Energy Infrastructure
If You Build It, They Will Come
By Charlie Burd
Independent Oil and Gas Association of West Virginia
You have likely heard the phrase, “If you build it, they will
come.” It’s a quote from the 1989 film “Field of Dreams,”
which was filmed in Dyersville, Iowa. It’s a real place. I’ve been
there and played baseball on the very field used in the movie.
There is another field of dreams, and it is called the Appa-
lachian Basin. This field of dreams encompasses eastern Ohio,
Pennsylvania and West Virginia and overlies the Marcellus
and Utica shales—two of the most prolific natural gas and
natural gas liquid (NGL) producing formations in the world,
accounting for nearly 27 billion cubic feet (Bcf) of natural gas
production per day.
In 2008, West Virginia produced 260 Bcf. In 2016, pro-
duction grew to a whopping 1.3 trillion cubic feet. This
tremendous growth can be attributed to a better understand-
ing of the geology of the formations, improved efficiencies and
the drilling of highly productive wells. According to the Energy
Information Administration (EIA), the Appalachian Basin has
been driving the growth of natural gas in the U.S. since 2012.
While technology has made these two shale formations the
place to be, recent regulatory reform will make West Virginia
Powering Production
The Rising Cost of Energy
By Rebecca McPhail
West Virginia Manufacturers Association
What seems like only a few short years ago, electric rates
in West Virginia were some of the lowest in the country. Given
West Virginia’s position as a natural resource-rich, energy-
abundant state and a net exporter of power, low energy costs
should be a given. The unfortunate reality in our state is that
low energy costs for consumers are no longer guaranteed.
Electric rates in West Virginia have steadily increased, and
large consumers like manufacturers have taken the biggest
hit. Energy-intensive industrial facilities that once looked fa-
vorably at building or expanding in West Virginia must now
pause and consider the relatively rapid increase of this signif-
icant operational cost.
Unlike surrounding states, West Virginia’s residential, in-
dustrial and manufacturing companies do not benefit from
open energy markets. Further, despite extensive natural gas
reserves, our state’s electric rates do not benefit from natural
gas-powered electricity generation, which could help create
more diversity in the energy market.
Further declining population and economic struggles have
reduced the ratepayer pool, which means everyone pays more.
That is especially true when large industrial users are lost and
costs must be further spread among remaining ratepayers. Now
West Virginia is in a difficult cycle of attempting to attract
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WEST VIRGINIA EXECUTIVE
the place to be. The recent passage of co-tenancy legislation
will help level the playing field in regulatory advancements
and further the ability of West Virginia producers to attract
investment capital to drill more natural gas wells.
Since West Virginia only consumes about 170 Bcf annually,
all this natural gas and NGL production must go somewhere.
Luckily, according to the EIA, there are currently more than
$23 billion worth of natural gas pipelines in West Virginia.
In addition, there are more than $21 billion worth of natu-
ral gas-fired power plants being planned in Ohio, Pennsylva-
nia and West Virginia. Add to this Dominion Energy’s Cove
Point, MD, natural gas liquification export facility, which
uses about 2 Bcf per day in Appalachian Basin production;
Shell’s plans to build a world-class ethane cracker in Pennsyl-
vania; PTT Global Chemical’s plans for another cracker just
across the Ohio River from Wheeling; and the momentum of
the proposed Appalachia Storage and Trading Hub. A recent
study by the American Chemistry Council projects as many
as 100,000 jobs could be created by the downstream oppor-
tunities from the hub.
Let’s also not forget the economic benefits. Since 2008, the
oil and natural gas industry has paid $997 million in sever-
ance taxes, $957 million in property taxes and more than $600
million to royalty owners.
Clearly, if we drill it, good things will come to West Virginia.
new industrial users to help reduce the overall cost to energy
users but is finding recruitment difficult when the initial cost
of doing business can be so dramatically driven by the regu-
lated price of electricity in the state.
During the 2018 legislative session, some leaders worked to
change the direction of industrial energy markets in the Moun-
tain State. Senate Bill (SB) 600 was introduced to provide the
Public Service Commission of West Virginia with the ability
to allow freely negotiated and more competitive electric rates
for large industrial and manufacturing consumers for both the
retention of existing customers and recruitment of new com-
panies. The bill set qualification provisions for special con-
tract eligibility, limiting such negotiations to companies that
provide significant economic impact. Unfortunately, SB 600
failed to advance late in the session.
Little access to or benefit from our own abundant energy
resources is harming the state’s residents, businesses and in-
dustries. West Virginia must take a hard look at future rate
increases, demanding that the commission carefully consider
whether rates are reasonable in the context of what is best for
the state as a whole.
Our citizens and policymakers must remember that a healthy
industrial economy creates overall positive gains for our state
and all of its citizens. When industrial users stay in West
Virginia or choose to locate here, the benefits are felt by all
energy consumers who enjoy lower rates when cost is spread
to a broader base. We must demand change and choice for
our energy future.