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A Guide to Natural Gas Access Opportuni es for Pennsylvania Rural Communi es
Na onal Center for Appropriate Technology 900 Ru er Avenue Suite 16, Forty Fort, PA 18704 • Phone: 479-587-3471 • Contact: Norm Conrad
Table of Contents
Introduction ....................................................... 1
Ten Critical Questions ........................................ 2
1. What is the closest potential natural gas supplier ............................... 2
2. Who are the potential natural gas customers ........................... 3
3. What type and quality of energy will be displaced ........................ 3
4. What are the community demographic and heating equipment characteristics ..................... 3
5. Are there local obstructions to pipeline routing ................................. 3
6. Is the community receptive .................. 4 7. What is the leadership poten-
tial within the community ..................... 4 8. Is there support from county
and state political leaders ..................... 4 9. Is the timing right .................................. 4 10. Has the future been
adequately considered .......................... 5
Traditional Natural Gas Access ......................... 6
How do you apply to the local natural gas company to become a natural gas customer ................................ 6
What are the costs of pipe- line extensions for new service ................... 6
Alternative Natural Gas Access ........................ 8
Leatherstocking Gas Company .................... 8
Residential Customers ............................... 11
Large Customer Example ........................... 12
Natural Gas Cooperatives .......................... 13
Additional Opportunities ........................... 14
Tungsten Reclamation .............................. 14
Ethylene Row Stock from Wet Gas ..................................................... 14
Natural Gas for Transportation ................ 15
Innovative Practices and Financial Incentives in Other Natural Gas Producing Areas ................................ 16
Fuel Switching Issues ....................................... 16
Economic Considerations ....................... 16
Residential Customers & Fuel Switching ................................ 18
Inconsistent Policies .............................. 19
Suggested Best Practices for Gas Project Inquiries ............................................ 20
Citations and Resources .................................. 21
Appendix A: Natural Gas Incentives ................ 24
Appendix B: Innovative Practices and Financial Initiatives in Other Natural Gas Producing Areas .......................... 29
Appendix C: State, Federal, and Municipal Considerations................................ 33
This publication was produced by the National Center for Appropriate Technology as part of USDA Rural Business Enterprise Grant # 44008752017047. The views and opinions expressed in this publication do not necessarily reflect those of the funder, the United States government, or any Federal or State agency.
December 2015
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 1
Introduction
Many of Pennsylvania’s agriculture
producers and businesses lack access to low-
cost natural gas because local distribution
lines and gas utility services are unavailable.
In many cases, rural businesses use bottled
propane, heating oil, and other more
expensive fuels, while the Marcellus shale
region of Pennsylvania is exporting 20% of
the nation’s supply of natural gas.1 This
publication has been compiled to provide
local government and business leaders with
information that will lead to greater access
to the natural gas being produced in
Pennsylvania.
The first section of this publication suggests
10 critical questions that should be
considered by rural community and business
leaders when assessing options for
expanded natural gas service. Next, the
traditional and alternative approaches to
expanding natural gas services to
underserved or unserved areas are
described. The most significant alternative
approach is that of Leatherstocking Gas
Company, which is discussed at length.
Finally, common barriers and the economics
of fuel switching will be identified and
discussed.
It is hoped that this guide will stimulate
discussion and interest among rural local
government and business leaders interested
in learning how to access natural gas. Access
to natural gas has already resulted in
increased employment through drilling, gas
extraction, and transportation activities.
More value-added uses of natural gas, such
as chemical feedstocks in manufacturing,
fuel conversion projects, and manufacturing
related to gas industry needs such as pipes,
rails, and drilling machinery offer expanded
job opportunities as well.
Page 2 National Center for Appropriate Technology
Ten Critical Questions for Rural Communities
By addressing the following 10 questions,
local communities will take a major step
toward assessing the feasibility of obtaining
natural gas service in unserved areas.
Answering these questions in detail will take
some time and effort. A reasonable
approach would be to answer each question
at a preliminary level. Such a preliminary
effort will provide a back-of-the-envelope
assessment of the benefits and challenges. If
the prospects for a successful project are
positive, then each question should be
addressed in more detail.
1. Who is the closest potential natural gas supplier?
In most cases, the closest natural gas
supplier will be a local gas service company.
It could also be a company that owns a
pipeline that passes close to the potential
customer. There are several sources for
information about pipeline routes, which
can be found at the Pennsylvania Public
Utility Commission website at
www.puc.state.pa.us/ and at the U.S.
Department of Transportation’s website at
http://primis.phmsa.dot.gov/comm/StatePa
ges/Pennsylvania.htm. Once the potential
supplier is identified, you can research their
record on service extensions. Most will not
have an official policy but you can find
information about their history with
providing service extensions and their
interest in future extensions. Some local
natural gas suppliers have a business model
that actively seeks out potential new
customers. These suppliers will often offer
attractive rates and incentives. Other local
gas service companies offer no incentives
unless the project involves large-volume
customers. Some companies may be
constrained through a unionized workforce
from developing projects that allow
customers to perform a portion of the
excavation work. The closer an unserved
area is to existing gas supply lines, the more
likely is an extension project.
The gas drilling industry’s initial rush to
capture profits from drilling in areas with
the highest production potential has left
some rural counties with lower-volume
shale gas sites undeveloped. These areas,
called “stranded gas” areas, are particularly
good candidates for local service expansion
projects. Some rural counties such as
McKean County and the town of Smethport
also have workforces with historic
petroleum industry skills from older shallow
gas and oil programs. These communities
are being overlooked and/or bypassed by
the gas industry and have an underutilized
potential.2
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 3
2. Who are the potential natural gas
customers?
Identifying key potential natural gas
customers and customer groups is critical
for evaluating service expansion options.
Large-volume natural gas users are drivers
for local natural gas distribution extensions.
Commercial and institutional customers
include restaurants, smaller food
processors, bakeries, feed mills, strip malls,
office complexes, schools, government
buildings, assisted-living sites, local health
centers, and hospitals. These customers can
form the economic basis for service
expansion projects. In some cases, there
may not be a single “anchor” customer but a
combination of users can fill that role. In
answering this question, it is important to
identify the number and type of customers.
3. What type and quantity of energy will be
displaced?
After identifying the key customers, the next
step is to quantify the type and amount of
energy currently being used. This
information will help identify the energy
sources (coal, electricity, propane, heating
oil, etc.) that could potentially be displaced
by natural gas. Understanding the cost of
these various energy types will prove useful
in evaluating the cost-effectiveness of fuel
switching to natural gas. In some cases,
customer consumption data can be
obtained from suppliers. However, in most
instances, consumption and cost data will
have to be obtained directly from the
customer or from the supplier with the
customer’s written permission.
4. What are the community demographic
and heating equipment characteristics?
The characteristics of potential natural gas
customers will help determine the likelihood
of them fuel switching. For example, elderly
customers, businesses with short-term
planning horizons, and low-income
customers will be less likely or able to fuel
switch. In some cases, such as homes with
electric resistance heat, fuel switching will
be too costly. This would be the case with
housing built in the 1960s when installation
of baseboard electric resistance heaters was
common. Homes with geothermal heat
pumps have heating costs similar to natural
gas and would have little incentive to switch
fuels.3 In these instances, gas conversion
becomes more expensive since new heating
and distribution systems would have to be
installed in order to use natural gas.
Pennsylvania also has a significant elderly
rural population who may not remain in
their current housing long enough to see a
return on investment for switching. Project
developers must be aware of how low-
income or fixed-income customers will react
to fuel-switching offers.
5. Are there local obstructions to pipeline
routing?
There could be physical obstructions to the
most cost-effective pipeline route. While
ultimately the local natural gas supply
company will determine the best route for a
new pipeline, it is important to identify
potential obstructions. There may be
topographic barriers, wetlands, state parks,
or other environmentally sensitive areas
that could impact pipeline routing.
Page 4 National Center for Appropriate Technology
6. Is the community receptive?
It is important to assess community
attitudes before launching a major natural
gas service extension effort. A community’s
previous success with related projects, such
as sewer and water infrastructure
expansions, can be a predictor of success
with a natural gas extension project. Some
communities are more receptive to
expanding public services than others.
Potential customers can be generally
categorized as: early adopters who are risk-
tolerant to changing their behaviors and
practices; middle-stage adopters who often
watch and wait to see what happens; and
late adopters.4 In all likelihood, it will
ultimately be necessary to develop a
promotional effort to “pitch” the program,
but assessing receptivity early on can help
predict the likelihood of success.
Communities with more early adopters will
be better candidates for major natural gas
expansion projects.
7. What is the leadership potential within
the community?
The support of key government, business,
and civic leaders is important for a
successful natural gas expansion project.
Having a project team with a mixture of
business, economic, community, and media
skills was identified by both the gas
company and community leaders as
essential for a successful project. In project
examples examined, critical community
leaders included the owners of businesses
that were larger-volume energy users,
community-based institutions, local banks,
and local political leaders. Identification of
primary “champions” to organize local
interest and support has been important in
past natural gas service expansion projects.
Successful community natural gas service
extension project teams have been
associated with economic development
organizations, councils of government, and
chambers of commerce.
8. Is there support from county and state
political leaders?
Having active support from county- and
state-level officials is often the deciding
factor in accessing state and federal funds
necessary for a successful natural gas
service expansion project. This is especially
true in communities that lie outside the
primary gas production areas where state
impact funds are unavailable. Counties that
produce the greatest amount of natural gas
benefit from monies returned to the county
through 2012 Pennsylvania Act 13, which
addresses impacts from natural gas
fracking.5 The funds are earmarked to
reimburse counties for infrastructure and
community costs related to law
enforcement, schools, conservation efforts,
planning, and road repairs.
9. Is the timing right?
A number of factors can make natural gas
expansion more feasible. A major new
natural gas consumer, a new or expanded
infrastructure project such as a sewer line, a
new large anchor natural gas consumer such
as a school, or development of an industrial
park can make the natural gas expansion
project feasible. Tropical Storm Lee
destroyed the 80-year-old Amphenol
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 5
manufacturing plant. The reconstruction of
that plant allowed fuel switching, which led
to a new 124-mile pipeline from
Susquehanna County, PA, to Schoharie, NY.
The pipeline included four connections to
rural communities including Sidney, NY, the
site of Amphenol Inc. When new natural gas
pipelines are proposed, it is an excellent
time to consider local pipeline connections.
In the case of Amphenol, the $750,000 gas
line connection was part of $20 million state
emergency infrastructure recovery funding.6
10. Has the future been adequately
considered?
One interesting observation made by
leaders of the Susquehanna and Bradford
county natural gas service expansion
projects is that visiting projects in other
states and communities was helpful. These
visits provided insight on how to develop
natural gas expansion projects. One
common theme to those visits was how
natural gas availability contributed to future
economic growth. In some cases, natural gas
availability led to business growth beyond
the scope of basic space and water heating.
The greater potential for natural gas
chemical feedstocks and transportation fuel
have been realized in some communities.
Combined heat and power plants are
becoming smaller. These small, packaged
units generate electricity and heat on-site
for facilities such as hospitals, schools, and
manufacturing plants. Growth in this
technology could change the economics for
natural gas service extension projects. It is
important to develop a vision for what
natural gas availability can mean to a
community.
Page 6 National Center for Appropriate Technology
Traditional Natural Gas Access
How do you apply to the local natural gas
company to become a natural gas customer?
Under state Public Utility Commission rules,
customers who seek new natural gas service
beyond existing service areas must contact
the local natural gas company franchised to
provide service in their area. Many of the
larger local natural gas companies have
downloadable applications for gas service on
their websites. The applications ask for the
physical location, the customer’s usage class
(residential, commercial, industrial), and
financial information related to the
applicant’s ability to pay.
What are the costs of pipeline extensions for
new service?
A local natural gas company representative
contacts the applicant and visits the site to
evaluate the potential connection. There are
no standardized rates for establishing the
cost of bringing a natural gas supply line to a
new customer site. The process and cost of
natural gas service extensions can vary
widely. Following are several examples of
how different local natural gas companies
deal with requests for pipeline extensions.
The local natural gas company provides
the first 100 feet of gas line at no cost to
the customer. That company also
establishes a “locked-in price” for the
gas for a specific period of time.
The local natural gas company in the
adjoining county provides 200 feet of
free gas line to the customer but
provides no fixed-price guarantee.
In another case, a customer was quoted
a price of $400,000 for a 600-foot gas
connection to a gas supply line that
serves a neighboring customer.
An industrial park in Wayne County had
been attempting for several years to
negotiate with a local natural gas
company to install a 2,000-foot gas line
extension in order to attract tenants.
The local natural gas company
steadfastly refused to negotiate any
price variation from the $250,000 that
had been quoted eight years before.
Later, when a large-volume industrial
user did actually locate to that industrial
park, the local natural gas company
installed the gas line at no cost based on
the projected volume of gas sales.
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 7
Occasionally, the local utility offers no-cost
installation of water, sewer, electric, and
natural gas service for industrial park
development. These development packages
are offered in anticipation of attracting new
large-volume commercial- and industrial-
class customers.
It is common for local natural gas companies
to pay for extending natural gas service to
new areas and clients by charging the
customer over a 10-year period. The
extension cost then appears on the
customer’s monthly bill as a “supply” or
“access charge.” Any subsequent customers
that connect to that line extension are also
charged a share of that cost. The original
customer(s) then see a corresponding
reduction in their charge. The Public Utility
Commission regulates how those new
customers’ connection charges and
adjustments are calculated.
Page 8 National Center for Appropriate Technology
Alternative Natural Gas Access
The traditional process for obtaining natural
gas service extensions has left many
potential customers frustrated and without
service. The following discussion identifies
local solutions to this challenge and the
economic opportunities associated with
such projects. The most relevant and
replicable alternative approach is the
example of the Leatherstocking Gas
Company, a joint-venture company founded
in 2010 between Mirabito Holdings and
Corning Natural Gas Company.
Leatherstocking Gas Company – “Local gas
for local people.”
In 2010, a new local gas supply company,
Leatherstocking Gas Company, was formed
as a joint venture between two existing
companies. The result was natural gas
service to many customers in Bradford and
Susquehanna Counties in Pennsylvania and
Broome County in New York. Corning
Natural Gas supplies natural gas to the
southern tier of New York State. Mirabito
Holdings is a supplier of fuel oil, propane,
electricity, bio-diesel, gasoline and coal in
southern New York state and northeastern
Pennsylvania.
Susquehanna County, while having one of
the highest-production gas wells in North
America, didn’t have a single residence or
business with access to natural gas.7 The
company motto became “local gas for local
people.” Many people involved with the
project felt that providing natural gas to a
greater number of customers was an answer
to a significant social justice issue. The two
individuals who best carried that message
forward to the general public were
Pennsylvania State Representative Tina
Pickett and Susquehanna County
Commissioner Mary Ann Warren.
Leatherstocking serves customers in both
southern New York and northeast
Pennsylvania. This fact complicated the
challenges associated with expanding
service due to Federal Energy Regulatory
Commission (FERC) authority over interstate
gas. Leatherstocking was given an
exemption from FERC review and approval
through a “Hinshaw” exception. This
exception applies when pipeline installation
is for the sole purpose of local gas utilization
into a defined area and not beyond.
Supply and Demand. The concept of forming
a local gas service company arose from an
awareness by Corning Gas and Mirabito
Holdings that the unserved region
represented a significant business
opportunity. Local political support was
evident from the outset. Customer demand
was coupled with Leatherstocking’s ability to
tap into the existing Cabot Gas pipeline
travelling through the region. That pipeline
had significant unused capacity. This
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 9
Public meeting in New Milford
scenario made a compelling argument to
offer natural gas supply service to the
region.
Cabot Gas and its pipeline subsidiary
Talisman Energy had too much gas entering
their pipeline and too few customers. Their
agreement with Leatherstocking was to sell
gas at $1.00 below their pipeline costs to
their end customers. The intent of this
marketing strategy was to create new
markets and to generate cash flow. The
agreement with Cabot Gas allowed
Leatherstocking to avoid paying delivery
charges, which are paid by most local
natural gas companies to pipeline
companies for transporting the natural gas.
The proximity of the Leatherstocking system
to the high-volume wells and pipeline also
ensured that the small operation would not
require significant off-season gas storage
capacity.
Leatherstocking’s management attributes its
rapid success to two factors. The first is that
they are a small company of only four
employees. This allows the company to
move faster than the large local natural gas
companies once potential projects are
identified. The second factor is that they are
located within the region served and
participate in community events through
company sponsorship.8
Community Involvement. Leatherstocking
employed two approaches to community
involvement. During the first phases of
service expansion, the company relied
largely on formal public meetings. When
Leatherstocking began phase two of the gas
supply expansion in Montrose Borough, they
augmented the formal pubic meeting with a
broader information based “open house”
event. They partnered with other energy-
related program partners to provide displays
and related presentations. Related topics
included promoting energy budgeting
programs, information about energy cost
assistance such as LIHEAP, the local
weatherization assistance program, and an
appliance company showcasing energy-
efficient gas appliances and rebate
programs. This open house event can be
more inclusive and inviting.9 Presentations
help address many of the tangential issues
that arose during the more formal public
meetings. The largely residential audience at
the first public events requested specific
information about costs of the natural gas
connection and appliance replacement.
Custom Solutions. Leatherstocking’s small
size provides the flexibility to respond to
individual customer needs. This was
demonstrated with a large-volume customer
just across the state line in New York. A large
farm and dairy operation was located two
miles from a Leatherstocking pipeline. The
operation included a farm house, two
tenant houses, large hay and grain dryers for
field crops, and space heating for the cow
Page 10 National Center for Appropriate Technology
barn. The initial cost estimate for installing a
gas supply line to the farm was $1.2 million
if Leatherstocking were responsible for all
the work. This was cost prohibitive for the
farm owner. The farm owner offered to do
some of the work, since he already owned
all the required excavation equipment.
Leatherstocking agreed to a “sweat equity”
agreement with the farmer doing almost all
of the excavation work. The company
assigned their pipeline construction foreman
to oversee the work to ensure the safe
installation of the gas line. The final project
cost was just under $500,000.8
Building the Customer Base. Leatherstocking
sought out the potential large-volume gas
customers in Montrose Borough. In 2012,
Leatherstocking reached an agreement to
supply natural gas to Pennsy Supply, a large
asphalt plant located in Susquehanna
County. This was the first use of natural gas
supplied by pipeline in the county. In 2013,
Leatherstocking received Pennsylvania
Public Utilities Commission approval of its
tariff proposal to expand its service area
from the asphalt plant to five boroughs and
a federal military depot. The nine-mile- long
pipeline extension from the asphalt plant
ran along a rural state road. The boroughs
served include Montrose, New Milford,
Great Bend, Hallstead, Lanesboro, and
Oakland.10
The Montrose Borough large customers
targeted by Leatherstocking included the
Endless Mountain Health Care System, a
small, rural 25 bed hospital, and the local
Montrose Junior/Senior High School. It also
included a strip mall with several stores,
restaurants, and a doctors’ office. There are
390 residential units in the borough.
Diagram 1 shows the Leatherstocking
service area.
Diagram 1. Leatherstocking Gas Company Service Area.11
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 11
The Junior and Senior High School
connection was approved by the school
board in the spring of 2013 and completed
during the summer. The cost of converting
the fuel oil boiler to natural gas was
$90,000, which included installation of the
connecting gas line, meter, and boiler
conversion. The projected operating savings
was over 50% in fuel costs alone. The
heating oil budget for the school was
averaging $190,000 per year prior to fuel
switching but in the first year of using
natural gas the fuel bill was $80,000.
Additional savings were realized since the
gas boilers are now 5% more efficient and
have significantly reduced maintenance
costs. The school had originally estimated a
payback of 2½ years but it turned out to be
significantly less.12
In 2014, the Montrose School District
converted another school, Lathrop
Elementary, to natural gas. This was made
possible by the second phase of the
Montrose project. Other added customers
included the county government service
buildings, several small businesses and the
county courthouse. These extensions
reached over 300 new customers. The
natural gas service made possible by the
second extension phase played a critical role
in bringing a new 40 unit low-income senior
housing, Tiffany Pines, to the Montrose
Borough.9
One customer incentive offered by
Leatherstocking was the natural gas rates.
Customers were charged a 55¢/ccf delivery
charge that helped pay for their distribution
lines and 39¢/ccf cost for the natural gas
itself. The customers were then refunded
38¢/ccf as a “contribution in aid of
construction” for a 10-year period.8
Residential Customers. The costs for new
natural gas appliances, such as furnaces and
water heaters, vary from home to home. A
key concern of community leaders and
potential residential customers was the cost
and availability of natural gas appliances and
furnace conversions. In some cases, the
energy-efficiency rebates offered by
appliance manufacturers for replacing older
electric stoves and water heaters helped
residential customers justify the fuel switch.
Natural gas line installation work.
Page 12 National Center for Appropriate Technology
Conversion costs for converting propane
furnaces to natural gas furnaces are
negligible. One service extension project,
the New Milford Extension, included no
large-volume anchor client. In this project,
the customers were all residential and
Leatherstocking established a minimum of
180 customers before the project was able
to proceed.
Large Customer Example - Mehoopany
Proctor & Gamble Plant
This is an example of a large-volume natural
gas industrial user that drilled its own gas
wells and supplied excess electricity to the
local power grid for the combined heat and
power unit. The Proctor & Gamble paper
plant in Mehoopany is one of the largest
employers in Bradford County, Pennsylvania.
This plant produces Charmin toilet tissue,
Pampers diapers, and Bounty paper towels.
Prior to drilling its own natural gas wells, the
plant consumed 800 billion kWh per year.
Much of the natural gas consumed by the
plant was moved from the Gulf Coast
through the aging Colonial pipeline to
northern Pennsylvania. That older pipeline
reported average annual natural gas losses
of 5% due to leaks at compressor stations
located every 200 miles along the route.13
In 2009, Proctor & Gamble drilled its first
natural gas well on the 1,400-acre site on
which the paper plant is located. They
installed a natural gas co-generation turbine
and now export electrical energy into the
local grid. By 2014, they had drilled five
more gas wells and the co-generation
turbines produce 85,000 horsepower, 64
Megawatts of electricity, and 140,000
pounds of steam per hour to power the
paper-making process. The cogeneration
plant allows the facility to: 1) heat steam for
their paper-making process; 2) generate all
its electricity needs and sell the excess into
the local grid; and 3) capture the waste heat
from the turbines for the paper-drying
process. A company spokesman states: “To
say we are now totally energy independent
for our site energy needs and actually selling
excess electricity back to the local grid is an
accomplishment that we are quite proud
of.”14
In the past year, Proctor & Gamble has
converted 75 of its delivery truck fleet of
tractor trailers to compressed natural gas
engines saving 400,000 gallons a year in
diesel fuel. Compressed natural gas burns
much cleaner than petroleum fuels and
leaves mainly carbon dioxide (CO2) and
water (H2O) as its combustion products with
no particulate exhaust. Proctor & Gamble
calculates that the Mehoopany Plant has
reduced its CO2 emissions by 100,000
tons/year since 2009.15
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 13
Natural Gas Cooperatives
The non-profit, independent member
owned cooperative model is a proven
successful business application for supplying
critical utility services of water, energy and
telecommunications to under-served rural
communities across the nation for over 75
years. The member owned cooperative
model is one that can be organized and
implemented by small underserved rural
communities. Utility cooperatives have both
technical assistance and potential grant and
loan supports available at the federal level.
The USDA Rural Development has
developed quality educational materials that
help local groups and communities educate
themselves about organizing cooperatives
(http://www.rd.usda.gov/publicatons/public
ations-cooperatives). Natural gas
cooperatives and publicly owned municipal
gas systems are recognized by the state’s
public utility regulators as an alternative
delivery option to the for-profit natural gas
utility company model.
Member owned cooperatives are business
model used in several public utility sectors
including telecommunications, rural
electrification, wind and solar energy. The
nonprofit cooperative model has also
worked successfully with agriculture and in
health care delivery. A good review of
successful cooperatives is in the paper “A
Study of the Organizational Characteristics
of Successful Cooperatives”
(http://www.researchgate.net/publication/2
28352518_A_study_of_the_organizational_
characteristics_of_successful_cooperatives).
The authors identify key factors for success,
those that hinder a coops’ function and
those that lead to dissolution using
examples from food, agriculture, health
care and electrical cooperatives across the
nation.
Pennsylvania has 13 rural electric supply
cooperatives that were formed during the
period of rural electrification in the 1930s
and 1940s under the Rural Electrification
Administration (REA) established by
President Roosevelt. The REA has developed
into the Rural Utility Services (RUS) within
the USDA’s Office of Rural Development
(USDA-RD) to include telecommunications,
water and waste water services, sustainable
energy and electric cooperatives for rural
communities. There are two natural gas
cooperatives in Pennsylvania. The first is
Knox Energy Cooperative headquartered in
eastern Ohio which provides natural gas
service to two small towns in western
Pennsylvania and to numerous communities
in central and eastern Ohio. Knox Energy
was formed in 1998 and has a nine member
board with 15,000 cooperative members in
both states. The gas supply and pipeline
services of Knox are contracted with Utility
Pipeline Services which contracts with three
other cooperatives and four small
community gas suppliers in Ohio, Illinois and
Pennsylvania. The second cooperative
within Pennsylvania is Keystone Cooperative
with 958 members located in southwestern
corner of the state serving village of
Windber in Somerset County and the
villages of Scalp Level and Nanty Glo in
Cambria County. This cooperative is also
served by Utility Pipeline Services.
Page 14 National Center for Appropriate Technology
Additional Opportunities
“Value-added” is a term used to refer to
business- and industry-related activities that
use natural gas in ways other than basic
space heating and cooling. These value-
added activities can be key to the economic
feasibility of natural gas service expansion
projects. Community leaders in Bradford,
Susquehanna, and Tioga counties have
stated that the high reimbursements
returned to their counties under
Pennsylvania Act 13 had helped them take
advantage of value-added natural gas
opportunities.9
In the western Pennsylvania and eastern
Ohio region, five new gas-fired “micro” steel
and roller mills, which produce pipe and rail,
are being constructed to supply gas drilling
rigs and pipeline construction in the
Marcellus gas fields. This is an example of
the southwest region of the state reviving its
historic steel industry by using cheaper fuel
and smaller-scale industrial manufacturing
facilities.
Tungsten Reclamation
An example of value-added economic
opportunity involves tungsten reclamation.
Tungsten reclamation and refitting is
occurring in Susquehanna County to service
the worn drilling heads. Reworking the
tungsten carbide tools requires significant
amounts of hydrogen fuel for the powdered
mineral process. In the past two years,
companies in Pennsylvania have begun to
re-work drilling and cutting tools where
previously the used equipment was
returned to Oklahoma and Texas for
retrofitting. The abundant hydrogen that
can be supplied from catalytic cracking of
natural gas makes this a strong value-added
enterprise for the region. Susquehanna
County is particularly well-suited to business
expansion in this area because of its long
history of machinery trade crafts with past
employers such as DuPont and Air
Products.9
Tungsten is considered a strategic resource
metal because of its uses in national defense
industry combined with the fact that the
United States has no major mineral reserves
of the ores from which it is refined.
Therefore, tungsten reclamation for
industrial uses such as drilling equipment
becomes important.
Ethylene Raw Stock from Wet Gas
In northwestern Pennsylvania, there is a
regional center of expertise in the powdered
metals and plastics industry extrusion. This
industry could utilize ethylene raw stock
derived from “wet gas” catalytic cracking.
This presents a potential regional industrial
opportunity. Discussions regarding where to
locate a large wet gas cracking refinery are
underway. The nearest operating wet gas
catalytic facility is located across Lake Erie in
Sarnia, Ontario. A wet gas cracking center
would serve as a hub with the cracking
refinery at the center surrounded by a
cluster of supply chain companies, chemical
manufacturing companies, final products
companies and distribution companies. The
area would employ not only plant and
chemical engineers and technicians but also
such trades as steam workers, pipefitters,
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 15
materials scientists, and vocational and
technical training professionals.16
Natural Gas for Transportation
Another potential growth sector for natural
gas is as a transportation fuel that can
displace diesel and gasoline. Lycoming
County invested Act 13 funds into
converting the Williamsport city bus fleet
and some of its service vehicles to
compressed natural gas. The American Gas
Association estimates that natural gas fueled
vehicles have 20% to 30% less CO2
emissions, representing a 75% to 95%
reduction in nitrous oxides and carbon
monoxide. Based on 2014 prices,
compressed natural gas transportation fuel
costs are half that of the equivalent gallon of
gasoline.18
There are several natural gas policy
proposals in the Pennsylvania state
Legislature in 2015 to address the
transportation fuel opportunity. Those
proposals are aimed at: 1) driving demand
for natural gas as a transportation fuel; 2)
serving as an incubator for natural gas
vehicle industry; and 3) meeting the state’s
Clean Air standards goals. There are
currently only 110,000 natural-gas vehicles
in the United States and 500 natural-gas
vehicle fueling stations available for public
use. The average heavy vehicle that gets low
mileage on short trips is the ideal application
for natural gas fueling. Examples of those
uses are buses, trash trucks, cement mixers,
and short-haul delivery trucks. With heavy
trucks, such as a trash trucks, that travel
25,000 miles per year at 2.5 miles per gallon
the rate-of-return would work out to be 2.4
years. The cost-effectiveness is directly tied
to the amount of fuel used and the vehicle
weight. The heavier low-mileage vehicles
have higher rates of return. Examples of
some short-range heavy-weight fleet
vehicles that run on relative constant use
include school buses, thrash trucks and
cement mixers.18
The lack of a natural gas fueling
infrastructure is currently a major limiting
factor. There have been several pieces of
state legislation introduced in 2015 to
promote the use of natural gas as an
alternative transportation fuel. Those
proposed initiatives are in the form of tax
credits, grants, and loans to promote the
Diagram 2. PA Shale Drilling Activity Since 200417
Page 16 National Center for Appropriate Technology
use and distribution of those fuels.
Proposals include making the interstate
corridors natural gas fueling corridors. This
effort targets tractor trailer compressed
natural gas usage (House Bill 1087) through
tax credits for compressed natural gas
fueling stations. Legislative proposals also
have been introduced for grant programs
targeting rural and urban compressed
natural gas fueled public bus transportation
(House Bill 1088). Another proposal provides
state tax credits for transport fleet
conversions and for personal automobiles
(House Bill 1084).18
In addition to what’s currently being
considered in this Legislative session,
there are a variety of initiative programs
currently in place, which are summarized in
Appendix A.
Innovative Practices and Financial Initiatives
in Other Natural Gas Producing Areas
There are several innovative practices
occurring in natural gas producing areas.
Examples include the use of distributed
generation plants, conversion of coal to
natural gas fired power plants, virtual
pipelines, small-scale liquefied natural gas
plants, and small-scale compressed natural
gas fuel systems. Innovative funding sources
include tax incentives, local government
rebates, cost-recovery mechanisms for
pipeline extension, and funding for natural
gas fueling applications. For a detailed list of
these innovative practices and incentives
see Appendix B.
Fuel Switching Issues
Fuel switching is the term that is used when
referring to converting to natural gas from
other energy sources such as electricity, fuel
oil, coal, or propane.
Economic Considerations
The major customer cost associated with
fuel switching lies in the gas line extension.
Other charges may include a one-time
“hook-up” or connection fee and the costs
of the gas meter. As noted previously, the
local natural gas company method for
calculating financial obligations and the
repayment plans for new customers varies
widely among local natural gas companies in
Pennsylvania. Specific charges and terms
can be found in each local natural gas
company’s tariff agreement filed with the
state Public Utilities Commission.19
In addition to the fixed costs of pipeline
extension, the fluctuating price of natural
gas must be evaluated when considering
investing in fuel switching. Natural gas prices
are currently relatively low due to a national
oversupply of gas and relatively low oil
prices. Diagram 3 depicts the natural gas
price trends in recent years.
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 17
Table 1. Appliance Costs21
Diagram 3. Pennsylvania Local Natural Gas Price Trends
The cost of natural gas varies widely among
the major natural gas companies in
Pennsylvania. Data from the June 2015
Pennsylvania Gas Outlook Report by the
Public Utilities Commission shows that the
price of the natural gas paid by local natural
gas companies ranged from $3.42/mcf to
$6.27/mcf, with the average cost of
$4.89/mcf. When the cost of the natural gas
itself is calculated as a percentage of the
total operating expenses, the average
among all the local natural gas companies is
65%, with ranges between 47% and 78%.20
Other factors that figure into a local gas
company’s operating costs include
transportation fees, storage fees, and
replacement of existing aging pipelines.
Some gas companies with higher operating
costs may not have the financial strength to
undertake larger low- or no-cost gas service
extensions.
A key to customer fuel switching has been
the cost savings for converting from electric
to natural gas appliances. This has been
especially evident in the residential and
small commercial customer classes. This was
highlighted in a case study from Oklahoma
entitled the Annual Home Source Energy Use
Comparison. Table 1 compares the annual
cost of using various natural gas or electric
appliances.21
Appliance Natural Gas
Costs
Electrical
Costs
Water heater $194.15 $ 351.32
Clothes dryer $41.26 $75.52
Cook stove $55.75 $61.86
Space heating $495.80 $521.87
Page 18 National Center for Appropriate Technology
The Oklahoma report estimated a 22%
average savings in residential energy costs.
In addition, the reduction in CO2 emissions is
estimated to be 52% by switching from
electric to natural gas.
In the restaurant industry, new natural gas
appliances such as low-oil volume fryers,
low-hood charbroilers, improved efficiency
pizza ovens, and boilerless steamers are less
expensive to operate than their electric
counterparts. The cost-saving opportunity
represented by these new technologies can
help finance a fuel switching project.
Residential Customers and Fuel Switching
A survey was conducted by the Center for
Rural Pennsylvania in 2013 entitled Analysis
of Potential Demand for Extension and
Expansion of Natural Gas Distribution
Infrastructure in Pennsylvania. This survey
interviewed 1,020 residential users in
different regions across the state. The three
most common reservations to switching
were: the uncertainty of future gas prices,
the inconvenience of switching heating
equipment, and the unknown upfront costs.
Residents in the northcentral counties were
more likely to consider fuel switching under
various price scenarios than those in the
southcentral and southeastern regions of
the state. Counties with the highest number
of unserved census blocks (>40%) were
Perry, Schuylkill, and Carbon.
The survey categorized U.S. Census blocks as
either being serviced or not by natural gas.
(Diagram 4). Some survey results may be
useful as local communities consider the
feasibility of natural gas expansion projects.
Diagram 4. Residential Census Blocks with No Natural Gas Service3
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 19
Most of the unserved areas are rural. The
poverty levels were lower (9%) in unserved
areas than in the gas service areas (13%).
Other counties with significant numbers of
unserved residential blocks included Fulton,
Huntingdon, Bedford, Wayne, and
Wyoming.3 One analytic weakness that
results from the use of the U.S. Census block
group data is that if one single residence
within the block has natural gas service,
then the entire block is noted as served.
Many unserved customers are in areas
where large-volume users such as electric
power plants are served. Not surprisingly,
the survey conclusions suggest that
recruitment of large-volume users as
opposed to a residential customer base is
what drives natural gas service expansion
into underserved and unserved areas.
Inconsistent Policies
In 2013, the National Regulatory Research
Institute produced a white paper that
focused on the topic of gas line extensions.
The institute is the national research arm of
the 50 state utility regulatory commissions
and is charged with developing economic
and technical reports to help those
commissions to make better informed
decisions regarding regulated utilities. The
paper highlighted the fact that there are no
consistent national policies or guidelines on
extensions for state utility commissions. At
the state level, there is also a lack of clear or
consistent policies regarding how utility
commissions address requests for natural
gas service in underserved and unserved
rural areas.22
Pennsylvania may address this lack of
consistent natural gas service extension
policy in proposed legislation under State
Senate Bill 214.23 This legislation is an effort
to provide the Public Utilities Commission
with the authority to establish and
implement a mandated protocol for local
natural gas companies to address the issue
of natural gas service extensions. Senate Bill
214 sets forth a procedure where the local
gas companies are required to submit an
extension plan to the state public utilities
commission every three years for review.
The plan would address the unserved areas
adjacent to the local natural gas company
franchise areas.
The New York State Utilities Commission has
revisited its gas line extension rules and
policies in selected cases. One such case is
the Constitution Pipeline, where the
commission required that four distinct rural
interconnects be installed to serve rural
communities.8 This solution was the result
of rural development arguments by rural
community leaders in a five-county area
served by the pipeline.
In Pennsylvania, a more recent decision by
the Pennsylvania Public Utilities Commission
regarding a pipeline extension from the
Williamsport hub to the Selinsgrove area
made no provisions for any connections as it
passed through three rural counties before
terminating at an electric power plant.24 It is
worth noting that, unlike New York, the
Pennsylvania Public Utilities Commission
does not require public hearings and input
for pipeline extension applications.
Page 20 National Center for Appropriate Technology
Suggested Best Practices for Gas
Project Inquiries
Throughout this project the author found
several good sources that helped to clarify
information and questions regarding the
regulatory issues and technical aspects of
the natural gas industry. In the reference
section of this document those web sites
and publications are listed that groups or
individuals may wish to use to further
educate themselves.
The Penn State Marcellus program at Penn
State University has expertise related to
local economic impacts of the downstream
portion of the gas industry within some
counties across the state. There is also staff
expertise about pipeline construction and
expansions both within the state and across
the northeast region. The program
coordinates an annual gas industry
conference and hosts periodic webinars that
are value.
On questions that are related to regulatory
and procedural issues for innovative natural
gas expansion to underserved areas through
forming cooperatives or small municipal
systems, the state’s Public Utility
Commissions’ Office of Communications is
the base point to begin inquiries. They can
be reached at (717) 783-9998. That office
helps clarify the inquiry and refers those to
their respective divisions and branches on
prompt basis. The author found the
Commission staff very supportive and eager
to assist those enquiries. Establishing
contacts and a channel of communication
with that agency is a vital first step when
considering gas service introductions.
In many cases, rural businesses use bottled propane, heating oil and other more expensive fuels while the
Marcellus shale region of Pennsylvania is exporting 20% of the nation’s supply of natural gas.
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 21
Citations
1. U.S. Energy Information Administration. Today in Energy. Marcellus region to provide 18% of total U.S. natural gas production this month. www.eia.gov/todayinenergy/detail.cfm?id=14091
2. Ladlee, J. Pennsylvania State Extension. 2015. Personal Communication.
3. Ready, R. 2013. Analysis for Potential Demand for the Extension and Expansion of Natural Gas Distribution and Infrastructure in Pennsylvania. Center for Rural Pennsylvania. http://www.rural.palegislature.us/documents/reports/Natural-Gas-Infrastructure-SR29.pdf
4. Rogers, E. 2003. Diffusion of Innovation. Simon & Shuster. p 282-285.
5. Sacavage, K. 2013. Overview of Impact Fee Act, Act 13 of 2012. Pennsylvania Public Utility Commission. www.puc.pa.gov/NaturalGas/pdf/MarcellusShale/Act13_Implementation_Presentation.pdf
6. Marshal, J. Amphenol Breaking Higher Ground. 12 Action News - WBNG. http://www.wbng.com/news/video/Amphenol-Breaking-higher-ground-207307191.html
7. Leatherstocking Gas Company, LLC. 2012. Natural Gas Use Comes to Susquehanna County. www.leatherstockinggas.com/news-room/newsroom-97.html?story=35
8. Miller, R. Vice President Leatherstocking Gas. Personal Communication.
9. Ventello, T. Bradford County Progress Authority. 2015. Personal Communication.
10. Leatherstocking Gas Company, LLC.
2014. Leatherstocking Gas Expands
Natural Gas Distribution System Build
Out in Susquehanna County.
www.leatherstockinggas.com/news-
room/newsroom-97.html?story=45
11. Leatherstocking Gas Company, LLC. 2014. Service Areas in Susquehanna County PA. www.leatherstockinggas.com/service-areas/service-areas-123.html
12. Tripp, C. Montrose School District. 2015. Personal Communication.
13. Nave, R. Proctor & Gamble. 2015. Personal Communication.
14. P&G Corporate Newsroom. 2013. Mehoopany Plant Goes Off Grid. November 8. http://news.pg.com/blog/sustainability/mehoopany-plant-goes-grid
15. UGI Energy to Do More. Priming the Pump: UGI-Procter & Gamble Expand Natural Gas Vehicle Partnership.
16. Penn State Conference Center. 2011. Industrial Use of Natural Gas: Opportunities for Shale Gas. Natural Gas Utilization Conference. www.research.psu.edu/events/expired-events/naturalgas/documents/industrial-uses-position-paper.pdf
17. Unconventional Wells Drilled. No date. Penn State Marcellus Center for Outreach and Research http://marcellus.psu.edu/images/TriState%20Spud%20Map%202014-15%2020150331.jpg
18. Office of House Republican Whip, Stan
Saylor. No Date. Marcellus Works
Briefing.
www.research.psu.edu/events/expired-
events/naturalgas/presentations/Saylor.
Page 22 National Center for Appropriate Technology
19. Pennsylvania Public Utility Commission.
Rates & Tariffs.
http://www.puc.state.pa.us/consumer_i
nfo/natural_gas/Rates_Tariffs.aspx
20. Stewart, M. 2015. Pennsylvania Gas
Outlook Report. Pennsylvania Public
Utility Commission. June.
www.puc.pa.gov/NaturalGas/pdf/Gas_
Outlook_Report-2014.pdf
21. Edelstein, R. 2015. Technology Update. SourceGas. July 12. www.narucmeetings.org/Presentations/Andreas%20Thanos%20-%201_a_Subcommittee%20Edelstein_Usovicz_Perez_Rogers_Weaver_Harder.pdf
22. Costello, K. 2013. Line Extensions for Natural Gas: Regulatory Considerations. National Regulatory Research Institute. Report 13-01. February. www.michigan.gov/documents/energy/Ken_Costello-_NRRI.pdf_natural_gas_418345_7.pdf
23. Senate Bill No. 214. Session of 2015.
General Assembly of Pennsylvania.
www.legis.state.pa.us/cfdocs/legis/PN/
Public/btCheck.cfm?txtType=PDF&sessY
r=2015&sessInd=0&billBody=S&billTyp=
B&billNbr=0214&pn=0123
24. Derr, M. Snyder County Commissioner. 2015. Personal Communication.
Resources
Carr, A. 2005. A Study of the Organizational Characteristics of Successful Cooperatives.www.researchgate.net/profile/Maureen_Casile/publication/228352518_A_study_of_the_organizational_characteristics_of_successful_cooperatives/links/0c96053a224628b82c000000.pdf. A white paper that reviews cases of cooperative business models from
agricultural, food, health, telecom, and energy cooperative organizations and summarizes key elements leading to success.
Costello, K. 2011. Hydraulic Fracturing: Placing What We Know in Perspective. National Regulatory Research Institute Report 11-16. Written from a regulatory viewpoint to clarify what evidence is known and what is inconclusive or uncertain regarding environmental, health and water use risks associated with shale gas fracturing.
Costello, K. 2013. “Line Extensions for Natural Gas: Regulatory Considerations.” National Regulatory Research Institute, Report 13-01. A white paper that discusses the varying policies and approaches that state utility commissions have and are implementing to expand natural gas distribution services.
NaturalGas.org. Overview of Natural Gas, http://naturalgas.org Through a series of four links on this site, the science, history, business, and industry components of natural gas energy are explained in unbiased, understandable terms.
Pennsylvania Public Utility Commission. 2001. Gas Term Book: Consumers Dictionary for Natural Gas Competition. A glossary that defines commonly used natural gas terms to help in the understanding of key words and phrases.
Ready, R. 2013. Analysis of Potential Demand for the Extension and Expansion of Natural Gas Distribution Infrastructure in Pennsylvania. Center for Rural Pennsylvania. A study released by the state government-funded initiative to study the expansion potential and residential customer opinions
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 23
and perceptions regarding natural gas energy adoption and expansion.
Reichard, A. 2012. Developing Natural Gas Resources in Bradford County: A Community Guide. An introductory guide that focuses on how shale gas wells are drilled and developed how natural gas is processed and transported, and how the sites are reclaimed. Guide also discussed gas industry regulations, best management practices, and how Act 13 monies are used in planning and community improvements.
U.S. Small Business Administration. Forming Cooperatives. www.sba.gov/content/cooperative – U.S. Small Business Administration website that discusses the how-to, advantages, and disadvantages of cooperatives.
Stewart, M. 2015. Pennsylvania Public Utility Commission Gas Outlook Report 2015. An annual report from the Pennsylvania Public Utility Commission that discusses infrastructure, demand, distribution and utilization of natural gas within the Commonwealth.
GAO-13-221. February 2013. United States Government Accountability Office Report to Congressional Committees. Pipeline Permitting. Interstate and Intrastate Natural Gas Permitting Processes Include Multiple Steps and Timeframes Vary. The GAO conducted a performance audit on the process for obtaining federal and state permits for projects to construct natural gas pipeline facilities. The paper discusses the (1) distribution network for natural gas pipelines; (2) the key federal environmental laws that may be involved in the permitting process for these pipelines; and (3) the key stakeholders that may be involved in the permitting process. See Appendix C for more information on permitting requirements for projects.
Page 24 National Center for Appropriate Technology
Appendix A Natural Gas Loan, Grant and Other Incentive Programs
State Programs
Pennsylvania Dept. of Community & Economic Development
Alternative & Clean Energy Program (ACE)
Type: Grant/Loan
The ACE program provides grants and loans for the development of clean energy projects.
This program is under the Commonwealth Financing Authority within the PA Department
of Community and Economic Development. It includes grant and loan funded through Act
13. Projects require a 1:1 match with ceilings of $2 to $5M or 30 -50% of costs. Criteria
include documentation of jobs retained or created. It does not cover pipeline construction
projects. http://community.newpa.com/programs/alternative-clean-energy-program-
ace/
Pennsylvania Dept. of Community & Economic Development
Ben Franklin Technology Partners (BFTP) Challenge Grant and Alternative Energy
Development Program
Type: Grant/Loan
A 31 year old initiative through the Dept. of Community & Economic Development that
supports start-up and early stage technology commercialization with technical & business
planning. In addition it provides early stage venture funding support for risk reduction to
leverage angel funders and venture groups for those projects. There are four regional
centers in Philadelphia, Pittsburgh, Allentown and State College. BFTP also has tech and
business support for the Keystone Opportunity Zone (KOZ) program areas.
benfranklin.org
Pennsylvania Dept. of Community & Economic Development
Pennsylvania Economic Development Financing Authority Bond Program (PEDFA)
Type: Loan
This program provides low interest bond financing with a minimum of $400,000. The
program can finance natural gas distribution projects and must prove and meet criteria
for jobs created or retained. http://community.newpa.com/programs/pennsylvania-
economic-development-financing-authority-pedfa-tax-exempt-bond-program/
Pennsylvania Dept. of Environmental Protection, Natural Gas Vehicle Program
Type: Grant
The Pennsylvania Department of Environmental Protection administers this grant, which offers
funds to purchase or convert commercial and municipal vehicles to natural gas on a
competitive basis. Grants may not be used for fueling infrastructure or fueling stations. Eligible
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 25
vehicles must have a gross vehicle weight of at least 14,000 pounds.
www.elibrary.dep.state.pa.us/dsweb/Get/Document-102438/NGVact13Chp27forprint.pdf
Pennsylvania Dept. of Environmental Protection, Small Business Advantage Grant Program
Type: Matching Fund
The Pennsylvania Department of Environmental Protection administers the Small Business
Advantage Grant Program, which provides matching funds of up to $9,500 to for-profit
businesses for improvements in energy efficiency and pollution prevention. Eligible business
must have a maximum of 100 full-time employees and must be the primary source of
employment for at least one full-time employee.
http://energy.gov/savings/small-business-advantage-grant-program
Pennsylvania Public Utility Commission, Sustainable Energy Fund
Type: Grant & Loan
Four sustainable energy funds were created during the restructuring plans of five electric
companies in Pennsylvania. The funds promote the development of sustainable energy
programs and clean-air technologies on a regional and statewide basis. The funds have
provided more than $20 million in loans and $1.8 million in grants to over 100 projects. The
statewide Sustainable Energy Board includes representatives from the Public Service
Commission, the Department of Environmental Protection, the Department of Community and
Economic Development, the Office of Consumer Advocate, the Pennsylvania Environmental
Council, and regional boards. The sustainable energy funds include the following companies:
West Penn Power, Metropolitan Edison (Met-Ed), Pennsylvania Electric Company (Penelec), PPL
Sustainable Energy Fund of Central/Eastern PA, and PECO Energy.
www.puc.pa.gov/utility_industry/electricity/sustainable_energy_fund.aspx
Federal Programs
USDA - High Energy Cost Grant Program
Type: Grant
The U.S. Department of Agriculture (USDA) offers an ongoing grant program for the
improvement of energy generation, transmission, and distribution facilities in rural
communities. Individuals, non-profits, commercial entities, state and local governments, and
tribal governments that have average home energy costs at least 275% above the national
average are eligible. A total of $7 million is available for qualifying projects under the most
recent solicitation, which offers grants ranging from $50,000 to $3 million. Relevant eligible
projects include:
• Natural gas or petroleum storage or distribution facilities;
Page 26 National Center for Appropriate Technology
• Backup up or emergency power generation or energy storage equipment; and
• Weatherization of residential and community property, or other energy efficiency or
conservation programs.
www.rd.usda.gov/programs-services/high-energy-cost-grants
USDA –Rural Development, Business & Industry Loan Program
Type: Loan
Guaranteed loan program for rural businesses including cooperatives for buildings
facilities and equipment. Fees vary over time and with principal amount. Loans require
collateral but no match. Project scope cap is $10M.
http://www.rd.usda.gov/programs-services/business-industry-loan-guarantees
USDA – Rural Development, Rural Cooperative Development Grant Program
Type: Grant
Funds individual and business startups, expansion or improved operations of cooperatives
and mutually owned businesses through cooperative development centers. For rural
coops and non-profits, not public agencies. Will fund feasibility studies and writing
business plans. A 25% local match is required, grant period is 1 year and $200,000
currently.
http://www.rd.usda.gov/programs-services/rural-cooperative-development-grant-program
USDA—Rural Development, Rural Energy for America Program (REAP) Grants
Type: Grant
The Rural Energy for America Program (REAP) provides financial assistance to agricultural
producers and rural small businesses in rural America to purchase, install, and construct
renewable-energy systems, make energy- efficiency improvements to non-residential buildings
and facilities, use renewable technologies that reduce energy consumption, and participate in
energy audits and renewable energy development assistance. These grants are limited to 25%
of a proposed project's cost, and a loan guarantee may not exceed $25 million. In 2015, a total
of $63 million in grants and loans was awarded. www.rd.usda.gov/programs-services/rural-
energy-america-program-renewable-energy-systems-energy-efficiency
USDA – Rural Infrastructure Opportunity Fund
Type: Loan
This a public private partnership between USDA, Capital Peak Asset Management, and Co-
Bank, a member of the Farm Credit System. The purpose of the fund is to serve as a new
source of capital for rural infrastructure projects. The anchor investment fund has $10
billion dollars and includes rural energy projects.
http://www.cobank.com/Products-Services/Public-Private-Partnerships/US-Rural-
Infrastructure-Opportunity-Fund.aspx
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 27
U.S. Economic Development Administration Grants
Type: Grant/Loan
Include several types of programs including grants and revolving loans including POWER,
Public Works and Economic Adjustment Assistance (EAA). POWER is designed for changes
in the coal industry and power industries and ceiling is $1M. EAA is for market studies,
planning and construction grants. All programs require a 1:1 match.
http://www.eda.gov/funding-opportunities/
U.S. Department of Energy - Loan Guarantee Program
Type: Loan
Under Section 1703, DOE is authorized to issue loan guarantees for projects with high
technology risks that "avoid, reduce or sequester air pollutants or anthropogenic emissions of
greenhouse gases; and employ new or significantly improved technologies as compared to
commercial technologies in service in the United States at the time the guarantee is issued."
Loan guarantees are provided in response to open solicitations. Up to $3 billion is available in
loan guarantees for projects in renewable energy, efficient end-use, efficient generation,
transmission, and distribution technologies. http://energy.gov/lpo/loan-programs-office
Pennsylvania Utility Programs
PECO Energy Natural Gas Heating Rebate Program
Type: Rebate/Incentive
The program offers rebates and incentives to commercial and residential customers that install
Energy Star listed high-efficiency natural gas furnaces, boilers, or storage tank water heaters.
Fuel switching rebates may also be available to eligible PECO customers. The program is
available to PECO natural gas customers in Bucks, Chester, Delaware, and Montgomery
Counties. www.peco.com/savings/pages/default.aspx
PPL Electric Utilities - Commercial, Industrial and Non-Profit Energy Efficiency Rebate Program
Type: Rebate/Incentive
Rebates and incentives are available for commercial and industrial products installed in the PPL
service area. Rebates are designed to reimburse customers approximately 50% of the added
cost of the high-efficiency equipment. Efficiency improvements that are not covered by the
rebate program can apply for incentives through a custom incentive program.
www.pplelectric.com/save-energy-and-money/all-rebates-and-discounts/business-and-
nonprofit.aspx
Page 28 National Center for Appropriate Technology
Philadelphia Gas Works- Commercial and Industrial Efficient Building Grant Program
Type: Rebate/Incentive
This program offers incentives up to $75,000 for commercial, industrial, and multifamily PGW
customers making natural gas conservation improvements to existing buildings.
www.pgwenergysense.com/efficiencybusinesses-buildinggrants.html
Philadelphia Gas Works - Commercial and Industrial Equipment Rebate Program
Type: Rebate
Philadelphia Gas Works rebates are available for energy-efficient industrial and commercial-
sized equipment rebates. The company also offers firm-rate and residential energy rebates for
installing qualifying natural gas equipment. www.rebate-
zone.com/pgworks/CurrentRebatesPGWCom.asp
West Penn Power SEF Commercial Loan Program
Type: Loan
The fund promotes the use of clean energy in West Penn Power’s commercial, industrial,
institutional, and residential sectors. Relevant eligible technologies include innovative natural
gas technologies and energy efficiency. Funding sources include commercial loans, equity
investment, subordinated debt, and royalty financing. www.wppsef.org/need-financing.php
Other Programs
TRF - The Reinvestment Fund – Pennsylvania Green Energy & Energy Works Loan Funds
Type: Loan
TRF is a Community Development Financial Institution that focuses its work on neighborhood
revitalization. It has been financing energy projects since 1993. This program provides loans to
commercial, industrial, multi-family residential, non-profit, and government entities to finance
energy conservation and energy-efficiency projects in buildings throughout Pennsylvania. The
program can also support projects involving combined heat and power (CHP) or on-site
renewable energy systems in conjunction with a larger building energy-efficiency project.
www.trfund.com/financing-development/energy/
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 29
Appendix B Innovative Practices and Financial Initiatives in Other
Natural Gas Producing Areas
There are several innovative practices occurring in natural gas producing areas. Examples
include the use of distributed generation plants, conversion of coal to natural gas fired power
plants, virtual pipelines, small-scale liquefied natural gas plants, and small-scale compressed
natural gas fuel systems. Innovative funding sources include tax incentives, local government
rebates, cost-recovery mechanisms for pipeline extension, and funding for natural gas fueling
applications.
Power Generation Alternatives
Distributed generation involves the placement of small, local generation stations placed at
commercial, residential, or industrial sites of use. This form of electric generation is suitable to
rural or remote areas, such as a shale oil-producing community. These plants typically contain
combined heat and power systems, natural gas powered turbine or micro-turbines,
reciprocating engines, or natural gas fuel cells (Naturalgas.org, 2013).
The conversion of a coal-fired power plant to a natural gas power plant can also facilitate the
use of locally produced natural gas. For example, Bechtel and Siemens Energy announced plans
in 2015 to construct a 1,124-megawatt natural gas power plant at the site of the former 400-
megawatt coal-fired power plant near the Shamokin Dam in Snyder County, Pennsylvania. It
will acquire the natural gas from the Marcellus Shale. The project will be funded by the private
equity group Panda Power, a Texas Company (Bechtel, 2015). Other coal to natural gas power
conversion plants include seven Duke Energy power plants in North Carolina and Indiana, the
Edge Moor Power Plant in Delaware, the McDonough Steam Generating Plant in Georgia, the
Big Sandy Plant in Kentucky, and Xcel Energy’s Riverside and High Bridge Plants in Minnesota.
Virtual Pipelines
Virtual pipelines are methods of transporting natural gas without the use of a traditional
pipeline. The most common virtual pipelines are pre-configured shipping containers that are
transferred by semi-truck or train. These containers are used to transport compressed natural
gas (CNG) or liquefied natural gas (LNG). The LNG and CNG can also be transferred by fuel
trucks, and sea tankers in a virtual pipeline. These delivery systems can be scaled to the size of
the producer or the end user.
The Last Mile Fueling Solution in the Bakken Oil Shale area of North Dakota is an example of a
virtual pipeline. In this system, natural gas is collected at the flare stack, oilfield production
site, or a remote pipeline. The natural gas is then compressed into CNG and is transferred via a
Page 30 National Center for Appropriate Technology
truck to the end user. This enables customers without natural gas pipelines access to the gas
and reduces the environmental impact of natural gas flaring. This system is operated by
General Electric and Ferus Natural Gas Fuels and operates as a mobile system. Additional GE
virtual pipelines for CNG and LNG operate in Australia, Indonesia, and Nigeria (General Electric,
2015).
Small-Scale Liquefied Natural Gas
Small-scale LNG plants are another option for natural gas producing areas without a local
pipeline transmission system. These modular liquefaction plants have a standard, simple set up
and can provide natural gas to residential and commercial customers. Idaho National
Laboratory developed a small-scale LNG system for communities without natural gas pipeline
access. This system draws natural gas from a transmission pipeline at the point of a large
pressure drop, such as a commercial distribution point, and uses the energy created from this
pressure drop to power the LNG plant. When the gas from the transmission pipeline enters the
small scale plant, it cools as it expands and acts as a coolant for the liquefaction process. This
process also aids in pre-cleaning the LNG for production. The small-scale LNG plant can be
scaled to the size of the community and can supply the gas via a local distribution system or a
virtual pipeline (Idaho National Laboratories, 2006). Pacific Gas and Electric (PG&E) employs
this system in Sacramento to address short-term demand spikes or “peak shaving” needs. Royal
Dutch/Shell Group operates over 200 LNG facilities to address “peak shaving” worldwide. There
are many companies and laboratories in the United States and worldwide working on
advancements for small-scale LNG systems. Examples include the Gas Technology Institute,
Brookhaven National Laboratory, Expansion Energy, Corban Energy, Honeywell, Cryostar,
Kryopak, Hamworthy, and LNG Global.
Natural Gas in Fueling Applications
Compressed natural gas and liquefied natural gas can be used to fuel commercial and consumer
vehicles. Both fuel sources can be integrated with a virtual pipeline system, providing fuel to
communities without a traditional distribution system. General Electric has developed a
product called CNG in a Box, which is a turnkey CNG system that operates in a pre-configured 8-
foot-by-20-foot ISO shipping container with a separate CNG fuel dispenser for consumer access
to the natural gas. The Last Mile Fueling System in the Bakken Oil Shale region has used this
technology. The Galileo Company makes similar plug-and-play CNG fueling systems known as
Nanobox and Femtobox that are sold as stand-alone products or as part of the company’s
virtual pipeline systems. Galileo has installed these CNG fueling systems in Texas, California,
Iowa, Wisconsin, and in several international locations.
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 31
Innovative Funding, Incentives, and Regulations
There are several laws and incentives that promote natural gas development and use in the
United States. Nebraska passed legislation in 2012 to facilitate the expansion of gas lines into
areas, particularly rural areas or underserved areas. This legislation allows the utilities to pass
the cost of constructing these lines on to their rate payers. The new lines must be approved by
the Public Service Commission and must be in the public’s interest, as determined by the Public
Service Commission (National Research Institute, 2013).
The state of North Carolina provides financial support for gas line extensions that are not
economically feasible. These funds are administered under the North Carolina Clean Waste and
Natural Gas Critical Needs Bond Act of 1998.There is additional legislation that allows gas
utilities to impose a surcharge on existing ratepayers, supplier refunds and sources approved by
the Utilities Commission to fund natural gas extension in remote areas that are not
economically feasible. The state of Virginia has passed similar legislation. The state of Vermont
has also permitted the state’s gas utility, Vermont Gas System, to use ratepayer funds for
planning gas line extensions (National Research Institute, 2013).
Texas companies are exempt from paying state sales tax on natural gas used in manufacturing,
fabricating, or processing tangible personal property or in the operation of a qualifying data
center. The state of Texas also offers a High-Cost Gas Investment Tax Credit that was designed
to encourage gas exploration and production in remote areas that are difficult and expensive to
develop. The credit is related to the cost of drilling the well and completion costs for the well.
This credit is used in the Barnett Shale, Eagle Ford, Haynesville, and Granite Wash formations.
The State also offers an incentive of $0.15 per gallon-equivalent for CNG and LNG dispensed to
motor vehicles. As part of the promotion of natural gas vehicles, state agency fleets that
contain more than 15 vehicles are required to purchase LNG and CNG fueled vehicles or hybrid
electric vehicles. Each existing state agency fleet must be comprised of at least 50% alternative-
fuel vehicles and these vehicles must be used for 80% of travel (Alternative Fuels Data Center,
no date).
The Texas Commission on Environmental Quality (TCEQ) administers a program that offers
vouchers of $3,500 to go toward the purchase of an alternative-fuel vehicle, including a natural
gas vehicle. The TCEQ also administers the Alternative Fueling Facilities Program as a part of an
emission reduction program. This program provides grants of up to 50% of eligible cost, up to
$600,000 to dispense, acquire, store, or construct alternative fuels, including natural gas, in
non-attainment areas in the state. As a part of accepting the grant, the facility must make the
alternative fuel available to the public at specified times (Alternative Fuels Data Center, no
date).
Page 32 National Center for Appropriate Technology
The TCEQ also administers the Texas Clean Fleet Program as a part of the emissions-reduction
plan. This program provides grants to offset the incremental cost of purchasing alternative-fuel
vehicles for fleets of 20 or more that operate entirely within the state. The group also
administers the Clean School Bus Program, which offers grants to school districts and charter
schools for the increased incremental costs associated with purchasing alternative fuel vehicles
and for the purchase of qualifying fuels. The TCEQ Natural Gas Vehicle and Fueling
Infrastructure grant program provides grants for the incremental cost of the replacement of
medium and heavy duty vehicles to new or converted natural gas vehicles. This program also
offers grants to support the development of a network of publicly available natural gas fueling
stations connecting the major cities of San Antonio, Houston, Dallas, and Fort Worth. These
grants offer up to $400,000 for a CNG or LNG station or up to $600,000 for a station that offers
both forms of natural gas. These stations must be located within one mile of an interstate
highway system (Alternative Fuels Data Center, no date). There are also alternative-fuel rebates
available from the State of Texas of up to $2,500 per vehicle. The fund for this rebate totals
$7.75 million and includes CNG and LNG fueled vehicles. The Texas Gas Service Conservation
Program offers rebates up to $2,000 for the purchase of natural-gas vehicles or $3,000 to
convert a gasoline powered vehicle to a natural gas vehicle. This fund offers $1,000 to purchase
a natural gas powered forklift (Alternative Fuels Data Center, no date).
In Oklahoma, the local utility CenterPoint Oklahoma offers incentives for fuel switching in new
construction and renovation projects for projects converting to natural gas. In Maine, the
Finance Authority office authorized a law in 2012 that authorizes the issuance of bonds for the
development of a natural gas infrastructure in the state, particularly in reference to fuel
switching from propane to natural gas (National Research Institute, 2013).
References:
Bechtel Corporation. 2015. Bechtel to Transition One of Largest Coal-to-natural Gas Power Plant Sites in US. October 28. www.bechtel.com/newsroom/releases/2015/10/bechtel-hummel-largest-coal-natural-gas-plant-us/
CenterPoint Oklahoma Demand Programs. 2014. Self-Published.
Energy Information Administration. 2010. Annual Energy Outlook 2010. U.S. Department of Energy. www.eia.gov/oiaf/aeo/pdf/0383(2010).pdf
General Electric. 2015. Last Mile Fueling Solution. www.ge.com/stories/last-mile-fueling-solution
Idaho National Laboratory. 2006. New LNG Plant Technology.
National Research Institute. 2013. Line Extension for Natural Gas: Regulatory Considerations.
Alternative Fuels Data Center. No date. Texas Law and Incentives for Natural Gas. www.afdc.energy.gov/fuels/laws/NG/TX)
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 33
Appendix C State, Federal, and Municipal Permit Considerations
The permitting process to build new natural gas pipelines can be very complex and involve local, state, and federal agencies and public interest groups and citizens. If a proposed pipeline crosses more than one state (interstate) the Federal Energy Regulatory Commission is the lead federal agency and coordinates with other federal, state, and local agencies. However, if the gas pipeline is within Pennsylvania state boundaries only (intrastate), FERC does not play a role in siting.
Some of the Federal, State, and Local Permits That May Be Required for a Natural Gas Pipeline Project in Pennsylvania (http://www.gao.gov/assets/660/652225.pdf#page=25&zoom=auto,-52,693)
Permit, license, approval, or certification Administering agency Federal Certificate of Public Convenience and Necessity FERC Section 404 General Permit Corps Section 7 Threatened and Endangered Species Clearance FWS State 401 Water Quality Certification Pennsylvania Department of Environmental Protection Water Obstruction and Encroachment Permits
National Pollutant Discharge Eliminations System (NPDES)— Hydrostatic Test Water Discharge General Permit (PAG-10) or Individual Permit
NPDES Individual Permit for Construction Activities
Concurrence of Exemption from Plan Approval
Submerged Land License Agreement
Chapter 110 Water Withdrawal and Use Registration
Highway Occupancy Permit Pennsylvania Department of Transportation Stream Crossings consultation Pennsylvania Fish and Boat Commission Clearance (Rare Species) Pennsylvania Department of Natural Resources Clearance (Cultural Resources) Pennsylvania Historical and Museum Commission Water Allocation Permit Susquehanna River Basin Commission Local Erosion and Sedimentation Control Plan Review County Conservation District Municipal zoning, land use policies, construction permits, setbacks for utilities, noise and light ordinances
Local Townships and Municipalities
PENNSYLVANIA MUNICIPALITIES
Local municipalities have jurisdiction over local planning activities and land-use policies in the over 1,400 townships and 2,500 municipalities in the 67 counties of the Commonwealth. The municipalities may have codes and regulations that would affect gas distribution projects including construction permits, local road right-of-way setbacks for utility services, noise and light ordinances, setbacks for fire ordinances, and vehicle safety for structures such as compressor stations.
Page 34 National Center for Appropriate Technology
Municipalities Planning Code (MPC), Act 247 of 1968 (P.L. 805, No. 247. The MPC sets forth the provisions for Pennsylvania municipalities to individually or jointly plan development by zoning, subdivision and land-development ordinances, planned residential development, and other ordinances by official maps, the reservation of certain land for future public purpose and by the acquisition of such land. The MPC sets forth provisions and framework for the municipalities to:
provide for reasonable development of minerals in each municipality
provide for the establishment of planning commissions, departments, committees, and zoning hearing boards, authorizing them to charge fees, make inspections, and hold public hearings
provide for further land use related activities as set forth in the Act The MPC requires land-use controls to be consistent with and not exceed the provisions of the Oil and Gas Act.
Public Utility Commission (PUC) – The PUC acts as the Commonwealth’s regulatory agency for oversight of every “public utility” operating in Pennsylvania, as defined in the Public Utility Code, 66 Pa. C.S. §102. This law establishes the Pennsylvania Public Utility Commission and the framework for the regulation of public utilities. The Commission has limited oversight of non-profit gas distributors, such as cooperatives and municipal gas services.
With regard to natural gas development, the definition of public utility excludes gas producers except when a producer is “distributing such gas directly to the public for compensation.” The definition of public utility includes the transportation of natural gas and hazardous liquids by pipeline “for the public for compensation.” The circumstances when such pipeline public utilities are subject to PUC jurisdiction entails a very fact-specific analysis.
In addition to the PUC’s direct jurisdiction over pipeline public utilities, several areas of Marcellus Shale natural gas reserves affect areas regulated by the PUC. These areas include common carrier transportation, water and wastewater, public utility service, wholesale gas purchases by natural gas distribution utilities, and the effects of gas prices in wholesale electric markets.
Pennsylvania Department of Transportation (PennDOT) – The role of the DOT is to deliver safe, efficient transportation services by providing information system policies, procedures, guidelines, and regulations. Its involvement with gas distribution would include utility construction standards at road crossings, right-of-way standards for utilities, and crossings at bridges. The State Highway Law 36 P.S. §§ 670 – 420 governs driveway and private road access from property abutting the Commonwealth highways, as well as the excavation of the highway surface for placement of drainage and utility pipelines
The U.S. Department of Transportation Pipelines and Hazardous Materials Safety Administration – (PHMSA) has oversight of all public utility and non-public utility gas and hazardous liquids pipelines. The PUC is a state partner with PHMSA and the PUC has the primary responsibility for gas safety over PUC jurisdictional pipelines.
Guide to Natural Gas Access Opportunities in Pennsylvania Rural Communities Page 35
Natural Gas Pipeline Safety Act of 1968 and Hazardous Liquid Pipeline Safety Act of 1979 Establishes federal/state "partnership" for pipeline safety overseen by U.S. Department of Transportation with grant funding for state partners. These safety rules capture the non-profit gas cooperative and municipal distribution systems as to safety compliance, inspection, and performance.