As the natural gas industry looks toward a resurgence in the area, it could do so with more efficiency and, as Marcellus Shale Coalition President David Spigelmyer hopes, a lot more opportunity.
The Atlantic Sunrise Pipeline – which would help transport natural gas from northeast Pennsylvania to the mid-Atlantic and southeastern parts of the country, and was expected to be fully operational by the middle of this year – is currently under construction, according to a website created by Williams that’s dedicated to the project. Spigelmyer is hopeful for what the operational pipeline will mean for the industry.
“Once in full operation I think it will have a very positive effect in this area, to be able to move gas to market at less of a discount than we currently face,” said Spigelmyer. “This is probably the most discounted point that has existed in the United States … historically over the past eight years. Companies that have invested heavily in this area, such as Chesapeake, I know are planning to add a couple of new rigs this year. I don’t expect to see a lot of new pad development. A lot of pads were developed in this region with the idea of putting six rig wells on those locations. Now technology has continued to advance to where you can even put more than that on a location. But I think, for the most part, companies will come back to pads that aren’t fully drilled out and drill additional wells on those locations.”
“Back in 2007-8-9-and even 2010, it would have taken us 60 days to drill a well, and it would have been, on average, a 2,000-foot lateral,” he added. “Today, laterals average close to 10,000 feet and they’re being drilled in less than 20 days.”
During the remaining summer, fall, winter and into next year, the public will see a fair amount of natural gas activity, although it won’t be to the levels seen around the height of the industry so far in 2010 and 2011, he noted.
Money generated through the Act 13 impact fee already shows a bit of a resurgence. Between 2014 and 2015, impact fee dollars dropped from $223.5 million to $187.7 million, and continued to decline to $173.3 million in 2016 until rebounding to $209.6 million in 2017, according to information published by the Public Utilities Commission. During this same time period, impact fee allocations went from $4,923,334.81 to $4,318,962.89 and then to $5,051,257.31.
In 2017, Bradford County was the third largest producer with 709,169,357 MCF, or 13 percent of Pennsylvania’s overall production. Susquehanna County topped the list with 1,306,666,799 MCF, or 24 percent of overall production, followed by Washington County, according to the PUC.
Although projects such as the Atlantic Sunrise Pipeline will help the local natural gas supply reach new markets and spur activity, and although liquefied natural gas technology has allowed the industry to ship the product to different parts of the world, Spigelmyer said there’s still challenges along the northern Pennsylvania border with New York state standing in the way of projects that could serve the New York City and New England markets, such as the Constitution Pipeline and Millenium Pipeline upgrades.
“Projects to get gas into the city and north into New England are critical for the success of this area as well,” said Spigelmyer. “New York has an unquenchable appetite for natural gas, yet we’re not allowed to build infrastructure there. I hate to say it, but I think there’s a day of reckoning for New York if they don’t allow infrastructure to be built.”
In Pennsylvania, the Marcellus Shale Coalition worked as part of the process to modernize the framework for development, such as increasing permit prices from $100 to $5,000 per well to make sure the Pennsylvania Department of Environmental Protection had the staff it needed to monitor the booming industry.
“You’ll hear folks make statements, ‘Well, the DEP has been cut.’ Not in the oil and gas section they haven’t,” Spigelmyer clarified. “They added a new office in Williamsport. They went from 60 compliance staff to over 225 at one point. I think they are at 190 right now. They have a robust group to provide oversight of our industry and permit our industry.”
“A well permit in Texas is like a Sonic – they come out with roller skates to give you the permit immediately. Here, you’ve gotta wait,” he continued. And while uncertainty with permitting has provided some uncertainty for those looking to invest, the coalition has increased its efforts in Harrisburg to make sure the state remains “a positive target for investment capital so that we can grow jobs and economic opportunity.”
One issue that Spigelmyer believes could harm the industry is the implementation of a severance tax, as has been propose by Gov. Tom Wolf in recent years. Not only would this dissuade investors, but he fears it could also lead to impact fee money being diverted from Bradford County and others at the heart of the shale play.
“If folks in the region think that the dollars, if they went into the general fund, would yield that kind of return for Bradford County, I think they are sadly mistaken,” he said. “I think about a third of the legislators, maybe a little more than that, are out of the southeastern part of the state. I think they would make sure Bradford County didn’t get that kind of a proceed back in their neighborhood.”
In response to environmental safety concerns that have come along with the natural gas industry, Spigelmyer pointed to the results of a Penn State University study published earlier this summer that found rare instances of potential natural gas contamination in ground water. Among the findings, just seven of nearly 1,400 wells studied in Bradford County, found a potential for methane contamination.
“I think it’s proof positive that the industry is focused on making sure it can be done in a safe manner and environmentally responsible manner,” said Spigelmyer. “It’s kind of disappointing that just to our east (New Jersey), the governor has joined other states in proposing a ban for development in the Delaware River Basin when you have the kind of studies that come out of Penn State and other institutions that show compatibility with our activity and water resources.”
He noted that although the industry does withdraw fresh water for its activities, the use has limitations imposed by the DEP in partnership with the industry. There are also recycling processes in place to reuse frack water and lessen the need for fresh water and disposal.
Looking to the future, he said there is still plenty of opportunity with both the Marcellus Shale and the deeper Utica Shale. Comparing natural gas development to a baseball game, Spigelmyer said while Bradford County might be in the second inning, Pennsylvania at large is still in the first, with other hydro-carbon shales yet to be explored.
There’s also opportunity on the manufacturing front from the play. Spigelmyer provided the example of Procter and Gamble, which has drilled wells on site to power their facilities and help with the manufacturing process.
“That’s happening across the state,” said Spigelmyer.
Just west of Pittsburgh, Royal Dutch Shell is investing in an ethane cracking facility that will make polyethylene from ethane, resulting in a plastic pellet that can be used by the plastics industry.
“I think it’s fair to say in the next five to eight years we’re likely to be seeing some new plastics manufacturing develop in our region because we’re going to develop the raw materials for plastics here instead of the Gulf Coast states, where it’s taken place for the past 200 years,” said Spigelmyer.
There’s also the benefits of energy independence, with reliance on foreign oil having dropped from around 60 percent in 2008 to less than 20 percent, he noted.
“I think it’s fair to say the Marcellus and Utica Shale play could be the granddaddy for shale plays in the United States for natural gas. It really has become that kind of play,” said Spigelmyer. “If you think about it, a third of the natural gas used in the U.S. is coming out of this play. That’s an enormous feat in such a short period of time.”