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MONDAY, NOVEMBER 13, 2017

China Energy's interest in W.Va. natural gas may not necessarily turn into big investment

China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.

China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.China Energy, the world's largest power company by asset value, signed a non-binding letter of intent last week to invest $83.7 billion over 20 years to develop West Virginia's natural gas industry, but some remain skeptical that the deal may ever materialize.

For one thing, "As Bloomberg Intelligence energy analyst Michael Kay points out, not even U.S. energy pipeline giant Kinder Morgan Inc. budgets that much for growth projects. There just isn’t enough infrastructure with high enough returns to make it worthwhile," Emma Ockerman and Lynn Doan report for Bloomberg.

Politicians and companies have been trying to develop an energy hub in Appalachia since shale gas began booming almost a decade ago, but it's still easier and cheaper to drill for gas and use the from the long-existing transport hub on Louisiana's Gulf Coast. Energy companies in the Eastern U.S. also face substantial regulatory hurdles in getting projects approved. "Some project developers have spent over a year waiting for federal approval as landowners and environmentalists there lodge complaints and stage protests. Even as politicians push for more investments, pipeline giants from Energy Transfer Partners LP to Williams Partners LP are being forced to delay projects because of regulatory setbacks and legal challenges," Ockerman and Doan report.

Another pitfall of the China Energy deal is that most of the major infrastructure investments needed for the Appalachian energy market may have already been made. "Enough pipelines are coming online to increase the region’s take-away capacity by about a third. And so much gas-fired power generation has been built in the area that Moody’s Investors Service has warned of 'a gas-driven apocalypse' in the power market," Bloomberg reports. "Later this year, Dominion Energy Inc. will bring online a liquefied natural gas export terminal in Maryland, and an ethane export terminal at Marcus Hook, Pa., is already sending cargoes overseas."

China Energy will need to supply more details before the deal's feasibility can be assessed -- details that the Charleston Gazette-Mail's Ken Ward Jr. says are thin on the ground: "What kinds of natural gas processing plants, pipelines or cracker plants will China Energy Investment Corp. Ltd. build? Where? How many jobs will be provided and how many of them will go to West Virginians? Is the state’s environmental regulatory system up to the task of protecting residents? What about the long-term climate effects of the drive to burn more fossil fuels? Will this kind of investment in natural gas spell an even faster decline for West Virginia’s already struggling coal industry?"

Whether the memorandum of understanding comes to fruition remains to be seen. "At the end of the day what really counts is contracts," Jason Feer, head of business intelligence at Poten & Partners Inc. in Houston, told Bloomberg's Jim Polson. "An MoU is usually an agreement to continue talking."

Written by Heather Chapman

Posted at 11/13/2017 

 

Date: 11-12-2017

Saving coal industry could cost you more for electricity; Big Sandy plant already closed for coal, new law no help...

Some power customers may need to be hit with higher electric bills in order to prop up the declining coal-mining industry, the new chairman of a federal energy board said on Thursday.

Chatterjee said he must respond by Dec. 11 to a proposal by Energy Secretary Rick Perry for new FERC rules to make sure coal and nuclear plants are fully compensated for the “reliability and resiliency” they contribute to the nation’s power grid.Chatterjee said he must respond by Dec. 11 to a proposal by Energy Secretary Rick Perry for new FERC rules to make sure coal and nuclear plants are fully compensated for the “reliability and resiliency” they contribute to the nation’s power grid.

"It would not be a federal subsidy," Federal Energy Regulatory Commission Chairman Neil Chatterjee, a Kentucky native and former adviser to Sen. Mitch McConnell, insisted in a conference call with Kentucky reporters.

The extra money to keep coal burning "would come from customers in that region, who need the reliability," he said. "It's in these customers' interests to keep these plants open."

Chatterjee said he must respond by Dec. 11 to a proposal by Energy Secretary Rick Perry for new FERC rules to make sure coal and nuclear plants are fully compensated for the “reliability and resiliency” they contribute to the nation’s power grid.

USA TODAY on Oct. 8 reported that Perry argues new regulations are needed because the nation’s electricity grid is threatened with early retirements of power plants that can withstand major fuel supply disruptions caused by natural or man-made disasters.

Perry's move was quickly panned by clean energy advocates who said it was a blatant attempt to prop up coal.

“This is an unprecedented effort to intervene in the electricity marketplace and provide a new subsidy, which ratepayers will foot the bill for, to coal and nuclear power facilities,” Greg Wetstone, president and chief executive officer of the American Council On Renewable Energy, told USA TODAY.

The Union of Concerned Scientists has criticized recent Department of Energy work that fails "to mention the growing threat of climate change to grid reliability and resilience, the important public health and climate benefits of renewable energy, and the enormous subsidies fossil fuels and nuclear power have received for decades."

Climate change does not factor into FERC's decision-making because it's not an environmental regulatory agency, Chatterjee said. But he said keeping carbon-free nuclear power and coal could be "carbon neutral," he added.

Coal has long been one of the nation's leading sources of heat-trapping gases.

Chatterjee said FERC may accept Perry's proposal – which he said has some "challenges" – or develop its own, and offered one as an alternative that would designate certain coal and nuclear plants as essential for grid stability.

Then, customers across a region would pay higher rates to keep those coal and nuclear plants running.

"Certain plants may be under economic pressure, but essential for reliability," Chatterjee said. "We need them because of where they are located," but may need extra compensation "to keep them open."

Details on which plants could get such a designation and how much extra customers would pay would still need to be worked out, he added.

Coal has suffered in large part from a glut of cheap natural gas. But Chatterjee said natural gas plants don't store large reserves of the fuel at their plants, unlike coal and nuclear plants.

The American Gas Association has argued that cheaper natural gas is highly reliable and that a lot of utilities actually do have underground storage for natural gas.

Chatterjee said the idea to designate essential plants for reliability would have little impact on power plants in Kentucky because most are regulated primarily by the Kentucky Public Service Commission. He said some Kentucky residents, however, could see higher rates depending on their regional grid.

It more directly could benefit Kentucky's coal mining industry, which has been flagging in recent years, he said.

The Washington Post on Oct. 19 reported that eight past FERC members including five former chairs oppose Perry's plan, arguing it would disrupt markets and raise the costs of electricity.

Chatterjee said he is looking for an option that would be "legally defensible and doesn’t distort markets."

He said he does not want to "find out down the road we actually needed the coal plants and lost them due to short-term market pressures," noting that coal production is down about 30 percent over the last decade.

President Donald Trump promised to boost coal during his 2016 campaign.


By James Bruggers
Louisville Courier Journal

 

November 9, 2017

West Virginia Commerce Secretary Woody Thrasher (seated at left at the table) meets with China Energy President Ling Wen (seated at right at the table) and other officials Thursday in Beijing in front of President Donald Trump and Chinese President Xi Jinping. W.Va. Department of Commerce photoWest Virginia Commerce Secretary Woody Thrasher (seated at left at the table) meets with China Energy President Ling Wen (seated at right at the table) and other officials Thursday in Beijing in front of President Donald Trump and Chinese President Xi Jinping. W.Va. Department of Commerce photo

West Virginia has a $83.7 billion investment agreement in place with a China-owned energy company for shale gas and chemical manufacturing projects in the state over the course of 20 years, the state Department of Commerce announced Thursday morning.

Gov. Jim Justice called the deal, a memorandum of understanding, “the largest investment in our state’s history” in a news release, and the deal is the largest of several agreements China made with the United States totaling $250 billion, the release said.

The projects will focus on power generation, chemical manufacturing and underground storage of natural gas liquids and derivatives, the release said.

A memorandum of understanding is a nonbinding business agreement and typically the start of developing a formal agreement. It is “the first step in a series of commitments” between the state and the company, the release said. It was signed by West Virginia Commerce Secretary Woody Thrasher and China Energy President Ling Wen on Thursday, the release said.

Specific details of the MOU are limited. Commerce spokeswoman Samantha Smith said a summary of the MOU will be released but when that will be has yet to be determined.

Thrasher said site locations for initial projects have not been finalized, but Brooke and Harrison counties have been tentatively identified as the locations for two natural gas power plants the agreement will factor into, according to a news release from the West Virginia Chamber of Commerce.

Brian Anderson, director of the West Virginia University Energy Institute, said specific projects that come out of the agreement likely will be the subject of due diligence from China Energy. Projects resulting from the deal could locate anywhere in the state, he said, but most likely will land in or between Hancock County and Kanawha County.

Whether the natural gas plants that the Energy Solutions Consortium is developing in those two counties is connected to the MOU was not clear Thursday, but Anderson said the agreement could help advance the development of plants like them.

Smith said development incentives, like tax breaks, have not yet been determined.

The release said China Energy selected West Virginia partly because it features one of the largest known shale gas reserves.

“The massive size of this energy undertaking and level of collaboration between our two countries is unprecedented,” Thrasher said in the release.

China Energy formed through a merger between the Chinese government-owned coal mining company Shenhua Group and energy company Guodian Group, the release said, adding that China Energy is now the world’s largest power company, with more than 200,000 employees.

West Virginia University has been jointly researching coal liquefaction with the Shenhua Group.

In its own news release, WVU said it will work closely with the state government to coordinate the investment.

WVU’s release added that investments also will go toward infrastructure, including electricity from natural gas plants, chemical and polymer manufacturing and high-end chemicals. Much of the deal’s investment will focus on the development of an “Appalachian Storage and Trading Hub,” it said.

State officials, including Thrasher, have long touted the potential of a natural gas storage hub in the state. In a September speech at The Greenbrier resort, in White Sulphur Springs, Thrasher cited a study by the WVU Energy Institute that found three of five plausible hub locations identified are in West Virginia. Several energy companies contributed funding for the study.

Anderson said the investment will help the West Virginia, Pennsylvania and Ohio region become “the second major petrochemical hub in the United States,” the first being in the Gulf Coast region.

Anderson said the West Virginia infrastructure built during the chemical manufacturing heyday in the 1970s made the investment more appealing for China Energy.

Before Thursday’s announcement, Sens. Joe Manchin, D-W.Va., and Shelley Moore Capito, R-W.Va, had been encouraging an ethane storage hub development in West Virginia. They co-sponsored a bill in June, the Capitalizing American Storage Potential Act, that would make the hub eligible for certain loan guarantee programs, in addition to a bill in May that would call for an assessment of the feasibility of a storage hub in central Appalachia.

The gas storage project is estimated to cost about $10 billion. Proponents say easy access to natural gas products via the hub and pipeline infrastructure would attract investment from the chemical and plastics industry.

John Deskins, WVU’s chief economist, said natural gas storage and downstream activities, such as refining and distribution, are rife with economic potential, adding that one of the biggest questions the state faces in the next 20 years is how much it will develop these industries. But the development of a storage hub takes time, he said, especially in regard to site location and regulatory approvals.

“Keep in mind that this is a long ways away,” Deskins said. “This [MOU] is spread over a 20-year period. Who knows what our state and economy will look like then? But the fact is: This is coming.”

Reach Max Garland at This email address is being protected from spambots. You need JavaScript enabled to view it., 304-348-4886 or follow @MaxGarlandTypes on Twitter.