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.