According to late 2012 estimates, the Marcellus formation could hold as much as 330 trillion cubic feet of gas.
The Marcellus is a region that encompasses a vast portion of the northeast: Pennsylvania, New York, Ohio, Maryland, West Virginia and parts of Virginia.
A slowdown in production has occurred because operators are waiting for new markets, greater pipeline infrastructure and rising prices.
On Friday morning, natural gas prices were $3.81 per million British thermal units, up .12 percentage points.
Natural gas prices are slowly creeping up, but it is not enough to invigorate more production.
But things are looking brighter.
The lower prices in natural gas has led to the enhancement of Pennsylvania’s industrial might, particularly steeling-forging.
And even though well production has slowed down, Marcellus is still known as the most lucrative natural gas field in the nation, with West Virginia and Pennsylvania producing some of the highest natural gas averages in 2012.
West Virginia and Pennsylvania are two among the top ten energy-producing states in the nation. New York production increased by 1 percent, but the 2012 production number of 26.4 bcf represented a 15 percent decrease from 2011 numbers of 31.1 bcf, the lowest level of production since 2000. New York’s fracking ban is a large component of lagging production, and a New York court has recently ruled that local governments have the right to maintain moratoriums on fracking.
But natural gas drillers looking for more infrastructure have cause for optimism.
According to the Energy Information Administration, half of all pipeline projects in the U.S. were concentrated on the East Coast in 2012 to relieve bottlenecking. And the Cove Point export terminal by Dominion Resources (NYSE: D) has a pending application with the Department of Energy for the export of liquefied natural gas to foreign markets with non-free trade agreements with the United States – something that could give drillers an extra incentive to keep up operations. Dominion has already signed deals with prospective buyers from India and Japan and is hoping to begin exporting LNG by 2017.
President Obama has signaled a desire to export more natural gas commodities abroad, and new Energy Secretary Ernst Moniz has been receptive to the idea before his new post as head of the DOE, but we’ll see if words translate into action.
As of now, only Cheniere Energy (NYSEMKT: LNG) and Freeport LNG have been approved for exporting abroad.
But regardless of the downturn in natural gas drilling, the energy boom has benefitted local economies.
Pennsylvania is the state with the most Marcellus territory. Fracking jobs in that state pays an average of $62,000 per year, roughly $20,000 more than average states.
And just like Texas and North Dakota, Pennsylvania is undergoing housing shortages. The hotel industry is adapting to the influx of workers flocking in from around the country who need temporary lodging. Some hotels are even converting their lodgings into full comfort hubs for oil and gas workers, where food is served according to shift schedules on energy fields.
The state is generating millions of dollars so counties in the surrounding Pittsburgh area can construct more housing.
And energy companies are eager to hire local workers, but many do not qualify for the positions, which is why local colleges are offering special training programs for the drilling boom. And companies are sponsoring job fairs for locals who are interested.
The Pennsylvania Housing Finance Agency already spent $7.9 million in 2012 to house more workers and to help the poor, elderly and disabled – all of whom have seen their rents skyrocket to an average of $1,500 per month because of the worker rush.
We’re seeing the same type of housing shortage creeping up in eastern Ohio, where many of the poor are unable to find affordable housing, but Ohio is not willing to devote significant resources to accommodate temporary workers. Pennsylvania, on the other hand, is investing in the Marcellus, since the play covers most of the state. Despite reductions in drilling, Pennsylvania natural gas production rose 69 percent to 6.1 bcf per day in 2012, according to the EIA. The Marcellus covers only the eastern half of Ohio, but economists say that shale oil and gas could contribute as much as $5 billion to Ohio by 2014, adding 66,000 jobs in the process.
The Pennsylvanian government has more riding on the line, since the state is the center of the Marcellus Shale. The restaurant makeup of Pennsylvania is also beginning to change. Barbeque and Tex-Mex based restaurants are sprouting up in small towns like Williamsport to draw in workers coming from Texas and states out west.
But there is a trade-off.
Residents have complained about contaminated water. There was even one case where a woman’s well blew up from methane contamination. And energy companies are facing pressure to use less fresh water, fueling a need to recycle dirty well water to keep fracking operations afloat.
But new technologies are being introduced to enhance fracking and conserve fresh water.
New Marcellus Technologies
There is talk of using acid mine drainage technology to convert acidic waters from abandoned mines into frackable water. This idea has been floating around since 2011, and a few companies are interested in exploring this new field. The idea has also received positive reception from the Pennsylvania Department of Environmental Protection (DEP).
Until then, however, energy companies are sticking with well water as the best solution.
Halliburton (NYSE: HAL) has a heavy hand in water recycling, using its H20 Forward recycling system on wells operated by XTO Energy, owned by ExxonMobil (NYSE: XOM).
Other heavy hitters in the Marcellus Shale include Chevron (NYSE: CVX), Anadarko Petroleum (NYSE: APC) and EOG Resources (NYSE: EOG).
These companies could very well take advantage of the next best piece of technology to boost production numbers.
A new piece of fracturing technology would effectively replace the sand component of fracking. During the fracturing process, a mixture of sand, water and chemicals are blasted on shale rocks to extract natural gas, bringing it to the surface. Proppants called Penn Prop are beads recycled from recycled glass and other waste items to keep cracks open as the gas is being extracted. This method alone could increase Marcellus shale production by 50 percent.