by Kathy Kiernan, APPI Energy


Untapped natural gas lies in the Marcellus Shale beneath portions of Ohio, Maryland, New York, West Virginia, and Pennsylvania. In the last 5 years, natural gas drillers have flocked to this region, particularly western PA, to extract gas from the Marcellus Shale’s black sedimentary rock.


Drilling in the Marcellus Shale region has profoundly increased since 2008 because of regulatory changes and hydraulic fracturing—also known as fracking or hydrofracking—a process during which a mixture of highly pressurized water, sand, and chemicals is injected into rock, releasing shale gas and forcing it upward. This practice, combined with a horizontal drilling technique, enables drillers to extract a massive amount of shale gas that was previously unreachable.


Pros


Low energy prices. The Marcellus Shale is comprised of enough gas to help the United States achieve independence from foreign energy, including the troubled Middle East for its oil. The amount of natural gas in storage by the end of March 2012 is expected to be the highest since 1983. Consequentially, the abundance of ready-to-be-shipped natural gas in storage and the extensive reserves now accessible have driven down the market price to a 9-year historical low.


In 2008, the average price for a Dekatherm of natural gas was $8. The price dropped to $5.50 in 2010 and now has declined to $2.50. Market forecasts are that natural gas prices will remain low for several years. The number of active drilling rigs is declining as prices have dropped. And, there is an immense amount of natural gas in storage. These factors are helping to keep a lid on prices.


2 • The Crucible March/April 2012


All of this is occurring while oil prices have steadily increased during the past year, recently eclipsing $100 per barrel. Oil prices are not linked to natural gas prices in any direct way. However, some industrial and other large energy consumers will convert usage of oil to natural gas if these price levels hold.


Economic growth. Forty drilling companies are currently leasing land in Pennsylvania and have invested more than $4 billion in land acquisition, new wells, infrastructure development, and community partnerships. Pittsburgh is the largest city atop the Marcellus Shale formation, but most Pennsylvanian communities with access to shale gas are quiet rural towns with no previous exposure to drilling. In communities where drilling companies are extracting natural gas, local economies are flourishing. Landowners are profiting, job opportunities are increasing, and local governments are considering implementing an “impact fee” to raise community revenue from drilling companies.


Jobs. Recent projections are that over 200,000 new jobs will be created by 2020 from Marcellus Shale drilling. In 2011, one of Pennsylvania’s poorest areas, rural Bradford County, led the state in job creation. “We’re not impacted by the recession at all,” says Gregg Murrelle, a hotel manager in the Bradford County seat who leased the land around his properties for drilling.


Drilling companies are just one piece of the puzzle. Existing businesses in the hotel and restaurant industries are adding employees. Local truck drivers and construction contractors are seizing opportunities. Law and engineering firms are hiring experts in oil and gas development and regulatory matters. Specialized insurance agents are needed. Environmental inspectors are required to monitor and enforce laws that protect air, land, and water. The list goes on.


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