You're right to point out that Marcellus Shale has become more of a household term, and as soon as that's happened ... it's probably just as important to talk about the Utica Shale, which is a deeper formation that holds a tremendous amount (of natural gas) and has a footprint that's even larger than the 95,000 square miles of the Marcellus. The Panhandle of West Virginia and where we're sitting right now (Canonsburg, Pa.) is very much in the center of all that gas and the ability to tap gas, to break up the very tight shale rock and liberate that natural gas has really changed how we, as a country, are looking at our energy prospects and what are the opportunities that come to us from a competitiveness standpoint, from an energy security and the associated geopolitical ramifications of that, and here we are right in the middle of it where we can have the benefit of both using that gas locally without transportation charges ... and also the associated economic and the responsibilities that come with developing it locally.
We have done some analyses over the last few years ... a couple numbers that can start to put (the investment) into context: In 2008 alone just in Pennsylvania ... around $1.8 billion went to local landowners. Another important indicator of this, we did a calculation of how many publicly announced investments have been done over the past several years in the broader region, and we're at $22 billion, with $17.9 billion of that in 2010 alone. Those are dollars beyond the investments that are being done day in and day out, those are new investments by both national and also international countries investing in what is seen to be tremendous opportunities economically from what's being done on the ground here.
The Bayer project is very exciting, with the asset base of the New Martinsville facility, the safety programs there, the workforce that's in place, it makes for a good place to put additional manufacturing around ethane, which is a byproduct of the gas development in our wet gas region. It's one of probably almost a dozen projects that have been announced, they won't all necessarily happen but at least a couple of them will. I think what it speaks to is that methane is good for heating our homes, cooking our food, but we don't always think about all the other uses, as a raw material in manufacturing, as Bayer uses it for; as transportation fuel.
There are a lot of different ways that natural gas is used by businesses around the region. ...
When we look forward and see a large supply from the Marcellus and other shale plays right now in the U.S. we can predict those are going to be more stable costs for natural gas than it has been, and all sorts of business decisions can be made assuming this is going to be a resource available for a long time.
The choices to drill, to develop a leasehold, there's a lot of factors that come into that - the amount of years left on a lease, the local conditions around which you're able to drill, and obviously commodity price is probably one of the most important. So where as development still will be occurring in the methane rich areas ... you're seeing with relatively higher prices of oil than gas additional interest in those wet gas areas. If you think of it, about 75 percent is the amount of methane in a wet gas area, 25 percent are these other liquids. And each one of these liquids has a market, has a value, whether it be propane that will go to also heating and other industrial uses, we talked about ethane ... all those products have value and can create a value chain and the associated manufacturing and other supply chain jobs that come along with them. And getting it here as opposed to having to ship it in from somewhere else present obvious advantages.
... But even beyond just the (gas byproducts), the presence of natural gas as a feedstock, as a raw material has manufacturing benefits and can result in a chemical industry rebirth well beyond just a single ethane cracker facility.
When you mention pockets, that's probably not the way to think about how hydraulic fracturing helps us get to oil and natural gas. It's more the very, very tiny spaces in which the hydrocarbons are trapped that hydraulic fracturing helps you get to.
Hydraulic fracturing has been used across the country for oil and gas development for decades now and is very much a part of oil and gas development around the country, as it is here.
- Video clip of Kathryn Klaber discussing the Marcellus Shale natural gas play
- Video clip of Kathryn Klaber discussing `wet gas' that is found in the local area
- Video clip of Kathryn Klaber discussing drilling concerns in New York State
- Video clip of Kathryn Klaber discussing jobs in the natural gas industry
- Video clip of Kathryn Klaber discussing the economic impact of the Marcellus Shale
- Video clip of Kathryn Klaber discussing the credibility of the Marcellus Shale Coalition
- Video clip of Kathryn Klaber discussing a possible ethane cracker facility
- Kathryn Klaber full interview with the Sunday News-Register
Many of my members are looking across their entire portfolio, whether it be in North Dakota, whether it be in the oil sands of Canada ... every company is making their own decision as to where their assets are, how much oil versus gas that they choose to develop based on their capital development plan and as you pointed out, the relative price of natural gas versus oil.
That's an issue with which I'm sure you could find better experts than me, but there are audit procedures in place, and ... the financial community needs to know what kind of gas is being produced for lots of reasons. ...
I think it's important for a lot of different issues, including this one, that when someone is signing a lease that they have an attorney review not just all the other contents but make sure to understand how that production value is going to be determined and be fully informed as to how that's being done over time. I think that's in the best interests of the oil and gas company as well as the property owner.
It's not unusual to have split estates. ... We have that situation here. You wouldn't treat a surface owner who's not a mineral rights owner any different from an environmental protection standpoint. ... I've heard of ... a lot of situations of a company that may be drilling on a property that does not have the mineral rights will really look at how to be a good neighbor with that individual ... because that's a relationship you really want to make sure is as strong as it could be. One thing that's important to remember with horizontal drilling is there's a very small fraction of the total area being drilled relative to where that well site is. So you can have lots of surface owners who are not mineral rights owners who will never see the well because it's going horizontally under their property. I think that helps when there's split estates when the drilling is happening underneath but not on the surface of those split estates.
No, I'm not concerned that it's going to sweep down. If it would have, it would have done it by now. When you look at the fact that (1,500) wells were drilled last year in Pennsylvania alone, many of those just south of the (New York) border, done so safely ... with incredible supply chain of local companies involved with that, with landowners that are happy to be benefiting ... I think what you are starting to see in the southern tier of New York is mineral rights owners who cannot believe they are continuing to be denied participation in this overall development. ... What they're doing there clearly is trying to get through a process, taking a lot longer than any regulatory agency should take ... You should be processing this to get to a conclusion, and that conclusion might be yes or no ... I think everyone deserves more certainty than we're seeing in a place like New York.
And remember, all through that moratorium, people in New York are using low-emissions, clean burning, reasonably priced natural gas to heat their homes, run their businesses, to cook their food. I see a little bit of a concern that there's not a broad-based understanding that to do this, we need to (drill).
I don't have those numbers absolutely current, but I did look at labor and industry data a few months ago ... When I looked at oil and gas, the number of injuries were actually lower than the equivalent than the category that was museums, zoos ... but no incident is acceptable or a good thing. ... We have a safety committee at the coalition that is doing tremendous amount of work on best practices around who's operating at a site, what kind of prequalifications do they have in terms of safety training, first responder training, we've now certified over 2,400 first responders in a pretty basic training but one that needs to be rolled out across hundreds of communities to be sure that those local fire departments know what they're facing if they would have to respond to an incident. ...
Scientists at Cornell University also have criticized fracking, claiming that leaks of methane at drilling sites can make natural gas an even worse emitter of gases blamed for warming the planet than coal.
Sen. Robert Casey of Pennsylvania also continues to push the FRAC Act in Congress, which would give the EPA more authority to regulate fracking. What is the industry's response to these concerns?
There are some of those that are legitimate concerns - we need to do process improvement, continue to get better - and there are some, like the Cornell study about greenhouse gas emissions, that is just blatantly irresponsible academics. I'll address those two things separately because I think they're in completely different camps.
The issue around hydraulic fracturing, I think that word has gotten some broad connotation about natural resource extraction in general, not the fact that it's just one phase of a very sophisticated, high technology way of bringing fuel and energy to Americans. The concerns around hydraulic fracturing have been all over the board, and I'll tell you there are ones that are legitimate, and there are ones that are not well founded. The fact that hydraulic fracturing, over a mile below the surface, can somehow cause vertical migration of hydraulic fracturing fluids and methane up through a mile of geology has never been shown, has never been confirmed. And when you look at the data from some of the companies, you cannot picture being able to have that process down below migrate up through the earth to a drinking water supply that might even be 1,000 feet deep. So that's important to recognize that what's going on beneath the surface is being managed well. ... The casing around the wells is a very important part of that. How do we build these wells to keep what's inside inside, and to keep what's in the surrounding geology outside. And that's where we've had some upgrades on regulations ... to make sure we're doing that well. Where we have to be ever-vigilant is at the surface. How do you avoid this fluid at the well site, having a spill, having some kind of contamination occur because of bad housekeeping. That's where the erosion sedimentation plans, how we build the sites, how protective they are to keep anything that's on the well pad on the well pad. That's what I think is important as we look through any violations that have been levied, that they are about surface management, and not about what's going on a mile below the surface. ...
The issue of greenhouse gas emissions ... That study, we could spend an hour going over the problems with that study. But suffice it to say, there was an ignoring of the cleanliness of this fuel when it's burned, that was totally not part of the calculation. ... Number two, the researchers chose to ignore factors that have been approved ... that are relied upon as the best science, and why one university somehow has better science, and only change those factors for natural gas. ... Thirdly, used pipelines that are very long-haul pipelines overseas and in parts of this country that have nothing to do with what we're seeing here in the Marcellus, which is if you're developing this gas locally you have to take it less distances. And then they made a major misappropriation by saying that any gas lost over that long period of time went to the atmosphere when it fact that gas is lost to other things like fuel to propel that gas along those long distances. ... Even the researchers themselves are on tape saying this data on which the study is based is pretty shaky. I think it is a disservice not just to the American people but when stories like that then get picked up overseas and have been based on calculations that would not hold up under any reasonable peer review and that are very easy to look at and say 'You've got to be kidding me.' So that's my view on that greenhouse gas story.
That is a really good question. Our full members are the majority of the exploration and production companies in this part of the country, as well as a growing number of midstream companies, those that are building the gathering lines to get the gas from the well head to the companies that would distribute it to our homes and businesses. Those companies have a lot at stake, not just financially but their global reputation is very much riding on how well they do the job here in Appalachia. But as you pointed out, that can't be where the story ends or it is just a self promotion. That's why the leadership of the coalition made the decision over a year ago to have another set of businesses be part of the organization, we call them our associate members. They can range from large multi-national corporations themselves that are selling safety equipment, or steel pipe and tube or other materials into our market. ... You mentioned Bayer earlier, having Bayer with a big stake in this industry is very important to show a broader interest in what this means for energy security, what it means for the regional economy, and frankly what it means for clean air. In all these studies that have been done it's amazing that no independent has come out yet ... showing that by just switching some of transportation fuel over to natural gas, as well continuing the increase in electricity generation by natural gas can pretty much allow us to meet our national ambient air quality standards for particulate matter for nitrogen oxides and other criteria pollutants just by that burning. I think that this industry will continue to need a lot of stakeholders, not just from other businesses but from academia, from regional chambers of commerce, from the stakeholders in the environmental community that understand the footprint of this gas production is a lot smaller than a lot of other alternatives out there right now. The agricultural community, the sportsmen's groups who can see partnerships in this industry having their groups better off tomorrow than they were yesterday if we all do it right, together.
If you look in northern West Virginia, where we are here in Canonsburg, in Williamsport, Pa., in Youngstown, Ohio, with the brand new steel plant and all the supply chain around there, I think it becomes pretty clear that a handful of jobs on a rig doth not make the workforce around this industry. Those are very important jobs and by their nature they are transient. ... As you are developing a natural resource, those jobs are moving with that rig. It can be a Texas-based team that picks up a couple Pennsylvanians or West Virginians or Ohioans on the way. That's all good, but that is such a tiny percentage of the overall jobs. Our full members and associate members, if you would look through the jobs they have available on our jobs portal, where they link directly to the open jobs that are waiting to be filled in this industry in this part of the country, you'll see hundreds of jobs. They range from accountants, HR managers, land agents ... just looking outside the window here, there are two (natural gas company) buildings that are being built right now, there's construction firms, the building management for those offices, it goes on and on throughout the types of jobs. A handful of folks running the rigs, sure, more of those being local would be great, and we're continuing to go in that direction because it's a lot more economical to have folks go home to their house and hour or two away instead of a plane flight away.
It's interesting. I've been on a lot of well tours, and when you go on a well tour you don't necessarily go and talk to who's providing the catering to the group that day. You don't go back and find out what local company did the site preparation, or the surveying work. What you're seeing on that well tour is the single person sitting in the control booth, and that person by their very job title is transient. They move with that multi-million dollar rig. ... Meanwhile, you've got a dozen contractors right on that site, the vast majority of them are local contractors, the vast majority of truck drivers that enter and leave the site every day are working locally, you don't bring people in from Texas and Oklahoma to drive that truck. So I do think there is an incredibly disproportionate focus on just who's running that drilling rig that day.
I have the pleasure of seeing those hundreds of people just within our coalition alone on a weekly basis who are either natives of Pennsylvania or who have come to West Virginia, Pennsylvania or Ohio to raise their families. Folks right here in this office, a lot of them have boomeranged back because their the ones who want to come back and be part of the communities, raise their families where they grew up and we're just growing jobs here to do that.