Marcellus natural gas production expanded in 2012

PITTSBURGH — This year was one of new records and new questions for the boom in Marcellus Shale natural gas drilling.

Previous doubts about the size of the vast resource were mostly put to rest, as data showed that the Marcellus became the most productive natural gas field in the nation, even though well drilling slowed substantially.

According to the federal energy reports Marcellus wells in Pennsylvania and West Virginia now produce 7 billion cubic feet of gas per day. That’s about 25 percent of all shale gas production nationwide, and nearly double the Marcellus production of the previous year.

The Marcellus could contain “almost half of the current proven natural gas reserves in the U.S,” a report from Standard & Poor’s said, while other experts noted the powerful combination of resource, cost and location is altering natural gas prices and market trends across the nation. In other words, natural gas that used to come all the way from the Gulf Coast or Canada to feed the power-hungry Northeast is now coming from Marcellus producers.

The Marcellus Shale lies under parts of Pennsylvania, Ohio, West Virginia, Maryland and New York. The procedure called hydraulic fracturing, or fracking, has made it possible to tap into deep reserves of oil and gas but the boom in shale gas fracking has raised concerns about pollution. Large volumes of water, along with sand and hazardous chemicals, are injected underground to break rock apart and free the oil and gas.

The industry and many federal and state officials say the practice is safe when done properly, but environmental groups and some scientists say there hasn’t been enough research on these issues.

In response to public concerns, major regulatory changes were made in 2012 at both the state and federal level.

In February, Gov. Tom Corbett signed Act 13, a wide-ranging bill that ended Pennsylvania’s distinction as the nation’s largest gas-producing state with no tax or levy on the activity. The 174-page bill imposed an impact fee, toughened safety standards and limited the ability of local officials to keep drilling out of their towns.

By October, $204 million from gas industry payments was being distributed to state agencies and counties and municipalities that host gas wells.

But even though many welcomed the money, there were still battles.

Representatives of seven municipalities said Act 13 takes away their ability to control gas drilling operations through local zoning, leaving them defenseless to protect homeowners, parks and schools from being surrounded by drilling sites or waste pits. The municipalities, with support from environmental groups, filed a lawsuit challenging portions of the law, and the State Supreme Court heard arguments in October. There’s no indication of when the court will issue a ruling.

At the federal level, the U.S. Environmental Agency filed new rules concerning methane and other pollutants that can be emitted as air pollution. The strict new regulations won’t take effect until 2015, but many drilling and energy companies said they’ve already made necessary upgrades, or are in the process of doing so.

On some fronts, there was evidence that regulatory and industry changes are helping to reduce pollution. Researchers said in November that high levels of an ultra-salty compound that could be linked to oil and gas drilling had declined in the Monongahela River, even as they persisted in the nearby Allegheny River’s Pittsburgh-area watershed. State officials credit a voluntary ban on disposal of such waste that shale gas drillers agreed to. But environmental groups point out that conventional oil and gas drillers are still allowed to take such waste to riverside treatment plants, and called for the ban to be extended.

The fight over perhaps the most high-profile case of pollution that was linked to Marcellus drilling wound down, too.

In August, court documents showed that residents of a northeastern Pennsylvania town who say their well water was poisoned by a gas driller agreed to a confidential settlement with Houston-based Cabot Oil & Gas Corp. Soon afterward, the Department of Environmental Protection said Cabot had met its obligations under a 2010 consent agreement and will be permitted to put seven previously drilled wells in Dimock Township back in production. That’s a rural area in northeastern Pennsylvania.

But aside from the ongoing legal and regulatory battles, the steady production of huge amounts of gas fueled even bigger dreams, and talks that the resource will have a global impact.

“The relative fortunes of the United States, Russia, and China — and their ability to exert influence in the world — are tied in no small measure to global gas developments,” Harvard University’s Kennedy School of Government concluded in a report last summer.

In March, Shell Oil Co. said a site about 30 miles north of Pittsburgh was its first choice to build a huge new petrochemical plant, which would turn natural gas liquids into consumer products such as plastics and antifreeze.

Though Shell said it’s still a few years away from a final decision to build, the project was sweetened by a huge package of state tax incentives. Corbett, legislators from both parties, and some union leaders supported credits of $66 million a year, which could total about $1.7 billion if the project is built. That would be Pennsylvania’s largest financial incentive package ever.