The Marcellus Shale| August 2020
Field Overview
The Marcellus Shale is the largest gas play onshore in the US. Located in the Northeast, it supplies the high demand markets along the East Coast. Most of the basin’s gas is produced through unconventional methods, while the little oil produced is mostly by conventional means. Some of the top formations include Onondaga and the Huntersville.
State Drilling Statistics (End of August)
Active Drilling Rigs in Basin- 26
Total Rigs in Pennsylvania- 18
Total Rigs in United States- 254
Total U.S. Rigs down 72% YTD
Financial & Economic Updates
Pennsylvania’s Pricey Permits
In early August there was the implementation of a new regulation that raises the price of shale gas wells in Pennsylvania. Earlier this year, a company would have to fork over $5,000 for a shale gas well permit, but today that number would run you $12,500 or 150% more. These permits are the basis of funding for the Pennsylvania Department of Environmental Protection regulatory program, so prices are adjusted from time to time to keep pace with costs of running the program. Even so, why the big jump? Well, the new price was based on an analysis of permitting trends between 2014 and 2017 which was already outdated before COVID absolutely tanked prices and limited drilling investment. In the first half of 2020 only 523 permits were issued which is the smallest quantity in any six month period since 1993. This is likely a combination of trends, and companies being scared to drill since permits are only good for 1 year.
State Highlights
Marcellus Rejoices for Methane Leak Rollback
The Trump administration has been working hard at undoing Obama era rules that were implemented to limit greenhouse gas emissions and went straight to Pittsburgh to make things official. Andrew Wheeler, the EPA administrator, was there to sign the rollback and praise the strategies that he feels are certain to “strengthen and promote American energy.” The EPA first proposed the rollback last year after accusing the Obama administration of enacting a legally flawed policy that, when revoked, will save companies tens of millions of dollars a year in compliance requirements without changing the trajectory of methane emissions. Even so, many states (California included) are expected to draft up a lawsuit and claim that the changes are illegal. Lifting these regulations could relax a lot of the regulatory pressures for small and mid sized companies, but time will tell how long this policy repeal will last.
Strong Support for the Industry in the Marcellus
A recent poll from API Pennsylvania uncovers the tremendous local support for the oil and gas industry. The poll revealed that 90% of Pennsylvania voters value American energy affordability, security, and independence. Additionally, the polling shows that 60% of registered voters in the battleground state would be more likely to vote for candidates who support access to natural gas and oil produced in the US. This support likely stems from the fact that Pennsylvania is the second largest natural gas producer in the country. This appears to be an accurate portrayal of results in the state as a similar poll showed overwhelming support for domestic energy development and independence. The people of Ohio seem to be aware of the fact that much of their economy hinges on the development of natural gas plays, so they are likely to vote by that standard.
Refining
Marcellus Production
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www.eia.gov
www.drillinginfo.com
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