A program of the West Virginia Oil & Natural Gas Association

Area businesses benefit from Marcellus boom

By Caitlin Cook | December 7, 2014

The U. S. Energy Information Administration released its U.S. Crude Oil and Natural Gas Proved Reserves 2013 report on Thursday, showing increases in crude oil and natural gas reserves year-over-year.

Local energy businesses say they are already reaping the benefits of increased activity throughout the Appalachian basin.

For the first time since 1975, the nation’s crude oil and lease condensate exceeded 36 billion barrels and an increase in natural gas set a new record for natural gas reserves at 354 trillion cubic feet, according to the report.

West Virginia and Pennsylvania account for 70 percent of the increase in proved natural gas reserves, according to the report.

Kyle Mork, chief operating officer for Energy Corporation of America, said many people thought Appalachia had experienced its best days in the oil and gas industry.

The Marcellus has changed how they approach business, Mork said.

Prior to the Marcellus around 2005, 2006, the company would drill 100 plus shallow wells a year, and that was the norm for many years, Mork said. Now, they’re drilling less wells using more technology that produce better results.

“You couldn’t afford to build some huge pipeline because each individual well only produced a fairly small amount of gas,” Mork said. “With the advent of the Marcellus and now Utica, and then shales that have taken off in other parts of the country, it’s almost hard to overstate the change.”

The company is currently operating two drilling rigs in Pennsylvania and about 1,400 producing wells in West Virginia and Pennsylvania. They also operate wells in Kentucky, Virginia, Texas and New York.

ECA got its start in Gilmer County in 1963. The company opened its new, $10 million Appalachian headquarters in Charleston in November with room to grow with 100 more employees.

“We wanted to plan for significant growth here,” Mork said. “We think we’ll realize it in the next number of years.”

The company’s corporate headquarters were moved to Denver, but much of the corporate functions like accounting and information technology services are facilitated through the Charleston office, Mork said.

He added it’s been neat to watch the increased activity in Appalachia where the oil and gas started hundreds of years ago.

Mork said he never imagined anything like the Marcellus - maybe the longevity but not the magnitude - something that could compete with Texas’ Barnett Shale.

“[The Barnett] was like the king and it was impossible to imagine anything would get bigger than that,” Mork said.

Until now.

ECA’s production has increased 300 percent in five years and its production out of the Marcellus went from zero to more than 100 million cubic feet per day.

“Appalachia has gone from producing a couple two or three billion cubic feet per day to now almost 20 BCF per day,” Mork said. “It’s grown to become about a third of the production in the U.S. in six years.”

There’s no projected slowdown anytime soon.

“The opportunity for growth is tremendous,” Mork said.

The growth of the industry has also led to an increase in worker fatalities over the past few years. Seven oil and gas industry workers died on the job in West Virginia last year, the Gazette reported earlier this week. Between 2009 and 2013, 15 on-duty oil and gas workers died in the Mountain State.

Last month, a contract worker was killed at an Antero Resources drilling site in Tyler County, the first West Virginia oil and gas fatality investigated by the U.S. Office Safety and Health Administration so far this year, an OSHA spokeswoman told the Gazette last week.

Natural gas production is expected to increase annually by 14 percent between 2014 and 2019, according to the West Virginia University Bureau of Business and Economic Research’s 2015 economic outlook report.

WVU economist and researcher Eric Bowen said the Appalachian region experienced another 50 percent increase in total natural gas production.

“There’s only so far that this growth can go at some point,” Bowen said. “But even a 5 or 10 percent increase would be a substantial increase.”

Bowen added significant increases in natural gas severance tax are offsetting the decline in coal severance tax for the state.

David Haney, president of E&H Manufacturing in Mink Shoals, has been in business for more than 30 years making equipment used by the oil and gas industry.

Haney noticed a significant increase in business last year that hasn’t slowed down.

“It’s nice to have a backlog but it’s not nice to be slow on delivery,” Haney said. “We’re trying to beef up to address that.”

The company recently added several employees and is looking to add more. It’s also investing about $9,000 to construct new manufacturing areas in Lee Roy, West Virginia where the company does its manufacturing.

They’ve also adapted what they’re making.

“The pressures from the Marcellus are a lot higher so we need thicker vessels. The volumes of fluids are a lot greater so we need bigger tanks,” Haney said. “Generally, that’s the direction the industry is going.”

The three new manufacturing areas will provide adequate space and machines to manufacture the larger equipment needed.

“Part of our big problem now is finding the skilled help that we need,” Haney said. He’s still looking to hire several skilled welders.

Scott Wallace with Energy Surveys in Clarksburg said the company will go wherever they are needed.

The company started in January with three employees and now employee 33 people.

“There’s all this supply of gas and there’s no way to get it to where it needs to go to sell it,” Wallace said.

Energy Surveys sits down with companies using GPS and geographic information systems to map out possible pipeline routes on computers before submitting anything to the Federal Energy Regulatory Commission, which regulates interstate pipeline transmission of natural gas.

So far, the company has $1.3 million of revenue, exceeding its goal of $700,000.

“This big boom has created a need for all these different services that go into pipeline construction,” Wallace said. “[The new office] will allow us to reach out and respond quicker when we are needed wherever.”

West Virginia Oil and Natural Gas Association executive director Corky Demarco said Appalachia is probably sitting on more natural gas reserves than anyone else in the world.

“We get smarter everyday,” Demarco said. He believes the oil and gas industry will not only be able to drill the Marcellus about 7,000 feet deep, the Utica at 10,000 feet economically but also the two formations below around 20,000 feet deep.

“Historically, West Virginia has been drilled by small, locally owned companies,” Demarco said. “Some of the companies operating now have been here a long time, some not and some were acquired.”

In October, Chesapeake Energy sold its Marcellus assets in a $5.38 billion deal to Texas-based Southwestern Energy. The move transferred 413,000 net acres and 1,500 wells in north West Virginia and southwestern Pennsylvania.

“We’re going on the radar screen of multi-national companies like Exxon, Chevron and Marathon,” Demarco said. “You’ll probably see as more information comes out about potential reserves here, there will be more interest from larger and larger companies.”

Reach Caitlin Cook at caitlin.cook@wvgazette.com, 304-348-5113 or follow @caitlincookWV on Twitter.

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