The Next Page: There Will Be Gas
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There is great excitement in Pennsylvania and other states in the Appalachian Basin about the promise of the Marcellus Shale to provide copious amounts of natural gas and to thereby reduce dependence on foreign oil, help control energy prices, create jobs and provide a financial windfall for the states where the deposits are located. These possibilities have created a natural gas boom in Pennsylvania.
Before we run full steam into developing this gas, however, it would be useful to examine the history of past natural gas booms in the region to see if we could learn anything from it.
Natural gas development began in Western Pennsylvania in the 1870s, highlighted by the discovery of the famous Haymaker Well and exploitation of the Murrysville field, with a smaller field developing at Tarentum on the Allegheny River.
George Westinghouse's Philadelphia Co., the Penn Fuel Co. and People's Natural Gas became the most prominent actors developing and distributing the gas, although many small companies were also formed. Companies fiercely competed for leases on land to drill for wells, with "bloody disputes" and "riots" ensuing.
Spirited competition also developed between gas companies in Pittsburgh in the mid-1880s as they tried to capture gas markets in the city. Nearly 500 wells had been drilled in the region by 1887, a number in Homewood and other parts of the city. One gas well, dug in 1876-77, was on Boyd's Hill overlooking the Monongahela River. It reached down 2,300 feet and had a 70-foot derrick but came in dry. Westinghouse, who patented many technical advances for natural gas development, had more luck, sinking a producing gas well on his estate "Solitude," on Penn Avenue in 1883.
Numerous industries and residences adopted the fuel and thousands of jobs were created, although many local coal miners lost their jobs. Pittsburgh's skies became notably cleaner. But a number of explosions, some fatal, also accompanied the introduction of gas in the city.
By 1890 or so, in spite of predictions by boosters that the gas supply was inexhaustible, many wells were coming up dry, as wasteful practices and overuse added to depletion. Many industries that had converted to natural gas reverted to the use of coal as their primary fuel and by the 1890s Pittsburgh had regained its title as the "Smoky City."
Gas exploration in the region continued, however, and in 1919 two wildcat operators produced a gusher (the Snake Hollow Gusher) in North Versailles that at its peak produced 62 million cubic feet a day and made huge profits for investors. The well drew from the Speechley sand, a geological formation about 3,200 feet below the Pittsburgh coal seam. This discovery led to a wave of new drilling in an area of about nine square miles including the townships of Versailles, Portvue, Lincoln and Elizabeth townships. It became known as the McKeesport gas boom.
In the expectation of large financial killings, 297 companies were formed within six months to exploit the field. Owners leased their land for large sums. A forest of derricks sprang up in the area.
A frenzy of gas well speculation swept over the towns. Ads in the Pittsburgh and McKeesport newspapers by gas exploration companies promised huge returns to investors.
One 1919 ad proclaimed that the "McKeesport Gas Fields are pronounced by experts the Greatest the world has ever known," and claimed that "Sudden wealth has been thrust upon thousands of investors and the Real Boom is just beginning." "Fortune-making opportunities" were offered to investors at $100 a share.
Another ad boasted that the area in which the company was drilling was "absolutely proven territory" while still another claimed, "96 per cent of wells drilled are producers." Some companies sold their shares at $1 a share in order to attract the small investor.
Many residents signed leases for drilling on their land. They bought and sold gas company stock on street corners and in barbershops transformed into brokerage houses. Houses were torn down and front yards uprooted. Hundreds, and even thousands, of wells were supposedly drilled in the 9-square-mile area.
Many of the wells, however, came in dry. By the end of 1920, while 180 wells were producing gas, 441 wells were dry and gas volumes from the producing wells had declined. A People's Natural Gas Co. spokesmen later ruefully commented that while $35 million had been invested in the field in less than a year, less than $3 million had been returned. The McKeesport gas field had become the "scene of the Pittsburgh district's biggest boom and loudest crash," and many of those who had invested money in gas stocks were heavy losers.
The history of gas booms in the region suggests several lessons for those concerned about the current Marcellus Shale boom. One is that over-optimism that gas supplies will continue into the future is often unwarranted, possibly leading to heavy losses on the part of investors. Even wells that initially produced copious amounts of gas can be exhausted quickly. A second is that expenses for leases and drilling equipment can rapidly eat into profits as gas prices fall, as they recently have.
On April 26, The Next Page published "Gas, Gas Everywhere -- But Will Water Be Fit to Drink?" by Abrahm Lustgarten of ProPublica. He examined water contamination in Dimock, a Susquehanna County town that is "ground zero for drilling the Marcellus Shale."
Continuing his investigation, Lustgarten reports that methane contamination in Dimock was not "an anomaly" (as a state Department of Environmental Protection official called it). "In fact, methane related to the natural gas industry has contaminated water wells in at least seven Pennsylvania counties since 2004," he writes, and at least some of the incidents might have been prevented with stricter state laws.
The article is published online at www.propublica.org/methane
And finally -- and most consequential for many of those concerned about the current gas boom -- are the environmental impacts of natural gas development.
We have limited information about the environmental effects of the late 19th-century gas boom, but we can be assured that considerable environmental damage had been done in an era of little environmental regulation, with frequent fires and explosions. More tangible evidence exists for the McKeesport boom where methane was recently found to be leaking into homes from abandoned and unsealed gas wells from the earlier boom period. Some homes had to be condemned while in others families had to vacate while the problem was corrected.
The development of the Marcellus Shale has also caused environmental problems in relation to water usage and wastewater disposal and damages to rural and wilderness areas by construction and transportation equipment.
We need to learn from our past experience with natural gas booms to perform needed research on actual and potential environmental dangers and to strengthen the oversight capabilities of the state Department of Environmental Protection. Many have suggested that a sensible manner to pay for the costs of potential environmental damage and of enhanced inspection would be the levying of a severance tax on the extraction of natural gas. In enacting such a tax, the state would be joining all other states that have greater natural gas production than Pennsylvania.
Without required environmental research and regulatory oversight Pennsylvania would be making the same choice made in the natural gas booms of the past -- leave the environmental damages created by the current boom to the next generation to remedy.
First Published August 2, 2009 12:00 am