Penn State forecasts boom for Marcellus Shale
From left, Ko Watanabe of Sumitomo Corporation of America, David French of L.R. Kimball, Lee Ann Wainwright of Chief Oil & Gas, Matt Pitzarella of Range Resources Corporation, Doug Matthews of U.S. Steel, Kathryn Klaber of the Marcellus Shale Coalition, Jack Thompson of Chesapeake Energy, Gregg Troian of PGT Trucking and Jason Norris of Dura-Bond Pipe take the stage as part of a press conference about a new economic impact analysis of Marcellus Shale development in Pennsylvania at the U.S. Steel Mon Valley Works Training Hub in Duquesne, Pa.
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Thanks to the Marcellus Shale development, the amount of natural gas produced in Pennsylvania could nearly triple within the next decade, according to an industry-funded report.
The Penn State University report -- commissioned by the Marcellus Shale Coalition trade group at the cost of about $100,000 -- projects the number of Marcellus wells drilled will amount to about 2,500 in the next decade, depending on whether natural gas starts to trade at higher prices.
In 2010, an estimated 1,055 wells were producing in the natural gas formation that underlies much of Pennsylvania and other Appalachian states.
The researchers had more confidently predicted 3,500 wells by 2020 in earlier reports, but stable natural gas prices have slowed the market and longer well bores mean more gas can be reached from a single point.
"At 2,500 wells by 2020, drilling density would remain quite low compared to other shale gas plays," according to the report that was released Wednesday.
The economic report by Penn State professors Timothy Considine -- now at the University of Wyoming -- Robert Watson and Seth Blumsack casts Marcellus development as something of a panacea for Pennsylvania's economic and employment woes.
The annual report is the third to come out of Penn State, and its approach to the state's most controversial point of debate -- whether to impose taxes or fees on the industry -- is more tempered than in years past.
"The absence of a severance tax in Pennsylvania ... offsets higher costs associated with complex regulations, climate conditions, topography, higher labor costs and other structural factors," the report reads.
That's a step back from the 2010 edition, which critics interpreted as academic advocacy when it said a severance tax would mean "losses in sales and income tax receipts resulting from lower drilling activity and natural gas production."
The report came out just two days before Gov. Tom Corbett's Marcellus Shale Advisory Commission will release its recommendations on how the state should regulate drilling.
The governor's commission is expected to support some sort of impact fee that would charge drillers to offset some of the disruptions that come when the industry moves in.
Kathryn Klaber, president and executive director of the coalition, said the governor's office received the Penn State report when it was released Wednesday and that the advisory commission had examined data from the 2010 Penn State research during its 120-day reconnaissance process.
The Penn State report said the total tax impact from drilling in 2010 was $1.08 billion in state and local taxes and $1.43 billion in federal taxes.
In 2010, Marcellus development in Pennsylvania accounted for $11.2 billion in so-called "value added," according to the report.
The "value added" figure was calculated by adding the direct economic impact from industry and the indirect economic impact from tertiary effects such as restaurant and hotel use.
During 2010, the industry supported nearly 140,000 jobs in the state, the report said.
"Supported" jobs are positions that would not exist were it not for the industry.
By 2020, that value-added figure could jump to $20.2 billion per year and the supported jobs could total 256,000 -- all to produce more than 17.5 billion cubic feet of gas per day.
That 17.5 billion would rank Marcellus Shale as the No. 1 supplier of natural gas in the United States, enough to provide one-fourth of the nation's natural gas needs.
The researchers also expanded the scope of study to include the effect of shale development on Pennsylvania energy costs.
The report said that, as a result of Marcellus Shale development, natural gas prices in Pennsylvania dropped 12.6 percent in 2010.
That decrease resulted in Pennsylvania consumers saving nearly $633 million on utility bills, the report said.
First Published July 21, 2011 12:00 am