Could shale deposits bring mid-Atlantic states $2 trillion?
A new oil industry study says there is as much as $2 trillion in natural gas locked in shale deposits beneath New York, Pennsylvania, and West Virginia. But drilling for it can be fraught with problems, critics say.
Underneath parts of West Virginia, Pennsylvania, and New York is a shale formation with enough natural gas to make the region second only to Texas in terms of supplying consumers with the clean-burning fuel.
In fact, if the Marcellus shale formation, as its known, is fully exploited, it has the potential to create 282,000 jobs between 2011 and 2020 and result in more than $6 billion in local, state, and federal taxes, according to an industry-backed report released Wednesday. The value of the gas reserves could be as high as $2 trillion at current prices, the report suggests.
“A lot of people have no idea there is a super giant gas field just 150 miles to their west,” says Tim Considine, an energy professor at the University of Wyoming in Laramie and author of the study, which was paid for by the American Petroleum Institute (API).
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In order to obtain the gas, however, the industry would have to do horizontal drilling and hydro fracturing, or "fracking," of the shale formations in which the gas is trapped. Fracking involves a mix of water and chemicals to release the gas.
Environmentalists are concerned about the impact of the process on water supplies, possibly making them unsafe to drink. As a result of these concerns, New York’s Department of Environmental Conservation is adding horizontal drilling regulations to its environmental requirements, which have essentially frozen new drilling. Environmental groups in Virginia and Pennsylvania are raising similar concerns.
“I have lots of qualms about the drilling, you only have to look at other states to see the potential for damage in New York state,” says Robert Sweeney, a New York Assemblyman from Babylon, N.Y., and chairman of the Environmental Conservation Committee.
For example, he says, Arkansas, which ranks 7th in natural gas production and is developing its own shale formation, will be spending more on road repair because of heavy truck traffic from drilling equipment than it will collect for gas drilling.
“There has been damage to water supplies and explosions in these wells,” he says, adding “not to mention damage to a way of life where people are not accustomed to the level of activity and other issues that will occur once drilling is done in a major way.”
In an effort to entice lawmakers to allow drilling, the oil industry sponsored the report entitled, “The Economic Impacts of the Marcellus Shale: Implications for New York, Pennsylvania and West Virginia.”
In the case of New York, for example, Mr. Considine says the moratorium on drilling is costing the state $11 billion in terms of economic impact and taxes over the next ten years. Much of the drilling in New York would take place in rural and economically disadvantaged counties.
“This is an economic opportunity that has not happened in that part of the world in a very long time,” says Eric Wohlschlegel, API's media relations director.
Before approving any shale drilling, some states may wait for a federal environmental study that began in March on fracking. Mr. Sweeney says he has heard it could take anywhere from two to five years to complete.
The results of the study are critical because the industry needs to continually drill new wells to replace the gas as it is consumed. Most of the formations release the bulk of their gas deposits in the first three or four years, according to the report. Then, production drops significantly.
Under high development, the number of wells drilled would go from 2,727 per year to 4,842 per year, according to the report.
Sweeney says he is hearing from a growing number of people who are concerned about gas leases they have already signed. “Now that the information about some of the issues is getting out, I see a definite turn from what used to be a very supportive population to one where they are questioning what they are getting into.”
Even with few new wells in New York, production of natural gas from the shale formations is expected to expand.
Currently, Considine estimates wells in New York, Pennsylvania, and West Virginia are producing about 500 million cubic feet of gas per day. With just medium development of the Marcellus in the three states, he projects output could rise to 2 billion cubic feet of natural gas per day by 2011 and as much as 9.5 billion by 2020.