New records released by the Pennsylvania Department of Environmental Protection on Friday reveal over 85% of state’s shale gas production is now coming from just 6 of the 67 counties that make up Pennsylvania. This follows an eerie pattern of contraction in productive shale gas areas as seen in the Texas Barnett shale formation. Fully half of Pennsylvania shale gas production comes from Bradford and Tioga counties on the New York State border. The state’s records now detail two major concentrated areas of production; one in the upper northeast corner of the state near Scranton and a second smaller area in the far southwest corner of the state not far from Pittsburgh.
This is a far cry from the industry’s early on claims shale gas reserves were to be found in abundance throughout an entire shale formation and could therefore be obtained using a “manufacturing model” of widespread and uniform drilling which resulted in a land rush that threw the state into chaos and uncertainty as the shale gas boom took off in Pennsylvania over the last 5 years.
The majority of Pennsylvania’s Marcellus shale gas production concentrates in the counties of Bradford, Susquehanna, and Lycoming counties along the upper state border with New York State and in Washington, Tioga and Greene counties near Pittsburgh close to Ohio. These 6 counties, representing less than 10% of the state’s 67 total counties, accounted for an estimated 848 billion cubic feet (Bcf) of shale gas production. While a total of 30 counties reported some level of shale gas production, just 19 counties reported at least 1 Bcf of shale gas production. Only three counties, Bradford, Susquehana and Lycoming, all in the upper northeast corner of the state, accounted for nearly 60% of total production.
Such geographic concentration of shale gas output calls into question the industry’s numerous and overheated claims that trillions of unproved shale gas reserves were spread uniformly throughout the entire Marcellus shale formation. Or that such a distribution would benefit the majority of Pennsylvanians.
Back in 2009 such unproven claims were parts of an all-out race by companies like Chesapeake Energy to grab millions of acres of land mineral leases. The land grab frenzy combined with massive industry political donations and industry funded high profile Penn State non-peer reviewed geology and economic development white papers. All of this played key roles in creating a mad rush resulting in the shale gas drilling boom in Pennsylvania. This led to a frenzy of landowners selling their mineral rights at prices along with land and water use all favorable to the shale gas companies as most landowners had no real experience dealing with large and aggressive oil and gas companies. As shale gas drilling took off, an outmanned and under resourced state environmental agency struggled to keep up with the shale gas industry.
As is now the case with the Pennsylvania Marcellus formation, the Texas Barnett Shale play contracted similarly to two core areas in an around greater Fort Worth, Texas. In 2007 the Barnett was being touted to investors as a 9 million-acre play which held equal shale gas production. Yet by 2009, Chesapeake CEO Aubrey McClendon told Bloomberg News, “There was a time you all were told that any of the 17 counties in the Barnett Shale play would be just as good as any other county. We found out there are about two or two and a half counties where you really want to be.”
At the same time in 2009, Chesapeake Energy was then telling investors that its 1.3 million plus acres of Marcellus mineral leasing rights were a solid investment because, “The Marcellus Shale play may ultimately become the largest natural gas field in the U.S. Not only has shale gas production contracted to largely a handful of counties within Pennsylvania, less than a year and half later in 2011 Chesapeake Energy and host of other large shale gas drillers were leaving the state in droves setting off for another frenzied drilling boom this time in Ohio for the claimed Utica “wet oil infused” shale gas.
As drilling has declined and contracted in Pennsylvania there are numerous land owners with now nonproductive land leases. Or in some cases wells which have been drilled but capped or “shut in” as the industry describes it thus depriving land owners of promised royalty payments. The value of land leases has also declined significantly according Gomarcellusshale.com, a land owner’s web site portal, with recent comments about leasing prices including one which read, “The real leasing games have begun. Last year we saw lease offerings as high as $5,850 and 20%. Since then offers have dropped to as low as $2,500 and 15%.”
In addition to field contraction of drilling in the Texas Barnett, recent shale gas well field production data in that formation appears to be showing a flattening of output despite more wells coming online. Several industry geologists and financial analysts are estimating annual field decline rates in the Barnett in the range of 25% to 30% annually. Partially as a result, large financial write offs of unproved shale gas reserves recently occurred throughout the industry earlier this year.
The belief here in Pennsylvania appears to be the Marcellus is somehow going to be different from other shale plays thus allowing the state to become the, “Texas of natural gas” according to Gov. Tom Corbett. His administration has been heavily biased in favor of shale gas over other new energy sources such as solar and wind development. Last week he helped pushed through new legislation to allow shale gas drilling on state owned lands hoping to stimulate more drilling within the state. But so far the concentration of shale gas to a few defined areas along with a marked slowing of drilling within the state over the last 18 months in Pennsylvania mirrors the recent history of the Texas Barnett.
Bill Powers, an oil and gas industry expert who researches the industry extensively and will publish a book on U.S. shale gas development early next year recently commented, “Unless there is something radically different about the Marcellus formation, based on the experiences of the Barnett and Haynesville shale formations, it’s reasonable to assume something similar will occur over time in the Marcellus.”
Powers further added, “The industry’s own history has shown no conventional and/or shale gas play anywhere in the world is immune from production declines with some, as in what we are now seeing with shale gas, much more immediate than others.”
To learn more about shale gas production in Pennsylvania, go to: http://www.fractracker.org/
To learn more about Chesapeake Energy’s move away from Pennsylvania dry shale gas, go to: http://www.cbsnews.com/8301-505123_162-43240336/chesapeake-energy-turns-tail-on-natural-gas-looks-for-oil-instead/
To learn more about Bill Powers and his excellent insights into the oil and gas industry, go to: http://www.powersenergyinvestor.com/
Disclaimer: The writer holds no U.S. securities in any shale gas company nor is he a member of any environmental group or anti-fracking group. He holds no financial arrangements with any of the entities and/or individuals listed in the article. He is not being paid to write by any shale gas industry group or any enviromental group, pro or con.