Appalachian Basin

The Marcellus Shale Gas “Prize” for Pennsylvania Will be Massive

Congressman Phil English and W. Jackson Coleman
Sr. Gov. Relations Advisor and Counsel, Arent Fox LLP
Submitted as supporter of Keystone Energy Forum

The development of the Marcellus Shale development is having profound economic impacts across the Commonwealth of Pennsylvania. Just over five years into full scale development benefits are being accrued to landowners, governments and some of the state’s largest industries.  The good news is this is just the beginning.

The economic benefits for Pennsylvania from natural gas development in the Marcellus Shale are already huge and are expected to multiply based on recent economic studies.  The beneficiaries of the development of the Marcellus Shale include not only the expected land/royalty owners, but also a broad range of manufacturers, suppliers, state and local government revenues, local businesses, employees in the entire supply chain, and others.

For example, a study by IHS Inc. in June of 2012 found that as of 2010 production of natural gas from the Marcellus Shale had created 56,884 jobs in Pennsylvania, with that number expected to increase to 111,024 jobs by 2015, and to 270,058 jobs by 2035.  That same study found that Marcellus natural gas production in Pennsylvania added more than $7 billion annually to the gross domestic product (GDP) in 2010, which is expected to rise to more than $42 billion annually by 2035.  That GDP contribution translated into about $4 billion in labor income in Pennsylvania in 2010, which is expected to rise to more than $20 billion annually in 2035.

Other studies have documented the broad economic impact of shale gas production.  For example, a December 2011 study by PriceWaterhouseCoopers LLP found:

“With shale gas resources more abundant that previously thought, U.S. manufacturers can look forward to multiple new opportunities and a significant uptick in employment in the sector.  Chemicals and metals companies are expected to gain the greatest benefit over the next several years.”

The study found that affordable chemical feedstocks derived from shale gas production would result in greater capital expenditures in the United States, and that an “underappreciated part of the shale gas story is the substantial cost benefit to manufacturers” of low natural gas prices as more shale gas is produced.   The study noted that the Marcellus basin is “considered the largest shale deposit in the United States.”  Manufacturers located nearer to natural gas production save more because the cost of transporting the natural gas is lower.  This study found that higher production levels of natural gas greatly benefit U.S. manufacturers – by an estimated annual savings in 2025 of more than $11 billion with natural gas prices about 30% lower than they would have been without the higher production levels.

The abundance of natural gas in the Marcellus Shale has already resulted in plans for a number of new, very large manufacturing enterprises.  Some of those will be addressed in later blog posts, but we want to note a report by the American Chemistry Council in March 2011.  That report found “More recently, the Marcellus basin (by some estimates the largest known shale deposit in the world) has witnessed significant development.  Portions of this formation are rich in NGLs but at a distance from the Gulf Coast where much of the existing petrochemical industry exists.  Significant development of infrastructure (pipelines, ethane recovery, etc.) would be needed and could also include investment in petrochemical and derivatives capacity.  Thus, areas in western Pennsylvania, New York and/or West Virginia could become the next US petrochemical hub.” (emphasis added).

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