Marcellus Shale Natural Gas Boom
Pennsylvania’s natural gas boom has driven local gas prices down, which in turn, has resulted in increased industrial development. According to a Public Utility Commission calculation, the decrease in natural gas prices has saved Pennsylvania energy consumers $13 billion in the last two years.
A recent report from the U.S. Energy Information Administration stated approximately 17 percent of Pennsylvania’s energy is generated by natural gas, which is a ten-fold increase since 2001.
In addition, natural gas plays an important role in the production of steel, according to U.S. Steel CEO, John Surma. “The low-cost energy really turns out to be an unbelievable asset for this state,” said C. Allen Walker, Economic Development Secretary.
Although the price of natural gas has fallen due to the unexpected increase in production, the lower prices come with a risky downturn. Shale gas will no longer be profitable if the price continues to sink. Right now the prices have fallen below $4 per thousand cubic feet. According to Louis D’Amico, president and CEO of Pennsylvania Independent Oil and Gas Association, “we’ve been a victim of our own success…it’s a very low number for this industry to make a profit on dry gas.” The shale has exceeded all production expectations.
Because of that, several petrochemical producers have expressed interest in the Marcellus Shale. Walker states, “Pennsylvania is in play for several large projects.” However, since the decline of gas prices, D’Amico says that we will “see a lot of money shifting into liquids-rich areas…shale wells have a very rapid decline [in production]-any reduction in the number of wells will have a very quick response time to impact the economy.” Most gas that is produced by a shale well comes out of the ground in the first two or three years after drilling.
Even if there is a slowdown in development, Sue Mukherje, Director of Workforce Development for the Pennsylvania, Department of Labor and Industry, states that the economic ripple effects through other industries are significant. According to Mark Lauriello, President of Rettew Associates, Marcellus has transformed his mid-state engineering and consulting firm, which has added 210 jobs since January of 2010.
Although we do not know how long this will last, Pennsylvania’s economy has shifted and they are hoping it is for at least “a good ten years.” Natural gas producers already invested more than $4 billion in Pennsylvania lease and land acquisition, new well drilling, infrastructure development and community partnerships, with an even greater investment expected in the future.