Scranton Times-Tribune: UGI links shale gas to system

By David Falchek (Staff Writer)

When UGI utilities purchases gas, it usually isn’t a big deal.

But unlike most acquisitions that end up deep in a state Public Utility Commission filing, UGI is celebrating the first direct connection to Marcellus Shale wells for UGI Central Penn Gas Inc., UGI’s unit serving the middle of the state.

Utility officials say there won’t be sparkling wine or eggnog, but there will be a holiday meal for the public and celebratory mood Friday at the Mansfield Hose Company starting at 11 a.m. Not far away is a direct connection from wells to UGI’s distribution system. For UGI’s history as a pubic utility it has purchased natural gas from as far away as the Rocky Mountains or Gulf of Mexico to meet customers’ needs.

The development of Marcellus Shale, a rock layer a mile below the surface full of natural gas, has given Pennsylvania utilities a local supply of gas.

For now, the gas, after minimal processing, will serve UGI Central Penn Gas customers, but utility spokesman Joe Swope said it is the beginning of UGI’s effort to develop more robust natural gas infrastructure connecting the gas-rich north central part of the state to the gas-hungry northeast and southeast parts of UGI’s service area.

“This is the start of the infrastructure you need to allow Marcellus Shale to reach its potential,” Mr. Swope said. “This is the first of many steps.”

At first, UGI will be drawing small amounts of gas from the connection. As the utility’s contracts with other suppliers expires they’ll be drawing more gas from the Mansfield connection, enough to fuel 15,000 homes, Mr. Swope said.

Typically, UGI purchases natural gas off the interstate pipeline network, which acts as a repository for natural gas sold through the continent. However, tapping into the pipeline includes transportation costs. The direct connection bypasses the pipeline companies and transportation costs associated with it. Transportation costs can be as much as 20 to 25 percent of price the utility and its customers pay for national gas, said Mr. Swope.

State Consumer Advocate Irwin “Sonny” Popowsky said the exploitation of shale gas nationally has already pushed down prices.

“To the extent that our local distribution companies can take advance of local natural gas, it is a positive development for customers,” he said.

Jennifer Kocher, spokesperson for the Public Utility Commission, said the regulator expects that more and more natural gas used by utilities will come directly from Marcellus Shale. Pennsylvania has a least cost purchasing requirement for utilities obliging them to find low cost gas supplies.

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