February 1 – February 3, 2013
R.T. Walker, Real Estate Consultant at Beynon & Company.
Rick Stouffer, Editor at Gas Business Briefing a Division of Platts.
Tom Foster, Co-Owner of The Northeast ONG Marketplace.
Joseph F. Barone, President of ShaleDirectories.com.
Darlyn McDermott, Keystone Programs Division Leader/Oil and Gas Practice Leader.
Hunt, Guillot & Associates, LLC
Tejas: Hi! This is Tejas Gosai. We are here at the Midstream Conference talking with RT Walker, real estate agent with Beynon and Company. One of the reasons we at themarcellusshale.com do a radio show, and are talking to RT, is that he has a good pulse on what is going on in the region and how it is affecting listeners. Let’s summarize. In 2008 you went to different events and have helped a lot of companies come to this area. How did you get that process started?
RT: The process started in 2008 in commercial real estate; the retail industry had crumbled due to the economy. I had to get into a new line of real estate. In 2008 I placed my first oil and gas company. I saw the opportunity after I did research which was difficult because no one knew about it then. I got more and more involved and I joined organizations, one of which is PIOGA.
Tejas: Right–the PA Independent Oil and Gas Association, one of the oldest (1859 was the first oil well in PA). Why does joining an organization help?
RT: I would say that they heard the cats. They put everyone together and have common interests and you get to meet each other. Without these groups or shows like this it would be very difficult to meet people and network, and grow the business. All the groups, YPE…
Tejas: Young Professionals in Energy, a non-profit. You mentioned learning. In that time frame from 2008-2009, you had to learn a lot about what fracking is, why it’s happening, and the hot spots. Because you get to be the one who gets the first information, let’s walk through the process. Someone meets you here and then what is the next step?
RT: The next step depends on the type of business they are in. I find out exactly what their needs are, their clients, who they work with. Once I find that out, we find an existing building, or land to build on, and then it blossoms into creating a development group and providing what is necessary for the market.
Tejas: You have a good matrix of organizations you have worked with. Let’s fast forward to 2010, natural gas production is up, there are shut in wells, we are waiting for it to get to market. That is why we are here at the Midstream Conference. Midstream is the longest piece of production. You have already placed…
RT: A lot of those companies I have placed are service companies, and a lot are recent.
Tejas: When you place one, they are helping produce natural gas, but they are buying gas, donuts, coffee, staying at hotels; they are doing so many things that the ripple effect takes place. A lot of companies here are residential; there have been people you help live here. You are in charge of projects in Philadelphia?
RT: Yes, I have a large developer there who has purchased the last 8 acres in South Point, which is considered the energy capital of the northeast. We are moving 402 apartments marketed to the oil and gas industry. People are coming in from everywhere; they have homes elsewhere but they need to live there for the business, so we provide nice living quarters in a good location.
Tejas: Very cool–and we will watch that unfold. Check out Beynon and Co. Thank you, RT. I am Tejas Gosai at the Midstream Conference.
Tejas: Welcome back to All Energy Now. This week we will talk to Rick Stouffer, also at the first Elite Energy Event we put on last week. The next event is February 21st. We hope to get another great turn out. Thanks for coming down, Rick.
Rick: I thought it was a very good event, well attended; the main thing was to get people together with like minds who are involved or want to be involved with natural gas.
Tejas: Thank you–and also to have a four foot oil rig made out of ice! Look out for that picture. Let’s get into the past week. We were just at the convention center for the Midstream Conference.
Rick: I guess you could say the conference is a good kick off for the coming year. The news over the week–every week there is a new survey of the populations of people who live in the Marcellus and Utica shale areas like Huntington Bank, based out of Columbus, but do business in Ohio and Western PA. A survey came out which found that 60% of inhabitants in shale plays believe that the oil and gas industry will provide economic opportunity. Fourteen percent believe shale development will provide significant opportunity. In Western PA, 79 percent said it will bring economic opportunity. I was not shocked at that high of a number for Western PA; this is where the Marcellus got started. It was first in Washington county south of Pittsburgh. The people here have had more time to digest what it means to have drilling come to their area in terms of what it does to the local economy.
Tejas: It is different than what a survey like this would have looked like 4 years ago.
Rick: Just to give you an idea, it was 75 percent in West Virginia. So the bottom line is, once people get a taste of what’s going on, they basically have a positive attitude towards it in terms of the impact on the economy.
Tejas: Because of the abundance of natural gas and how advanced shale energy is, everyone in the US is wrapping their heads around it. There are 535 CNG gas stations in the country; we are looking at possibly 100 on the line in the next year and there are more ways to get the gas to market.
Rick: Directly to that, the investment banking firm Raymond James–their top oil and gas guy Marshall Adkins said last week that natural gas production in the US will grow for another decade. It will be driven by huge production gains. It will be driven by the Marcellus with the production of gas associated with drilling for oil. We have talked about North Dakota which has a crude oil play, but they also find natural gas. They have so much that they don’t know what to do with it because they do not have the infrastructure. According to Marshall, the Marcellus will continue to be a huge player. For the US, he predicts production will average 66.8 billion cubic feet per day, up 1.3 billion. In 2014, it goes up to 67.4 billion cubic feet per day. This is a guy who follows the industry on a daily basis and while some areas have shrunk in dry gas production because we have a glut and the price goes down, he still believes Marcellus will carry this.
Tejas: We have anticipated this perfect storm to get this network online. And what happens when building networks is that one pocket goes a little faster than another. Some people get it better than others, some places are more difficult. It is getting to the point it needs to be now.
Rick: And it is going to be something to see. It is a great time to be involved in the industry. Things are moving together and once things are in place, I think that overall the population will be in better shape.
Tejas: It is like the internet when people realized it would revolutionize the computer world which changed everything; it is the same in the energy world. Going into the next news brief, one of the environmental concerns is that fracking uses water. There have been other methods of fracking with CO2 and gasoline. Water has become the best but that leads to issues.
Rick: In fact last week a study released by Duke and Kent State said the volume of waste water generated by Marcellus shale gas wells threatens to overwhelm disposal systems in the Appalachian basin. They figured this out by per unit of natural gas; fracked wells in PA produced 35% as much as conventional wells. It is less on a per well basis, but the total amount of waste water has increased 570% since 2004 as a result of increased drilling. Less per well, but you have so many more wells that the total volume is higher than before. The Researchers at Kent State and Duke said that waste water management continues to be a huge issue that has to be addressed by everyone. The water has to be disposed of properly. We have talked about this, and smart companies know what to do with the water– haul it away or treat it on site.
Tejas: One thing for sure that has taken off immensely is the water hauling business because companies need it. On the other side, managing the water at the site uses amazing technology and then it is used again and again. We are getting smarter at being able to conquer the issue of waste.
Rick: It is an instance where you have a problem and someone will come up with a way to fix the problem. The problem is how do you handle this released water? Where is the best place to treat it, etc.? There are a number of ways to handle the problem; you figure which is the best way that does the job for the least money and go with it. It’s happening throughout the Marcellus. It needs to be taken care of and the industry is doing that.
Tejas: Let’s get into your last news item that has to do with the main ways you can pull a system of oil and natural gas on a line.
Rick: We have talked about the Keystone XL pipeline which is proposed by TransCanada. They have a great deal of operations in the US, to build from western Canada down to the Texas Gulf Coast, costing around 7 and 8 billion dollars. It would haul the oil from the oil sands in Canada and supply the refineries along the Gulf Coast so they would not be importing from elsewhere. They spent about 4 years going through the process. A year ago this month, the president said that basically for a couple of reasons, he would not grant the permit. TransCanada split the pipeline in two and immediately began construction on the southern part which didn’t need a presidential permit. It is already in motion and being built. The Northern part that crosses the border is waiting for approval. The governor of Nebraska said that TransCanada has satisfied his concerns with environmental areas. So last week, 53 senators wrote a letter to the president to approve the application.
Tejas: I am happy that we are ending on this. The network to bring this system online is being built, and when that happens we will be fueling our own country. That is the focal point because as a country, when we can take care of ourselves and not rely on others and they rely on us for our CNG and LNG and other products, we can one day get stability in our energy independence. Rick, thank you for checking in with us.
Tejas: We are at the convention center in Pittsburgh; there are a lot of gas companies in the region at this Midstream Conference. There are a lot of oil and gas companies in the Midstream. We are talking to Tom Foster. Welcome to AEN. Tell me about why you are here.
Tom: Our publication goes to people in the industry no matter where, and we connect business in the northeast with explorers getting gas downstream.
Tejas: And you’re covering the topic this month with a shale play comparison.
Tom: This issue is going to Texas and we wanted to show them what was happening here.
Tejas: When did you launch The Northeast ONG Marketplace?
Tom: 18 months ago
Tejas: So it has 18 publications to date? And this came from another piece of the energy world– your father started a coal publication 26 years ago.
Tom: It’s a little different; it’s primarily about used and rebuilt shuttle cars, mining, different conveyers or systems. It’s more of a trade paper. Whereas, with the ONG Marketplace, we found we needed more content because in the coal paper the equipment was the content, and in oil and gas we don’t have that issue. It’s editorial. We start with content, and try to make it broad enough that people can understand, but also cover new technology.
Tejas: How do you see it unfolding over the next year?
Tom: It’s an exciting time; I meet someone in the industry for a while and then it’s always changing. If you can adapt, you can succeed. There are lots of shows popping up; the shows are the places where people can get together and talk.
Tejas: We look forward to checking ONG Marketplace; you can see an electronic version of the magazine. Tom Foster with ONG Marketplace. We are on site at the Marcellus Midstream Event.
Tejas: You are listening to All Energy Now; we have Joe Barone from shaledirectories.com. Check out their site. Welcome back.
Joe: What we are going to talk about today is an issue many companies are not aware of. That is, the insurance requirement to work in the industry. People are familiar with the MSA requirement if you want to work with the major companies like Consol or Chevron. Part of that is insurance. The requirements for the oil and gas industry are much different than general liability insurance.
Tejas: There are many requirements in order for you can get their contract–
Joe: One of the things we do is to reach out to the insurance broker as soon as the company is interested in the industry to understand the requirements rather than waiting until the MSA, and then it doesn’t work. Sometimes a company will get a call and the oil and gas company will ask about insurance and find out the company does not have enough insurance.
Tejas: Also we were both at the Midstream Event with Hart Energy. The titans of the oil and gas world were there. What did you think of the turn out this time?
Joe: It was a great turnout; it was the largest midstream conference. They had excellent speakers and it provided the attendees with a good vision of the next two years.
Tejas: For sure, it is not slowing down. The consensus was that we are in the tip of the iceberg. Thank you for keeping in touch and we will check out shaledirectories.com
Tejas: We are talking about the energy industry in the area and how it affects you. If you have questions or would like to discuss a topic, go to email@example.com . Tell me what you want to hear about. Our next guess is Darlyn McDermott with Keystone Insurers Group. We have been talking about insurance for some time, and the energy world revolves around needing things at a specific time, and if businesses don’t take care of their liability before they start work, it is bad all around. We hope this helps prepare you to get involved in the business. Welcome Ms. McDermott.
Darlyn: I appreciate the opportunity to help educate about risk management in the industry.
Tejas: There are a lot of ancillary businesses, and actual people working. You have represented folks with insurance products. You started the Keystone Shale Solution Project?
Darlyn: We are in Pennsylvania and we are a franchise of insurance agencies. My division is programs and what we do is focus on a very niche piece. That is commercial, and what we do is create things for the buying consumer and sell it through the agencies that are a part of us. What we create is programs. What makes a program is one, a unique coverage pursuant to an exact class of business. For example, environmental testers, drillers, etc. Two, it is offered at a premium because we can negotiate across many policies. Lastly, it is unique. It is only able to be gotten to through our channel, our independent agencies located through all the sweet spots in the shale plays now. In addition, we write 64-65 million in-house every year with programs already established; one we put together is Keystone Shale Solutions. What that was for is a piece I am in charge of for the energy industry. It was an answer to what we saw in the market place.
Tejas: Let’s work through a live example. Tell us how a company goes through this.
Darlyn: In order for an entity to be part of the supply chain for shale activity, they have to be approved by one of the major energy companies in the area. Let’s use an example. Right now I read an article that BP has announced where they will be drilling. They will be east of Mosquito Lake, so if I am a person with a business that wants to be on the payroll of BP, I need to … 1) make sure that my insurance coverages are in order for the type of business I do and that they comply with the definitions of what BP will want in their MSA. Usually they are different. Companies need to get on the BP website and look at the PDF that explains the MSA.
Tejas: Let’s talk about that. MSA covers all your liabilities, the agreement between you and the gas company.
Darlyn: If I am trying to be in on the food chain, I want to get on an MSA for all the energy companies. They are all written differently and are confidential. They are all multiple pages and are literally thousands of words. The supply company needs a great broker that fully understands the MSA. They need to be on the approved supplier list and have exposure to workers compensation across state lines. The areas that are biggest hindrances for companies are a lack of expertise around answering questions about the MSA, and they have not submitted it correctly. Three, they do not have insurance requirements in order.
Tejas: Thank you, Darlyn, for the amazing information. I want people to get hold of you, so email me and I will forward it to Darlyn at KeystoneInsGRP.com. I think it is not just you, but you’re group is a large network of people?
Darlyn: Yes, that is correct. We want to let people know we have a ton of agencies that are leaders in their community. Everything companies need. Eight of the partners in PA and OH are extremely involved.
Tejas: Thank you so much and very cool. We will have to have you back.
Darlyn: Anytime–we are happy to do it.
Tejas: This is All Energy Now and we will be right back
Tejas: We are back at the Midstream Conference by Hart Energy. Right now we are with Craig Barris. His company is involved in pipeline work. Welcome to the program. Why are pipelines important?
Craig: Ok, they are critical in getting the gas to market. The midstream is a huge part of the industry and you have wells drilled and need facilities to get gas to market.
Tejas: We have never seen so much happening as it is now. How do you fit in?
Craig: We work from the wellhead to the facilities. We do the engineering and design. We also provide inspectors on the field, project managers, etc.
Tejas: And another question I have, who are you working with in the midstream and how is it going?
Craig: Well we are working with several companies that have been here and new companies from all over. Companies like Dominion– we work a lot with them. Our website is www.hga-llc.com
Tejas: And thank you for listening to our program. This is Tejas Gosai for All Energy Now where we have the privilege of speaking to experts about what is going on and how it affects us. Look at our previous podcasts at allenergynow.com and register for our next event. We thank our guests today; we have been broadcasting at the Midstream Conference.