Industry spokesman opposes gas extraction tax
The economic boom that the Marcellus Shale natural gas formation could bring to Pennsylvania could be substantially slowed if an extraction tax is enacted on it, according to the executive director of the Independent Oil and Gas Association of Pennsylvania. Lou D’Amico, also the co-director of the Marcellus Shale Committee, told the editorial board of the Herald-Standard Monday that taxing oil always sound good, but taxing natural gas would “all but end shallow well production” and would slow down Marcellus Shale gas production. State Rep. Bill DeWeese, D-Waynesburg, has introduced a bill that would allow the natural gas brought from shale to have value.
The idea to tax the natural resource is on the heels of the movement to tap into the gas reserve, which inhabits a substantial portion of the state, including southwestern Pennsylvania.
D’Amico said southwestern Pennsylvania is currently the most active drilling area, specifically Washington, Fayette and Greene counties. He said half the producing wells in the state are in the tri-county region.
Last year companies were paying $3,000 an acre for leasing bonuses, D’Amico said.
“We’re going to be creating millionaires in Pennsylvania,” he said of the amount of money that could be made by property owners.
D’Amico said, however, that it could take companies extracting the Marcellus Shale gas reserve three to five years to turn a profit and it would be nice to get a profit before the state starts taxing it.
The formation is expected to create 100,000 jobs over the next decade. Some of the needed jobs include geologists, drillers, equipment operators, surveyors, engineers and landmen.
“It’s a big job generator and we need to develop the workforce,” D’Amico said.
D’Amico said the Barnett Shale formation in Fort Worth, Texas, is 5,000 square miles, which is substantially smaller than the 95,000 square miles that encompasses the Marcellus Shale. The Marcellus formation extends from southern West Virginia through Pennsylvania to New York.
He said the Marcellus Shale could make Pennsylvania “the Saudi Arabia of natural gas.”
During a presentation on the Marcellus Shale at Uniontown High School, D’Amico said currently Pennsylvania imports 74 percent of the natural gas that is used here. He said the new horizontal drilling technique for Marcellus Shale wells has a smaller footprint than the vertical wells because up to 24 wells can be drilled from one pad.
A horizontal well can be drilled 5,000 feet, and D’Amico said most wells are 3,000 feet deep.
D’Amico said companies must have permits to use the water for the wells.
He said at the peak production, about 30 million gallons per day will be used, which is substantially less than other industries, including coal mining. D’Amico said one power plant uses 60 million gallons per day.
Also, D’Amico said because hundreds of loads of equipment will be used for the wells, the roads would be improved along the way.
For horizontal drilling, first companies drill vertically and then branch off from the original drill site in horizontal directions. Vibrations are sent through the pipes to fracture the shale. D’Amico said shale is compressed mud with little permeability. The shale must be fractured for the gas to be extracted.
D’Amico said to “frac” the shale, a combination of 90 percent water, 9.95 percent sand and .05 percent chemicals is used.
He said the gas will travel up to the end of the shale formation but not out of it, and thus the drilling process will not contaminate water. The drilling process includes three layers of pipe.
He said wells one mile deep in the ground are well isolated from surface water, adding that everything that is done is regulated by the state Department of Environmental Protection.
While there aren’t currently enough trained people for the future jobs in the industry in the state, D’Amico said the goal is to train people in Pennsylvania.
Some of the people who attended the information session asked questions about neighboring gas wells extracting gas from other properties.
D’Amico said there is one way to tell which property the natural gas is coming from and the “law of capture” states that the owner of the gas well that captures the natural gas gets the royalties from it.
Although industry representatives declined to disclose how much they are paying for leases or royalties, a spokesman from Atlas America said in April the company discontinued drilling shallow wells. Marcellus Shale wells are generally much deeper.
Officials estimated that the average lifespan of a Marcellus Shale well could be 20 to 30 years.
For more information about the Marcellus Shale gas, visit www.pamarcellus.com. Lou D?Amico, executive director of the Independent Oil and Gas Association of Pennsylvania, explains the benefits of Marcellus Shale gas drilling Monday during a meeting with the Herald-Standard Editorial Board. Robert Esquivel/Herald-Standard