New York has had a moratorium since 2008 on horizontal drilling and high-volume hydraulic fracturing, which frees natural gas from shale by injecting a well with chemically treated water and sand at enormous pressure. Other states in the gas-rich Marcellus Shale formation have seen local economies boom as drilling rigs have sprouted up.
Jim Smith of the Independent Oil and Gas Association of New York said Sunday that permit applications for conventional vertical gas wells, which are still allowed in the state but are less profitable than the far-larger shale gas wells, have dropped from about 600 in 2008 to below 200 in 2012 as the industry has moved to other states.
“For business owners, the opportunity is not here in New York,” Smith said. “We can assume the exodus we’re seeing now will continue” if the moratorium remains until results of the Geisinger study are in, he said.
I shrug. Will they come back if the moratorium is lifted? If those business owners don't, somebody else will if wells can be drilled profitably. I hope the door hits them in the rear end as they leave.
The drilling itself is not the big job creating bonanza so over-hyped of late. Energy intensive industry will pop up wherever there is a reliable supply of relatively inexpensive fuel. New York doesn't need to drill even one well to cash in:
The Constitution Pipeline is being designed to transport natural gas that has already been produced in Pennsylvania. The pipeline is not dependent upon nor does it require the development of new natural gas wells along the project’s proposed path. The pipeline is already fully contracted with long-term commitments from established natural gas producers currently operating in Pennsylvania.
Emphasis added. The proposed path cuts through New York State to feed energy demand there. You might have noticed that natural gas prices in the United States are low, really low. That's a result of over-production. There's plenty of gas in Pennsylvania to grow the economy in New York. Hence, the proposal to build the Constitution Pipeline. But wait. There's more to this story:
Cabot Oil & Gas's (COG) fourth quarter results report last Thursday (February 21, 2013) was nothing short of spectacular - positive surprises were many and significant and explain the stock's 11% rally on Friday.
In the context of the North American natural gas supply, Cabot is a relatively small player: The company ranked as #19 U.S. natural gas producer based on net volumes during Q3 2012. Nonetheless, its operating results have material implications for the industry as a whole.
First, the most recent wells confirm that the highly productive dry gas sweet spot in the Northeast Pennsylvania extends well beyond the four-five townships in Susquehanna County that have been initially proven up with production.
Second, the discussion during the call shows that well productivity in the area continues to improve fast, with each new generation of well designs and completion techniques.
Third, the company has a potential to emerge, within just four to five years, as a top five U.S. natural gas producer, likely passing by companies such as ConocoPhillips (COP), BP (BP), Chevron (CVX), and Royal Dutch Shell (RDS.A) in terms of net volumes. According to Zeits Energy Analytics' estimate, Cabot's gross operated production may exceed 3 Bcf/d by the end of 2017, limited only by the pipeline off-take capacity from the area. ...
... With recent well results in Northeast Pennsylvania suggesting continued rapid growth of supply from the area, the LNG export solution becomes very compelling. This increases the likelihood that the Cove Point project - which is almost ideally situated to provide an outlet for the Marcellus gas - will add to the growing list of U.S. LNG export projects with high probability of reaching completion.
Emphasis added. Cabot is sitting on the mother lode in Northeastern PA. The shale gas is so abundant in that part of the state that exports are feasible. There is enough for New York and Japan without any fracking to the north.
So, what's the rush? There isn't any. A few landowners would like to cash in on the shale gas bonanza. Moratorium or not, they've already missed the boat. The Governor of New York is dragging his feet. There isn't any pressure on him to open the state up to drilling. Better to focus on the downstream jobs boom that will occur at the end of a pipeline.
2 comments:
The problem is, the same political forces that have banned the drilling are likely to be successful in fighting and banning pipelines and LNG facilities.
Big difference is that pipelines have the okay in New York (there isn't a moratorium) and the likely LNG exports facilities are outside the state's jurisdiction. There's also an existing pipeline infrastructure. The main point is that we don't need more natural gas.
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