online.wsj.com/article/SB120709326316581793.html?mod=googlenews_wsj
The above link is to a paid article, so I copied and pasted it here, but shortened it to fit:
Gas Producers Rush to Pennsylvania
Promising Results
For Wells There
Spur Investment
By RUSSELL GOLD
April 2, 2008; Page A2
PITTSBURGH – Natural-gas producers are swarming into Pennsylvania to chase what many are betting could be the next big thing: a thick wedge of gas-bearing rock called the Marcellus Shale.
The recent surge in interest was triggered by disclosures in the fall from producer Range Resources Corp. of Fort Worth, Texas, that it had drilled a well there producing more than three million cubic feet of natural gas a day, proving that Marcellus Shale wells can be profitable. Since then, Range has reported wells that produce even more gas.
PENNSYLVANIA PLAY
• Rising Interest: Natural-gas producers are swarming to the state to drill in a potentially hot production area.
• Difficult Area: Lack of equipment and manpower has impeded some efforts.
• The Risk: The area hasn’t yet shown that producers will find major gas deposits.
The result is a land rush unmatched anywhere else in North America as companies try to snap up drilling acreage on a giant swath of rock stretching from West Virginia across Pennsylvania to the northeast corner of the state, 90 miles from New York City.
Range Resources plans to spend $426 million in Appalachia this year. Other out-of-state companies, such as EOG Resources Inc., Chesapeake Energy Corp. and Anadarko Petroleum Corp., have either begun drilling or are planning to drill wells targeting the Marcellus Shale.
Estimates of the Marcellus Shale’s supplies vary widely. In 2002, the U.S. Geological Survey estimated there may be 1.9 trillion cubic feet. Earlier this year, Terry Engelder, a Pennsylvania State University geosciences professor, made what he called a conservative estimate of 168 trillion cubic feet. His estimate has yet to be confirmed. By comparison, the U.S. consumed 23.05 trillion cubic feet last year, according to the Energy Information Administration, or about 63.2 billion cubic feet a day.
Still, there have been relatively few completed Marcellus Shale wells, and it isn’t clear whether the rock will produce prolific wells across the state or only in certain pockets. Companies could be spending a lot of money leasing acres and drilling wells in counties where there won’t be enough gas for the wells to offer a reasonable return.
Information about the potential of the Marcellus gas field has emerged slowly because of Pennsylvania rules that allow companies to keep well-production data and drilling logs confidential for five years, compared with about 60 days in Texas. While Range has told Wall Street analysts about its wells, it hasn’t disclosed where the wells are.
“Why would we educate anybody else?” says Ray Walker, Range’s head of Appalachian shale production. The best way to protect shareholders, he says, “is to keep information close at hand.” In the fall, after Range personnel caught someone snooping around their wellhead reading the production meter, Mr. Walker padlocked covers on well-production meters.
The technique for drilling into shale rock to harvest natural gas was pioneered outside Fort Worth about six years ago. Since then, the Texas Barnett Shale has gone from obscurity to the most prolific domestic gas field in the continental U.S. That one field produces about 3.5 billion cubic feet a day, or about eight times more than all of Pennsylvania in 2006, which is the latest data available.
Gas producers hope they can do the same for the Marcellus, but development in Pennsylvania has been slowed by a lack of equipment. Drilling rigs capable of penetrating deep into the complex rock formations needed to be imported from Texas, Wyoming and other active energy regions. Experienced crews capable of fracturing the dense shale in order to coax out the gas also had to be brought in.
Pennsylvania has had an oil and gas industry for more than a century, but it’s been dominated by small companies that tend to drill low-cost, low-risk wells that produce a fraction of the gas that companies believe they can coax from a Marcellus Shale well. But these small, local companies long ago locked up most of the drillable acreage.
To gain access, out-of-state companies are opening up their checkbooks to sign deals with local companies sitting on large swathes of acreage. “We’ve never seen this kind of money around here,” says Terry Jacobs, president of family-owned Penneco Oil Co. He cut a deal last year to allow Range to drill wells on leases he holds.
It isn’t uncommon to find drilling crews filled with Texans and Oklahomans. On a recent morning, Jared Griffith, a third-generation Texas oil hand, sat with his crew inside an oil-field office trailer. Almost all were Texans. “I never thought I’d be north of the Mason-Dixon line,” says Mr. Griffith, an operations manager for Frac Tech Services Ltd., a drilling-services firm based in Cisco, Texas.
Leasing prices for land still available for drilling has skyrocketed along with the out-of-state influx. Near Williamsport, Pa., a drilling lease that fetched $5 an acre in 2003 now can fetch $2,000 an acre, local residents say. Those kind of prices are “unheard of in our part of the world,” says Rich Weber, president of Atlas Energy Resources LLC, based in Moon Township, Pa.
Range’s Mr. Walker has worked to smooth over relations with local landowners. The company contributed $35,000 so Hickory, Pa., could buy a bronze statue of a farmer to commemorate the region’s agricultural history. At last year’s local Washington County Youth Livestock Show, Range bought the champion steer for $12,285. “I thought it was cheap,” Mr. Walker says.
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