Shale Rejuvenating Small Town America One Play at a Time

shaleSamuel Cook
Managing Editor, Oilman Magazine

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The shale play is breathing new life into Small Town America bringing along jobs, investments in the local community and a new sense of pride.

The oil industry has always had a stunning fascination with numbers.

To the casual observer, it may at times seem that the oil and gas industry’s love of numbers supersedes all else. When most newsworthy topics about the industry find their way to print, there’s invariably a number somewhere leading the story, inexorably answering the key questions: “how much?” or “how many?”

small town America

In a world where content is king, for oil and gas, data still takes the top spot. Barrels of oil per day (bpd), index prices, production output, estimated reserves, jobs numbers (both gained and lost)–one might be hard pressed to find a news story about oil that doesn’t have at least some ear to the ground for data.

Yet, behind those numbers, indices, barrels and projections are Americans whose days begin and end with oil; the old and the young, the hopeful and the hopeless. A steadily growing number of livelihoods depend on the oil industry, but few Americans in the nation’s largest population centers have much first, second, or even third-hand experience with an unstable industry that’s ironically considered a stabilizing economic backbone for America’s economy.

The human face of oil and its impact on America is felt more tangibly with the hurried resurgence of shale oil and gas exploration. According to the U.S. Energy Information Administration, the United States is now producing as many barrels of oil per day since it reached its 1970s zenith of more than 9.6 million bpd. Over half of the U.S. oil production numbers now are due to shale oil, a stark contrast to America’s pumpjack-heavy past.

It’s easy to question whether the oil boom of today shares any resemblance to booms of yesteryear. Numerically speaking, there are some similarities. However, the biggest difference between the current shale surge and the “peak oil” production period that rounded off the 1970s is the noticeable level of preparedness, both within the industry and the communities who immediately feel the impacts of these boom and bust periods.

Even now, the oil industry is experiencing another boom of sorts with shale. We are seeing new stories emerge that reveal just how important the oil industry is to many American lives and communities.

A Nation of Shale Reserves

Perhaps ironically, it’s the cold numbers that explain why shale will play a leading role in the future of oil and gas exploration and discovery, and points toward the real, human impact of shale.

Stretched across large swaths of Pennsylvania and West Virginia, with tips in Ohio, Virginia and New York, lies a vast, 104,000-mile region known as the Marcellus Formation. Consequently, if one were to overlay a map of America’s Appalachian coal country with that of the Marcellus Formation, it becomes apparent that these two regions cover a significant amount of the same territory.

Consequently, as many have lamented the gutting of the coal industry, in the past decade, the development of the natural gas industry in a region that shares the same space as Appalachian coal has turned many landowners into millionaires. The growth has also created new job opportunities for struggling communities, and created a distinct dichotomy between states that choose to adopt mining, and those that choose to reject it.

A Tale of Two Cities

“It’s a tale of two cities,” explained George Stark of the Cabot Oil & Gas Corporation. Cabot, which operates over 500 wells in Susquehanna County, Pennsylvania, has been at the forefront of a new tale of American progress, one highlighted by farmers, landowners, and struggling towns becoming flush with economic success seemingly overnight.

Those “two cities” that Stark mentions are not so much two cities, but two states: Pennsylvania and New York. As the estimates for how much gas sits underneath the Marcellus Formation ticked upward, Pennsylvania made the decision to allow the hydraulic fracturing necessary to gain access to the untapped reserves. Just across the border, New York decided to disallow such drilling.

Stark and others in the area have seen the results of these disparate policies. Over the past eight years, Cabot has paid landowners in Susquehanna County over $1 billion. “It’s hard not to pay that much money and not see a community grow from top to bottom,” Stark said. In many ways, the infusion of cash into the county’s local economy has been a boon. With a 4.9% unemployment rate as of June 2017, the county’s employment situation is the best it has been since just before the recession hit in 2008.

Just over the border in Binghamton County, New York, a different story is playing out. Susquehanna’s neighbor to the north has seen its population decline since the 1970s, with no clear signs of a reversal. The county is sustained primarily by the presence of a state university (Binghamton), which historically has ensured the area maintains some level of economic stability.

“There seems to be a bit of envy from people from New York State,” explained Peter Quigg, President of The Community Foundation of the Endless Mountains. While Quigg has benefited from a few wells on his own property, he has family just over the border in Binghamton that have seen no such benefit. “My brother-in-law in the Binghamton area jokes he wants some Pennsylvania gas royalties for Christmas,” Quigg joked.

On a more serious note, Quigg highlighted the many benefits that now exist for Susquehanna County, which include increased charity, better educational opportunities and more jobs. “Natural gas has saved family farms,” Quigg explained. And while some residents do have a distaste for the wells and the drilling (“People who are not from this area are less inclined to embrace the gas activity,” said Quigg), even those who would prefer no drilling have reaped the rewards.

Still, for those do choose to relocate to the bucolic setting that can be found in Susquehanna County, Quigg has one message: “Those who move here to view the “pastoral poverty” of cows in pastures and quaint dilapidated barns need to remember the farmer who is scraping by to hang onto his property.”

Stark of Cabot Oil & Gas stated that the difference between the Pennsylvania and New York counties is evident in the infrastructure. “You see it in the storefronts, the farmers’ barns, the equipment they’re using,” Stark said. With the injection of dollars from shale drilling, Susquehanna’s government and landowners have seen a growth opportunity the county has not experienced since the coal boom following the Civil War.

small town America

Shale Extends Across the United States

The Marcellus is, of course, not the only region in the U.S. with significant shale deposits. Although the Marcellus shale play produces the most significant output of liquid natural gas in the U.S., other major regions also playing a large role in shale oil include the Permian, Utica, Eagle Ford, Haynesville-Bossier, Barnett, Woodford, Fayetteville, Niobrara and Bakken plays. Shale plays now exist in 16 different US states. As a combined force, shale plays are contributing 50% of America’s crude and dry natural gas.

However, the size of the Marcellus, combined with its estimated natural gas reserves, are enough that anyone can easily understand why there’s an increasing amount of interest in that region. By some estimates, the Marcellus Formation contains anywhere between 143.8 trillion to 480 trillion cubic feet of recoverable natural gas. Even if the Marcellus were the only source of natural gas in the U.S., its lowest estimated recoverable gas would be enough to meet the entire yearly US natural gas demand (26.6 Tcf/year) for over 5 years. At the high estimate, it would cover that demand for 18 years.

When all of the shale oil reserves are taken into account, the U.S. has around 2,474 trillion cubic feet (Tcf) of recoverable natural gas. According to the U.S. Energy Information Administration, that’s enough natural gas to supply current U.S. demand for 93 years.

Shale’s Transformation of “Small Town America”

Beyond just the Marcellus Formation, the steadily increasing projections for the amount of natural gas and crude oil trapped in rocky shale formations has resulted in a literal transformation of placid small town across the US.

One such town that experienced a dramatic transformation was Dickinson, North Dakota.

Before the early 2000s, Dickinson epitomized the problems inherent in North Dakota, and in particular, the state’s western portion. Both an aging population and population decline had been stymying the state’s economic growth potential for decades. North Dakota reached a population high point of over 680,000 people—in 1930.

According to Shawn Kessel, City Administrator for Dickinson, the city’s population exploded with a run on shale mining in 2010. “The city of Dickinson’s population in 2010 was just over 17,000”, he said. “By 2015, we grew to over 25,000.”

According to Kessel, the benefits to shale in Dickinson were muted by the negative consequences that often exist when such booms occur. Rents increased to somewhat unaffordable levels. Roads crumbled under the weight of heavy trucks they weren’t designed to handle. Water, sewage and hospital services were stretched to their limits. And then came the crime.

“Certain types of crime increased,” said Kessel, which he explained included “bar fights, drug use and human trafficking.” Kessel stated that the city anticipated the increases in crimes that city has historically seen very little of. The city increased its police force in the run-up, helping to keep a better handle on the new wave of criminality that followed the shale boom.

Economically, however, the city expanded. Kessel notes that sales tax revenue increased 50% during the 2010-2015 period where oil prices were high and shale was particularly booming in the city. And while lower gas prices in the past few years resulted in a large drop in that revenue, as well as fewer jobs in the shale oil industry, many people chose to stay in the city post-boom.

“We have lost some population but many newcomers have changed industries and remained in Dickinson,” Kessel said. As a result, the population growth remained, the school enrollment numbers continue to be higher than they were before the boom, and Dickinson is building new schools to meet enrollment demands.

“The city of Dickinson is much better off after the oil boom than before from an infrastructure perspective,” Kessel explained.

Dickinson is one of many boom towns taking advantage of the Bakken formation, as well as several smaller formations in the region. According to Dean Bangsund, a North Dakota State University research scientist in agribusiness and applied economics, North Dakota has seen its fortunes change for the better thanks to the 2008-2014 boom in the Bakken and other regions.

small town America

Bangsund stated that the average age of population in North Dakota not only grew younger, but that the shale oil boom has reversed a decades-long population decline in the state.

He also explained that the boom from the early 2000s caused significant growing pains in many cities, but that the state is now positioned well to absorb the steady growth. Alongside well pads that are already in place, Bangsund noted that the state’s infrastructure grew, however painfully, to match the sudden surge. Now all that remains is to meet the continued need for workers.

While there aren’t over 100,000 positions needing to be filled as there were when oil prices were high, Bangsund explained that North Dakota is still hiring, even at $50 a barrel. “We still have possibly five digits in employment opportunities going unfilled,” he said.

The Future of Shale

Although data on the most recent renewed interest in shale comes with an air of impersonality, it can hint at the more interesting human stories nestled underneath. Where job numbers exist, so too does increasing birth rates and revitalized communities. Where shale plays take hold, unsuspecting landowners are made millionaires almost overnight. Where old communities turn into shale boom towns, older populations contend with both the depths of human depravity that often follow, and the very human predilection for charity.

Shale now seems to bring with it every aspect of the human countenance, in a manner not too dissimilar to the 1800s gold rush. Shale may yet play host to the most interesting revitalization of forgotten communities now reaping its benefits. What remains to be seen is whether those towns now finding their fortunes in shale can successfully invest in a future—however far off that may be—without shale.

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The post Shale Rejuvenating Small Town America One Play at a Time appeared first on Natural Gas Now.

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