas arrives earlier than predicted, and the price skyrockets. The green transition not yet complete. That day may come, but it's not on the horizon.

The longer we wait, the more likely new, safer technologies for hard to recover gas will permit us to bypass it. Compressed air or some other benign alternative may one day replace the huge water consumption and toxic chemical use currently essential to fracking.

Waiting to develop the Marcellus shale with safer technology will also virtually guarantee increased royalties for landowners with leases, profits for gas companies, and tax revenues for governments. That's because it's a sure bet prices will rise sharply sooner than we're ready for. Avoiding fracking also saves water supplies, protects water quality, and hedges against the certainties of an uncertain future.

If hydrofracking is the only option for Marcellus gas, the wisest course is to wait, baby, wait.

Natural Gas Closes at $4.36/mmBTU

Natural gas futures rose Tuesday on the view that the seasonal low in prices may have passed and amid the continuing threat of tropical storm activity disrupting offshore production.

Natural gas for October delivery rose 2.8 cents, or 0.7%, to $3.966 a million British thermal units on the New York Mercantile Exchange, the highest settlement price since Aug. 24 and the third consecutive session of gains.

The benchmark gas contract has climbed for three consecutive sessions, leading to speculation that the seasonal low in prices has passed. Gas futures typically bottom in August or September as cooler temperatures reduce demand for natural gas-fired electricity to meet air-conditioning needs and the bulk of winter's gas heating demand is still months away.

"Traders are starting to wonder whether that was the bottom," said Chris Kostas, senior analyst with Energy Security Analysis Inc. "We're kind of at a crossroads over the next couple days."

Futures earlier Tuesday had climbed above the $4 level for the first time in almost three weeks, but gave up some of those gains later in the day.

"Psychologically, crossing $4 could be a hindrance," said Jay Levine, president of Portland, Maine-based Enerjay LLC. Gains in gas futures represented a slow change in investor sentiment, rather than a convincing upward trend. "There's no fire being lit underneath" the gas market, he said.

Some market participants are waiting for Thursday's weekly U.S. gas storage report before making firm bets that a seasonal rally is under way. Gas prices have hovered near 11-month lows for much of September, pressured by above- average inventories and high gas drilling activity.

Meanwhile, futures received some support Tuesday from the threat of production outages in the Gulf of Mexico, but no imminent storm threats are seen. The energy-rich Gulf is home to about 11% of U.S. gas production, and prices can jump if storms seem likely to disrupt production.

Government forecasters said Tuesday that a cluster of storms moving west through the Caribbean had an increased chance of forming a tropical cyclone. The National Hurricane Center said the low-pressure system had a 90% chance of becoming a tropical cyclone in the next 48 hours, up from 40% earlier Tuesday. But the storms are seen moving west across Mexico's Yucatan Peninsula, and aren't projected to threaten Gulf energy infrastructure.

In the Atlantic, Hurricanes Igor and Julia continue westward, but are expected to follow the path of some previous storms this season and turn north, missing the Gulf.

Fracking Fight is On

BINGHAMTON, N.Y. (Dow Jones)--Hundreds of people gathered as here Monday to debate the safety of a gas drilling method called hydraulic fracturing, with critics campaigning against the industry and urging federal regulators to halt the practice.

The U.S. Environmental Protection Agency, which organized the forum, said that the depth at which the practice occurs in the East Coast -- thousands of feet below the surface -- provides protection against contamination of groundwater. But the agency also warned about the volume of water used in shale-gas drilling and said that it would evaluate the integrity of some individual wells as part of a high-profile study -- a shot across the bow to the industry, which has been pushing the agency to keep the study narrowly focused.

"Depending on the type of well that is used for a hydraulic fracturing operation -- particularly these newer horizontal wells -- you can use as many as five million gallons per well," said Robert Puls, the EPA's technical lead on the hydraulic-fracturing study. With companies drilling as many as 16 wells from a single well pad, "that's 80 million gallons of water. Where is that water coming from? Is it competing with other uses, in particular drinking water?"

The gas industry says that golf courses use more water in New York state than shale drilling would.

"If all the wells expected to be drilled are drilled, water usage for natural gas operations in the state could grow to 28 million gallons a day," said Cathy Landry, a spokeswoman for the American Petroleum Institute. "In contrast, golf courses in New York state use more than double the water -- or a seasonal average of 58 million gallons a day."

The EPA's stated purpose is to get input on its study of hydrofracking in the U.S. shale regions, which are home to gas resources that the energy industry estimates could last a century. Accessing shale gas has become a growth area thanks to technological advancements, including more sophisticated uses of hydraulic fracturing. The technique involves pumping water, sand and chemicals underground to crack open the rock, releasing the gas within.

A big concern is that the chemicals used in fracturing could taint water supplies, through spills at the surface or through faulty wells or problems in processing spent fracturing fluid. But the forum on Monday also provided evidence that the concern is broadening beyond chemicals and touching on the entire process of high-volume shale drilling.

"Over the last few years I've developed many serious concerns about hydrofracking in tight shale," said Lou Allstadt, who described himself as a former vice president of Mobil Oil Corp. Shale-gas wells "are going to have to be fracked many times over their lives," he said. One problem: "such successive fracking increases the risk that the frack will break out of the target shale zone and into fissures that communicate with aquifers."

Perhaps nowhere is skepticism as deep as in New York. New York City draws fresh water from reservoirs in the Catskills, which sit atop a swath of the Marcellus Shale. High-volume shale gas drilling has yet to come to New York, as it has to other states, amid concern about contaminating the city's water supplies.

"There's a big difference between a 100,000 gallon hydrofrack and a three million to five million gallon hydrofrack," said Neil Woodworth, executive director of the Adirondack Mountain Club. He warned that the Northeast probably lacks the capacity to clean up the chemical-laden hydrofracking fluids. "Water in New York State is the most precious resource we have and we can't afford to contaminate it," he said. Applause broke out in the theater.

The industry is increasingly concerned by signs that the EPA is taking seriously the concerns of drilling critics that fracking puts drinking water at risk. On Friday, the API organized a conference call and publicized a study highlighting that if drilling in the Marcellus Shale -- which stretches from New York to West Virginia -- begins in 2011 under a middle-range scenario, production could reach 9.5 billion cubic feet a day in 2020, generating more than 180,000 jobs and almost $4 billion in additional tax revenue.

The forecasts resonate with some people in the southern tier of New York, where jobs are in short supply.

"Rich people do not want gas drilling or any economic development in their backyard," complained Douglas Lee, a resident who spoke at the forum. "They have no concern about how our people make a living. Our communities are poor. We have a high unemployment. Our young people are forced to move away to find work."

Brad Gill, executive director of the Independent Oil and Gas Association of New York, said that "there hasn't been a single case of groundwater contaminated by frack fluid in New York" and complained that "fear-mongering and emotion will always trump science."

EPA Wants Chemical List for Natural Gas Fracking

The U.S. Environmental Protection Agency is asking nine natural-gas service companies to disclose the chemicals used in hydraulic fracturing, or fracking, as it studies the impact of the gas extraction method on drinking water and public health, the agency said Thursday.

Fracking uses large volumes of water, sand and chemicals blasted into underground rock formations to release gas. Environmental concerns have fueled opposition to its use in the Marcellus shale, found under parts of Ulster and Sullivan counties.

“Natural gas is an important part of our nation’s energy future, and it’s critical that the extraction of this valuable natural resource does not come at the expense of safe water and healthy communities,” Lisa Jackson of the EPA said in a statement.

Natural Gas Drillers Fill Local Hotels and Motels

Hotels in areas nearest gas drilling operations are boasting 30 to 50 percent increases in overnight stays thanks to the influx of personnel extracting natural gas from the rich deposits located 5,000 feet or more under the ground.

Philipsburg’s Harbor Inn packed gas workers into 25 of its 65 rooms from January through June, according to general manager Dolores Hollabaugh.

“Our winters are usually really slow, and having them brought us way up,” Hollabaugh said. “Revenue went up 40 percent.”

Before their arrival, the presence of gas drilling in the rural western and northern parts of the county was news to Hollabaugh.

“I didn’t know anything about the Marcellus Shale before the whole gang of them walked in one day. It was a total surprise to me,” she said.

Several hotels and motels near the drilling sites reported sizable boosts in their occupancy rates.

Gas workers started arriving in the area as early as January 2009. Their numbers have increased so much so that several places that previously only filled up on Penn State football weekends now report they’re regularly booked up once or twice a week.

Front desk clerks tell stories of

groups of 40 to 50 employees from companies such as U.S. Energy, Superior Well Services and Halliburton arriving unannounced in the middle of the night and staying for months at a time. Those same clerks also tell of groups of 60 or more planning on staying five weeks and leaving unexpectedly after five days.

The gas rush hasn’t yet completely overrun the county’s hotels, as it has in the state’s northern tier, where more drilling has taken place.

So far, hotels nearest the sites of ongoing drilling — which is occurring mostly in Rush, Boggs, Snow Shoe and Burnside townships — are benefiting the most, though some hotels in State College have also seen some gas worker traffic.

A number of hotels in State College and the eastern part of the county haven’t seen any gas workers stay with them — yet. But many local hoteliers said they think that will change in coming years as more wells are drilled in the county, and are eager for increased Marcellus Shale action to hit the area.

Raj Dave, manager of the Comfort Inn in Lamar, Clinton County, said his hotel got a taste of the possibilities Marcellus Shale development may bring to the area when gas workers who had been staying in Williamsport had to leave because their rooms were rented out for the Little League World Series last month.

“Maybe we’ll see an increase in the future, if there’s more drilling in the area,” he said.

Advice from Williamsport

The gas industry has hit full force in Williamsport, where local hotels are now booked solid for months in advance.

Jennifer Locey, general manager of Williamsport’s Holiday Inn Express, said her hotel’s occupancy rate has risen 30 percent in the past year.

She said when more drilling happens in Centre County, local hoteliers can expect large numbers of long-term lodgers, and special requests from guests with unusual schedules.

“They’ll run their hotels as an extended-stay property,” Locey said. “To serve their guests well, they need to look at what long-term guests are looking for, things like laundry facilities or other amenities they might be able to find at home.”

Susan Oliver, a spokeswoman for the energy firm Williams, said the company looks at two factors when choosing a hotel for its employees: first, that the hotel is a member of its local chamber of commerce; and secondly that it gives “a great corporate discount.”

Shaner seeks an ‘in’

In advance of the incoming tide, the Shaner Hotels group launched a website, MarcellusShaleHotels.com, designed to market its regional accommodations to gas companies.

Through the site, Marcellus- related companies are being offered discounts for booking stays at any of the eight Shaner hotels, located in State College, Milesburg, Lock Haven and Pittsburgh. The effort appears to be paying off, as large white pickup trucks with industry labels on the doors are now ubiquitous at the Shaner’s Williamsburg Square development in Patton Township, home to three of the company’s hotels.

On one night last week, Luis Hernandez idled by his truck near Shaner’s SpringHill Suites, where he was in the midst of a three-week stay. He has traveled around the country constructing drilling rigs for Patterson-UTI Energy, and had been in other parts of Pennsylvania for about a year before arriving in State College.

Hernandez has to be out of the hotel by 5 every morning in order to make it to his work site in Clearfield County on time, and he frequently works until 7 p.m. or later.

“I’m from Odessa, Texas,” he said. “But I live in my hotel room.”

Conferences help hotels

Marcellus Shale is benefiting hotels in State College through other means than housing gas workers. Penn State recently launched the Marcellus Center for Outreach and Research, which Jim Purdum, general manager of hospitality services for Penn State, said is likely to boost State College’s profile as one of the hubs of Marcellus development.

One of Penn State’s hotels, The Penn Stater Conference Center, has already made out well from the gas boom, hosting a number of Marcellus-related conferences that bring in revenue from food and beverage sales and overnight accommodations for conference attendees.

“There’s no question it’s having a positive impact on the hotel,” Purdum said.

The Penn Stater will once again host the annual Marcellus Summit in October, which brings hundreds of people related to the industry into the hotel. Purdum said he believes The Penn Stater, with its large conference facilities, is well-positioned to host additional similar events in the future.

“We think we’re just at the start of it,” Purdum said. “We’re paying attention to what opportunities there are, and we’re anticipating more events surrounding learning more about the industry.”