by Kathy Kiernan
Untapped natural gas lies in the Marcellus Shale beneath portions of Ohio, Maryland, New York, West Virginia, and Pennsylvania. In the last 5 years, natural gas drillers have flocked to this region, particularly western PA, to extract gas from the Marcellus Shale’s black sedimentary rock.
Drilling in the Marcellus Shale region has profoundly increased since 2008 because of regulatory changes and hydraulic fracturing—also known as fracking or hydrofracking—a process during which a mixture of highly pressurized water, sand, and chemicals is injected into rock, releasing shale gas and forcing it upward. This practice, combined with a horizontal drilling technique, enables drillers to extract a massive amount of shale gas that was previously unreachable.
Low energy prices. The Marcellus Shale is comprised of enough gas to help theUnited States achieve independence from foreign energy, including the troubled Middle East for its oil. The amount of natural gas in storage by the end of March 2012 is expected to be the highest since 1983. Consequentially, the abundance of ready-to-be-shipped natural gas in storage and the extensive reserves now accessible have driven down the market price to a 9-year historical low.
In 2008, the average price for a Dekatherm of natural gas was $8. The price dropped to $5.50 in 2010 and now has declined to $2.50. (See an energy market snapshot graph.)
Market forecasts are that natural gas prices will remain low for several years. The number of active drilling rigs is declining as prices have dropped. And, there is an immense amount of natural gas in storage. These factors are helping to keep a lid on prices. (See how to benefit from historically low energy prices.)
All of this is occurring while oil prices have steadily increased during the past year, recently eclipsing $100 per barrel. Oil prices are not linked to natural gas prices in any direct way. However, some industrial and other large energy consumers will convert usage of oil to natural gas if these price levels hold.
Economic growth. Forty drilling companies are currently leasing land inPennsylvania and have invested more than $4 billion in land acquisition, new wells, infrastructure development, and community partnerships. Pittsburgh is the largest city atop the Marcellus Shale formation, but most Pennsylvanian communities with access to shale gas are quiet rural towns with no previous exposure to drilling. In communities where drilling companies are extracting natural gas, local economies are flourishing. Landowners are profiting, job opportunities are increasing, and local governments are considering implementing an “impact fee” to raise community revenue from drilling companies.
Jobs. Recent projections are that over 200,000 new jobs will be created by 2020 from Marcellus Shale drilling. In 2011, one ofPennsylvania’s poorest areas, rural Bradford County, led the state in job creation. “We’re not impacted by the recession at all,” says Gregg Murrelle, a hotel manager in the Bradford County seat who leased the land around his properties for drilling.
Drilling companies are just one piece of the puzzle. Existing businesses in the hotel and restaurant industries are adding employees. Local truck drivers and construction contractors are seizing opportunities. Law and engineering firms are hiring experts in oil and gas development and regulatory matters. Specialized insurance agents are needed. Environmental inspectors are required to monitor and enforce laws that protect air, land, and water. The list goes on.
Drilling opponents have voiced complaints about fracking and taken actions to slow it down. The fracking process creates extremely high water pressure underground, which could trigger tremors and earthquakes. Horizontal wells require as much as 5 million gallons of water for fracking. After the fracking process is complete, wellbore pressure is released and water flows out of the wells. Backflow and the threat of spills and downhill leaks are causing concerns.
Fracking backflow. Drilling companies are not required to disclose which chemicals are mixed with fresh water for fracking, which raises alarm over water pollution. Fracking additives could be as harmless as household chemicals or as harmful as toxic ingredients. Even if chemicals makeup only 0.5% of 5 million gallons of water used for one horizontal well, that amounts to 250,000 gallons of unknown chemicals. Plus, when fluid mixes with shale rock it becomes brackish and could become contaminated with radioactivity. “You bring everything the fluid encounters down there back to the surface along with the gas,” comments Michel Boufadel, an environmental engineer at Temple University in Philadelphia.
Leaks. Drilling companies must securely cement wells to prevent leaks. In December 2010, a major oil and gas business paid a $4.1 million settlement to the Pennsylvania Department of Environmental Protection (DEP) and 19 families in Dimock, Pennsylvania, whose water was tainted with methane because of poor cementing around well castings.
On farmland outside of Wellsboro, Pennsylvania, 75-year-old Don Johnson, who has lived in the area his entire life, was forced to quarantine his livestock in the summer of 2010 after his cows drank from a pond with a suspected wastewater leak. “They affected the water, and without water you can’t farm here and you can’t live here,” says Johnson. The DEP also fined one major energy company $565,000 for violating rules protecting streams and wetlands in Potter and Bradford counties. Some of these violations were administrative, such as improper signage or paperwork.
Despite relevant concerns over natural gas drilling, coal mining will always be more harmful to the environment. Coal mining uses 5 times more water than natural gas drilling and permanently changes the terrain and environment in the area around the mine. The burning of coal causes many air pollutants and some experts argue it is primarily responsible for climate change. Thousands of people die worldwide each year from coal mining operations, and toxic emissions from coal-burning power plants cause thousands of premature deaths each year in the United States. (See the health effects on residents in states downwind from power plant emissions.)
Backflow water from fracking is pumped into wastewater holding ponds and storage areas for transport to water treatment plants for recycling. Chesapeake Energy, the second-largest natural gas producer in theUnited States, asserts that it recycles 100% of fracking wastewater to reuse in additional wells. Pennsylvania is tightening its regulations for screening wastewater at municipal treatment plants, and an increasing amount of wastewater is now being reused for additional fracking.
In September 2011, the U.S. Environmental Protection Agency launched a probe to analyze the impact of drilling on air, land, and water in Washington County, Pennsylvania. “While natural gas operators employ various safeguards to minimize the risks inherent to the industry, legitimate concerns have emerged regarding potential environmental impacts,” says Bonnie Smith, EPA spokeswoman.
A step in the right direction is for the gas industry to continue improving its level of recycling wastewater, and to identify the chemicals used for fracking. Technologies that can capture and clean wastewater at the wellhead would be a valuable innovation, as well. In the meantime, fracking wells could be completely prohibited or dramatically restricted in dense population areas like Pittsburgh and the New York City watershed, where real and potential environmental/human concerns are simply too high compared to the benefits of drilling.
How bountiful is the Marcellus Shale? Reports vary. Investors, academia, politicians, energy companies, and government agencies are just a few of many industry experts who track the shale gas market and provide evaluations and predictions.
Experts have declared that enough natural gas is in the Marcellus Shale to fully meet the energy demand for the entire United States for as few as 6 years and as many as 100 years. Regardless of whether the Marcellus Shale contains 141 trillion cubic feet or 410 trillion cubic feet of natural gas, experts predict that 49% of energy will be generated by shale gas by 2035. By 2016, the United States will most likely become a net exporter of liquefied natural gas.
Much of the Marcellus Shale, which is thousands of feet below the earth’s surface, remains untested for long-term productivity. More than 2,400 wells were drilled between 2006 and 2011 in the Marcellus Shale region. As fracking continues, more information will be revealed about accessibility and environmental consequences. Future technological innovations could improve accessibility and increase productivity. Forecasts will evolve as all of these factors come into play.
In addition to the Marcellus Shale region, shale formations in the United States include the Barnett Shale in Texas, the Woodford Shale in Oklahoma, the Fayetteville Shale in Arkansas, the Haynesville Shale in Louisiana, and the Antrim Shale in Michigan, Ohio, and Indiana. Shale formations in China, India, Britain, and Eastern Europe countries provide potential natural gas resources, as well.
About the author
Kathy Kiernan is senior vice president of Affiliated Power Purchasers International LLC (APPI Energy), a team of energy experts that is endorsed by the American Society of Association Executives and 140 affinity groups. Since 1996, APPI Energy has assisted more than 3,300 organizations with locations across the United States to reduce operations expenses. To learn more, contact 800-520-6685, firstname.lastname@example.org, or www.appienergy.com.