PGW executive: Banning Marcellus gas might be illegal

Philadelphia Gas Works is not currently buying natural gas that comes from Pennsylvania's Marcellus Shale, but a PGW executive suggested Tuesday that a proposal to ban future purchases might put the utility at odds with regulators.

Craig White, the city-owned utility's executive vice president, said state and local regulations oblige PGW to buy the lowest-cost fuel on behalf of its customers, regardless of its origins.

White's testimony at a City Council hearing on the Marcellus Shale's impact - issues such as drinking-water quality also were discussed - suggested that the proposal by anti-drilling activists could force the city's 500,000 gas customers to pay higher rates to make a political point against Marcellus drilling, and thus might be illegal.

"PGW is required by both state law and city ordinance to pursue a least-cost procurement policy in order to benefit our ratepayers with a stable supply of natural gas at the lowest possible cost," he said in written statement.

Councilman Curtis Jones, who sympathizes with anti-drilling activists and organized Tuesday's hearing before joint Council committees on transportation and public utilities and the environment, has contemplated directing PGW to boycott natural gas from the Marcellus Shale to express the city's displeasure with gas drilling.

Pennsylvania's shale-gas boom has generated an abundance of economic and industrial activity; the Marcellus geologic formation lies about a mile beneath half the state. But it also has produced worrisome environmental damage, social conflict, and political turmoil.

City Council appears to have limited legal means to influence drilling activity in areas outside its jurisdiction. The nearest drilling is taking place more than 100 miles from the city limits.

In March, Council passed a resolution objecting to drilling in the Delaware River basin, from which Philadelphia and many communities in the region draw their drinking water. That resolution, which passed unanimously with no public debate, was a symbolic gesture without legal weight.

Tuesday's hearing - attended by about 200 people, including many waving placards - was an opportunity for Council to gather more facts about Marcellus Shale drilling, which depends on a controversial extraction technique called hydraulic fracturing, or "fracking."

Anti-drilling activists testified about the perils of fracking, high-pressure injection of water, chemicals and sand a mile below the surface to stimulate gas production. Industry representatives testified that the practice, when conducted properly, was safe.

City Water Commissioner Bernard Brunwasser testified that his department closely monitored water quality and was working behind the scenes to strengthen drilling regulations.

"Please do not mistake our rigorous scientific approach for nonchalance," he said.

The hearing was a tableau that has been repeated hundreds of times across Pennsylvania in the last year, in legislative hearings and before regulatory agencies, as the state comes to grips with the environmental and economic implications of the Marcellus.

After PGW's White told Council that the city was not now buying Marcellus gas, some members appeared to lose interest in using the city-owned utility to punish Marcellus producers.

White said that PGW bought all its natural gas under contract from Gulf Coast producers. It has signed long-term contracts with interstate pipelines to carry the fuel to Philadelphia.

Because of the configuration of the gas-pipeline network, Marcellus gas is more expensive for PGW than Gulf Coast gas. But White said Pennsylvania shale gas could become a cheaper alternative in the future.

PGW buys about 60 billion cubic feet of natural gas a year - equivalent to only about one day's supply for the entire nation - for residential, commercial and industrial customers. About 84 percent of homes in Philadelphia use natural gas for heating.