Where Will Gas Drilled in NY Go?
Where Will Gas Drilled in the Marcellus Shale in New York Go?
by Sherrie Negrea
For decades, consumers in New York State have used natural gas piped in from distant reserves on the Gulf Coast, in the Rockies and in Alberta, Canada. But once natural gas is extracted from the Marcellus Shale in the state's Southern Tier, those distribution patterns will likely change.
While New York currently contributes to 4 percent of its natural gas needs, that quantity is expected to rise once gas companies are allowed to drill in the Marcellus Shale using high-volume, horizontal hydraulic fracturing. As gas companies set up wellheads in the state, the Marcellus will supply more natural gas within the state using the established pipelines.
"The advantage is the gas will be directed into the regional pipelines," says Gary Marchiori, president of EnergyMark LLC, an energy supply company in Amherst, N.Y. "Your energy security will increase because you're not hauling it 1,500 miles; you're hauling it 150 miles from the wellhead to the source."
Gas drilled in the Marcellus Shale will be distributed to consumers in the region where the wells are located, based on demand from utility companies. Gas extracted from shale wells in the Southern Tier will also be piped to the New York City market, according to industry officials.
"Either way, it's certainly going to benefit New York as a state," says Brad Gill, executive director of the Independent Oil and Gas Association of New York, based in Hamburg. "I certainly think there's a market for natural gas all across the state."
New York State derives 33 percent of its electricity from natural gas, a proportion that is well above the national average of 23 percent. And only California has more natural gas vehicles on the road than New York, says Chris Tucker, spokesman for Energy in Depth, a national trade group based in Washington.
Whether gas extracted from the Marcellus Shale will be used to meet the state's energy demand will depend on the decisions of utility companies to bring this natural gas supplies to their customers. New York State Electric & Gas Corp., which serves 261,000 natural gas customers across more than 40 percent of upstate New York, obtains natural gas supply from numerous sources, including local production. Since it is unclear when Marcellus Shale gas will be available in New York, the company does not know what its role will be in bringing this gas to market. But Clayton Ellis, NYSEG's manager of corporate communications, says, "Our goal is to obtain the most economical and reliable natural gas supply possible for our customers."
The distribution of natural gas extracted from the Marcellus Shale in New York will be facilitated by a well-established pipeline system that currently moves natural gas across the state. The Millennium Pipeline, which stretches 186 miles from Corning to Ramapo, N.Y., originally opened in 2008 to bring natural gas from Canada and Western New York to the New York City market.
Increasingly, though, the Canadian gas supplies are being replaced by Marcellus gas from Pennsylvania and conventional wells that have been drilled in Western New York, says Stan Brownell, vice president of development and marketing for Millennium Pipeline Co., based in Pearl River, N.Y. While 80 to 90 percent of the gas in the pipeline once originated from Canada, that figure has now dropped to 25 to 30 percent, he says.
"There was Marcellus gas here so the U.S. producers get to benefit, and we can back off the Canadian gas," Brownell says. "It's more beneficial for the local producers to put their gas in. With the gas coming from Alberta, they had to pay a lot more for transportation."
Once high-volume, horizontal hydraulic fracturing is allowed in the Marcellus Shale in New York, gas companies will set up rigs to drill the formation. After the drilling is completed, the companies will fracture the well, a process that takes about two days. Then the natural gas, in the form of gas and liquid, will come up through the ground and stored in a holding tank. The water will be steamed off and the natural gas that remains will move into a gathering unit for the area.
From there, the gas will move through compressor stations, located every 150 to 200 miles on the pipeline system. After the gas is compressed, it can be shipped in higher volumes in the pipeline, and it will also reach its destination more quickly, Tucker adds.
Drilling in the Marcellus Shale in Pennsylvania has already spurred development of new pipelines into New York. In July 2011, Laser Northeast Gathering Co. LLC began construction of a 33-mile pipeline that will shuttle natural gas from Pennsylvania to the Millennium Pipeline. The 16-inch-diameter extension will wind its way from Susquehanna County into the town of Windsor, near Binghamton, and then form a junction with the Millennium.
Other pipelines are expected to hook into the system once the state approves unconventional drilling in the Marcellus. "Right now the pipeline infrastructure is kind of lacking because we haven't had the green light to develop the Marcellus Shale," says Gill. "No one in their right mind would go in and develop pipelines without the assurances that we could develop gas."
In July 2011, Governor Andrew Cuomo's administration proposed allowing high-volume, horizontal hydraulic fracturing in 80 percent of the Marcellus Shale in New York, excluding drilling within 4,000 feet of the Syracuse and New York City watersheds, on any primary aquifers and on any state-owned land. The state now must complete a final draft of its review of the procedure, which is expected to occur next year.
Since Marcellus gas drilling has been permitted in Pennsylvania, some pipelines into Canada are being used to export, rather than import, natural gas. "What we're seeing is this resource that we've created here in the U.S. is flowing back to Canada," says Marchiori.
As the production of gas from the Marcellus Shale in the Southern Tier is expected to exceed the needs of New York consumers, some of the gas may be shipped north or south. The wells developed in the Marcellus are estimated to last 40 to 60 years.
Central New York will most likely receive its gas from local wells and intrastate supplies once Marcellus Shale drilling begins in the state. Since gas is fungible, it will be difficult to a large extent to determine where its final destination will be.
"It all gets comingled so you can't really say what's Marcellus gas or Medina gas," Gill says. "It all goes into the pipeline and then distributed to the end users. It's hard to say if a molecule of Marcellus gas will end up in a home in Rochester, but certainly it will contribute to the well- being of the natural gas supply picture."