NGLs are major part of Marcellus potential, says executive

Nick Snow
OGJ Washington Editor

STATE COLLEGE, Pa., Oct. 13 -- Natural gas liquids can play a significant part in the Marcellus shale's development, but only if government regulators, community leaders, and producers work together, said an official from a company that has successfully marketed NGLs in Appalachia.

“This area's potential is incredible, but everyone will need to sit down and develop a workable regulatory framework,” Randy S. Nickerson, senior vice-president and chief commercial officer at MarkWest Energy Partners in LP, told OGJ following his Oct. 12 address to the 2010 Marcellus Summit. The 2-day conference was cosponsored by the Interstate Oil & Gas Compact Commission and Penn State University's Cooperative Extension.

The single biggest potential problem would occur if compressors' airborne emissions were regulated cumulatively instead of individually, and by the US Environmental Protection Agency instead of Pennsylvania's Department of Environmental Protection, Nickerson told OGJ. EPA has proposed a “co-location” approach that would turn the time it takes to get a compression station's air quality permit from months into years, he said.

Pennsylvania's DEP is aware that there could be a fairly heavy concentration of compressor stations individually emitting 500 tons/year if NGLs are produced from Marcellus gas, according to George Jugovich Jr., regional director in the agency's southwest regional office in Pittsburgh. DEP is evaluating the situation, he said during the US Energy Association's annual supply forum in Washington, DC, on Oct. 7.

'Clear and certain'
“The industry isn't perfect. There have been some mistakes,” Nickerson told OGJ on Oct. 12. “But I think we're ready to talk about the need for new regulations. They could be strict, but that wouldn't be a problem as long as they were clear and certain. They aren't now, and companies are hesitant about committing hundreds of millions of dollars to new projects that might not be profitable.”

In his address, Nickerson said the Northeast provides excellent markets for NGLS produced from Marcellus gas if producers can find the necessary marketing, storage, and transportation. Ethane would be the only exception, and MarkWest has identified Louisiana as the premium market based on conversations with ethane customers there that show 60,000-120,000 b/d of potential demand, he said.

MarkWest and Sunoco Logistics have proposed the Mariner project, a pipeline-and-tanker system that could support up to 2 bcfd of rich-gas production by mid-2012 and could be expanded to accommodate additional Marcellus production, Nickerson said.

Range Resources Corp., Chesapeake Energy Corp., and other key Marcellus producers have agreed to support the project as firm shippers, and MarkWest is negotiating with large customers in Louisiana regarding prices and contract structure, he indicated.

The proposal involves MarkWest constructing a 45-mile ethane pipeline to a connection with a Sunoco Logistics 250-mile pipeline that would be converted from refined products to liquid ethane and move 50,000 b/d to Philadelphia for loading onto tankers bound for Louisiana. Plans call for it to be in operation by early 2012.

Contact Nick Snow at nicks@pennwell.com.

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