An economy in recession, regulatory problems and environmental concerns have slowed leasing and drilling for natural gas in Pennsylvania's deep Marcellus shale.

But none of those setbacks has done anything to dampen enthusiasm for developing the massive and potentially lucrative gas deposits beneath much of the state and region.

Pennsylvania State University geoscientist Dr. Terry Engelder was upbeat last week in telling those attending the first Pennsylvania Natural Gas Summit in State College that there are 363 trillion cubic feet of recoverable gas in the Marcellus shale, enough to supply all of the nation's natural gas needs for 14 years.

That estimate, based on recent deep-well-production reports and better geologic data, is seven times larger than his earlier projections.

"The numbers are very big, and even if we recover only half of that, Pennsylvania is in really good shape for the next 20 years," Dr. Engelder told nearly 300 participants at the two-day summit. "It's important and will last a long time."

According to Dr. Engelder, the Marcellus shale deposits, underlying 48,000 square miles of New York, Pennsylvania, West Virginia and eastern Ohio, have the potential to be the largest of the nation's two dozen known gas-development areas or "plays."

Worldwide, there are an estimated 24,000 trillion cubic feet of recoverable natural gas in shale deposits, about a third of that in the United States.

John Pinkerton, chairman and chief executive officer of Range Resources, which has spent $700 million in the state since 2004 to lease gas-drilling rights and develop about 130 deep gas wells in the state, said development of the Marcellus shale could create more than 100,000 jobs, many in rural areas, and make the state a natural-gas exporter. Pennsylvania now imports 76 percent of the natural gas it uses for home heating and electricity generation.

"The Marcellus shale will be the driving force for Pennsylvania's energy and economic future," Mr. Pinkerton said.

Individual property owners, municipalities and even state agencies also could make money by leasing the rights to drill for the gas, which is more than a mile underground in the 400-million-year-old black Marcellus shale.

The presence, if not the amount, of gas in the Marcellus has been known to geologists and the gas industry for 80 years, but it took high gas prices combined with new horizontal drilling and hydro-fracing technology, developed to tap into the Barnett shale play in Texas, to launch the fledgling drilling boom in Pennsylvania.

The rosy projections also come with an assortment of thorny short-term problems, not the least of which is the economic downturn that has dropped gas prices from $14 per thousand cubic feet to $6, dried up the ability of gas companies to borrow and all but halted their efforts to lock up gas-lease rights from property owners. Some companies have told landowners they will delay offering and signing drilling leases until next year.

Where lease negotiations are still taking place, the per-acre "bonus payments" are in a dip on a roller-coaster ride that saw them begin the year as low as $5 an acre, rise to more than $5,000 an acre in some areas and fall to half of that or less today.

Earlier this year, the state Department of Conservation and Natural Resources leased 18 tracts covering 74,023 acres in the Loyalsock, Tiadaghton and Tioga state forests in Tioga and Lycoming counties -- the heart of the most competitive leasing area in the state -- for more than $188 million. Last week, Gov. Ed Rendell proposed using $174 million of the lease money to offset part of the state's $1.6 billion deficit.

Gas leases also typically include royalty payments of at least 12.5 percent, and as high as 20 percent, of the gas produced.

"It's amazing how things have changed in the industry between June and today," said Mr. Pinkerton. "Gas prices are down and that's affecting the industry. Drilling has slowed across the country, and some companies have reduced their Pennsylvania focus."

He said the drilling industry also is changing its focus from leasing to drilling on existing leaseholds in Pennsylvania. It still expects to spend $2 billion in the state next year, the same as this year, and drill 200 deep vertical wells and 250 deep horizontal wells.

Horizontal well-drilling technology allows drillers to bore down to the 50- to 200-foot-thick shale layers then sideways for up to 4,000 feet. A mixture of water, chemicals and sand then is injected into the wells under high pressure to fracture the rock and release the gas. Up to six wells can be drilled from a single five-acre drilling pad, and each well uses 1 million to 4 million gallons of water.

But questions have arisen about where the water will come from and how the well waste water, which carries heavy concentrations of salt and unknown quantities of other dissolved metals and minerals from the shale, will be disposed of.

Two streams in Washington County, Sugarcamp Run and Cross Creek, were drained by well-drilling withdrawals.

And last month 13 environmental and sportsmen's organizations asked the state to do a better job of regulating water withdrawals and monitoring treatment of waste water from the wells.

The call came after it was determined that the waste water contributed to high dissolved-solids levels in the Monongahela River that is affecting public drinking water supplies for 350,000 people. Sewage treatment plants, which have been allowed to dilute and discharge the waste water, are not equipped to treat it.

"Treating water has been a big deal in the Barnett and will be a big deal here," said Mr. Pinkerton. "We spend millions of dollars on the process and it's not something we take lightly."

He said the company is considering using an evaporative "crystallization" process or some other on-site treatment of the waste water. In Texas, Range Resources injects the waste water deep underground, which may not be possible due to Pennsylvania's different geology and has been criticized by environmental groups.

Mark Hartle, chief of aquatic resources for the Pennsylvania Fish and Boat Commission, said the cumulative effects of the state's 277 deep wells, combined with about 7,000 other oil and gas wells drilled this year, puts aquatic resources at risk and fragments habitat.

"The prime Marcellus shales development area in the north-central part of the state has a big overlap with the state's high quality designated streams," Mr. Hartle said. "That's cause for concern because such development requires an impressive amount of infrastructure, including five-acre drill pads, roads, pipelines and water use and storage."

He said the state Department of Environmental Protection has a responsibility to make certain that waste water is properly treated and discharged so it won't damage water quality or natural habitat. The DEP has indicated it would favor having the drillers recycle and reuse drilling water.

Mr. Pinkerton, while professing respect for the state's DEP regulators, also said they are "tough" and warned that overregulation could drive some drillers from the state and delay development of the Marcellus. The drilling industry has been lobbying the governor's office to pressure the DEP to "streamline" its regulations.

"We're in five shale plays across the U.S.," Mr. Pinkerton said, "and the state here needs to be careful and work hard to encourage people to develop this play."

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