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There’s High Hopes for Natural Gas

February 21, 2011
By CASEY JUNKINS

WHEELING - In recognizing the possible creation of 22,928 new West Virginia jobs this year, Corky DeMarco, Jeff Kessler and Charlie Burd know how much potential Marcellus Shale natural gas drilling holds for the state.

"This is going to be a real game-changer for West Virginia over the next two decades," said Acting State Senate President Kessler, D-Marshall. "It can create huge wealth for landowners, and provide plenty of employment opportunities."

University of Wyoming professor Timothy J. Considine's report, "The Economic Impacts of the Marcellus Shale: Implications for New York, Pennsylvania and West Virginia," 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. The research shows that drillers will pay as much as $221 million in state and local taxes this year, as well.

Article Photos

File Photo by Casey Junkins
More Marcellus Shale natural gas drilling sites, such as this one operated by Chesapeake Energy in Avella, Pa., should continue popping up across the Upper Ohio Valley.

It is not just about West Virginia, though. While companies such as Chesapeake Energy, AB Resources, Trans Energy Inc. and Shell Oil Co. lease land and drill for gas in the Mountain State, other operators - Consol Energy Inc., Beck Energy Corp., Starr Energy Resources, and David Hill Inc. - are drilling into the ground throughout Eastern Ohio.

"This could be the largest natural gas play ever found to date," said DeMarco, executive director of the West Virginia Oil and Gas Association. "We are in the very early stages of this, and it is going to continue to grow."

The Marcellus Shale field 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.

Fact Box

What potential does the Marcellus Shale natural gas find hold for the region's future?

Many people in the industry believe the area's natural gas reserves could be a "game changer" in terms of economic impact and job opportunities. Some experts anticipate about 23,000 new West Virginia jobs will be created this year, and billions of dollars in lease and royalty payments are being made to those holding mineral rights in the area.

DeMarco said the total recoverable reserves in the Marcellus field, as known now, could be as high as 500 trillion cubic feet, which would place the Mountain State in the middle of the second largest natural gas field in the entire world.

As such, he said most drilling companies are assembling drilling plans with 20-year outlooks.

"I am not totally sure we know the full extent of the available gas yet," DeMarco noted. "Two years ago, we thought there was 200 trillion cubic feet. Then last year, we said 500 trillion cubic feet."

Burd, executive director of the Independent Oil and Gas Association of West Virginia, said "This is the biggest natural gas find in decades."

DeMarco said the shale development, of which the Mountain State will be part, holds the key to America's energy future.

"We can, clearly, through development of these shale formations, provide energy independence for our country," he said. "This gives us the ability to compete with coal, wind, solar, biomass, geothermal, and any other form of energy out there."

By adding more gas to the supply, DeMarco said there will also be a price break for natural gas consumers everywhere.

Kessler said as long as West Virginia officials "play our cards right," the possibilities for growth in the state are virtually limitless.

"When we come out of this recession, we are going to need energy," he said. "And we are sitting on the mother-lode of energy."

And the drilling companies are paying local residents who own gas reserves hefty sums.

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. These payments allow mineral rights owners the opportunity for substantial financial gain during the Marcellus Shale rush.

Some, however, are not concerned about leases and royalties. Glenville, W.Va. resident Ed Broome spent 55 years working in the Mountain State's gas fields. When he bought 22,000 acres of oil and gas rights in Wetzel County in the late-1990s, little did he know he would one day be able to sell the rights to Chesapeake for $22 million.

"I didn't pay anywhere near that much for it," Broome previously said, though declining to note exactly how much profit he made from the sale.

As for money being pumped into the local economy, Burd said it will easily reach "tens of millions."

"It will be in the hundreds of millions for the whole state," he added.

Burd also pointed out that gas drillers will spend money in area hotels, restaurants, supply stores and other shops, thereby promoting other jobs.

Local businesses also have been experiencing a boom, with some farm supply stores saying 2010 was one of their best years on record as they sell tractors, excavating equipment, off-road vehicles, straw and grass seed.

In relation to the 22,928 jobs Considine's report predicts, DeMarco said there will be "tens of thousands of jobs created in the shale formation."

"Some of these companies need to bring in technical expertise from outside the area," he said. "Over time, we will train local workers to do these jobs."

That is welcome news to Kessler, who said he wants to see more Mountain State labor used in constructing and operating the gas wells.

"We need to get some apprenticeship programs going. If we can train blackjack dealers for table gambling, we can certainly train people to work in the natural gas industry," Kessler noted.

DeMarco said the natural gas drilling business should be particularly strong in the Northern Panhandle because of its proximity to pipelines and major transportation routes.

"The major market for us is in the Northeast," he added.

Kessler said the opportunity to grow wealth in the state with natural gas drilling revenue is great, but noted he would like to see state leaders plan for the future, as opposed to just haphazardly spending the money.

"I would like to see us establish a West Virginia Future Fund," he said, explaining that this would act as an endowment of money collected from the drilling to be saved for later use.

"We could then use that money for the diversification of our economy at a later time."

In the meantime, Kessler said he and other legislators must work to make sure the state gains as much from the drilling as possible.

"We have the supply - there will be demand," he added of the prospects.

 
 

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