“Utica” gas, but Pennsylvania profits

by E.J. McMahon |  | NY Torch

Screen Shot 2014-09-04 at 9.43.51 AMThere’s been a huge increase in gas production in the Utica shale region, including two highly productive finds just across the New York border in northern Pennsylvania. And so the economic opportunity cost of New York State’s moratorium on shale gas exploration keeps on rising.

From Bloomberg News (with hat tip to the AEIdeas blog):

Two gas finds in Tioga County, Pennsylvania, announced today by Europe’s largest oil company are more than 300 miles away from the epicenter of Utica shale drilling in Monroe County, Ohio. Shell, which has been selling gas assets in other parts of the U.S. to focus on its highest-profit prospects, said it owns drilling rights across about 430,000 acres in the discovery zone, an area five times the size of Philadelphia.

[snip] 

The Utica “could be much bigger” than previously mapped, said Kayla Macke, a Shell spokeswoman.

Shell’s discoveries, known as Gee and Neal, were found about two miles underground. The Gee well was producing 11.2 million cubic feet of gas a day when output began a year ago. The Neal well saw a peak in daily production of 26.5 million cubic feet after drilling ended in February.

Shell, based in The Hague, held off on publicizing the well results for months to avoid alerting competitors to the potential bonanza in that part of Pennsylvania.

As shown in the map below, the Utica Shale is deep beneath the Marcellus Shale region.  Both shale formations are thought to offer especially rich deposits beneath one of the poorest and slowest-growing regions of New York, the Southern Tier, which includes the stagnant Binghamton and Elmira metro areas. Those gas deposits can effectively be harvested using the new technique of deep-underground horizontal drilling aided by hydraulic fracturing – but Governor Andrew Cuomo has been stalling the issuance of regulations that would allow gas hydrofracking in New York. 

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Speaking of northern Pennsylvania and the Southern Tier, here’s a chart illustrating how the two neighboring areas have been faring based on a comparison of one key economic indicator.

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As of 2007, Chemung County, New York, including Elmira, had 3,639 more private sector jobs than the combined total for neighboring Bradford County and Tioga Counties in Pennsylvania.  But over the next five years, as average employment in Chemung County dropped by 5 percent, average employment in Bradford and Tioga counties increased by 11 percent. Result: in 2013, Chemung County had 1,306 fewer jobs than the two counties across the Pennsylvania border.

Note: private employment actually dropped on both sides of the border in 2013.  The decrease was slightly larger in Bradford and Tioga counties, at -2.4 percent, than in Chemung, where employment was down 2 percent. This may reflect the decline in the number of new gas wells being drilled south of the border.  However, even after drilling crews leave, continuing gas production should generate higher royalty incomes for local landowners and higher revenues for local governments.

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.