Preparing the future for natural gas: Full speed ahead
Joe Wilson is CEO of Infinity Resource Group, Inc., a professional mineral rights consulting firm in Parkersburg, W.Va., and a Registered Landman. David Pearl is managing director of a CNG patent holding company and president of a CNG fuel island development company. Your questions are welcomed by calling 412-535-9200 or by e-mailing joe@irg-energy.com.
Our last two columns discussed the ramifications that lower oil prices may have on oil and natural gas development in the U.S. Although some speculate that domestic gas development will be hindered as a result, it appears that industry and state government leaders are proceeding full speed ahead.
For example, Constellation Energy, a subsidiary of Exelon Corporation (NYSE: EXC), announced on Jan. 20 an agreement to acquire seven compressed natural gas (CNG) fueling stations in Indiana and Ohio. Constellation will own and operate the stations as public/private-access fueling sites for regional and interstate transportation fleets.
Constellation is a leading competitive retail supplier of power, natural gas and energy products and services for homes and businesses across the continental United States. One of the 10 largest natural gas marketers in the United States, Constellation delivers more than two trillion cubic feet of gas annually to homes, businesses, regulated utilities and municipal co-ops.
Adam Waterson, Constellation鈥檚 development manager for CNG Infrastructure, explained that the purchase leverages the company鈥檚 scale and core expertise as a leading natural gas supplier and marks Constellation鈥檚 expansion into the CNG market, supporting the continued growth of its distributed energy business. Through its distributed energy business, Constellation is working with a number of its customers to develop, build, own and operate CNG fueling stations in locations to serve customer-owned and third-party contracted fleets.
鈥淥ur customers and business partners see CNG and electric vehicle charging as key opportunities to address their long-term sustainability and cost management objectives,鈥� said Gary Fromer, senior vice president of Distributed Energy for Constellation. 鈥淭he addition of CNG to Constellation鈥檚 retail offerings will help our customers accelerate fleet conversions while allowing Constellation to address their CNG infrastructure and gas supply management requirements.鈥�
There are an estimated 150,000 natural gas vehicles on the road today and that number is expected to grow. The economics for fleet conversion are compelling, according to Accenture, a global management, consulting technology and outsourcing company, which is working with Constellation on alternative fueling markets. Vehicle conversion and infrastructure development is underway throughout the United States, driven by expectations of long-term low price volatility in natural gas, corporate sustainability initiatives and potential additional incentives via developing carbon markets.
Apparently all of the recent activity in developing the Marcellus shale and the promise of natural gas鈥� economic and environmental viability has not been lost on the state of Maryland, which is reconsidering its prohibition against fracking. The far western counties, Washington and Allegheny, are situated perfectly to take advantage of the Marcellus shale.
As one of its last acts, Governor Martin O鈥橫alley鈥檚 administration proposed new regulations that would end a four-year freeze on drilling. He has called the rules the 鈥済old standard鈥� for safeguarding residents and natural resources. Newly elected Governor Larry Hogan has said he believes western Maryland鈥檚 economy should have the opportunity to benefit from the gas beneath its mountains, and he believes it can be extracted safely.
It鈥檚 interesting to note that O鈥橫alley, a likely Democratic contender for President of the United States in the upcoming election, has denounced the Obama administration鈥檚 plan to permit off-shore drilling for oil and gas off the mid-Atlantic coast, citing environmental concerns.
Marty Durbin, CEO of the American Natural Gas Association, called Maryland 鈥渁 long-term play鈥� and noted that production grew by a third last year from the Marcellus shale formation, which stretches from the Carolinas to New York. The need for more gas is bound to grow in the next few years, he said, as more power plants and factories adopt it as a fuel, and as exports begin via Cove Point in southern Maryland and elsewhere.
And according to an Associated Press report posted Jan. 26, West Virginia officials have, for the first time, opened millions of dollars in bids to drill for oil and natural gas beneath state-owned lands, including waterways and a wildlife management area.
This is a new undertaking for the state. In the past, these types of leases were never considered. While the actual drilling and storage of equipment will not be on state owned land, but rather on adjacent privately owned land, the mineral money earned from the leases will go to West Virginia鈥檚 Department of Natural Resources.
All of this bodes well for mineral rights owners. Although the sudden drop in oil prices may have hurt some short-term investments, market influencers like Constellation Energy and state governments are preparing for what is surely becoming America鈥檚 dominant fuel: natural gas.
Before making any decision regarding the disposition of your mineral rights, it is always advisable to seek professional advice from a mineral rights consultant for an evaluation of your mineral rights, and to consult with your lawyer and tax advisor.