Appalachian Basin

Marcellus Shale Exceeds Economic Expectations

The Marcellus Shale recently celebrated its 10 year anniversary of the first successful horizontal well developed in the formation.  This is as good a time as any to look back at the successes this industry has had in the Marcellus Region and ask if the formation has lived up to the predictions set forth in a report released five years ago by Pennsylvania State University titled, The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An Update.

After reading back through the report it’s clear that not only did the Marcellus Shale meet all the predictions in the report, it exceeded many of them. This just goes to show how prolific the resources and opportunities are in the Appalachian region.

Below are a few estimates that were given for the Marcellus Shale when the report was released on May 24, 2010.

Estimate one:

“The Marcellus resource base is large and could support significant levels of drilling in the future. This study estimates a dramatic expansion of Marcellus gas production from slightly over 327 million cubic feet per day during 2009 to over 13 billion cubic feet per day by 2020. If this occurs, employment would expand by 200,000 jobs and annual gains in state and local taxes revenues would exceed $1 billion.” (pg. V)

As of November 2014, the U.S. Energy Information Agency puts Marcellus Shale production at a staggering 16 billion cubic feet of natural gas per day. We produce more gas today than this report predicted the region would in the next six years. This can be attributed to better efficiencies and innovation on behalf of the industry.

Estimate Two:

“At 3,500 wells by 2020, drilling density would remain quite low compared to other shale gas plays. If these projections are borne out, the Pennsylvania Marcellus could have a profound effect on the U.S. natural gas market.” (Economic Impacts – pg. 17)

Operators in Pennsylvania beat estimates here as well. According to the Pennsylvania Department of Environmental Protection, since the release of the report through today there are 5,938 active Marcellus Shale wells producing in the Commonwealth. Again, this exceeds predictions of where this industry would be in 2020, five years earlier than expected.

Estimate Three:

“During 2015, the Marcellus gas industry could be generating more than $14 billion in value added, $1.4 billion in state and local tax revenues, and increasing state employment by 160,000. In 2020, the impacts grow even larger with over $18 billion in value added, over $1.8 billion in state and local tax revenue, and a workforce 200,000 larger.” (Pennsylvania Marcellus – pg. 18)

According to a recent study by the American Petroleum Institute, the natural gas industry here in Pennsylvania is contributing an astounding $34.7 billion to the state economy, which makes up 5.8 percent of the state’s total economic activity.  Another recent report by PriceWaterhouseCoopers found that the oil and natural gas industry in Pennsylvania supports 339,000 jobs, making it 4.7 percent of the state’s total employment. It doesn’t stop there: according to the Associated Press the natural gas industry has paid more than $2 billion in state taxes since 2007.

The report accurately predicted the impact of shale development on local manufacturing jobs, cheaper energy and lowering greenhouse gases and other emissions, stating:

“If the Marcellus is developed to the extent envisioned in this report, the abundance of reliable, low cost natural gas could attract gas intensive manufacturing industries to expand capacity in Pennsylvania.” (pg. VI)

Thanks to low cost natural gas being produced domestically, this country is seeing something it hasn’t seen in decades: re-shoring. More companies are moving their operations back to the United States to take advantage of our cheap energy. According to one estimate, this increased investment will create more than 500,000 new jobs all across the country. President Obama recently spoke about our growing manufacturing here the U.S. stating, “Our manufacturing sector that used to be losing jobs, just hemorrhaging jobs, is now adding jobs for the first time since the 1990’s.”

Finally, the report also accurately addressed the reduction of air emissions that would come from increased supplies of natural gas:

“Abundant gas supplies also could reduce the cost of achieving reductions in greenhouse gas emissions as well as emissions of NOx, SO2, and other pollutants. Thus, the additional natural gas produced from the Marcellus would propel Pennsylvania’s economy forward while reducing greenhouse gas emissions.” (Economic Impacts – pg. 19)

Due to increased domestic production, Pennsylvania has been able to transition to cleaner burning natural gas. According to a report by researchers at the National Oceanic and Atmospheric Administration (NOAA), thanks to increased natural gas over the last decade, there have been “Significant reductions in the emissions of CO2, NOx and SO2.”

It’s interesting to note that this Pennsylvania State study didn’t come without scrutiny from those opposed to shale development, such as Food and Water Watch and Responsible Drilling Alliance, who criticized its findings.  Now, five years later, not only did these researchers correctly predict  that development would be beneficial to Pennsylvania, they actually fell short in their estimates of just how vast economic benefits of shale development would be.  With that track record, it’s safe to say the future of shale will only be brighter in the years to come.

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