Danger, Will Robinson! Danger!

Posted by By at 8 June, at 17 : 13 PM Print

Lower-than-hyped revenue, plunging natural gas prices, and growing environmental concerns could spell trouble for the Marcellus Shale industry.

Its attempt to recover corporate value could be problematic for Pennsylvanians at both ends of the state, as natural gas producers leave the northeast for the, hopefully, more profitable western hills.

Back in May 2011, the Pa. Department of Revenue said it planned to collect $102.7 million in its 2010 personal income tax collections on royalties its residents would receive from gas produced from the Marcellus Shale. In November, someone discovered a $56.5 million error. State coffers only received $46.2 million.

Apparently, an overzealous effort to help hype Gov. Tom Corbett’s pet campaign contributors resulted in a little rushed miscalculation by the revenue department.

Industries often boast of the increased jobs and taxes they will put into local and state fiscal systems, and just as often, local and state revenue counters say they cannot provide such specific numbers. The Marcellus Shale industry was a notable exception.

Fracking (the colloquial name for hydraulic fracturing), also called “unconventional drilling,” involves drilling a well about 8,000 feet down, and then up to about 13,000 feet horizontally. Three to five million gallons of fresh water, specially formulated sand and up to 250,000 gallons of chemicals, some of them highly toxic, are poured into the well at great pressure, shattering the deep shale and releasing the coveted gas.

The freshly freed gas pushes the poisoned water back to the surface, where some is reused, some is treated and dumped back in nearby streams and rivers, and some is pumped into other deep wells – such as those blamed for several earthquakes in the Youngstown, Ohio area, the worst of which was a 4.0 shaker on New Years Eve Day.

While those away from the drilling fields see little effect from the industry’s efforts, those within it notice promised riches, flammable water, and eviction notices.

Similar concerns in Ohio prompted the Muskingum Water Conservancy District, across the state line from Pittsburgh, to announce this week a move that could spread to Pennsylvania fracking fields. MWCD will not sell water to the fracking industry – at least until the U.S. Geological Survey completes its inventory of the district’s supplies.

Meanwhile, a flood of natural gas has inundated a market ill-prepared to use it. In Pennsylvania, for instance, there are plans to spend $20 million in Marcellus impact fee revenues to encourage large businesses to switch their vehicular fleets to natural gas. Trash hauler Waste Management already has announced plans to convert its diesel-powered fleet to compressed natural gas – but the switch has not yet been made.

As soon as gas begins to escape from the deep fractured rock, pressure and quantity begin to decrease. Revenue recipients almost immediately begin to see their checks become smaller. Natural gas production, and the profits from it, depends on drilling more wells.

Declining gas profits in the Keystone State’s northeast are driving drillers to the western side of the state, leaving behind capped wells, uncompleted pipelines, and emptying motel rooms.

Back in the board room, Chesapeake Energy CEO Aubrey McClendon, is facing stockholder ire at a meeting in Oklahoma City. Among the complaints: Chesapeake, the second largest driller in the industry, has taken a staggering hit on the stock market in the past year. In June 2011, company stock was worth about $30. Today it is slightly more than half that.

McClendon has a plan. His company will move it’s operations to southwest Pa., where, there is more in the holes than gas used to heat homes and run trash collector engines. There is propane, used in barbeque grills nearly everywhere, and ethane, used by plants that make the chemical building blocks of plastics, tires and beach sandals.

Gov. Corbett has offered Shell a $1.7 billion tax break over 25 years – an estimated $66 million a year – to build a plant about 35 miles from Pittsburgh that would purchase the ethane and, according to Corbett, entice more manufacturing plants to build statewide.

Don’t start spending the new wages, yet, though. Shell has picked a site, but is still in the study phase of development. The company may yet decide that, even with a couple billion in Pennsylvania taxpayers’ dollars, it can’t make a long-term profit. At best, the plant will not be operational for several years.

The rush to perforate western Pa. may also receive a push from the Environmental Protection Agency. Beginning in 2015, regulations will mandate drillers trap the gas, mostly methane, that many of them now allow to escape in that initial surge that pushes fracking fluids back to the surface. Some companies already trap the gas; others will try to get as many wells as possible drilled before the rules take effect.

Natural gas from Marcellus Shale may indeed turn a profit, or at least act as the oft-touted bridge fuel to get us from coal and oil to whatever is next in line to run our electricity generators and automobiles.

But it appears the instant profits and jobs promised only two years ago have gone the way of escaping methane, dissipating into the winds blowing away from Pennsylvania, leaving behind earthquakes, polluted air and waters, segmented state forests and at least one entire community – Riverdale Mobile Home Park, in Jersey Shore, Pa. – evicted to make way for a three million gallon a day water withdrawal site.

Maybe this is a good time, while profits have slowed, to inventory the costs of continuing the “hurry up and get it done” attitude that has characterized the past couple years of Marcellus development.

Somewhere just out of sight, there is a robot, returned from “Lost in Space,” crying out, “Danger, Will Robinson! Danger!”

It would be good if we listen.

Photo by Tom Owad
This post was written by:
- who has written 169 posts for Rock The Capital
John Messeder is an award winning journalist with more than 35 years experience writing about education, environment and local government issues. He has lived in Maine, Florida, California and Alaska, and, by temporary turns, numerous places in between. John also is an accomplished photographer, and avid hiker, conservationist, oral history buff, and author of several books he has not yet got 'round to writing. He lives in Adams County, Pa., just over a hill from Gettysburg, with his wife and Golden Retriever. He may be contacted at john@JohnMesseder.com - Email jmesseder

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