Transcript Marcellus Shale Formation

Pennsylvania’s Shale Gas
Industry – What’s Ahead?
PIOGA/Independent Oil and Gas Producers
• PIOGA: largest and most diverse
association of oil and gas businesses,
over 750 members
• Represent conventional and
Marcellus/Utica shale producers
• Pennsylvania activity:
 Conventional natural gas/coal-bed methane well
 Shallow oil wells
 Unconventional/Shale wells
Pennsylvania Oil and Natural Gas History
• Fueling Pennsylvania for
more than 150 years
• 1859: Drake Oil Well near
Titusville, “The start-up
that changed the world”
• 1878: Haymaker Well in
Murrysville, First
commercial natural gas well
in U.S.
• 350,000 vertical wells
drilled
• 120,000 wells remain in
production today
• 60 years of hydraulic
fracturing
Marcellus Shale Formation
• Geological formation created
about 380 million years ago in
Middle Devonian age
• As formation aged and decayed,
natural gas trapped in the shale
• Formation rests a mile or more
below surface, thickness
between 50-200 feet
• Approximately size of 95,000
square miles
• Reserves estimated at
approximately 500 trillion
cubic feet
Impact of Shale Gas on Pennsylvania
Jobs, Jobs, Jobs
 Over 250,000 jobs added in PA
 According to Raymond James analysts
90% of PA jobs added from 2005-2012 come
from this industry
 Among the highest paying jobs in the state
Jobs Controversy?
Whose Numbers to Believe
In 2008, an Allegheny Conference on
Community Development study found 26,500
jobs relating to the legacy oil and gas industry
in Pennsylvania.
Several groups are claiming under 30,000
jobs exist from the shale industry today!
 Seriously???!!!
New Business?
One PA city has added 85 new companies just
to service the Marcellus Shale industry in
Pennsylvania.
Not to mention the existing hotels,
restaurants, fuel dealers and other service
and supply businesses that have benefitted
and in many instances added employees to
meet the needs of the industry.
Increased Natural Gas Production
 In 2007 Pennsylvania producers supplied 25%
of the Commonwealth’s natural gas needs.
 In 2014 thanks to shale gas, Marcellus and Utica
production account for 18% of the US natural
gas supply!
Decreased Natural Gas Costs
 In May 2008 natural gas prices were at $13.70
per MCF (thousand cubic feet).
 Today prices are at 2.71 per MCF, with PA
shale producers receiving far less at the
wellhead.
 Translates to lower gas prices delivered to
residential, commercial and residential
consumers.
Benefits to the Commonwealth
Business and Consumers Benefit
Consumers have more discretionary dollars
to spend
Businesses and manufacturers have lower
overall energy costs
Chemical and Fertilizer Industries have
cheaper feedstock.
Reduced carbon footprint
Higher Tax Revenues
State, Local and Federal
Income taxes
Sales taxes
Local Impact Tax
New Business Opportunities
Decreased energy costs encourage
manufacturing rebirth
Natural Gas Liquids bring opportunity for
Northeastern US chemical and plastics industry
Adds to Pennsylvania’s ability to attract new
business development.
Challenges to the Future
Activists determined to stop fossil fuel
development
Low commodity prices
Regulatory overreach
Taxation
Infrastructure
Anti-Fossil Fuel Activism
The oil and gas industry has been targeted by
anti-fossil fuel activists determined to destroy
the industry.
They have mounted an effective
disinformation campaign and galvanized a
protest movement to undermine every effort
to develop our resource base.
Then What?
 Can we run our economy on windmills and solar
panels? No environmental impact on those energy
forms – right?
 How about biomass? We can convert more land to
growing switch grass or just convert food plots
instead –right?
 No feedstock for chemical and plastics industry. We
don’t need those for everyday uses or medical
supplies or medicines nor anything else – right?
The Result
Elected leaders buy into the misinformation,
draft legislation, enable regulation and
discourage the industry in fear the public will
cost them their jobs.
Hysteria rules instead of common sense
regulation and legislation and development is
discouraged.
Decreased Activity
Oil and Gas Impacts Jobs
Decreased Activity Means Fewer Oil and Gas
Jobs
Means Less Support Jobs
Increased unemployment in related jobs
Less development discourages investment in
manufacturing further damaging the job
market.
Lower Tax Collections
Fewer Dollars Spent – Less Tax
Decreased activity – Lower Impact Fees
Less Investment in PA
Government Policies Affect the Economy
Excessive taxation kills investment
Excessive regulation increases costs, lowers
investment
Excessive delays discourages investment
Every State has a Severance Tax
 The ultimate sound bite logic.
 How does that square with the taxes other
states have?
 What is the overall tax structure in each
state differ?
 What else is different in PA?
What other costs of business are in PA?
How about the Floor for Severance Tax
 Setting a floor price far above what
producers are getting for their product is
patently ridiculous.
 If you earn $40,000 per year should you be
taxed at $100,000?
Victims of our own Success
Shale plays across the nation have added
production nationally which has created an
oversupply of natural gas. Natural Gas
producers are receiving prices lower than
those that would justify further drilling.
Then why drill?
Tax Fairness
Please explain to me the fairness in taxing
one extraction business different from any
other.
Please explain to me how taxing any
business in PA differently than any other is
fairness.
Infrastructure
Challenges to Pipeline and Facilities
Construction is Major Impediment
Local Concerns - NIMBY
Anti fossil fuel activists
So What is the Future?
 The future could and should be bright.
 PA should be able to attract jobs and
manufacturing to the Commonwealth
 Government could act as a partner rather
than a hindrance to developing this resource
 Natural gas should be the foundation of
economic rebirth to the Commonwealth
Competitiveness
 To change the should and could to will
means PA must be competitive with other
states
 That will take cooperation between business
and government
 We must deal with the social license issue
If We Get This Right…
Pennsylvania has a future that should be the
envy of any state – and many nations
Wonderful opportunity for jobs in industry
and manufacturing
Stable Economy
Keep our kids at home!