29 November 2008
By Marc Levy
Houston, PA. - Illuminated drilling rigs glow for miles from atop flattened hills when night falls in this rolling farm and coal country in southwestern Pennsylvania.
Tanker trucks back up traffic on two-lane roads, and Texans wearing heavy coats and muddy boots fill Shelley's Pike Diner at lunch as landowners hope royalty checks will make them rich.
The deteriorating economy and a drop in natural gas prices has slowed a rush to snap up mineral rights to the thick, black rock called Marcellus shale, which stretches deep underground from West Virginia to New York state and could become the nation's most prolific natural gas reservoir.
Drilling goes on, though, as exploration companies seek to make their investments pay off, changing places like Houston, an old iron and steel town near Pittsburgh, which has become the epicenter of the exploration boom.
Even amid the nation's economic troubles, the companies have a powerful incentive to keep going. Natural gas produced and sold in the East commands a higher dollar than the gas now extracted and transported from fields in Texas, Louisiana and other mid-continent states.
"It's in the middle of the best place in the world to sell gas," said John Pinkerton, chairman and chief executive of Range Resources Inc., of Fort Worth, Texas.
Range Resources and several other major players say they even plan to increase their drilling in 2009, helping the Marcellus shale region avoid the bigger pullbacks happening in other, more established gas fields in places such as Texas and the Rocky Mountains.
So far, several dozen wells have been hooked up to pipelines that carry the gas to customers, said Penn State University geoscientist Terry Engelder, but that number could climb into the hundreds within a year, as companies extend pipelines and hook up the more than 400 wells that officials in West Virginia and Pennsylvania say are completed or almost complete.
Range Resources and Pittsburgh-based Atlas Energy Resources LLC have drilled nearly all of their 200-plus Marcellus shale wells in southwestern Pennsylvania, and many more are in the works.
"They're just drilling them everywhere," said Nancy McBane, a retiree whose house sits between a new well and sprawling processing station just outside Houston.
The massive gas formation is trapped 5,000 to 8,000 feet underground in an area covering more than 50,000 square miles - about the size of Greece - and stretching across New York, Pennsylvania, Ohio and West Virginia.
The industry has long known about the gas in the Marcellus shale - but it wasn't until gas prices rose and a new shale-drilling technology was proven in Texas over the past decade that companies decided it was profitable to pursue.
If the Marcellus shale ends up producing even a small fraction of the recoverable gas that Engelder has projected to be there, it will be the largest gas field ever in the United States.
"It's like having one of the giant gas fields from the Middle East under Pittsburgh," said Pete Stark, a geologist and vice president of Colorado-based energy consultant IHS Inc.
Exploration of Marcellus shale is in the early stages as companies work to identify the best drilling prospects. It could be five or 10 years until production is fully engaged because there is a relative dearth of gas pipelines, rigs and trained workers in Appalachia to support the deeper, horizontal wells needed to extract gas from shale.