Shale gas drill

Observer-Reporter

A natural gas well in Washington County

The boom began in October 2004, although it didn’t resonate like a boom at the time. This was more like an autumnal rustling of leaves in a quiet slice of Americana.

Range Resources, a Texas-based oil and natural gas exploration company, came to Washington County hoping to successfully employ the horizontal drilling techniques that had served it well in the Lone Star State’s Barnett Shale.

There was a bounty of gas in the Appalachian Basin, specifically in the nether regions of Southwestern Pennsylvania, and Range was gung ho about the opportunity. So were competitors, who were eagerly anticipating what may happen in the Marcellus Shale.

So the Fort Worth firm found a spot in Mt. Pleasant Township, called it Renz Well 1, and drilled down a mile, then out laterally. It sent a mix of water, sand and chemicals to break up the rock and release gas hydrocarbons to the surface. The process – hydraulic fracturing, or fracking – was relatively unknown to the region, and it worked at Renz.

Suddenly and unofficially, the shale boom began in the basin, and suddenly, fracking became part of the tri-state lexicon.

In a few years, the boom became a nationwide BOOM! – which grew with each succeeding year. Companies positioned themselves to take advantage of these resources. Larger firms bought smaller ones, investors spent billions of dollars to build terminals to export gas to China and Europe.

Those gas hydrocarbons were like gold to companies and consumers alike. The cost of heating a home became more affordable.

Good times rolled for an extended period, and led to Pennsylvania becoming the nation’s No. 2 gas producer behind Texas. Then about four years ago, declining commodity prices began to hit the producers and continued to hit them. And is still hitting them, with prices half of what they were a year ago.

Natural gas is still being produced, and there is now a serious glut, supply outstripping demand to the point that it is causing energy firms to slash costs. Some companies are shuttering drill sites, filing for bankruptcy protection, laying off employees and curtailing operations. In the past year, the number of drilling rigs operating in the Keystone State has plummeted from 47 to 24.

These moves have become commonplace in recent months, especially in the tri-state region encompassing Pennsylvania, West Virginia and Ohio.

Boom has, indeed, gone bust.

“Natural gas is in the tank,” Patrick Montalban, president of Montalban Oil & Gas Operations, told the New York Times. “We’re looking at a project right now of over 200 wells in Montana that are for sale, but they are uneconomic. Not only are the wells uneconomic, the gathering of the gas is uneconomic.”

The industry’s quandary was underscored recently by the decision of Chevron Corp., the second-largest oil and gas operator in the United States, to market for sale its natural gas interests in the Appalachian Basin.

Those assets include 890,000 acres in the Marcellus and Utica shale plays across the tri-state, valued at about $10 billion to $11 billion. The company, which employs about 400 at a regional office near Pittsburgh International Airport, attributed the sale directly to suppressed gas prices.

This followed third-quarter layoff announcements at EQT Corp., Range Resources and CNX Resources Corp. – all major players locally.

Officials at Range and CNX did not respond to multiple requests for comment for this story.

David Spigelmyer, president of the Marcellus Shale Coalition, an industry support organization, commiserated over Chevron’s action. He said in a statement: “By every measure, this is very tough news, as Chevron has been a true leader on any number of fronts in the communities across Pennsylvania and the broader region.

“This difficult business decision ultimately reflects the fragile nature of the commodity landscape along with permitting, regulatory and tax challenges as well as the intense level of competition for limited capital resources not just in Pennsylvania or the tri-state, but across the country and the world.

“Pennsylvania is in a fierce fight for these job-creating capital resources, and we must continue to work as hard as possible to ensure we’re making the commonwealth more competitive, not less.”

In the four months preceding Chevron’s Dec. 11 announcement:

  • Southpointe-based CNX cut “fewer than 50” people in August, most of them corporate personnel at headquarters. A spokesman said the cutbacks had been planned and the company was “combining functions that currently exist across our upstream and midstream teams.”
  • EQT Corp., the nation’s largest independent natural gas producer, laid off about one-fourth of its workforce – 196 of 800 employees – in mid-September. EQT, headquartered in downtown Pittsburgh, said at the time it was “streamlining” its business, reducing its operation from 58 departments to 15. The layoffs, the company added, would save about $50 million annually in general and administrative costs.
  • Fort Worth, Texas-based Range shuttered its Houston offices in mid-November, resulting in about 50 furloughs. It did not release anyone at its regional headquarters in Southpointe then, but in June did slash about 40 jobs between Houston and Southpointe.

Jeff Ventura, company president and chief executive officer, said of the November cuts: “Over the last several years, persistent low commodity prices have challenged the energy industry. Range has continuously sought to position itself to successfully navigate a cyclical business environment by reducing debt and controlling costs.”

About two weeks ago, Antero Resources told

  • Pittsburgh Business Times that the company planned to sell $750 million to $1 billion in assets in 2020 in an attempt to reduce its debt.

Yes, the boom has been supplanted by bust, and a quick turnaround isn’t likely. Andy Brogan is among industry insiders who don’t anticipate that. Brogan, leader of the oil and gas global sector at EY (formerly Ernst & Young), told the Times:

“In the short term, the gas market is oversupplied and is likely to remain so for the next few years.

“It’s a cyclical business, and we’re at the bottom of the cycle.”

Staff Writer

Rick Shrum joined the Observer-Reporter as a reporter in 2012, after serving as a section editor, sports reporter and copy editor at the Pittsburgh Post-Gazette. Rick has won seven individual writing awards, including two Golden Quills.

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