July 20, 2008

Natural Gas in Marcellus Shale Can Create Revenue, Jobs

By Joe Napsha, The Pittsburgh Tribune-Review

Jul. 20--Higher gas prices coupled with the abundant natural gas reserves trapped in Marcellus Shale underneath Western Pennsylvania have been good for those who own the rights to the gas, the drillers and gas companies, and job-seekers, say industry experts.

"It is the last great natural gas play in the United States," said Kent F. Moors, director the Energy, Policy and Research Group at Duquesne University in Pittsburgh.

The state's economy could see a big boon in employment and revenue as a result of the drilling into the natural gas-rich Marcellus Shale, according to a report from the Penn State Workforce Education and Development Initiative.

The report estimates that for each $1 billion of royalty income generated by the Marcellus Shale reserves, the state could gain 7,880 jobs this year, and close to 8,000 next year.

"At the industry standard 12 1/2 percent royalty, royalties could amount to hundreds of thousands of dollars over just the first decade of the well life," said David O'Hara, vice president of Snyder Brothers Inc. of Kittanning.

The company last week "fractured" a 6,200-foot Marcellus Shale well near Kittanning by pumping high pressure water streams to break up the shale deposits and release the trapped gas. If the wells that Snyder Brothers plans to have drilled into the Marcellus Shale in the next year prove successful, the oil and gas exploration company could add another 10 jobs to its work force of 50 employees, O'Hara said.

More drilling activity has been done recently than in his previous 16 years in the business, O'Hara said. The company drills about 150 shallow wells, and anticipates drilling 30 to 50 wells in the deeper Marcellus Shale within the next 12 months, he added.

Snyder Brothers was ranked fourth among gas companies in terms of the number of wells drilled in Pennsylvania in 2006. It will continue to be a major player, because it owns or leases about 200,000 acres of mineral rights in Western Pennsylvania, he said.

The rise in activity is because of the increase of the natural gas wellhead prices, as well as the natural gas futures, which are tied to the price of oil, Moors said. The price of natural gas at the wellhead has jumped 100 percent in five years, to $8.94 per thousand cubic foot in April 2008 from $4.47 in April 2003, according to the Energy Information Administration.

Drilling for oil and gas statewide has increased, from 2,358 wells in 2003 to 4,183 wells drilled in 2006, the last year for which the state Department of Environmental Protection has data. Armstrong, Fayette, Westmoreland, Indiana and Greene counties accounted for 1,840 of the wells drilled in the state in 2006, about 43 percent, the agency said.

The increase in drilling has resulted in "a great deal of demand for workers, entry-level jobs with drilling companies and well servicing companies and a variety of jobs," said Steve Rhoads, president of the Pennsylvania Oil and Gas Association, a Harrisburg-based trade group.

While S.W. Jack Drilling Co. in Indiana has been operating at full capacity for years, the lack of trained employees keeps the company from expanding the size of its work force, said James McElwain, president. S.W. Jack Drilling operates in Pennsylvania, West Virginia, Kentucky, Virginia and New York.

"There's a whole generation missing from the industry," McElwain said. Workers in their 30s and 40s left the business during the downturn, so that the industry has young workers in their 20s, and veteran drillers in their 50s, McElwain said.


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