This article originally provided by The Charleston Gazette

January 25, 2011

WVU study details Marcellus permits, income

By Paul J. Nyden

Gazette file photo The West Virginia Legislature is pondering whether to regulate a process of releasing natural gas called "fracking."

CHARLESTON, W.Va. -- Between 2002 and 2008, West Virginia led the nation in the number of gas drilling permits issued. More than 2,800 permits were issued for new drilling in 45 of the state's 55 counties.

Those statistics were part of a study released Tuesday by the West Virginia Oil and Natural Gas Association.

The study focuses on the economic impacts of growing efforts to harvest natural gas from major Marcellus Shale reserves.

Tom Witt, director of the Bureau of Business and Economic Research at West Virginia University, co-authored the study with three of his colleagues.

In 2009, the study shows, West Virginia's natural gas industry generated more than $12 billion in business, created more than 24,000 jobs in the state and paid more than $550 million in wages.

Titled "The Economic Impact of the Natural Gas Industry and the Marcellus Shale Development in West Virginia," the study is available at: www.wvonga.com and www.bber.wvu.edu.

The Marcellus Shale is a formation of sedimentary rocks that developed 390 million years ago. It lies under a 95,000-square-mile area that includes part of southwestern New York, most of western Pennsylvania, eastern Ohio and nearly all of West Virginia.

Marcellus gas reserves lie between 3,000 feet and 9,000 feet under the land's surface.

"Severance taxes affect locations where corporations will develop new wells," Witt said. "Marcellus Shale could be a major source of long-term economic development in West Virginia."

West Virginia severance taxes are now 5 percent of the gross value of natural gas production - higher than the other states. Ohio has lower severance taxes. Maryland, New York and Pennsylvania have none at all.

However, the new report adds, "For overall state and local tax burden, West Virginia's general tax policy climate is relatively more conducive to natural gas industry operability than other states with significant Marcellus Shale deposits."

Greg Kozera, an engineer with Superior Well Services Ltd., believes the "fracking" process is being criticized unfairly.

Fracking, or hydraulic fracturing, pumps millions of gallons of water - filled with sands and various chemicals - underground to fracture shale deposits to release the natural gases trapped inside.

Kozera believes drilling and fracturing underground rocks will not pollute water supplies. "Contamination from a septic tank, through the soil, is far more likely to pollute them."

The Marcellus Shale formation is the second-largest natural gas field in the world, Kozera pointed out, second only to gas fields in parts of Russia, Iran and the Caspian Sea.

"We can produce enough natural gas to get off of foreign oil," Kozera said. "Today, we send $1 billion overseas every day to pay for oil.

"We can finally kick our foreign-oil habit. We can bring our troops home. There will be no strategic value for those wars. If we quit buying oil, we can change global economics and terrorism."

Jim Crews, director of commercial operations for NiSource Gas Transmission & Storage, said, "We also want to increase white-collar jobs."

Crews pointed out that underground natural gas reserves also contain materials used to make plastics.

"Union Carbide scientists here in South Charleston first discovered how to change ethane gas into plastics," he said.

Crews also believes horizontal drilling and hydraulic fracturing are likely to discover "other shale and unconventional hydrocarbon sources in the [Marcellus Shale] basin, including previously abandoned formations."

West Virginia legislators are considering whether to regulate fracking or not.

The U.S. Environmental Protection Agency is examining the fracking process to determine whether it endangers supplies of drinking water, as many critics argue.

Environmental groups, such as the Natural Resources Defense Council, believe Marcellus Shale drilling could have long-term negative environmental impacts.

Those groups also question the wisdom of the federal Energy Policy Act of 2005 that exempts hydraulic drillers from federal Safe Drinking Water Act regulations, which would have required companies to reveal what chemicals they use.

Last August, the New York Senate voted overwhelmingly to set a nine-month moratorium on Marcellus Shale drilling. That moratorium ends in early May.

Corky DeMarco, director of WVONGA, said Tuesday, "I am happy New York has shut off drilling. That will help West Virginia.

"There is no evidence of contamination of water wells from fracking," Demarco added.

New York's Marcellus Shale reserves lie under the Catskill Mountains and the source of almost all drinking water consumed in New York City.

By 2020, natural gas companies expect to drill about 30,000 underground Marcellus Shale wells across the basin, according to a New York Times article published on July 8, 2010

Many major companies already are involved in financing, exploration and drilling Marcellus Shale wells, the article pointed out, including: Chesapeake Energy, Halliburton, Columbia Natural Resources, Consol Energy, Exxon Mobil Corp. and Royal Dutch Shell.

Reach Paul J. Nyden at pjny...@wvgazette.com or 304-348-5164.