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Natural Gas’ Bright Future

Brad Bauer
October 16, 2010

Technology allows access to shale fields beneath Eastern Ohio.

Ohio's oil and gas industry is celebrating its 150th anniversary, touting the economic, environmental and lifestyle benefits the industry - that got its start in Macksburg -provides to the state and region.

The industry has been filled with booms and busts, but is buzzing with excitement again as recent advancements in drilling techniques are unlocking large natural gas deposits that are stored deep beneath much of eastern Ohio and the upper Appalachian region.

"We're talking about something so big and vast that it could provide (much of the nation) with 50 to 100 years of gas production," said Bob Chase, professor and chairman of the Department of Petroleum Engineering and Geology at Marietta College.

Most of the efforts currently under way to tap into the new fields are being done in northeast Ohio, Pennsylvania and New York, said Martin Miller, vice president of operations at Alliance Petroleum Corp. in Reno. The local company operates more than 1,000 oil and gas wells across the region.

"How much it affects us (in Washington and surrounding counties) will depend on how the trend goes. We may find we're sitting in the right spot, who knows?" he said. "The way things look, I believe the day is coming for southeast Ohio."

The excitement in the natural gas industry surrounds breakthroughs in tapping into thick shale formations that are buried at 5,000 to 15,000 feet deep.

Most of the current work in the industry is along the Marcellus Shale formation, which runs across upstate New York, through western Pennsylvania and much of West Virginia.

A portion of the Marcellus formation extends into eastern Ohio, but the best chance for a major boom here is finding ways to tap into the Utica Shale formation which covers most of the eastern half of the state, according to oil and gas experts.

Miller said companies are scrambling to lease properties from landowners in hopes of someday tapping into the resource. Still, he said, it could be years before the Utica Shale is fully exploited.

"Booms in gas and oil are brought about by two things: changes in technology and gas and oil prices," Miller said. "The change in technology is what is bringing the current boom north and east of us, but the price and demand (for oil and gas) will determine how much drilling there is."

Chase said natural gas prices are currently about $3.60 per Mcf, down from about $12 just a few years ago.

"Consequently, with all of the current leases and expected development along the Marcellus, I expect natural gas prices to stay low for some time, which will discourage development of the Utica Shale here in Ohio," he said.

But that all could change with the development of more natural gas-fired power plants or a transition from gasoline to natural gas-powered vehicles.

"If that happens, then more people would definitely be inclined to put their resources into the Utica Shale formation," Chase said.

Miller said most conventional vertical wells that reach 5,000 to 6,000 feet cost $300,000 to $400,000 to open. He said the new wells, which reach similar depths, but cut across horizontally several thousand feet cost between $4 million to $5 million to open.

Miller said recent developments in vertical drilling technology is allowing for the exploration of the region's shale formations.

Attorney Abe Sellers, with local firm Theisen Brock, said there has been a rush by companies to secure land leases because of the drilling advancements.

"The past few years there has been what I could call an oil and gas rush in certain parts of West Virginia and to a very limited extent, certain parts of Ohio," Sellers said. "So far, it hasn't been too much locally. Basically, I think because we're talking about geological formations that are different."

In addition to a flat-fee for securing land acreage, Sellers said landowners typically see a one-eighth percentage in royalties from well production.

"It could mean thousands upon thousands each year or very little, just depending upon the well and how it produces," he said.

According to the Ohio Oil and Gas Energy Education Program, an industry-funded initiative, more than $2.4 million in landowner royalties are paid in Washington County each year.

There are 15,075 oil and gas wells in Washington County, with 4,485 currently producing, according to the Ohio Oil and Gas Energy Education Program, which .
There are more than 273,000 oil and gas wells across the Buckeye state, and in terms of natural gas and crude oil production, Ohio follows only Texas, Oklahoma and Pennsylvania.