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Economic Impact of the Marcellus Shale

Economic Impact of the Marcellus Shale. Pennsylvania Northern Tier Region. The Progress Authority. Established in 1993. General Purpose Authority. IDA/IDC. 20 member board of directors- key . Small staff. Certified by the Commonwealth for all Pennsylvania economic development programs.

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Economic Impact of the Marcellus Shale

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  1. Economic Impact of the Marcellus Shale Pennsylvania Northern Tier Region

  2. The Progress Authority • Established in 1993. • General Purpose Authority. • IDA/IDC. • 20 member board of directors-key. • Small staff. • Certified by the Commonwealth for all Pennsylvania economic development programs. • Contracted with Bradford and Susquehanna Counties, as needed in Sullivan and Wyoming. • Responsible to facilitate investment and employment enhancement. • Local Economic Development.

  3. Natural Gas Development Education • About 3 years ago we started to educate ourselves adequately about the Natural Gas industry. • Unlike Western PA, not familiar- conventional vs. unconventional. • Due to heritage, economic impacts are not visible, as compared to impacts with 150 years of development.

  4. Continuing Education; from Texas to Canada • Traveled to Wise County, Texas to Barnett Shale Play. • Similar demographics to our counties. • Saw Every Aspect of Natural Gas Drilling. • Community impacts. • Alberta, Calgary Canada-RIM. • GO EXPO Prospect Companies. • Gained perspectives on US and Canadian gas industry development & impacts.

  5. Understanding the Differences • Critically important to realizing the Marcellus impact vs. other gas plays. • The conversion focused on climate, topography, demographics, governmental structure, regulations and mineral rights. • Translate the industry to Northeast Pennsylvania unlike Texas, Oklahoma, and Arkansas. Critical Components include: • High rural population (People/ per sq mile). • Many properties; Fragmentation. • Dependence on ground water for drinking. • Rural infrastructure to support development. • Abundant water supply. • Characteristics of resources and market proximity. • Geographic and political dynamics

  6. Availability of Local Infrastructure • High Rural Population • 72% • Highly Fragmented • 51 Municipalities • Few areas covered by Municipal Water and Sewer • High Dependency on Private Water & Sewerage Systems • Majority of Roads maintained at local municipal level • 1,593 mi/2,495 mi. = approx. 64%

  7. Economic Impact Drivers • Two Ways to Generate Revenues: • 1: Business to Business spending. • 2: Payments to land owners. Community Giving • Differences in Economic Impacts vs. other plays: • Free hold minerals-#1 reason. (PA vs. Texas/Canada) • Leasing frenzy- from $25 or less per acre, to $5,700+ (Strategic value) • Second largest gas play in the world, next to South Pars/Asalouyeh, located between Iran and Qatar. [1] • Now other plays – Eagleford/Ohio/North Dakota/Israel • Thickest part is in the Northern Tier Region. • Thermal maturity: key to resource value. • Rig Counts as a measure. [1]:PSU Update

  8. PA Marcellus Shale Well Permits

  9. Bradford County Gas Activity Source: Bradford County Office of Planning and Grants

  10. Well Flare West Burlington Township, Harris Lease, Bradford County

  11. Economic Impact Drivers Continued… • 98% methane no downstream processing; (sweet gas) very little H2S. • Outstanding volumes (8mmcf) +/- average 2mmcf + • Pipeline infrastructure, Millennium, Stagecoach, Tennessee (Project 300), Transco and others. • New Marc I project/hub creation • Proximity to largest natural gas market in the US the east coast/megalopolis [1]:PSU Update

  12. Industry Swings; Ups, Downs and Use of Money • 2008: 3.2 Billion. 2009: 4.5 Billion. 2010-2011:8.7 Billion, 100,000.[1] • 20 Billion 200,000 jobs by 2020.[1] • Capital projects-Texas use of revenues. • (Taxation) Must be cautious with revenues. • Employment Swings- “had job, lost job” volatile employment not as severe. • Waste water- controlling variable.*(recycling vs. injection and filtration) • Alberta/Calgary Plan called for diversity. • New York State Factor • US rig counts shifting to oil. [1]:PSU Update

  13. Additional Economic Motivators • Oil company valuation. • Reserve and LHP. • XTO by Exxon • EAST by Shell (next slide) • PSU Study recognizes other economic drivers, not evaluation. (pipeline, compression, midstream) • Pipeline upgrades-transportation costs-critical. • Other formations above and below the Marcellus (seismic testing to 20,000 to 25,000 ft) • New Development, housing, commercial industrial. • Understanding gas drillers business models.

  14. Shell buys US company East Resources for $4.7 billion European oil giant buys US shale gas company East Resources for $4.7B from private investors Date of article: May 29, 2010 NEW YORK (AP) -- Royal Dutch Shell PLC said Friday it will buy East Resources Inc., a major owner of shale gas holdings in the northeast United States, for $4.7 billion from private investors. Europe's largest oil company said it will pay cash for East Resources, a Pennsylvania company that owns more than 2,500 oil and natural gas wells in the U.S. It also controls 1.25 million acres of land, mostly in the energy rich Marcellus Shale region that runs from New York to southwest Virginia.

  15. Localized Analytical Study • Based on Penn College’s work force model; 400 jobs/well/rig count. Measures employment. • Progress Authority in collaboration with Penn College. • Special Scope of work to attempt to quantify and measure local economic impact. • Model will utilize metrics such as permit activity (January 2010=502 total permits, January 2011=1442 total permits), water utilization, productive wells, leasing activity, etc. • Six months (+/-) to complete.

  16. Bradford County 2010 Gas Activity • In 2010-2011, 25% of Marcellus Shale Wells drilled in Pennsylvania, are located in Bradford County. • 1,990 Wells Permitted to Date • 848 Wells Permitted in 2010 • 480 Wells Permitted in 2011 • 533 Total Wells Drilled to Date • 355 Wells Drilled in 2010 • 299 Wells drilled in 2011 • 94.23 miles of of Interstate Lines • 466.803 miles of Gathering Lines • 532.558 miles of Temporary Water Lines

  17. Business to Business Expo • Second Annual Expo June 25, 2011 • Troy Fairgrounds, Troy PA. • 200+ exhibitors, indoor and outdoor in 2010. • Local interface with businesses. • Business to business impacts to date. • Amazing catalyst for entrepreneurs and new business activity. • Break Out Sessions • Center Rock Drilling • Metadyne

  18. Examples of Local Business Impacted by the Marcellus Shale Wilcox Jewelry & Engraving Chesapeake Energy in an empty dept. store Harkness Family Restaurant

  19. Value Added Utilization • Simple production process: from harvest to exportation, much like milk and timber • #1 concern for area industries • 2010 electric rate caps removed • Completing feasibility for generation • Taking the lead on generation facility • Attracts new businesses with stable, low rates • Industrial business grafting. • Conversion to compressed natural gas Gas Fired Electrical Generation

  20. Value of Northeast Hub Pricing • Attract gas-intensive industries: • Steel/Aluminum • Chemical • Metallurgical • Plastics • Fertilizer • Glass Towanda Metadyne, Inc. Center Rock Drilling

  21. DEVELOPMENT IMPACTS • Demand for commercial and industrial sites and buildings, existing and new. • Impacts on housing, existing and new, residential and northern training facility; hotel development. • Impacts on infrastructure. • Limited sites with infrastructure. • Resources for capital. • Local business buyouts. • Substantial demand for rail served sites • 2,500 to 10,000+ cars in 2011

  22. Valley Business Park, Athens Township, PA

  23. Conclusion; Key to Unique Economic Impacts • Availability of Minerals. • Quality of gas. • Quantity of gas. • Pipeline infrastructure. • Abundant water supplies. • Proximity to Market. • Short and Long-term business objectives. • Bradford County unemployment from 10% to 7.4% - #1 in new jobs created state wide.

  24. SUMMARY • Local investment increased – land owners and businesses. • Bank deposits up – positive and negative. • Development/investment made – commercial and residential. • Real estate values up substantially. • Job creation - leading the state in new jobs. (Hire Local) • Non gas related investment being made. • Traffic increases • Road improvements ($20m) • Population increases – statistics not keeping up. • Railroad activity increased.

  25. SUMMARY • Environmental impacts increased. • What is the cost to local government? • Services/first responders/police/fire/ambulance • How do we fund this? • State and federal governments see this region as an economic engine to help the state and US

  26. Questions?

  27. Contact us: Central Bradford Progress Authority 1 Elizabeth Street, Suite 3 Towanda PA 18848 USA Telephone 570-265-0937 Toll Free 888-263-0937 E-mail: cbpa@epix.net Website: www.cbprogress.org Anthony Ventello, Executive Director CBPA

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