COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON PUBLIC PROPERTY and PUBLIC WORKS - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, March 3, 2009, 10:17 a.m. - - - Bill No. 090003 - Authorizing the extension of the extended trial program thrived by Bill No. 060799 under which advance approval is given to the Philadelphia Management Corporation to enter into certain contracts and transactions arising thereunder for the purchase, storage, distribution, transportation, and/or transmission of natural and other gas on behalf of the Philadelphia Gas Works, subject to certain terms and conditions. COUNCILMEMBERS PRESENT: Darrell L. Clarke, Chair Frank DiCicco William K. Greenlee James F. Kenney Donna Reed Miller Also Present: Councilman Curtis Jones, Jr. - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 I N D E X WITNESS Janet Parrish, Executive Director......... Philadelphia Gas Commission Douglas A. Mozer, Vice President.......... 6 Gas Management, Philadelphia Gas Works 7 8 9 3 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003
Good morning. This is the Committee on Public Property and Public Works. We have established a quorum: Councilman Greenlee, Councilman Kenney, Councilwoman Donna Reed Miller, and Councilman Frank DiCicco. We also have present Councilman Curtis Jones. Will Mr. Carter please read the title of the bill.
Bill No. 090003, an ordinance authorizing the extension of the extended trial program authorized by Bill No. 060799 under which advance approval is given to the Philadelphia Management Corporation to enter into certain contracts and transactions arising thereunder for the purchase, storage, distribution, transportation, and/or transmission of natural and other gas on behalf of the Philadelphia Gas Works, subject to certain terms and conditions.
Thank you. 4 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 (Witnesses come forward.)
Good morning, Chairman Clarke and members of the committee. My name is Janet Parrish, P-A-R-R-I-S-H. I'm the Executive Director of the Philadelphia Gas Commission. Seated to my left is Douglas A. Mozer, Vice President of Gas Management for Philadelphia Gas Works. Thank you very much for the opportunity to be here this morning in support of the bill. On behalf of the Philadelphia Gas Commission, we have submitted written testimony, as has Philadelphia Gas Works. Our testimony has attached to it, so you can see all of the detail and background, a copy of the Gas Commission's order in this matter recommending to this council the adoption of the ordinance. And that is attached to my written testimony. These recommendations were 5 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 approved by the Gas Commission on its meeting on January 6, 2009. We are asking that -- for a suspension of the rules so that the first reading can occur at the next session of Council. The current ordinance, which provides a framework within which PGW is pre-authorized by this Council to purchase natural gas supply, will expire on August 31, 2009, and that is why we are before you today requesting a simple two-year extension of this program. We have found that it has been a very viable program that does balance the needs of PGW to purchase gas supplies for its customers in today's market conditions, and, at the same time, preserves accountability and requires certain reporting by PGW and then also by the Gas Commission to this council. We'd be happy to answer any questions that you may have, and we've at your disposal.
Thank you. 6 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 You say this is a renewal. How many renewals have we done already?
The initial program was adopted by this council in 2004 as a trial program for a two-year period of time. At the conclusion of that, we did find a need for certain modifications to the ordinance, and those were also adopted by this council in a one-year program. Then we got some experience under our belt with that. And our last renewal that was approved was also for a two-year period of time. The conditions in the gas market are dynamic. PGW has considered during the past period the possibility of entering into a different form of gas, prepay transactions; that has not come to fruition. 7 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 So it seems to be workable to look at it in a period of time, sort of reassess what the market looks like, and then come back to Council again with our recommendations.
Thank you very much. This is not exactly related to this bill, but it's related in subject matter. I've asked probably three times now for the Public Property Department to give me an update on any investigation they may conduct or would conduct at a parcel of property owned by the City up in the Pocono Mountains that is not directly in the middle of the Marcella shale deposit but is kind of on the outskirts of it. It's an old camp that we -- Camp Happy or Camp William Penn.
Before we 8 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 transfer it to the State, which is going to be transferred to the Department of Environmental Resources, the State has the rights to any oil or mineral rights under that land but do not necessarily have the rights to natural gas deposits. Is there any way -- I mean, have you had any contact with Public Property relative to the investigation of that land? I've asked a couple of times; I don't think they're moving forward with it. And I would ask that perhaps that maybe you guys could make an inquiry to them as to when -- I think that there's enough institutional help with this at Penn State and some other of the universities without the -- within the State to, at least if don't have it there, just to dispel the fact that we don't have it. There's a possibility -- if you look at the map of the Marcella shale deposits and you look at where Camp 9 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 William Penn is, there's some possibility that on some of the land, there may be some access to it. And if we're talking about the transportation and purchase of natural gas, I really would like some other agency to kind of push at least the initial investigation as to whether or not there's anything there of value.
I am not aware of any investigation on that, but I will take it back, and we can, you know, begin that.
And if you have a chance to look at it, you can check with my staff, Sarah, at the map of where Camp William Penn is and where the Marcella shale deposits are. Again, it's not dead-center in the middle of the colored area, but it's right on the edge. And I'm wondering whether or not there's some segue that we could do in there that would give us -- I mean, I know that people who are -- own land in Tioga County and Potter County are, you 10 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 know, putting wells in their backyard and making money from it, and if we have, I think -- (Addressing Councilman DiCicco.) Frank, do you remember how much property that -- I mean, how many acres that was? It was like almost, you know, 60, 70 acres of land. I mean, there's a possibility there's something there, and I'd rather, before we turn it over to the State, have some indication of whether we can dispel the notion or take advantage of the opportunity.
Surely. We'll get the details and we'll do some investigation.
And we can also report back to the chairman of the committee as well so that all of the members can be informed. There is, obviously, a lot of activity with -- around the Marcella 11 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 shale. At the same time, I don't know if been following, but there's been a number of concerns raised about the amount of water supply that would be required to -- for the drilling process, so it appears to me that that fast track has slowed down a bit, but, uh...
Yeah, I get it. I just want to -- whether or not it's there and whether or not it's salvageable are two open questions, but I really would like to know whether there or enough. And perhaps if it is there and it's too cost -- it's not cost- effective for us to nail it, that we maybe do something with selling the rights to it or something that we could make some money off of it. 'Cause if we're giving this parcel of land to the State for parkland, which is a wonderful thing, and there's either coal or oil or any other mineral there that's theirs, the natural gas that might be there is ours. 12 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 So I'd appreciate you -- you're getting involved in it.
Thank you, Mr. Chairman. A couple of brief questions. Ms. Parrish, good morning.
In regards to this purchase, it allows us, if I understand it, to understand the fluctuating prices, and be able to get in on a purchase when it is low in order to have gas reserves so that we don't have to experience the high end of the peak when the prices are high; is that correct?
Generally, yes. Mr. Mozer can expand on this if he would like. 13 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 But PGW has a purchasing plan each year, and because their gas cost rate is approved by the Pennsylvania Public Utility Commission and they continue to be subject to at least cost procurement standard, they are mandated to have that plan going forward. And what they do is, they basically lock in a certain percentage of their supply at various points throughout the year in order to balance the need to get the best price possible, but also to have a secure supply. And what this ordinance does is to approve PGW's entry into, you might consider it, almost a master agreement. It's the standard industry contract, which then permits PGW to go forward with individual transactions as they arise. And copies of those contracts and each individual transaction are submitted to the Gas Commission as they are entered into for our further review and also for submission to the Law 14 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 Department.
A couple of -- and thank you for that background. And I kind of knew the answer to the question, but it is to ask this following question: We also have liquification processes where we actually take that commodity, liquefy it, and store it; is that correct?
And the difference between when we buy it and when we actually use it, sometimes do we sell it to other municipalities?
We do have the ability to do what's called "an off-system sale," so we can take advantage of that to some degree. We would not typically sell it to another municipality. 15 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003
In the storage capacity -- and I -- you actually, in an initiation, took me to giant tanks and dared me to walk around them, which I did not, for the record. But what capacity are they filled at this point with the liquefied gas?
I'm not sure of the exact volume, but it's right around 3.2 BCF --
So for those of us who speak English, is it 50 percent full, 80 percent full?
And does it make sense to monitor that when we can freeze it when prices are low to save it? I mean, almost speculating, if you would, on the fluctuation of price? 16 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003
Well, that's typically what we do. We typically liquefy the gas in the summertime, when the price is lower, and put it in storage, and then withdraw it in the wintertime, when typically prices are higher. One of the issues that we have right now are that prices have been falling over the past year. So we liquified some gas last summer, when the price was higher than it actually is at the current time. So the inventory cost of the LNG will be at a higher price than we could buy flowing gas for right now.
So at some point, you know, it will fluctuate in the other end, and we'll be able to do that. We have two machines that actually provide this service and actually performs the freezing or the liquification of the gas. And are they currently on line, 17 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 both of them?
Well, we actually have one process that actually liquefies the gas. And, currently, they are offline. We're in the opposite mode: We're actually pulling liquid out of the tank, pumping the liquid out of the tank, reheating it up, vaporizing it, and then reinjecting it into our distribution system for the customers right now.
But in some point in the future, do we have two machines? We have a aging machine and, as I understand it, a newer processing machine, and both of them have the capacity, however, to be ramped up and go into production if we needed to.
You're -- what you're thinking and what you saw at the plant there is that currently active is the so-called expander plant, but the old cascade plant, which is some 35 years old or so, is actually not in active status right now. 18 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 And PGW currently is conducting a review -- or wants to have a consultant review -- to see what it would cost to get that one back on line, if it's at all feasible.
Well, I mean -- and that's what I wanted to kind of get out. The second part of my questioning is: In the stimulus package, were we -- did we consider any of the operations of the Gas Works as a part of shovel-ready activities that we could have ramped up for? And what were they?
Yes, I know that PGW has been in discussion with the City regarding being made part of some construction work in the street. This is not really Mr. Mozer's area directly, but Mr. White at PGW, should you need follow-up information, could provide that. Yes, there's some money for streets, as I understand it, resurfacing. 19 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 The Water Department has some projects in there, all of which would impact PGW main in the street, and also PGW would hopefully need to get some compensation out of that package.
Just as a point, if we do eight -- I think it's eighteen miles of infrastructure replacement a year.
If we were to double that, would that mean increased employment, subcontracting opportunities for people in neighborhoods?
Yes, it would to a degree. I think that PGW uses contractors for some 70 percent, if I'm not mistaken, of the pipe-laying that's involved. The contractors do not work on so-called live gas. That's restricted to PGW's unionized workforce.
But there are 20 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 opportunities there. There would be some questions about what capacity exists in the Philadelphia market. Again, if you would like additional information on that --
If you could provide that to the chairman and members of this committee and this Council that would be appreciated.
The idea here is shovel-ready is shovel-ready. If we are looking at the fact that we do eighteen miles, then if we doubled that, then, hypothetically, we could double the amount of the workforce that comes from the neighborhoods. And if 70 percent of that work is, in fact, contracted out, we could probably get a condition from the subcontractors that they hire from neighborhoods. Mr. Chairman, that's my interest in that. Finally, if, in fact, we are at 21 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 some point going to have to face the prospect of raising prices on gas, what efforts are you engaging in in the greening aspect, the first-rung agreement, which is weatherization. Could you put that the record for us.
Again, I know that this is not directly in Mr. Mozer's area, but I'll just briefly state that I am aware that PGW is preparing to submit a demand-side management and conservation proposal to the Public Utility Commission shortly. And, as a matter of fact, as a gas commissioner, Councilman Jones, you will be receiving a preliminary briefing on that and some other matters tomorrow morning. And I think we'll be in a position to provide additional detail after that briefing has occurred.
And I would encourage you to give this information to the chairman as we start to look at 22 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 employment possibilities. Finally, the question I would have is on the engineering side. We had talked to one of the engineers that said that there was a possibility of using the same natural gas infrastructure to put hydrogen and move hydrogen through the same pipelines and that, in fact, don't get me talking about being an engineer because I am not, but it was intriguing to think that if we could take hydrogen and move it with natural gas and increase our capacity and use alternate fuel sources, that it could actually be a revenue-generating aspect to the Gas Works. And have we moved off of that idea and actually tried to vet it with our engineers?
We have not. I -- we've had some brief discussions about that topic, and we have not moved forward on that. But if it's something that -- 23 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 which we see as advantageous, the hydrogen technology is really not that developed out there, from my understanding.
So it's okay for Philly to be cutting-edge. I mean, that's --
And so, just like Councilman Kenney, who asked that question about the gas potential reserves up in the Poconos, I'd like some information and follow-up to be provided to the chairman of this committee. Thank you, Mr. Chairman.
Thank you, Councilman. Maybe you should contact T. Boone Pickins. I understand that he is very well versed in the hydrogen issue, so give us a reason to get him here to testify at a hearing. Any other questions by members of the committee of these witnesses? 24 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003 (No further questions.)
Anyone else that wishes to testify on this bill. (No response.)
There being none, this concludes the public hearing on the committee Public Property and Public Works. We will now go into the public meeting. Councilman Greenlee, can you please make a motion on Bill No. 090003?
Thank you, Mr. Chairman. I move that Bill No. 090003 be reported out of this committee with a favorable recommendation and move further that the rules of Council be suspended to allow for first reading at our next session of Council. (Motion duly seconded.) 25 3/3/09 - PUB. PROP./PUB WORKS - BILL 090003
It's been moved and seconded. All in favor? Those opposed? (None opposed.)
The ayes have it. Bill No. 090003 will be reported out of committee with a favorable recommendation with a rules suspension to allow for reading at the next session of Council. Thank you. This concludes the committee hearing. (Proceedings end at 10:35 a.m.) * * * C E R T I F I C A T E I HEREBY CERTIFY that the proceedings of the City of Philadelphia Council Committee on Public Property and Public Works are contained fully and accurately in the stenographic notes taken by me on Tuesday, March 3, 2009, and that this is a true and correct statement of same. __________________________________ JOSEPHINE CARDILLO Registered Professional Reporter (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)