Shale Gas: An American Advantage

AEP’s service territory overlaps five of the seven major shale formations in the United States (as identified by the U.S. Energy Information Administration). The abundance of these natural gas resources provides important growth opportunities that support local economic and business development and create new jobs.

Since 2011, many shale oil and gas customers have tapped into these resources in AEP’s Ohio, West Virginia, Oklahoma and Texas service territories. We have been tracking short- and long-term customer power requests related to shale gas growth since 2011; this data helps us to plan transmission improvements to meet customers’ needs. Since the recession, AEP has seen a dramatic shift in energy production – shale oil and gas vs. coal – within our service territory. Today, we serve more oil- and gas-related customers than coal industry customers. In 2016, customer requests for shale-related service slowed across AEP’s service territory, which tracked with national trends.

Although low oil and gas prices slowed investments in drilling, growth increased for new midstream and pipeline investments in the Marcellus and Utica shale regions of Ohio and West Virginia and the Eagle Ford formation in Texas. Our data indicates emerging growth in additional formations in other parts of our service territory, once infrastructure to support growth is in place. Coastal Texas, including Corpus Christi in our footprint, is an attractive location for liquefied natural gas (LNG) terminals to support exports of gas. We remain committed to supporting this industry’s growth.

Shale customers need highly reliable electricity to maintain many of their 24/7 operations, as well as meet their downstream customer needs. In AEP’s eastern service territory, transmission planning engineers developed a transmission shale expansion plan to help us forecast where transmission improvements will likely be needed. This plan helps us prioritize our investments and system improvements to maximize benefits to customers and the power grid. A similar effort is underway in AEP’s western service territory. These efforts position AEP to seize growth opportunities in shale regions as they develop.

Between 2012 and 2016, AEP Economic & Business Development worked on 33 shale oil- and gas-related customer projects in AEP Ohio’s territory, including new facilities and expansions. Those projects have created 953 jobs and other direct benefits for the region. Speed of electric service, reliability and power quality were key location drivers in 25 of those projects.

Thanks to innovative solutions such as AEP Transmission’s “station in a box” (aka Skid Station), AEP built temporary mobile substations to serve several of these oil and gas customers to meet their aggressive power needs and production schedules. AEP then built permanent substations to serve the customers’ long-term capacity needs. Customer-focused approaches such as these give us a competitive advantage in business attraction, retention and expansion.

In November 2016, AEP Ohio Transmission Company began operation of a new 138/69-kilovolt (kV) station to support a resurgence of natural gas and oil production in Ohio and West Virginia. The new station in Harrison County, Ohio, sits atop the deep deposits of Marcellus and Utica shale that are rich in gas and oil. Recent intense drilling for these resources and construction of pipelines and processing plants in Eastern Ohio required the transmission infrastructure to be upgraded because it was not originally built to handle industrial loads. An additional 138-kV line, through the heart of the shale area, will go into service in late 2017, bolstering the capacity and reliability of the local transmission network.

Load Requests/Expansion - AEP Overview

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To support recent and future load growth associated with oil and gas production in far West Texas, AEP Transmission and Oncor Electric Delivery Company are asking the state’s regulators to approve construction of 220 miles of new transmission lines. The proposed 345-kV line would serve as the “backbone” needed to support a resurgence of oil and gas production in that region. In spite of low natural gas prices, AEP and Oncor have experienced increased load demands from production, transportation and mid-stream processing facilities.

The proposed 345-kV loop will address load growth from the oil and natural gas industry as well as renewable generation development in the Delaware Basin and Permian Basin areas, affecting AEP, Oncor and Texas and New Mexico Power. This shale basin is expected to see an average growth of 11 percent over the next five years and seven percent growth over the next 10 years. As of April 2016, far West Texas had more than 1,650 MW of renewable generation already connected to the transmission system, with requests for an additional 3,380 MW to be interconnected.

As oil and gas drilling activities have increased in shale gas-rich regions of the country, the incidents of earthquakes have also been increasing. The U.S. Geological Survey and others have tied the process of wastewater disposal from oil and gas extraction activities to surges in earthquakes in eight states – including four states in AEP’s service territory (Arkansas, Ohio, Oklahoma and Texas). While seismologists and geologists continue to gather data to learn more about the connection between tremors and wastewater injection wells, we remain concerned about this. As we rely more heavily on natural gas for 24/7 power generation, we will look to that industry to ensure responsible practices are in place to minimize environmental impacts, and address earthquake concerns.