IMG Midstream plans small plants to generate electricity from gas

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Technically, the Marcellus Shale wasn't the motivation behind IMG Midstream's plan to build natural gas power plants in Pennsylvania.

The startup, based in Yardley, Bucks County, came up with the idea of building the plants after talking to small, shallow gas producers who were having trouble getting their gas to buyers, edged out of interstate pipelines by Marcellus production.

Don Clayton, a managing director with IMG, said he heard the concerns from a number of natural gas drillers in West Virginia. So, he thought, why not create a market for them?

The company wants to use local gas to make electricity that would be sold to the grid and fed back to local utilities.

"It's similar to a farm-to-table concept," said Ron Kiecana, another managing director at the company. "We want to keep the gas in the community and generate it for local consumption."

IMG, which is backed by New York-based private equity firm Bregal Energy, has a dozen plants in development, according to Mr. Kiecana.

Most are 20 megawatt natural gas power plants, with a capital cost ranging between $15 million and $20 million. Two of those are planned for southwestern Pennsylvania: the Bayles Energy project in Greene Township, Greene County, and the Red Glen Energy plant in Chartiers Township, Washington County.

In planning the projects, IMG found that the same constraints that stifle conventional gas producers' getting their product to market also apply to Marcellus companies. So, now, the company plans to source from both conventional and shale producers.

In August, IMG signed a deal with Chief Oil & Gas, a Marcellus gas producer that promised to supply fuel to several IMG generation plants in northeastern Pennsylvania. Mr. Kiecana expects most of IMG's gas supply in northeastern Pennsylvania would come from shale wells, but in the southwestern part of the state and West Virginia, the gas supply will be a mix of Marcellus and traditional, shallow wells.

That would put a small, but welcome dent into the pipeline constraints that have stifled sales at several local shallow gas companies.

"The volumes that are out there, the large companies are buying up the capacity and it doesn't leave room for the smaller producers," said Lou D'Amico, executive director of the Pennsylvania Independent Oil & Gas Association.

Last spring, Mr. D'Amico's group hired a full-time employee to develop new markets for natural gas, with an emphasis on small, conventional producers.

Mr. Kiecana expects construction on the first few IMG plants to begin this year, a timetable twice delayed from previous projections. Other details in the company's plan have changed as well.

For example, when it first began, IMG, then known as Iron Mountain Generation, advertised its intention to build customized plants, ranging between 2 megawatts and 20 megawatts in capacity. It planned to fire up its first power plant by 2013.

But the market changed.

The revised strategy was to streamline everything -- buy equipment in bulk, perfect the design and cookie-cutter these plants across Pennsylvania, West Virginia, and, maybe, Ohio.

Though the economics of micro-generation can't always compete with large installations, IMG isn't the only company betting on small, gas power plants.

Of the 119 natural gas plants currently under study within the territory of PJM Interconnection, a regional grid operator that manages the flow of electricity to 13 states, including Pennsylvania, 30 percent have proposed capacity of 20 megawatts or less.

By comparison, the Bruce Mansfield Plant in Shippingport has three units, each with a capacity of 835 megawatts.

For the foreseeable future, IMG expects to sell its power into the PJM market, but if there's an opportunity to sell directly to a large industrial customer or a municipality -- to create a mini grid, in essence -- the company said it would welcome that.

Anya Litvak: or 412-263-1455.

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