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Marcellus 'Important' for Region's Revival, Says API Economist

Noting that while there are "important questions" about the environment, it has been reported that the Marcellus Shale could provide enough gas to meet U.S. demand for decades, while creating thousands of jobs, and most important can be developed responsibly, according to John Felmy, chief economist with the American Petroleum Institute (API).

Speaking at the 2010 Marcellus Summit at Penn State Monday, Felmy said it is important to move forward. "In terms of developing the Marcellus, I firmly believe we can do it, we can do it right and it has important positive consequences for an area that hasn't had a break for 100 years," he said. "We can develop this responsibly."

While noting that development "faces a lot of challenges," Felmy said there are even more benefits. "There is no question the resource is there and there is no question we can develop it responsibly. The economics seem to support it in terms of being able to produce it even at relatively low natural gas prices... Everything is just set up in terms of being a godsend for folks who really need it. You have property owners who probably have property valued at $100 getting $5,000 an acre in leasing."

Felmy noted that development of the play could provide real economic impacts that the state needs. Citing a study, he noted that Marcellus development could spur the creation of 140,000 industry jobs by 2020 just in the state of Pennsylvania. In addition, some 44,000 other nonindustry jobs would be created in the state to support the Marcellus development operations. Combining Pennsylvania, West Virginia and New York, "you're talking about a couple hundred thousand jobs in the area, which is something we haven't seen in a very long time," Felmy said.

Some of the challenges facing Marcellus development include "irresponsible arguments" being made by politicians and environmental folks, he added. "A lot of it is just plain misinformation...All we need is to get the facts out and stop the rhetoric that is really scaring people for no reason. Movies like 'Gasland' are not helpful. They are completely omitting the real facts on the issue. We need to move forward.

"There has been such a huge amount of misinformation about fracturing itself. As near as I can tell, it stands very clear that the fracturing process itself has not resulted in any contamination of water supplies."

"Some people opposed to this development say 'we don't need it, we just need renewables. We just need solar, wind and geothermal,' as though that solves the problem...It is helpful to remember how it is used. Renewables, a little bit goes into transportation into the bio fuels, but for the most part it goes into industrial, residential, commercial, and of course one of the biggest is electric power, and [renewables] have the opportunity to grow going forward. But what you don't see is a lot of cases where we just won't need the natural gas...Unfortunately, the sun doesn't shine 24 hours a day and the wind doesn't blow 24 hours a day and so you're going to need that natural gas."

Addressing the argument that Marcellus development will "spoil the area," Felmy says Pennsylvania's history of oil production shows you can have proper remediation over time. "Yes, we have had things in the past that were development that left a legacy," he said, highlighting coal slag heaps in parts of the state. "This is a world away and a century away," he said, noting that "we can develop it responsibly.

"Pennsylvania is a very effective regulator. Some of the folks that have had incidents have learned quite clearly what regulation in Pennsylvania is. What we do not accept is the need for more regulation at the federal level."

Commenting on the tax issue currently being debated in the state, Felmy said he is supportive of a "fair tax" and "paying our fair share," but "we do not want an irresponsible level of taxation that will kill off what is a good economic development right now."

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