Future of US gas is overseas, replacing coal for power – shale exec

➤ Exporting U.S. gas in the form of LNG can offset coal for power overseas.

➤ Gas industry methane emissions need to come down.

➤ Pittsburgh has potential as a hydrogen hub, and natural gas producer EQT is doing some small-scale hydrogen projects.

Promising to use high technology to transform the operations of the U.S.'s largest natural gas producer, Toby Rice took over as EQT Corp.'s CEO in July 2019, after a brief but vicious shareholder revolt and proxy fight.

Now that the Appalachian shale driller is close to what he envisioned — a digital company he can run from his cell phone — with shares trading at three-year highs, Rice says it is time to transform the world.

Rice talked with S&P Global Market Intelligence about the role of U.S. natural gas in the energy transition. The following is an edited transcript of that conversation.

S&P Global Market Intelligence: You say the next thing for U.S. gas exports is to try to reduce global carbon emissions in the next decade by replacing coal worldwide. At 39 years old, you are a millennial. Do you have trouble convincing your peers that a fossil fuel is the way to fight global warming?

Toby Rice: Energy consumption is the biggest factor driving human progress around the world. The more energy people use, the longer they live, the better quality of life. Do you want to make an impact on the world? Give people access to low-cost, clean, affordable energy.

I grew up near Boston in a town called Braintree. My mom, to this day, burns oil in her basement for home heating. She and almost 25% of Massachusetts residents still burn oil in their basement. That's like the 1800s. That's just a clear example of the environmental impact. Thousands of dollars of incremental costs that can be eliminated with more natural gas infrastructure.

What do you say to those who counter that renewable technology is equal to or even cheaper than natural gas? That we should just skip natural gas and go directly to renewables?

The criteria that we need for the energy of the future is reliability, affordability, and cleanliness. Those are the priorities.

Europe has prioritized the green aspects ... and so now they're subjected to these ripple effects that you see in the world. Now they've seen their energy costs go through the roof, and what's really amazing is, people are talking about having to make the decision between whether they eat or whether they heat their homes this winter. That is energy poverty.

What's the best decarbonization effort going on right now?

Hands down, not even close: U.S. LNG to replace foreign coal.

What about methane emissions?

Methane is an issue that this industry needs to deal with. And we're doing exactly that. Here at EQT that will be shown with our net-zero target by 2025. Eliminating pneumatic devices, which is our biggest source of methane emissions, is something that we've got our bullseye on. We're going to be pulling out over 9,000 of those devices. ... That's going to cut our methane intensity by almost 70%. That same opportunity applies for the rest of industry.

Despite these reductions, natural gas adds to the carbon load. We have a limited budget and it is shrinking. What do we do for 10 years and 20 years to get emissions to zero?

The leak in the dam is burning foreign coal. So, we've got to shut that off. The way we shut that off is with U.S. LNG. We can fill this hole for the world. Right now, this is the fastest solution to shut off the flow and give us some time to come up with an innovative solution that makes renewables — that brings the reliability to renewables that they desperately need.

Do we need more LNG export terminals in this country?

Yes. ... The reality is, we've got over 14 billion tons of CO2 emissions around the world coming from using coal for electricity. ... How do we accelerate the retirement of those emissions? U.S. LNG. We've got the resources. We've got the industry. We've got the roughnecks. ... We just need more infrastructure.

Outbound pipeline capacity from Appalachia is getting scarce. EQT is selling some southbound capacity on Mountain Valley Pipeline LLC and booking westbound capacity on Rockies Express Pipeline LLC. Which way is Marcellus gas going to flow in the future? To the west and Texas or the Carolinas?

We still have a significant amount of exposure to MVP. All we did is just replace that with a firm sales agreement. So, we still have access to southeastern markets.

We just got a letter from Sen. Elizabeth Warren [D–Mass.], talking about how her consumers are struggling with higher gas prices ... not because we're not doing enough to produce; it's because we don't have enough infrastructure to serve those people. I'm not giving up hope that New England is going to be a source of demand.

Where is demand growth going to come from in Appalachia going forward five years? 10 years?

In the basin, I think coal-to-gas switching is the most obvious source of demand for us right now. That's around 2 Bcf/d of incremental demand here in Appalachia. Outside of that, you look at what's going on in the country and there's about an 18 Bcf/d opportunity.

To circle back to your original question, when we look at what's happening in the Northeast, there's been about 6 Bcf/d of pipeline projects that have been cancelled more or stalled significantly: Constitution, Penn[East], [Atlantic Coast Pipeline]. We need to look at common sense solutions and putting those pipelines back on the table.

Let's think big thoughts about the future. Does Pittsburgh have a future as a hydrogen hub?

I think so. We've certainly have the industrial base. ... The question with hydrogen isn't about the desire. I think a lot of people want the hydrogen economy to happen.

Do you see EQT evolving into a hydrogen producer?

We have the skill set it takes to be able to do hydrogen. We obviously have the lowest cost feedstock of natural gas. The question really comes down to just commercial terms. ... It's a chicken and egg situation. But we're moving forward and doing some small-scale hydrogen plants.