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Pitt Study: One Marcellus Well Adds Millions to Economy

A single Marcellus Shale well in southwestern Pennsylvania directly adds $7.6 million to the economy, on average, according to a new study released Tuesday.

"We've seen averages range from $4 [million] to $8 [million]. In extreme cases we can actually see it go over $20 million." Bill Hefley, a professor with the Katz Graduate School of Business at the University of Pittsburgh (Pitt), said at an energy forum in Canonsburg, PA.

The study -- presented at the Washington County Energy Partners' 2011 Energy Forum -- aimed to break down the cost of the entire supply chain in the Marcellus region.

A group of undergraduate and graduate business students at Pitt visited an EQT well this past March and subsequently conducted interviews and studied both academic material and company financial data to map the supply chain and figure out the cost for the life of the well. They found that drilling and hydraulic fracturing accounted for nearly half the cost of development, and that leasing accounted for another quarter of the total cost.

Hefley acknowledged that costs can vary wildly from well to well, but he said the figures represent the "typical" cost from leasing to completion and consider high and low cases.

The study did not consider indirect or induced impacts of natural gas development, according to Shaun Seydor with the Institute for Entrepreneurial Excellence at Pitt. Hesaid future research should consider those impacts, as well as how an impact fee or severance tax would change the economic model and how the model impacts workforce development.

Washington County Energy Partners started as a way to attract energy companies to the region and is now promoting Washington County as the "energy capital of the East."

In terms of well counts and production volumes, though, northeastern Pennsylvania continues to be the capital of at least the Marcellus region, if not the entire "East." Operators have reported drilling 366 wells in Washington County since January 2009, making it the most active county in the region but only the third most active in the state after Bradford (740 wells) and Tioga (526 wells) counties along the Pennsylvania-New York border.

But increasingly analysts like Bentek Energy LLC say the liquids in southwestern Pennsylvania make the region among the most economic shale plays in North America at current prices. Companies like Range Resources Corp. and Chesapeake Energy Corp. are focusing their Marcellus efforts on that wetter corridor (see Shale Daily, July 27; Feb. 24).

While Washington County ranked third in condensate production during the first half of the year, after Tioga and nearby Butler counties, it accounted for nearly the entire oil production reported from the Pennsylvania Marcellus -- 363,887 bbl (see Shale Daily, Aug. 17). And many companies have regional offices in Washington County (see Shale Daily, Jan. 3).

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