Midwest Energy News

North Dakota’s transformation as an oil producing state is no secret. But when you look at the historical data, it’s breathtaking how rapidly things have changed.

In the short-term, the very government support that is buoying uncompetitive clean tech deployment is set to decline drastically. But even if much of this funding continues, the nascent clean tech industry is on a potential path of stagnation.

FirstEnergy’s annual meeting of shareholders lasted 10 minutes Tuesday morning as the company took measures to try to keep protesters who had been bused in from voicing their displeasure against the company.

Adding ethanol to the nation’s collective gasoline supply has helped lower pump prices for American consumers, researchers at the University of Wisconsin-Madison and Iowa State University say.

The Obama administration is listening more attentively to the oil and gas industry in the past few months, the top White House official on energy said yesterday, after neglecting the relationship early in the president’s term.

Officials at MidAmerican Energy Co. are studying potential options now that the Iowa Legislature adjourned without taking action on a bill the utility sought as a step toward its planned construction of a nuclear power plant in Iowa.

For Sen. John Hoeven, examples of gridlocked roads in his home state help make the case for fast-tracking the Keystone XL crude oil pipeline, which would help take more than 100,000 barrels of oil per day — about 500 trucks worth — off of North Dakota roads.

The public would have a better idea of what chemicals shale gas well developers are using, under legislation approved by the Ohio Senate Tuesday. But the state stands to lose $2 billion in new wind farm development because of that same bill.

Energy-efficient ice cream freezers installed at a new Pierre’s factory in Cleveland. (Photo Courtesy of Pierre’s Ice Cream Co.)

The Midwest is a hot spot for Clean Energy Funds, and an ice cream business is among the beneficiaries.

The scoop? So-called Clean Energy Funds, or CEFs, from sources including monthly surcharges on utility bills, have helped pay for energy efficiency and other improvements at places like Pierre’s Ice Cream Co., which opened a new, 35,000-square-foot factory in Cleveland almost a year ago.

Pierre’s used a state grant as part of a project that’s allowed the company to spend less money on the electricity needed to make its tasty treat — and keep the final product at an optimal temperature of minus 20 degrees when it’s stored in an on-site distribution center.

“The beauty of having all of this installed is that as we can increase volume, we will not be consuming more energy,” said Shelley Roth, president of Pierre’s Ice Cream Co.

“We’re hoping to see a savings of anywhere between 15 to 25 percent (on electricity costs).”

There are numerous other examples of states using CEFs for energy efficiency and renewable energy projects in the U.S. But Ohio is among a number of states working to change the recipe for funding projects. Ohio’s version of the CEF was called the Advanced Energy Fund, or AEF. Pierre’s received money for its upgrades through an Ohio program supported by the AEF and federal funding.

Ohio’s Advanced Energy Fund was in place for a decade, until legislation that allowed for a 9-cent monthly surcharge on utility bills expired in December 2010, said Chad Smith, deputy chief of the Office of Energy at the Ohio Department of Development.

The state estimates that 120 companies are saving a total of $13 million in annual electricity and natural gas costs due to improvements supported by the Advanced Energy Fund.

Since the expiration, Ohio has restructured its remaining program dollars into an Energy Loan Fund, using payments from previous Advanced Energy Fund investments and supplemental federal funding.

“It was successful,” Smith said of the former AEF program. “One of the things we saw, however, was that the demand (for grants) exceeded the supply. So we ended up looking toward financing that could be sustainable, into the future.”

Under the state’s new Energy Loan Fund, money given to companies for efficiency improvements will be recycled, Smith said. Eligible projects include upgrades like insulation, lighting, heating and cooling systems, renewable-energy projects and improved production processes.

“The projects that we do will be repaid with a financing program,” he said. “The funds will come back into the program, and they can be loaned out again and again.”

The program is structured so companies can design a schedule that uses savings from reduced energy costs to pay back the loan, in 15 years or less and at an interest rate below prime, Smith said.

The Energy Loan Fund, with about $10 million per year available, received 60 pre-applications after its December launch. After a round of evaluations, 47 companies have enrolled in the program, said Penny Martin, communications specialist at the Ohio Department of Development. The surcharge collected a similar annual amount for AEF grants, via a 9-cent monthly fee on all investor-owned utility bills.

Christina O’Keeffe, assistant deputy chief at the Ohio energy office, said the Energy Loan Fund seems to fill a gap in the marketplace.

“Some of our customers cannot get loans from commercial banks because there’s not an understanding of the technology involved,” O’Keeffe said. “When we look, we’re looking at estimated energy savings from a project, and using that as a source to repay the loan.”

According to a January report from The Brookings Institution, a public policy think-tank based in Washington, D.C., CEFs exist in more than 20 states, mostly in the Northeast, West Coast and Midwest, generating more than $500 million annually, mostly from utility surcharges.

Programs in Minnesota, Wisconsin, Michigan, Illinois and Ohio will have collectively distributed more than $600 million in assistance by 2017, according the report.

States with clean energy funds, via the Brookings Institution.

Over the last decade, the state funds have invested more than $2.7 billion to support renewable energy markets while leveraging another $9.7 billion in federal and private sector investment, the report states. As a result, $12 billion has gone to more than 72,000 projects in the U.S., including solar and wind installations, hydrokinetic projects in rivers, and biomass generation plants on farms.

But authors of the Brookings report caution that such programs need to better coordinate activities with their respective state and federal economic development agencies, and go beyond per-project financing measures like grants.

Smith said he’s familiar with the Brookings report, and agrees that clean energy and economic development efforts in states work best if they’re merged.

“That’s something we’ve always thought was a good idea,” he said. “It really creates an environment that allows a company, in the future, to pursue job expansion and job creation.”

For Pierre’s Ice Cream, shifting from grants to loans also seems to make good sense, said Roth, company president.

“We have a very large electrical bill,” she said. “Our goal was to have a new state-of-the-art facility that allows us to grow. And as we grow, the per-gallon, cost-per-unit in electricity will decrease due to what we’ve invested.”

Energy-saving features in Pierre’s new factory include:

• Using the hot and cold air created during the ice-cream making process to heat and cool rooms in other parts of the building;
• Insulated panels to save on energy use;
• Making use of natural light with strategically placed windows and skylights;
• Motion sensors and timers that make sure the lights are on only when rooms are in use;
• Programmable equipment control panels that optimize utility consumption;
• Pumps and equipment controls designed to reduce water consumption and process waste;
• A recycling program for corrugated packaging.

Roth said she’s not sure if her company will take advantage of Ohio’s new clean energy loans in the future, but she encourages other companies to look into ways to save energy.

“I thought what was great about the program was they made us really evaluate all aspects of our energy consumption and our training and our focus,” she said. “They made us quantify things that were eye-opening.”

Jeff Kart is a longtime environmental journalist, blogger and writer in the Great Lakes region, and principal of Enviroprose consulting. He lives in Bay City, Michigan.

A proposed $55 million development would double the number of turbines in a controversial Champaign County wind project, according to plans submitted Tuesday.

Remember, unlike wonks, average folk don’t think in terms of discrete political “issues.” They think in terms of broad cultural associations and identities.

It is far from clear whether one of the new routes proposed by TransCanada would involve less potential damage in the case of a pipeline spill. And a route change does not alter other fundamental concerns.

Over the past decade, more than 300 oil and gas workers were killed in highway crashes, the largest cause of fatalities in the industry. Many of these deaths were due in part to oil field exemptions from highway safety rules.

Purdue has been a target of local and national criticism for its reliance on coal to power its utility plant. But recent changes are moving the university toward natural gas as a primary fuel.

The hearing will provide a high-profile forum for GOP criticism of an agency that’s already in the crosshairs of Republicans, who called the remarks a sign that EPA unfairly targets companies.

Proponents say feed-in tariffs are key to stoking the clean energy economy, but advocates have struggled to sell the program in the United States — a problem they blame in part on its loaded name.

Energy industry bigwigs have spent the past three-plus years talking trash about President Barack Obama’s policies, but that’s not stopping their executives and employees from filling his campaign war chest.

North Dakota passed Alaska in March to become the second-leading state in crude oil production, trailing only Texas, according to officials from Alaska and North Dakota.

A GasFrac operation in Alberta (PR photo)

Some 8,000 feet deep and 450 million years old, the Utica Shale has a lot of petroleum — crude oil, natural gas and byproducts like ethane.

Although no one really knows how much there is, oil and gas companies are flocking to eastern Ohio, home to some of the shale’s most amenable portions.

“Right now we’re still in an exploratory phase,” said Brian Hickman, a spokesperson for the Ohio Oil and Gas Association.

It’s also an experimental phase for the technology that makes shale extraction possible, Hickman said. Companies that have used horizontal hydraulic fracturing successfully in the Marcellus, Barnett and other shales are still trying to figure out how to best use it in the Utica.

In Ohio, 65 Utica Shale wells have been drilled so far, each requiring 5 to 6 million gallons of water, said Heidi Hetzel-Evans, a spokesperson for the Ohio Department of Natural Resources.

But as Utica drillers analyze early results, at least one company thinks water might be unnecessary — or even a hindrance — and that using a waterless, propane-based form of fracking called LPG might be more efficient and profitable.

That currently unnamed company has asked GasFrac Energy Services to frack two Utica trial wells in Ohio using LPG, short for liquid petroleum gas. Founded in 2006 and based in Calgary, GasFrac is apparently the world’s only provider of LPG fracking and has used it about 1,200 times, mostly in western Canada and also in Texas and Colorado.

LPG uses a mixture of propane (and occasionally some butane) that’s pressurized to the consistency of a gel. Then, like water-based fracking, it’s injected through pipes at high pressure underground to release oil and gas by cracking open rocks using sand (or another proppant).

Unlike water, though, LPG naturally mixes with petroleum, so it returns to the surface with the oil or gas being extracted. And since LPG is electrically neutral and lacks much friction, it doesn’t dissolve any salts, heavy metals or radioactive compounds — compared to water, in which these things return to the surface and make a typically toxic mixture even more so.

Fracking, of course, is enormously controversial, mostly because of concerns of potential risks to water supplies. LPG fracking eliminates an entire wastestream — the copious amounts of toxic “flowback” water that has to be reused, treated and discharged into waterways, or disposed of in deep injection wells, which have been linked to earthquakes in Ohio.

But why would companies using hydro-fracking — which has proven to be pretty profitable — be interested in using a niche technology like LPG?

“I think the results they’re getting [in the Utica] are sub-par, and they’re looking for an alternative,” said Kyle Ward, GasFrac’s spokesperson.

GasFrac argues that LPG, compared to hydro-fracking, is both more environmentally sustainable and economically efficient in the the long run — a claim that has drawn some skepticism.

Terry Engelder, the Penn State University geologist who’s been dubbed the “Godfather” of the Marcellus Shale for his calculations of the rock layer’s natural gas potential, says water is the “mechanically most efficient fluid for breaking apart rock.”

Anthony Ingraffea, a Cornell University engineer who spent 20 years researching fracking for Schlumberger, one of the largest fracking companies, said: “I’ll give [GasFrac] credit that geochemically, it’s much better to use a hydrocarbon [propane and butane] to stimulate a reservoir…But I’m not sure how well this technique will work in a high volume long lateral shale formation [like the Utica or Marcellus shales] because they haven’t released proprietary data. That’s still unknown.”

Petroleum engineers in the 1960s and 1970s tried using propane fracking, but the potential for explosion — which is still a risk today, if better managed — left the technology uneconomical.

Last year, the petroleum giant Chevron used LPG to frack several natural gas wells in the Piceance Basin, home to several lucrative coal, oil and natural gas deposits in Colorado. The company’s annual report, while not mentioning GasFrac, noted that LPG “significantly increases production while minimizing water usage.”

The company BlackBrush recently announced a two-year contract with GasFrac in Texas’ oil-rich Eagle Ford Shale.

Offering an explanation for the dearth of public data on GasFrac’s work for other companies, Robert Lestz, the company’s chief tech officer, said, “Because our results our so superior to what people have done before, they’re not interested in sharing those results.”

In Ohio, GasFrac’s spokesman said the company hopes to start the Utica wells by the end of the month.

It could be a proving ground for the technology. “It’s no secret we’re going to the Utica,” Zeke Zeringue, GasFrac’s CEO, said in a May conference call. “Obviously we hope that leads to an establishment of some sort of base of operations.”

While GasFrac has been keen to note in its recent marketing efforts that LPG uses no water, the technology’s profitability will ultimately determine its potential, said Michael Mazar, a financial analyst who follows the company for BMO Capital Markets.

“The environmental benefits are secondary.”

CORRECTION: Because of an editor’s error, Robert Lestz was incorrectly identified as GasFrac’s founder in an earlier version of this story.

Portions of this story were originally reported for InsideClimateNews.

Anthony Brino is a Springfield, Illinois-based freelance writer whose work has appeared in The Allegheny Front, InsideClimate News and Illinois Statehouse News.

Given the trends in natural-gas production, coal-to-gas projects look more like white elephants than ever. Making a synthetic version of a product found in growing abundance makes no economic sense.