Will China Import Liquefied Natural Gas from West Virginia?

Posted on 03-14-2018

By Huiru (Ruth) Kang

In November, China Energy Investment Corporation signed a non-binding agreement with West Virginia. The agreement laid out a plan to invest $84 billion in shale gas development, underground storage of natural gas liquids and derivatives, and chemical manufacturing in the state over the next 20 years. Since signing the agreement, the Chinese state-owned enterprise has made no further announcements, nor have they explicitly expressed their rationale for these investments. Given the China’s increasing demand for natural gas, it is likely that these investments are intended to facilitate imports of natural gas from Appalachia.


Three factors could promote imports of liquefied natural gas(LNG)produced in West Virginia to China. First, China’s rising demand for natural gas necessitates increased LNG imports. China is expected to continue to import LNG due to a massive government program pushing to heat millions of homes and power thousands of factories with natural gas instead of coal. Further, the International Energy Agency predicts that China's natural gas demand will triple by 2040. Meanwhile, China Energy is eager to ramp up investment in gas-fired electricity generation. As China’s top coal miner and the largest power utility, China Energy remains under pressure to clean up its energy mix. In fact, the possibility of imports from West Virginia has been ostensibly confirmed by Chinese media reports, which emphasize imports as a main driver for China Energy’s planned investments.


Shale gas royalties in Pennsylvania: How much goes to local or state residents?

Posted on 02-19-2018

By Associate Professor Jeremy G. Weber

Pennsylvania has quickly become the second largest producer of natural gas in the United States. If it were a country, it would rank about sixth in the world in terms of production. Unlike elsewhere in the world, where governments own the right to the gas in the ground, production revenues in Pennsylvania and other U.S. states are split between energy companies and (mostly) private owners of gas rights. 

How natural gas production affects local economies depends on whether gas-right owners live near where production occurs. Suppose that the price of natural gas doubles but drilling and production do not change. Revenues to gas-right owners, referred to as royalties, will also double but have no effect on the local economy hosting the wells if the owners live elsewhere. If, instead, many owners reside locally, their incomes will rise and lead to greater spending on restaurants, home renovations, and the like, all of which will have a multiplier effect on local income. This multiplier effect has been documented by myself and others in a research paper of the Federal Reserve Bank of Kansas City, which found that each $1 in royalties creates an additional $0.50 in the county where it is received.


A Safety Subsidy for Nuclear Power?

Posted on 02-13-2018

By Nick McClure

The U.S. nuclear power industry has found it difficult to compete in electricity markets in recent years. Major operators such as Exelon have shuttered nuclear power plants and announced plans to close others in the future. In an effort to improve their profitability, nuclear power plant operators have sought subsidies from state governments in which their plants are located. At the urging of operators, policy makers in Illinois and New York have agreed to provide billions of dollars in “zero emission credits” to nuclear power plants, ostensibly to compensate nuclear power’s lack of greenhouse gas emissions. Similar subsidies have been considered in Ohio and Pennsylvania. Zero emission credits have been widely criticized and a majority of Americans hold an unfavorable view of nuclear power.

While the merits of zero emission credits are unsettled, proponents of nuclear power may consider another aspect of the industry for which to seek public remuneration: safety. Despite public apprehension regarding the industry, nuclear power is among the safest sources of electricity generation. Strict regulation of the U.S. nuclear power industry since its origins has resulted in a safety record with only three deaths in the history of the industry when an experimental military reactor exploded nearly eight decades ago. Since that time, despite widely publicized incidents such as Three Mile Island, no deaths have occurred due to the nuclear industry. However, such a high safety standard comes with costs and the nuclear industry’s current unprofitability is in part due to rising capital costs over the past five decades of increasingly strict regulation. 


A Cost-Effective Approach to Plugging Pennsylvania’s Oil and Gas Wells

Posted on 12-22-2017

By Nick McClure

Recognizing the potential public and environmental danger of improperly plugged and unplugged oil and gas wells, Pennsylvania established the Orphan Well Plugging Fund in 1992 to support the plugging of wells for which there is no operator that can be held financially responsible. Supported by fees on new oil and gas well permits, the Fund allows the Pennsylvania Department of Environmental Protection to plug roughly 25 to 50 orphan wells annually, less than one percent of the nearly 6,400 orphan wells currently in Pennsylvania. 


In an effort to assist Pennsylvania and other states with legacies of oil and gas production in allocating scare well plugging resources, the Interstate Oil and Gas Compact Commission developed the Plugging Prioritization Schedule for Orphaned and Abandoned Well Sites. The Schedule uses a points system to score wells according to ten factors, divided into 27 sub-factors, including whether the well is leaking oil/gas or brine and whether the well is located within 300 or 1320 feet of an occupied structure or a public water supply. A high score indicates that a well should be a high priority for plugging. 


What have two years of allowing exports meant for domestic oil markets?

Posted on 09-27-2017

By Max R. Harleman

In December 2015, Congress lifted forty-year-old restrictions on the export of crude oil. Some members of Congress supported the decision, arguing that it would boost domestic crude production and lower gasoline prices. Other members opposed lifting the restrictions, contending that it would reduce domestic supply, deepen dependence on foreign oil, and raise gasoline prices. The contradictory nature of the two arguments raises the question: What has been the impact of the first two years of allowing oil exports?  


Politicians on both sides of the debate predicted that removing the restrictions would cause producers to sell domestic oil in higher-priced international markets. Both sides were correct. Since lifting the restrictions, the US has exported 644 thousand barrels per day on average, or about 7 percent of domestic supply. This is almost 40 percent more than it exported in 2015.

About the Blog

The GSPIA Energy and Environment blog provides commentary and analysis that furthers understanding of E&E issues of public interest. Its primary contributors are GSPIA faculty and students.

Interested in the writing the for the E&E Blog? See the Format & Style Guide for additional information, click here.


Nick McClure, Managing Editor
Nick is an MPA student at GSPIA. His research and professional interests center on state and local public finance issues related to energy, infrastructure, and the environment. 

Questions about the blog should be directed to Nick at ngmcclure@pitt.edu

Max Harleman, Co-Managing Editor
Max is a PhD student at GSPIA. His research focuses on the governance of energy projects and their associated economic and environmental impacts on communities near development.

Jeremy Weber, Faculty Editor
Jeremy is an associate professor at GSPIA. His research cuts across energy, agriculture, the environment, and well-being. He teaches classes in quantitative methods and energy and environmental policy.

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