The Marcellus Shale could be a job-creation and economic development machine if natural gas producers are allowed to develop the huge play under appropriate regulatory and tax conditions, according to a new industry-backed study.

"One of the biggest opportunities to create jobs and increase America's energy security lies within the Marcellus Shale region," said American Petroleum Institute (API) CEO Jack Gerard. "Pennsylvania, New York and West Virginia have enough natural gas to create hundreds of thousands of well paying jobs and provide Americans with a stable, domestic energy source for generations to come."

The Marcellus gas bounty could create 280,000 jobs and add $6 billion in tax revenues to local, state and federal governments over the next decade, according to the study, "The Economic Impacts of the Marcellus Shale: Implications for New York, Pennsylvania and West Virginia," by Timothy Considine of consultant Natural Resource Economics Inc.

The study expands on recent Pennsylvania State University research (see NGI, May 31) that found similar economic benefits from developing the Marcellus region -- a layer of shale rock underneath much of western Appalachia, from southern West Virginia into southwestern, central and northeastern Pennsylvania, and the southern tier of upstate New York.

Gas production in the Marcellus grew considerably during 2009, adding 57,000 jobs, mostly in Pennsylvania and West Virginia, according to the latest study report.

"Our analysis indicates that 1,121 wells were drilled in these two states during 2009," the study report says. "Output of dry natural gas and petroleum liquids increased to over 600 MMcf of gas equivalents during calendar year 2009. Total value added or contribution to gross regional product for these two states increased by $4.8 billion as a result of Marcellus production activities."

According to Considine, under the best scenarios development of the Marcellus could mean $24 billion in total economic value to the region.

The study examined factors that could limit Marcellus development, including a possible severance tax in Pennsylvania (see NGI, July 12); the current de facto moratorium on horizontal drilling in New York (see NGI, May 3), estimated at $11 billion dollar in lost economic output; and the effects of a challenging tax and regulatory climate in West Virginia.

"Maintaining production growth is like running on a treadmill. Slowing down drilling and production would negatively impact employment and economic growth. If governments pursue policies that encourage the development of natural gas, the ultimate benefits to the economy, the tax base, and society would be significant," said Considine.

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