Anyone else remember when Pittsburgh banned hydraulic fracturing and horizontal drilling back in 2011?
That was the first time a city here in the U.S. did so, and quite a few cities have since followed their lead. As you know, Pittsburgh is located right on top of the Marcellus shale – a deposit that the EIA believe holds 369 trillion cubic feet of natural gas.
Of course, this frack ban came into effect in spite of the fact that our economy has been recovering at a snail’s pace since the recession ended. I can only imagine the number of residents in western Pennsylvania still desperately searching for work.
Fortunately, several municipalities surrounding Pittsburgh recently won back the drilling jobs and economic stimulation that comes with it.
Just this week the Allegheny County Council approved a plan to lease oil and gas rights under Deer Lakes Park, in the northeastern part of the county, to Range Resources (NYSE: RRC).
Not surprisingly, the usual crowd of fractivists at the hearing led loud protests… and the council still decided to award the rights, thus helping win back some potential economic growth in an area hit hard by the recession.
Even though many have tried to keep hydraulic fracturing out of the greater-Pittsburgh area, it seems that more residents are opening up to the revolutionary new technology.
And that’s also not to mention the recent victory for Range means more than the company drilling more Marcellus wells – it opens the door for other companies as well.
A better question, however, is whether smaller drillers can even venture back into the area at all. Not only are natural gas prices still relatively cheap, but these frack bans have helped create a virtual monopoly by the larger operators in the area.
Right now, there are approximately thirty natural gas wells in Allegheny County – 63% of these are operated by Range Resources. The rest are operated by just two other companies; XTO Energy and EQT Corp. It’s a side effect we could see nationwide once more anti-fracking legislations are passed.
In other words, only the major players with enough cash to keep drilling (ExxonMobil is a perfect example) will stay above water.
So, is all the trouble over extracting shale gas worth the effort?
Regardless of who’s doing the drilling, we will see huge economic benefits in the area, including more jobs, more money, and even more manufacturing (since cheap natural gas has driven costs down for American manufacturers).
We’re also going to see a second group of winners emerging from this situation. Chemical and fertilizer companies like Dow Chemical Company (NYSE: DOW) can use the cheap gas to power their plants and as a feedstock for production.
Naturally, this situation will inevitably make West Virginia, Western Pennsylvania, and parts of Ohio hot spots for economic growth, and that growth will continue as long as regulations against the producers in the area continue to dissolve.
Until next time,
Keith Kohl
