Pennsylvania Investment Observer

Will future economic development be ‘driven’ by natural gas?

by Daniel J. Nestlerode

Not without standard rules and regs ...

We are in the first stage of the development of what seems to be a very large natural gas find in western New York, Pennsylvania and West Virginia. The Marcellus Shale is a 37 million acre natural gas bearing layer that is geologically similar to the Barnett Shale in Texas. The Barnett Shale, in development for a number of years, was the proving ground for the horizontal drilling and fracturing techniques that are making the drilling of the Marcellus Shale economically viable. A number of drilling companies are investing hundred of millions of dollars in leasing, preparing, drilling, fracturing and running pipelines to develop this Pennsylvania “play”. Yet, there are many pitfalls ahead that need to be addressed if central Pennsylvania is going to effectively benefit from our newfound resources.

Download reprint of the article from Pennsylvania Business Central.

Not long ago, Penn State's Natural Gas Exploration and Leasing Team took a trip to Forth Worth, Texas, which is in the heart of the Barnett Shale. Ken Balliet, Tom Murphy and Tim Kelsey and others went to Texas to determine the effects of the development of the Barnett Shale on the local economy, hoping to help determine what the Marcellus Shale might mean to Pennsylvania. While the two “finds” are geologically similar, the physical and governmental infrastructures in the two states are very different. Pennsylvania, in many ways is the WildWest as far as gas development is concerned. Our lack of regulatory infrastructure is a substantial problem for the drilling companies as government entities wrestle with rules, regulations and jurisdictions regarding land usage, taxing authority, roadway repairs, rights of way, reporting, and water quality to name just a few issues. It is incumbent on Pennsylvania's government at all levels to develop a regulatory infrastructure to help the drilling companies, local units of government and most importantly, landowners and citizens with a comprehensive framework so that this resource can benefit all of our varied interests. We do not need to stop gas development, as has been suggested, to put such regulations in place as other states have already done this work and can be called upon to facilitate Pennsylvania's efforts.

In the Fort Worth area, The Perryman Group analyzed the impact of the Barnett Shale. Their report is an indication of what may very well unfold here. The major impact already realized as a result of their natural gas development has been increases in retail trade (up 27%), eating and drink establishments (up 15%), new construction (up 9%), maintenance and repair construction (up 7%) and health services (up 6%). Furthermore, the population of the area in and around Forth Worth increased and the number of jobs in many areas expanded as the energy money has flooded into that area.

From an industry perspective, the local economy will benefit from a flow of land leasing revenues, drilling and well fracturing activities, pipeline land acquisition and construction and finally, the flow of royalties from sale of gas in the major eastern markets. While solutions must be found to handle a number of local problems arising from increased population, heavier roadway usage, retraining our workforce and working smoothly with industry, I believe we will still enjoy substantial economic benefits which will insulate central Pennsylvania from the economic slow down that is being experienced by the rest of the country.

Now is the time for all interested parties to come together for the benefit of all the folks of central Pennsylvania, those relying on our energy sources, the shareholders and employees of the drilling companies and those downstream of our homelands to benefit from what will likely be the best thing that has happened in central Pennsylvania in many years.

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