Moving the Mountain State Forward
May 30, 2012|
By Kensie Hamilton
There are many innovative, entrepreneurial people who call West Virginia home. For this multi-part article we wanted to let some of these folks outline the challenges they see in the energy industry in the Mountain State. Not being the kind of people who like to complain without solutions, we also asked them to address these concerns with ideas to improve the industry. We hope this helps get the conversation moving on some of these topics and that steps can be taken to protect West Virginia’s place at the top of the list of energy producing states.
President, NGInnovations, Inc.
Cross Lanes, WV
CHALLENGE: Confronting the oil and gas industry’s contaminated waste water issue.
SOLUTIONS: Water is a precious commodity. While it is a limited resource in some states, other states do not allow drilling in order to protect their water. The oil and gas industry should take ownership and the opportunity to become a partner in the conservation of water and reuse as responsible stewards. As an industry, we should contribute to general funding for the development of technologies for improved methods, reprocessing water for reuse, recovering water as possible and separating usable products such as heavy metals and different salts so as to leave only uncontaminated water for reuse.
Coordinator – Community Development,
Chesapeake Energy Corporation
CHALLENGE: Realizing the full potential of the vast new supplies of clean energy that exist underneath West Virginia.
SOLUTION: The transition to natural gas as both an electrical power and a vehicular fuel has the potential for extensive fuel cost savings for private and commercial use. In the energy sector, employing natural gas-fired power plants makes low-cost, clean-burning fuel stock available to power companies while stimulating further demand for natural gas. In terms of vehicle fuel, consider this: the sheer abundance of natural gas that shale development has unlocked allows compressed natural gas (CNG) to maintain price points at $1.24 per gas gallon equivalent (GGE) below the cost of gasoline. With natural gas vehicles (NGV) development expanding throughout the nation—and infrastructure advances and new NGVs rolling out of the automotive industry—American drivers who make the switch are looking at an average savings of 36.7 percent on fuel costs. High-consumption public and private fleets are realizing the significant financial savings with a CNG/GGE price point average of $2.13 (versus 3.37/gallon for gasoline), lowering their bottom line and driving demand for this domestic fuel source.
Dr. Wallace Boston
President and CEO, American Public University System
Charles Town, WV
CHALLENGE: Incorporating alternative energy to offset rising energy costs.
SOLUTION: To complement its recently completed 45,000-square-foot green academic center, American Public University System (APUS) is constructing another green building in downtown Charles Town. The highlight of the 105,000-square-foot building is a 1,600-panel solar array that will double as a covered parking lot. The array will provide approximately 60 percent of the building’s energy needs and offset approximately 350 tons of carbon each year. Fifteen universal electric car charging stations will be available to the public. Based on historical increases in utility rates, over the life of the system it is estimated that APUS will save more than $9 million in energy costs.
President, GasSearch Corporation
CHALLENGE: Keeping reclaimable water from being disposed of into an injection well at a minimum while sending only highly contaminated water that cannot be economically reprocessed for reuse.
SOLUTION: The most significant challenge to the natural gas industry is the recent deterioration in price for natural gas. The only solution is to create more demand for this cost-effective, environmentally friendly commodity. To accomplish this, we will have to see more power generation fueled by natural gas and a more rapid switch to natural gas vehicles and the infrastructure necessary to support them.
Conventional natural gas producers are being overwhelmed by the new Marcellus supplies in more ways than one. While the new supplies have caused prices to collapse, new regulation geared toward the Marcellus have had a negative impact on conventional natural gas producers as well.
Regulators must recognize the significant differences between conventional producers of natural gas and the newer developers of the Marcellus and Utica shales. Adding on new and costly regulations to what is already a difficult situation will lead to further weakness in the industry, the results of which could be devastating.
President & CEO, Triana Energy
CHALLENGE: Addressing the rising fuel costs for service fleets.
SOLUTION: We see migration to propane autogas-fueled vehicles in our service fleet as a cost-effective solution to rising fuel costs. In choosing propane autogas, we have access to a variety of cars, vans and medium-duty trucks with original equipment manufacturer-installed fuel systems. We can utilize existing infrastructure to fuel them or add central fueling at a very reasonable cost. With propane autogas, we get the benefits of performance, power, torque and driving range all while using a domestic fuel with significant benefits in emissions and greenhouse gases.
Joe Manchin, III
U.S. Senator, West Virginia
CHALLENGE: The fact that we don’t have a national energy policy that uses all our domestic resources—coal, natural gas, oil, hydro, solar, wind—to end our country’s dangerous dependence on foreign oil; the very difficult regulatory climate—one that makes it extremely challenging to keep the good jobs we have, create more jobs and become truly energy independent; and the way this EPA has ignored the fact that we rely on coal for 45 percent of our electricity and has instead targeted coal—our nation’s most abundant, reliable and affordable source of energy.
SOLUTION: We have to have a balance between our environment and our economy that creates good jobs, protects the environment and keeps rates affordable. Our government shouldn’t be picking winners and losers. I believe we have to rein in this EPA now. I have proposed several bipartisan bills to do just that, including the Fair Compliance Act, which would prevent the EPA from destroying countless good-paying jobs, would keep utility rates stable and would ensure a reliable grid system while still protecting the environment. Ultimately we have to put our political parties aside and come together around a true “all of the above” energy plan.
Vice President, Sales & Marketing, Mountain View Solar & Wind
Berkeley Springs, WV
CHALLENGE: Increasing understanding and awareness of how solar energy works, and addressing why it is at odds with traditional energy sources.
SOLUTION: In a coal state such as ours, it is assumed that the solar industry is in competition with or is a threat to the powerful fossil fuel industry, which is so important to our state. This is not true. Solar energy equipment creates electricity, one of West Virginia’s most significant exports. Every panel installed increases our output capacity, thus bolstering our state’s energy portfolio. The other common misconception is that there isn’t enough sun here for solar power to work. West Virginia gets 95 percent as much sunlight as Florida and 20-30 percent more than Germany, the country leading the world in installed solar capacity. Through education and greater public awareness of the benefits of solar energy, our industry will grow, create more good paying jobs and provide much needed clean energy for generations to come.
U.S. Senator, West Virginia
CHALLENGE: Utilizing technology properly for our energy future.
SOLUTION: We need a strong future for West Virginia energy—including clean coal and responsible natural gas development—and to create both jobs and a healthy environment for our children and grandchildren. I know we can do both if we will just focus our efforts more intensely than ever on new technologies. Technology is the solution to energy’s future in West Virginia. We will need to work together to move our energy industry forward and thrive for years to come, creating jobs and building our domestic energy supply for our workers, communities, the state and the country.
Kevin Highlander, CPA
Partner, Hayflich & Steinberg, CPA’s
CHALLENGE: The confusion, or lack of awareness, in the energy industry about the EPAct and its tax deductions for private building owners and designers of government-owned buildings.
SOLUTION: The tax incentives available under EPAct can be quite significant for designers of public buildings. Increased dialogue between designers and public entities, such as schools and university systems, can prove to be quite beneficial to both. For the designer, a deduction of $1.80 per square foot can quickly add up when considering the size of most public buildings. For the public entity, assigning the deduction to a designer can result in reduced soft costs, allowing more funds for bricks and mortar. If designers, tax consultants and public officials work together, the economic benefits for both can be monetized.
Business Operations Manager, Energy Corporation of America
CHALLENGE: Industry restrictions caused by regulatory and environmental burdens.
SOLUTION: As a state, West Virginia has been blessed with access to a clean and reliable energy source that holds the potential of economic, environmental and national security benefits. Despite the abundance of natural gas and all of the good that comes with responsible development of this resource, unnecessary regulatory and environmental burdens could restrict the industry’s ability to provide low-cost, clean energy for the State of West Virginia and the nation. While we support reasonable and effective regulation, we must always be wary of anything that could hinder future development.
President, West Virginia Coal Association
CHALLENGE: A reduction in West Virginia coal demand due to the recent mild winter and economic uncertainty combined with the long-term issues related to the anti-coal, anti-energy, anti-job policies of the Obama Administration and a less-than-caring EPA.
SOLUTION: Cyclical ups and downs in demand are to be expected in any industry. The job losses that sometimes result are painful, but if there is any solace, it is that the jobs will hopefully return when the demand rebounds and supplies on the ground are used. The problem is that this isn’t just a question of demand—it is also a question of a long-term effort by the Obama Administration and the EPA to destroy the coal industry, both at the production end and at the consumption end. The evidence of this is clear—it has been virtually impossible to get a new mining permit since the earliest days of the Obama Administration. In essence, the EPA declared a permit moratorium that continues today. In the meantime, the EPA has passed rules and regulations that have forced the closure of dozens of coal-fired power plants, taking with them thousands of jobs.
Director & CEO, RCBI Advanced Flexible Manufacturing
CHALLENGE: Increasing energy efficiency in the manufacturing industry.
SOLUTION: Manufacturing is estimated to consume one-third of all the energy used in the United States. Today, as more and more manufacturers go green, they’re increasing their energy efficiency. It’s not happening overnight; it’s an evolution, not a revolution. Today’s forward-thinking manufacturers are using new, cutting-edge technologies to dramatically increase their productivity, and they are implementing new production processes that enable them to decrease the energy they use. For many manufacturers, “Reduce! Reuse! Recycle!” creates a comprehensive method for evolving to green energy.
President & CEO,
Appalachian Wildlife Foundation
CHALLENGE: Overcoming the ongoing debate over mining and the use of coal among regulators, environmental groups, elected officials, coal operators and the public.
SOLUTION: The Appalachian Wildlife Foundation believes the private sector can develop a voluntary program that sets baselines and elevates the overall ecological performance of the coal industry. The Mine Land Stewardship Initiative (MLSI) will create standards to improve the conservation and restoration of ecosystem services and wildlife habitat, the protection of water quality and the recreational opportunities for mining communities. Companies that choose to participate in the MLSI will agree to adhere to these standards, with performance confirmed through a rigorous third-party auditing process. When a company is deemed to have adhered to the standards, the coal they produce can be certified as having met the performance standards. The performance standards would be created through a collaborative process among coal suppliers, mineral owners, utility companies, conservation groups, wildlife conservationists, coal community representatives and others as deemed necessary.
R. Dennis Xander
President, Denex Petroleum Corporation
CHALLENGE: The impact of not having a national energy policy, which hinders both traditional and alternative energy development.
SOLUTION: Without a well-defined, comprehensive energy policy, it is difficult to chart any meaningful course. Is our goal energy independence? Or should we purchase as much foreign energy as is available, thereby saving our domestic sources for the future when prices skyrocket? Shouldn’t the government establish regulations and tax policies based on goals set forth in a comprehensive energy policy? By failing to plan, we are planning to fail. Energy development requires billions of dollars of investment in exploration, development and infrastructure. Investors require some degree of regulatory and tax certainty. The adoption by Congress of a comprehensive energy policy would provide energy developers and their financial backers with the assurances they need to invest in America’s energy future.
Gastar Exploration Ltd.
CHALLENGE: The stagnation of technology advancements due to declining product prices.
SOLUTION: Today, natural gas prices are approaching 20-year lows. At the beginning of this decade, natural gas prices increased to the $6-8/Million British Thermal Units (mmBtu) range with short-term spikes approaching $14/mmBtu. Improved prices and their resulting greater profit margins spurred technological advances in horizontal drilling and hydraulic fracturing. The result of advanced technology was the unprecedented development of unconventional reservoirs such as the Barnett and Fayetteville shales and, closer to home, the Marcellus and Utica shale formations. As a result, natural gas reserves have grown to levels that will sustain the country for 100 years and abundant supply has eroded prices. Low prices mean further technological advances are stymied, traditional operators are driven to the point of extension and major players are deterred from entering this basin.
Natural gas needs to be used to fuel power plants and the vehicles we drive. The result would be lower oil prices and less dependency on foreign oil from unfriendly countries. Natural gas prices would improve and allow growth of the industry domestically through continued technological advancements and survival of the traditional producer.
Attorney, Babst, Calland, Clements and Zomnir
CHALLENGE: The tri-state shale gas plays present multi-faceted complications along with their opportunities.
SOLUTION: Expanding shale gas development in West Virginia, Pennsylvania and Ohio has drawn the attention of both governmental and non-governmental entities. Increased government involvement in shale gas development has resulted in expanded regulation and enforcement efforts. The prospect of lucrative profits has also spurred an increase in mergers, acquisitions and joint ventures, with the most recent focus of these activities being on further development of shale formations containing natural gas liquids, i.e., wet gas. Litigation prompted by landowners and lease holders is also on the rise. In short order, our collective shale sensibilities have become an important part of our tri-state economy.
How do we fix this? The answer is equally clear.