Natural Gas Found in Shale Could Fuel Economies to the West

By Heerwagen, Peter

When domestic gas prices spiked during an energy crisis in the early 1980s, prospectors came into the western part of the Quad- state region to acquire drilling rights. With oil at $130 a barrel and natural gas prices headed above $11 per thousand cubic feet, they may return.

Exploration and production companies are looking for huge reserves of natural gas in Marcellus black shale in the northern Appalachian region. New drilling technologies for extracting gas from shale, coupled with historically high oil and natural gas prices, have triggered a land rush for drilling rights.

Marcellus shale, named after the town in New York where it was first gassed, is found mostly in western New York and Pennsylvania and much of West Virginia. The shale area also stretches into Garrett and Allegany counties of Maryland, Morgan County and western Berkeley County and western Frederick and Shenandoah counties.

Farmers in Lycoming County Pa., are reportedly being offered from $1,500 to $2,500 an acre for drilling rights, and if gas is found, they collect royalties.

Even if no large discoveries are found in the western part of the Quad-state region, drilling activity in the Appalachian Mountains could have an economic impact on its neighbors to the east. It would tend to raise standards of living, tighten labor supplies, and possibly result in lower energy costs.

Just as growth pushing out from the Baltimore-Washington area has affected the Quad-state region, an increase in energy-related activity to the west might indirectly impact the region.

Marcellus shale recently gained popular attention when USA Today reported that geoscience professors at Penn State and SUNY-Fredonia had estimated original gas in place within the shale at 168 to 516 trillion cubic feet (Tcf), and recoverable reserves of as much as 50 Tcf. The United States currently produces roughly 30 trillion cubic feet of gas a year.

It is one of the three largest potential onshore resources of natural gas in the United States, according to the U.S. Geological Survey, with reserves of up to 75 Tcf.

“There’s been much interest in Marcellus shale in the last year or two,” said Lee Avary, petroleum geologist with the West Virginia Geological and Environmental Survey in Morgantown. “I’ve gotten a lot of calls about what’s going on in the Marcellus. They’re coming out of the woodwork.

“But for those people without experience in the region, getting leases is a tremendous challenge. And there are speculators in the market already buying up rights.”

Avary said that in the late 1970s and early 1980s, when oil and gas prices spiked, Amoco and Exxon drilled in Hampshire and Hardy counties in West Virginia, and possibly in Frederick County, Va. “However, they found no elephants in terms of production.

“A good bit of the shale in West Virginia crops out at the surface, and because of that, it is not likely to contain gas. You need to drill down or horizontally into hills about 2,000 to 3,000 feet to find the gas.

“Companies are taking the knowledge gained from working in Barnett shale in the Dallas-Fort Worth area and applying it to West Virginia. The shale mania is over an unconventional gas resource, but people have learned more about how to drill for it, especially going horizontally or sideways.”

The industry claims that horizontal wells allow for drilling a cluster of wells in a single spot to drain a large area, minimizing the impact on the surrounding area.

Avary said gas exploration and production companies would not necessarily focus on the geographic center of the Marcellus shale area, in effect, picking the low-hanging fruit.

But when it comes to the possibility of Marcellus shale in the western Virginia portion of the Northern Shenandoah Valley, Kathy Enomoto, geologist in the Economic Geology Section of the Virginia Department of Mines, Minerals and Energy in Charlottesville, said the formations in New York, Pennsylvania and West Virginia were “much thicker and had better potential. The Marcellus shale in Virginia is thinner and smaller.”

Enomoto was not aware of any permits issued to drill in Virginia or any interest in the shale’s potential, but said the natural gas rush that took place 25 years ago could happen again. “But if they did find gas, they would need a pipeline to transport it.”

Map Showing Marcellus Shale

Corporate players looking fof gas in Marcellus shale include Range Resources, which has the largest land position, Southwestern Energy, Chesapeake Energy and Cabot Oil & Gas.

Houston-based Cabot has,, an extensive leasing program in six targeted areas in Pennsylvania and. West Virginia. It has more than 90 lease brokers working in the field.

“The most exciting new play in the U.S. right now is the Marcellus section of the [larger] Devonian shale in the East,” said Dan O. Dinges, chairman, president and CEO, in a press release.

“Cabot has a substantial holding of acreage with Marcellus potential and an ongoing program gathering multiple data points.

“The reason we are excited about this play is the fact that the Marcellus regional shale could contain several hundred TCF of gas in place. This shale is sparsely drilled, both vertically and geographically, it is normal to over-pressured in contrast to the shallower pays in the basin, and it appears to be extensively fractured.

“Also, the rocks are at the optimum maturation level, with the “rock mechanical properties appropriate for maximum stimulation effectiveness.”

Avary said there are several ways a gas deal can be struck with landowners. The driller can lease the land for a period of years, paying a bonus on signing the lease and then making annual payments until drilling begins. If gas is found, then the landowner receives a minimum royalty of one-eighth the value of the production.

Or the landowner can sell outright the oil and gas rights on a certain number of acres for a lump sum, but receives no royalty payments if gas is produced.

Brick Companies Also Like to Work in Shale

Natural gas companies are not the only ones that like to play in shale-so do brick companies. The proposal of Continental Brick in Martinsburg to mine shale on North Mountain near Gerrardstown in Berkeley County has created a stir in the local community. Last December it reportedly purchased 420 acres for $2.6 million.

The Washington County Planning Commission recently approved a 30- acre shale mining area for Redland Brick Inc. in Williamsport. The area is an extension of an existing surface mine, and was already zoned for mining.

Copyright News for Business, Inc. Jun 2008

(c) 2008 Quad – State Business Journal. Provided by ProQuest Information and Learning. All rights Reserved.