Jobs, Revenue and Risks: Sides Picked in Gas Drilling Battle
Wheeling Intelligencer
7 November 2010
By Casey Junkins, Staff Writer
PITTSBURGH - Powered by expanding operations from Chesapeake Energy -
and oil giant Shell Oil Co.'s entry to the market - Marcellus Shale
natural gas drilling could generate 22,928 new West Virginia jobs next
year.
Along with those jobs - and more than $1 billion worth of state
economic activity - however, comes the potential for water pollution,
air pollution, significant road damage, fires and explosions.
During the Developing Unconventional Gas East Conference and Exhibition
in Pittsburgh last week, gas industry leaders discussed how to make the
most of the Marcellus Shale field that stretches from New York through
West Virginia. The total area is roughly 95,000 square miles, which is
19 times larger than the 5,000-square-mile Barnett Shale area in Texas.
The gas officials' gathering did not go unchecked, though, because
hundreds of anti-drilling protesters packed the Pittsburgh streets as
Republican strategist Karl Rove told drillers they no longer needed to
worry about the U.S. Environmental Protection Agency regulating their
operations. This, Rove said, is because Republicans gained majority
status in the U.S. House of Representatives during the general election
last week.
Economic Impacts
On Thursday, University of Wyoming professor Timothy J. Considine
discussed his report, "The Economic Impacts of the Marcellus Shale:
Implications for New York, Pennsylvania and West Virginia." This
research shows that Marcellus activity boosted the Mountain State's
economy by $1.3 billion in 2009, with gas companies paying lease and
bonus money to property owners totalling $657.6 million.
West Virginia state and local governments gained $109.5 million from
Marcellus activity in 2009, highlighted by $36.6 million paid in sales
taxes. Direct industry employment was responsible for 8,436 jobs in
2009. The remaining 4,813 are credited to economic action by those
directly working for the industry, such as workers spending money in
retail stores.
Chesapeake Energy, AB Resources, Trans Energy Inc. and CNX Gas Corp.
are just some of the companies presently leasing and drilling in West
Virginia's Northern Panhandle. Current local lease contracts range from
as low as $5 per acre to at least as high as $4,000 per acre, with
production royalties ranging from 12.5 percent to 18.75 percent.
Chesapeake is planning to soon drill for gas on property located near
The Highlands in Ohio County, while the company is still awaiting
permission from the office of oil and gas to drill in Oglebay Park.
Driller Plans
One driller that does not hold much acreage in the Northern Panhandle,
yet is a significant player in Pennsylvania, is Fort Worth, Texas-based
Range Resources Corp. During the conference, Chairman and Chief
Executive Officer John Pinkerton told attendees about why his company
opened an office in Canonsburg, Pa., right in the heart of the
Marcellus Shale.
"Because of the size and breadth of this play, you have to be here
every day," he said.
Pinkerton believes strongly that development in the Marcellus will help
propel the natural gas industry to new heights, noting, "I am
absolutely convinced that the next 20 years will be the golden era for
natural gas."
"The key here is to get it right," Pinkerton continued. "Companies need
to work together because there is a lot at stake."
Bryan Lastrapes, business development manager for Shell, said the
global petroleum giant is working to close a $4.7 billion acquisition
of East Resources Inc. The East assets include several properties in
both Wetzel and Tyler counties.
Lastrapes noted Shell is glad to be in the Marcellus Shale business
because of the tremendous growth potential.
Environmental Hazards
Also during the conference, Jack Tuschall, general manager of
TestAmerica Laboratories said state regulators do not seem to be able
to keep up with the drilling. This squares with a previous statement
from Dave McMahon, founder of the West Virginia Surface Owners' Rights
Organization, that the West Virginia Department of Environmental
Protection's Office of Oil and Gas only has 17 inspectors to cover the
entire Mountain State.
Tuschall said proper regulation now could prevent later problems for
both residents and gas companies.
"Operators need to know what the guidelines are," he said. "If you want
to protect your company from future lawsuits, you need to address these
issues."
Currently, West Virginia DEP Secretary Randy Huffman is formulating
plans to properly regulate the Marcellus activity.
Kathryn Klaber, president and executive director of the Canonsburg,
Pa.-based Marcellus Shale Coalition, said the idea that hydraulic
fracturing, or "fracking," causes water contamination has not been
proven. Recently, Marshall County resident Jeremiah Magers said his
water well became contaminated with methane - and that natural gas
began bubbling in Fish Creek - shortly after Chesapeake began fracking
at a production site roughly 1,200 feet from Magers' drinking water
well. Chesapeake officials previously confirmed the presence of methane
in Magers' water well, but denied their operations generated the gas.
John Veil, manager of the water policy program for the Argonne National
Laboratory, noted the process of transporting heavy equipment to and
from the well sites could be a contributing factor in releasing gas
into water supplies.