The Awakening of Shale 3.0: Natural Gas as a Catalyst Fuel, not a Bridge Fuel

Nick Deiuliis, President and CEO – CNX Resources Corp.
MSC Shale Insight – September 29, 2022

Thanks to my good friend Jeff Nobers for the kind intro and for all his stellar work with our regional building trades. Without the great women and men of the local trades, nothing I’m about to say would be possible.

And good morning, friends.  First let me acknowledge our title.  The Awakening is a tribute to the great Pittsburgh jazz pianist Ahmad Jamal, borrowing one of his epic album titles.  The best pianist in jazz history, for my money.

The other part of the title for today references the next chapter in this epic story that is the domestic natural gas industry.  Shale 3.0, where our industry and product are the catalyst for the economy, quality of life, and lower CO2.  For the region of Appalachia, the nation, and the world.  Don’t call it a bridge fuel.

Make no mistake, we are the necessary catalyst if you want a better future.  You want us to be a bridge, it’s a bridge where society is not going to like what’s on the other side.  We are seeing examples of what that looks like everywhere these days.

BRIDGERS VS. CATALYSTS

What it comes down to are two very different approaches out there.

On one side you have what I call the “bridgers” warranting natural gas is heading toward obsolescence.  Bridgers employ mistruths, politics, fiction, and mysticism.  Their approach is wrong.  They lead to problems, big ones, for society at large.  Government is the decider

On the other side you have us: the “catalysts”.  We know natural gas is more crucial than ever.  Catalysts live in the world of truth, science, reality, and fact.  Our approach is right.  We offer solutions for the region and the nation and the world.  The free market is the answer.

Now the bridgers have been winning the policy game of late.  How is it, you might frustratingly ask, that a view based in traits that I listed is so successful?  It does not compute, right?

Well, actually and unfortunately, it does compute.  Because the success of the bridgers hinges on the application of a tried-and-true recipe used by manipulators and those looking to control for over a century.

THE FOUR-PART RECIPE

The recipe was explained by the great author and thinker Victor Klemperer, when he lived under fascist rule in Germany.  I want to thank historian Timothy Snyder for igniting my interest in Klemperer. Because Klemperer and his recipe matter greatly to modern energy policies.  The recipe has four parts.

First, you attack reality.  And present in the void made-up creations as fact.

Second, you apply constant and endless repetition.  Pound the message everywhere so that no one can escape perpetual exposure to it; on the TV, in the paper, on the smart phone, surfing the web, and sitting in the classroom.

Step three: it’s time, in the words of one of my favorite essayists, the great Joan Didion, to apply some ‘magical thinking.’  Reason becomes a casualty and people embrace blatantly untrue positions.  There is hostility to any dissent or dissenter to such untrue positions.  This is where your calendar opens up because you stop getting invited to panels and cocktail parties with the elite.  An adult form of peer pressure.

Last step, and this is key because it is the whole point of the recipe, is to offer up the neat, simple, lone solution to the problem that the prior steps have constructed.  The solution can be a messianic leader, a movement, or a policy path. That’s the payoff: in the form of money, power, and, most important, control.

So, what I’d like to do is walk through these four steps in the recipe and list examples when it comes to energy policy.  And then rebut them with what we, the catalysts and doers, know to be the truth.

Let’s give it a go.

STEP 1: ATTACK REALITY AND REPLACE WITH MADE UP CREATIONS

The bridgers have successfully attacked an absolute scientific truth:  that all activity in this world has a certain scopes 1-3 carbon footprint.  That truth has been replaced with the manufactured concept of a zero-carbon economy, business, or portfolio of energy.

But we know that while lower carbon is absolutely possible, zero carbon is scientifically impossible.  And that continued regional utilization of natural gas, particularly to displace coal, oil, gasoline, and diesel, will drive CO2 to the lowest level and by the most efficient path.

Another example of step one of the recipe in action: the bridgers covering over reality with touting that the comically-named Inflation Reduction Act’s $369 billion use of taxpayer money will get about a 37% CO2 drop by 2030.  But we know the natural gas industry will drop US CO2 30% by 2030, without the IRA.  Which means domestic natural gas delivers >80% of the CO2 drop at $0 cost to taxpayers.  And the IRA ekes out <20% of the improvement at a $369 billion cost.

How about RGGI?  Bridgers hype RGGI by warranting the state and region’s CO2 footprints are escalating without action.  That justifies need for wind and solar mandates and subsidy through government intervention. Yet we know how Pennsylvania reduced its CO2 emissions by 40% and the US by 23% since 2005 through the utilization of more natural gas (38% more in the US).  This would make Pennsylvania if it were a stand-alone developed nation the only such nation to achieve the Paris Accord targets.

Those pesky bridgers press a popular but flawed notion that wind and solar, aka renewables, are “carbon-free.” They simply are not.  Ignored are the greenhouse gas emissions produced during the mining, processing, manufacturing, and transportation of all the materials needed to construct these facilities, as well as the activities associated with their maintenance, service, and disposal. Not to mention the redundant fossil back-up power that is necessary.  DOE, EPA, SEC, state energy and environmental agencies across the country – you name the government entity – where are they on this? How can we decide our energy future when we won’t be honest about the basic carbon accounting?

Shale Insight 2022

STEP 2: POUND THE MESSAGE

The bridgers excel at this step.  Think of the catchphrases you see and hear everywhere: code red, keep it in the ground, combatting climate change, energy transition, zero carbon economy.  The direct and indirect vilification of our industry are nothing new, but have certainly become  more intense.

But we, the catalysts, know the true message that needs broadcast.  The region is thriving from natural gas.  And natural gas derivative products, and vertically expanded markets for natural gas products, are the answer.  All of this benefits the local region and our local communities.

There is another constant mantra from the bridgers about how wind and solar are deployable at scale, everywhere, including in places like Pennsylvania.  The common sense, rational catalysts here today know if we want to lower global GHG emissions, then deploy solar and wind in the sunniest and windiest places that still rely on higher emission sources, to displace them. You don’t place renewables at scale in places like Pennsylvania where the efficiencies are low, the costs at scale are high, the supply chains are thousands of miles in length, and the life cycle carbon footprints are going in the wrong direction.

Yes, we doers in the catalyst mold ask: what is better for the planet, for greenhouse gas emissions, for the regional economy, and for business models?  Making products overseas using high-emission, inefficient factories, which utilize poor labor and environmental practices, and having all that wasted cost and energy transporting these products all the way here? To sometimes work, depending on weather? Or, simply manufacturing these products here with low-carbon-footprint natural gas, more-efficient power plants and factories, adhering to stringent environmental standards, using local well-paid workers, and shipping it within a one-day drive? Pretty simple.

STEP 3: APPLY MAGICAL THINKING

Bridgers keep incanting that slogan of ‘increasingly competitive renewable energy.’  And how natural gas, or fossil fuel in general, is bestowed lavish subsidy by taxpayers.

But catalysts understand the math of subsidy.  University of Texas ran the math of subsidy for different forms of energy on an apples-to-apples $/MWh basis.  $1-2/MWh for natural gas and oil.  $15-57/MWh for wind.  $43-320/MWh for solar.

Another, related chant you always hear from the bridgers is how the natural gas industry needs to pay its ‘fair share.’  Under the impact/severance fee in Pennsylvania, in ten years our industry has provided $2.3 billion in revenue to state communities and coffers.  Who or what has paid more of a fair share than we have?  And how much taxpayer subsidy and middle-class regressive taxation did the wind and solar complex enjoy in the recent IRA?  $400 billion or so?

Another magical thought applied by the bridgers is that wind turbines, solar panels, and EVs will be manufactured in the US and in places like Pennsylvania.  We know under the laws of geology and economics that will never happen.  Because 68% of global nickel, 73% of cobalt, 93% of manganese, and 100% of graphite in lithium-ion batteries are controlled by…China.  This is the stuff needed for wind/solar/EVs.

And bridgers paint that rosy picture of sustainability in action with wind and solar.  Never mind the reality we know all too well: child labor in open pit mines, acid runoff poisoning entire ecosystems, slave labor camps in Xinjiang, and Scotland cutting down 14 million trees to make way for wind projects.  That doesn’t compute as sustainable nirvana.

That ties to the bigger magical thinking concept of energy resilience we hear from the bridgers.  How wind/solar/EVs make the US stronger and better positioned.  But consider the true evolution.  We were not long ago a nation that built its grid and its transportation vehicles but that relied on OPEC and the Mideast energy to power them.  Then with the shale revolution we evolved into the nation that made the grid and vehicles and manufactured the energy that powered both.  But moving toward the bridgers vision will take us to a place where inevitably the grid and transportation fleet will be made from stuff from China and Russia and will also be powered by stuff from China and Russia.  Xi and Putin would like to thank western environmentalists, politicians, and bureaucrats—aka ‘experts’—for gifting them control of our energy and thus geopolitical leverage.

STEP 4: OFFER THE LONE ANSWER

Now comes, as I said earlier, the payoff for the bridgers with the recipe.  This is where a host of answers and solutions that solve the crisis and save the world come to the fore.  Examples abound.

The IRA is the most recent.  Almost $400 billion in subsidy and support to those in the favored caste.  But we look at the IRA and say, ‘wait a minute, did anyone run the math to see how this proffered solution impacts the problem of global temps and rising sea levels?’  Well, when you plug the IRA assumptions into the UN climate models, which is what noted climatologist Bjorn Lomberg has done, the answers come out to 0.0009 degrees Fahrenheit and 0.08-inch reduction in sea level.  Those work out to $411 trillion per degree and $4.7 trillion per inch.  And you thought waterfront property on Lake Erie was expensive.

How about the bridgers’ answer of how a mad dash to wind and solar at scale on our grids will be a smooth transition.  The data say something different.  California going from best-in-class grid to third world grid.  Energy rich Texas starving maintenance investment to build unneeded wind and the resulting freeze crisis.  To quote the North American Electricity Reliability Corporation, “there’s clear, objective, conclusive data indicating that the pace of our great transformation is a bit out of sync with the underlying realities and the physics of the system.”  You don’t say?

And things get worse when a realistic eye shifts focus globally.  The anything but smooth energy transition to wind and solar at scale in Europe emboldened Russia to invade Ukraine, tighten its energy grip on the EU, and send inflation soaring.  Meanwhile Russia sells oil and natural gas to China. China then uses that Russian oil and natural gas to fuel its industrial sector to make wind turbines and solar panels to sell to the US and EU. Thereby increasing its energy leverage and fueling its militarization in the South China Sea.  These policies promising the shiny, sole solution have achieved instead exactly what they really intended: create energy scarcity, run up prices, and restrict access to supply.

There are other power grabs in the solution, final step, of the recipe.  It’s how we end up needing a Climate Czar who flies from elite confab to elite confab in a private jet.  It’s what leads to the Paris Accord and UN positions that penalize Pennsylvania, Ohio, West Virginia, and Virginia domestic energy to force false solutions that rely on China and Russia as providers.  And it’s why a US National Economic Council Director recently asked out loud: “the question should move from ‘Why should we pursue an industrial strategy?’ to ‘How do we pursue one successfully?’”.  That should frighten all of us.

THE AWAKENING TO SHALE 3.0

I could go on and on.  But in the interests of time and your blood pressure, I will shift to the good news in all of this.  There is a growing awakening in our industry and across society that there is a better way than the bridgers’ road to certain ruin.  One where the catalysts’ word bubble I showed you applies.

Let me paint that path for you.

Natural gas continues to be a foundational fuel in the energy mix.  Appalachia and Pennsylvania play the lead role by fueling new industrial and manufacturing businesses and by supplanting foreign oil via CNG and LNG to drive our transportation sectors, ground, and air.

Pennsylvania, Ohio, West Virginia, and Virginia become the center for skilled labor job creation that reopens a currently closed path to the middle class for the region’s underserved rural and urban communities.   We leverage the region’s unrivalled work ethic and create family-sustaining jobs that don’t require a college degree or college debt forgiveness.  And we lower regional, national, and global carbon emissions even further.

The Appalachian Basin is uniquely positioned to serve major nearby US population centers. Our local natural gas is low-CO2 intense, but high energy dense—providing unmatched greenhouse gas efficiency from an all-in, scopes 1 through 3, lifecycle perspective.

Investment in, and utilization of, our low-greenhouse-gas-intensive natural gas and its derivative products will use infrastructure that works with new technologies, like hydrogen, when and if they are ready and able to be deployed.  Engines and factories can run off 100% compressed natural gas, 100% hydrogen, or related blends.  So, we don’t need to wait or bet on when and how the hydrogen economy unfolds – we just accelerate and derisk its arrival.

Further, natural gas utilization will reduce unnecessary shipping logistics for other energy sources, resulting in fewer transportation-related emissions.  When supply chains stretch thousands of miles, it hurts reliability, cost, and carbon footprint.

Build it here, make it here, use it here – first.

Technology and assets being developed in Appalachia and from CNX now can help displace higher carbon intensive fuels in the US energy mix, and aggressively compete with wind and solar, both on a cost and scopes 1-3 carbon footprint basis.

It is happening now.  Two examples we already announced at CNX:  partnerships with the Pittsburgh International Airport and with Newlight Technologies.  The straws at your seat are biodegradable and made from abated coal mine methane as feedstock. Talk about a circular economy.

THE PRESENT AND THE FUTURE

I hope you now see and appreciate that ill-intended recipe of the bridgers that Klemperer so elegantly defined and how policy is steered away from facts, science, and what is best for Pennsylvania.  We must remedy it.   Thankfully we have science and math and physics on our side.

Follow those and good things, really good things, happen.  America and our allies overcome our daunting challenges brought on by the recipe’s ill-advised energy policies.

Pennsylvania and Appalachia can grow markets and demand for natural gas vertically, not just horizontally. We’ll keep energy affordable.

We’ll make things here again instead of the other side of the world. We’ll transform communities and countless lives in the process while achieving environmental goals.

Those who want to eradicate our industry are not the answer.  Bad things will follow, not the contrived solutions.  Catalysts, answer back and rebut with facts, data, and the unmatched quality of life that our work provides.

We are the present and the future. The moral imperative is for societies to embrace our catalyst product, not jettison it.

It’s been a pleasure. Text CNXinsight to 52886 for more information on the topics I’ve discussed today and to stay in touch. Contact me on Twitter @nickdeiuliis, check out the website nickdeiuliis.com, or reach me on LinkedIn at Nick Deiuliis. Order that book, Precipice, if nothing else to help the Mentorship Academy, which the book’s net proceeds are being donated to – and tell me what you think.

Thank you and see you out there on the frontline of public discourse.

Nick Joins the Energy Strong Podcast

In this episode of the Energy Strong Podcast, below, Nick chats with hosts DRW and Mike Umbro about the history of Pittsburgh as a sports town, the history of CNX Resources, the meaning of “sustainable,” the role of natural gas decarbonizing America’s economy, and much more.

From the show’s description:

“Join Nick’s conversation with DRW and Mike Umbro as they open with the shared challenges of running a major league baseball organization and operating a successful energy company; both require mindfulness in corporate planning, market-specific growth strategies, and a focused effort to protect the culture/brand of the organization.

“Nick describes the evolution of CNX’s business model and the company’s positive impact on local communities in the Appalachian region. CNX is focused on sustainability as an organization, which requires 1) hiring and retaining talent from the local community, 2) offering sustainable wages and compensation that grows the middle class, and 3) producing energy while improving the environment. CNX, and other domestic natural gas producers, are making tremendous strides to decarbonize our energy systems. Did you know that if Pennsylvania was a stand-alone nation, it would be the ONLY developed nation to have met the Paris Accords on its own? WOW!

“Don’t miss out on this fact-packed discussion that highlights the importance of sustainability, free cash flow, innovation, environmental stewardship, and energy security.

“Domestic energy production, specifically natural gas, has a tremendous opportunity to revolutionize transportation, aviation, manufacturing, and other industries through technological solutions brought forth by companies like CNX. These solutions will continue to reduce carbon intensity and associated emissions but we need transparent, science-based reporting on an apples-to-apples basis to ensure the most efficient solutions are adopted.

“DRW reads Senator Elizabeth Warren’s ridiculous letter chastising domestic energy companies with energy-illiterate claims like, ‘local producers are maximizing their profits by exporting natural gas to Europe.’ Nick believes our policymakers are confusing market symptoms for root causes, with the extreme-left politicians deliberately hiding root causes of energy scarcity (and limitations of wind and solar at scale) from the general public.

“We discuss scopes 1-3 emissions, geopolitical events, the challenges of scaling energy systems to meet demand growth from the developing world, the growing importance of science-based analysis, and the need for government policies to “get out of the way” as the free market figures out how to meet the energy needs of tomorrow.”

For daily insights and commentary from Nick Deiuliis, follow Nick on Twitter at @NickDeiuliis and on LinkedIn.

Nick Joins the Young Professionals in Energy Podcast

In this episode of the Young Professionals in Energy (YPE) Podcast, Nick chats with host Mark Hinaman about his 32 years at CNX Resources, the state of the natural gas industry, CNX’s plans for the future, and much more.

Show notes:

  • 00:44 Nick’s background & the evolution of natural gas throughout his career at CNX
  • 08:48 The sustainable business model of CNX, and the company’s investments in the local communities
  • 20:49 CNX’s strategies to limit emissions; the role of natural gas in producing cleaner energy, and its advantages over other sources
  • 40:04 Why aren’t more pipelines being built?
  • 45:58 Nick’s advice for young professionals in energy

For daily insights and commentary from Nick Deiuliis, follow Nick on Twitter at @NickDeiuliis and on LinkedIn.

Nick Deiuliis’ CNX Q2 2022 Earnings Call Remarks

The following is a summary of Nick Deiuliis’ introductory comments from CNX Resources’ Second Quarter 2022 Earnings Conference Call, held Thursday, July 28, 2022. Click here for more information.

Allow me to highlight three themes that are core to the CNX investment thesis:

  • First, we built and now manage a low-risk, $700 million per year free cash flow annuity that works year after year. This helps to largely insulate us from macro events out of our control, it creates confidence and conviction in our business, and it is sustainable and works in any environment.
  • Second, we then apply clinical math and, when the math dictates it, we allocate a significant portion of the free cash flow to reduce our share count at highly accretive rates of return, which will continue to deliver unprecedented free cash flow per share growth. That’s a tremendous opportunity for any value investor.
  • Third, and lastly, in addition to our organic free cash flow annuity and our growing free cash flow per share, we are creating, demonstrating, and deploying new technologies which will create incremental free cash flow and free cash flow per share beyond our base business and plan. The new technologies opportunities are here and now and offer a meaningful avenue for incremental per share value for our shareholders and for the next chapter of Appalachia’s energy legacy.

We are excited by the opportunities in front of us – they are impressive, outside-the-box, and unique to CNX.

So with that bigger picture in mind, let’s talk specifics.

During our first quarter call, we covered the destructive, yet predictable consequences of current national and global energy policies. These policies have, unfortunately, been extremely effective in manufacturing energy scarcity and stoking inflation by preventing the most sensible supplies of natural gas and oil from reaching demand centers and by relying too quickly on renewable energy not yet at scale. The consequences are higher energy prices, energy scarcity and inflation, economic turmoil, and geo-political instability, and they are becoming painfully clear to all.

This morning, I would like to build on this discussion and talk about what CNX is doing to improve the current situation.

Perhaps it goes without saying, but I will say it anyway:  CNX will continue to advocate for natural gas and the Appalachian region.  The standard of living we all enjoy is owed in large part to the great men and women doing the hard work to provide our energy, and we are proud to be a part of that.

Tangible Actions, Leading the Charge

At CNX we focus on near term, tangible actions rather than hypothesizing as to what may or may not occur decades into the future. Opportunities exist here and now to advance environmental and socio-economic goals, and we are proud to be leading that charge with recent announcements like our work with Pittsburgh International Airport and with Newlight Technologies.

We have been hard at work driving these and other key initiatives forward to advance our view of a legitimate and actionable sustainable energy revolution.  Improper planning and an inconsistent push toward the so-called energy transition, which is pinned to an irrational ideology that demands an immediate transition away from natural gas to renewable energy that will struggle to deliver at scale, is creating turmoil.  A realistic and achievable sustainable energy revolution demands a more thoughtful, common sense, practical approach.

That means creating fact-based solutions grounded in math and science today, not hypothesizing about potential solutions 20 or 30 years from now.  And by taking tangible steps to meaningfully reduce global carbon footprints in the most efficient manner.  Natural gas, Appalachia, and CNX must play a pivotal role in accelerating and enabling this progress.

Natural gas is not a bridge fuel.  I want to repeat that. Natural gas is not a bridge fuel. Instead, it is a catalyst fuel, which is the basis of the sustainable energy revolution by helping industries across sectors lower costs and emissions immediately.  It will also fast-track the implementation of new technologies. This will allow companies and industries to focus on driving efficiencies to eliminate waste, stop egregious labor and human rights practices, grow the value proposition for their ownership, and provide a viable path to achieve carbon reduction targets.

Look, the concept of solar and wind powering the quality of life to which we have become accustomed sounds fantastic in theory and is romantic as advertised.  But the ability of these technologies to satisfy the world’s energy needs is, to be kind, a highly questionable proposition.  One that is only practically achievable decades into the future and that is highly dependent on major advancements in technology and a massive increase in rare earth element and battery production capacity, an order of magnitude more than currently exists today.

For perspective, the world currently produces roughly 600 exajoules of energy annually, which includes approximately 39 exajoules from renewable energies related to wind, solar, and geothermal.  Said differently, only 6% of current energy production is derived from renewable energy despite decades of policy incentives and subsidies that cost nations, economies, and societies trillions of dollars. Twenty twenty-one was a record year for renewable energy installation, yet resulted in only 5 exajoules of renewable energy added to overall global energy production.

Now, on the consumption side, forecasts indicate that world energy demand will grow on average around 2% per year, which is approximately 10 to 12 exajoules per year.  Renewable energy is unable to keep pace with that type of global energy demand growth, let alone have the ability to displace fossil fuels any time soon.

During the last 20 years, world energy demand has grown by roughly 200 exajoules, and over the same time approximately 35 exajoules of renewable energy capacity has been added.  Renewables have a long way to go to simply meet new demand before they have any hope of displacing oil and coal in a meaningful way.  More low-cost and environmentally-friendly Appalachian natural gas can help meet this growing demand and make progress now on environmental goals.

Also, of the 600 exajoules of world energy production, fossil fuels account for over 490 exajoules of that total, with hydro accounting for 40, nuclear adding 25 more, and then the 39 EJ of wind/solar renewables to get to approximately 600.  A majority of fossil fuel production is oil and coal. Appalachian natural gas only accounts for approximately 12 exajoules, or roughly 2% of total global energy production, and represents the cleanest, lowest greenhouse gas intensive fossil fuel. Within Appalachia, CNX accounts for 0.5 exajoules and has the lowest GHG intensity and cost structure in the basin.

We Are the Solution

We, the Appalachian basin and CNX, are not the problem. Math and science show that we are the solution. CNX serves as a needed ally as the world seeks to reduce the other 490 exajoules of much higher GHG intensive fossil fuels and help keep pace with new energy demand.

There is also the issue of supply chain realities to consider.

CNX and Appalachia are closest to the major U.S. demand centers for energy, goods, and services, allowing our local energy to be even more greenhouse gas-efficient from an all-in, scopes 1-3, life cycle perspective.  Reducing unnecessary shipping logistics is the elephant in the room when it comes to emissions.

Investment in, and utilization of, our low-greenhouse-gas-intensive natural gas and its derivative products will rely on infrastructure that works with new green technologies when and if they are ready and able to be deployed to meet future demand.  This means that engines and factories can run off 100% compressed natural gas (CNG), 100% hydrogen, or related blends. The same logic applies to additional electric vehicle (EV) deployment, as natural gas turbines on the grid allow electrification to play a more meaningful role sooner.

CNX has been quite active making moves and investments with these broader policy realities in mind.

Our New Technologies team has numerous projects in various phases of development which will help the world move to a lower GHG emitting future, while also maintaining reliable energy resources for a properly functioning society.

The New Technologies team is commercializing technology that will produce low-carbon-footprint natural gas, derivative products, and associated environmental attributes.  These technologies are a game changer for the natural gas extraction and transportation industries.  Technology and assets from CNX can help displace higher carbon intensive fuels in the US energy mix, both on the power grid and in the transportation sector.

These displacement opportunities are over 100 billion cubic feet per day of natural gas opportunities in the U.S. alone.  More products and services could be produced within the Appalachian region.

Think of these emerging technologies to be commercialized falling into one of three major buckets.

The first bucket consists of what we designate as having valuable and monetizable environmental attributes.  We are capturing methane, through incremental capital investment and deployment of technology, which would have otherwise been vented into the atmosphere.   This ultra-low carbon gas is  increasingly valuable in a carbon constrained world.  Our Virginia assets are the foundational piece of that effort for CNX. Coalbed methane (CBM) is back in a big way, but in a much different world.  CBM today has a natural gas pricing base level of value, but also now enjoys an increasing portion of value tied to its ultra-low carbon characteristics.  Recognition of this value is growing across numerous economies.

The second bucket is proprietary technology we developed that will fundamentally change the manufacturing process for the extraction and delivery of natural gas.  The technology will transform drilling, completions, flow back, compression, processing, and so on.  It will make these processes more efficient, reduce risk, lower emissions, and increase margins.

The third bucket is using in-house proprietary technology to disrupt various industries currently relying on other less-efficient and higher-emitting forms of energy.  This technology efficiently transforms the state of natural gas from gaseous phase into CNG and LNG.  That CNG and liquefied natural gas (LNG) on pad can transform the aviation and ground transportation industries. Instead of off-shore, high carbon footprint, high-cost gasoline for ground transportation, the ability exists to use local, low carbon footprint, low-cost CNG.  It’s a similar story for aviation, with LNG replacing jet fuel.

The business case for this third bucket comes down to common sense.  If we want to lower global GHG emissions, you deploy new renewable energy in the sunniest and windiest places that still rely on coal and oil, to displace them.  You don’t place renewables at scale in places like Pennsylvania where the efficiencies are low, the costs at scale are high, the supply chains are thousands of miles in length, and the life cycle carbon footprints are going in the wrong direction.

What is better for the planet, for greenhouse gas emissions, for the regional economy, and for business models?  Making products overseas using coal fired power and inefficient power plants and factories, that utilize poor labor practices, and having all that wasted cost and energy transporting these products all the way to America? To sometimes work, depending on weather?  Or, simply manufacturing these products here with low carbon-footprint natural gas, more efficient power plants and factories, using local well-paid workers and shipping it within a one-day drive?  Pretty simple.

Focused on Innovation, Positioned for Success

Now let’s talk about tangible, impactful, and local recent results of the New Technologies team across these three buckets.  Our year so far has been full of accomplishment spanning all three.

A pathway for implementing our propriety technology to disrupt the old economy fuel supply mix is the announced partnership between CNX and the Pittsburgh International Airport. This is an exciting partnership for both parties.  CNX will help PIT lower their costs, reduce emissions, and create jobs by using low carbon intensity natural gas to displace traditional aviation and transportation fuels. This fits squarely in our Tangible, Impactful, Local mantra.

This partnership centers on how CNX has developed proprietary technology to cost-effectively convert on-site dry natural gas into LNG, CNG, and electricity for various uses including as a hydrogen feedstock.

These technologies reduce emissions and operating costs at the airport. This partnership opens a new frontier for using lower-cost, lower-carbon-intensity LNG and CNG fueling depots for higher energy intensive businesses such as airlines, transit, cargo, fleet, and related businesses. These natural gas derivative products will leverage our local community’s workforce and create more family-sustaining jobs.

We also recently announced another exciting partnership, between CNX and Newlight Technologies, to convert air and greenhouse gas into a biomaterial called Aircarbon.

Aircarbon is a carbon negative PHB biomaterial produced by naturally occurring microorganisms that replaces plastic in industrial segments ranging from food to fashion. Under the agreement, CNX and Newlight will work together to capture waste methane from third party industrial activity that would typically be vented to the atmosphere. CNX will capture, gather, and process captured methane to remove impurities, compress, and deliver the methane through new and existing natural gas pipeline infrastructure for conversion into Aircarbon by Newlight.

This strategic partnership, with CNX capturing methane gas to support Newlight’s manufacturing needs, is expected to result in several manufacturing facilities in the Appalachian region and advance critical decarbonization goals while boosting our region’s economic activity, capital investment, and job growth.

Beyond our New Technologies team, we believe the Appalachian region has the resources, know-how, and work ethic to be the epicenter of providing solutions to the challenges brought by poor energy policy and weakened geopolitical standing.

We can be a center for skilled labor job creation to help pave a path to middle class access for the region’s underserved rural and urban communities, and we put into effect a program to do just that.

This quarter, we graduated our inaugural class from the CNX Mentorship Academy, which consisted of 28 young men and women from this great region’s urban and rural communities. Six of these talented individuals recently joined our team at CNX; this is something our entire team and I are very proud of. We expect the second-year class to be even larger.  These young men and women will help us build our local energy ecosystem to cultivate and sustain the middle class for the next generation.

We also recently submitted comments to the U.S. Securities and Exchange Commission (SEC) regarding their proposed rules for climate disclosure. We are supportive of the SEC’s efforts but believe their proposed rules as drafted will create inconsistent and highly subjective standards for reporting Scopes 1, 2, and 3 carbon dioxide emissions across different industries and companies.

We believe in transparency and accuracy.

Our position is that the SEC should amend the rules to create greater standardization and clarity.  Fully transparent and honest accounting of carbon emissions will underscore the importance of natural gas as the pathway to a promising future.  We encourage you to read our letter to the SEC, which is posted to our website.

Conclusion

We believe that products and goods that we all use daily should be manufactured in Appalachia and first utilized in the U.S. to help our local citizens and economies. Similarly, let’s first focus on creating new and growing existing markets for our products regionally in Appalachia and nearby markets like the Northeast U.S. via short pipelines.  A local first mentality will go a long way to solving myriad problems across the socio-economic and environmental spectrum.  It’s not protectionism or anti-free trade.  Instead, it’s common sense, rational, and free market-based.

Nick Joins KDKA’s Kevin Battle’s “One-on-One” Podcast

Listen below as Nick goes “one-on-one” with KDKA’s Kevin Battle. Nick and Kevin cover topics ranging from the technology spurring the shale revolution to energy policy and prices, and from the CNX Mentorship Academy to their mutual appreciation for Milton Friedman. Nick also highlights the strengths of western Pennsylvania and the Appalachian region. “We have certain attributes and advantages that no other city or other region has,” says Nick. Additionally, Nick discusses Precipice and his year-plus of hosting The Far Middle podcast.

For daily insights and commentary from Nick Deiuliis, follow Nick on Twitter at @NickDeiuliis.