1. Broadening the Marcellus Discussion – Issues and Economics of the Resource Thomas Murphy Penn State Cooperative Extension October 2009

2. How big is the Marcellus Shale? …now estimated that potential recoverable gas could be 489 trillion cu. ft. w/current technology. U.S. consumption annually is 20 trillion cu. ft.

4. Natural Gas Facts Geologists estimate a 100+ year supply of natural gas (current use rates) Marcellus is largest shale play in U.S. – 2 nd largest in the world – 50 to 93,000 sq. miles – Lifespan to drill and extract is likely decades Companies reporting increasingly strong yields on Marcellus wells -2 to 10 Mmcfd IP Transportation costs add up to 50% onto cost of gas at delivery (current price) Proximity to market is key for Marcellus 500-900 Marcellus wells planned for ’09 Over 1200 permits issued Rig count rising in PA

5. Why here? Why now? Updated technology --drilling/fracing/water Additional shale targets Favorable economics

7. Current Permits & Drilling

8. Leasing/Seismic Frenzy 18 companies leasing One “new” company conducting seismic New agreements New process in area

9. Issues Associated with Marcellus Leasing to landowners unfamiliar with process – tens of thousands Legal uncertainties w/lease documents – Few O&G attorneys Financial decisions lasting generation(s) Limited understanding of economics of the process

10. Impacts on Communities --New “haves” and “have nots” --Local officials – new decisions – new skill sets --Change in ag? -green space --Broad change coming…

11. Environmental Issues Groundwater Surface waters Headwater streams NORM Gas migration Sound Wildlife Forest fragmentation Aesthetics –viewsheds Research needed???

12. Build Out of Infrastructure Key components: – Pipeline – Compressors – Gas Processing Plants – Water Treatment/Injection (availability) – Oil Field Service Companies – Regulatory Agencies –monitoring the process – Work force needs

13. Pipelines Critical to development of well – $1 Billion+ in projects planned Change in how we use ag lands? Placement of lines No eminent domain

15. Marcellus Economics 35+ energy companies looking at Marcellus and increasing – $5 Billion+ collectively -$55B by 2014 $200 million recently by Hess Oil in NE PA $165 million deal by Fortuna in NE PA – Some selling other assets to reposition here – Investments by Wall St. as JV partners KKR Avista Capital StatoilHydro Enerplus Resources

16. Gas Field Services Most needed drilling services scaled for Marcellus were not in Appalachian basin – New regional centers in WV/PA/Southern Tier NY Critical link in development New workforce needs New short line rail demand, commercial real estate interest, airport traffic, engineering offices, road re-construction, housing development

17. Workforce Development

18. Industry Workforce Needs Assessment 75% of workforce will need OTJ training – Some technical training required Certificate 2 year programs Community colleges Vocational/Technical 25% need a professional university degree New program offerings to train PA-bred workforce – Industry sanctioned/sponsored

19. What does this mean in terms of jobs?

20. What specific jobs are required? Natural Gas Workforce Requirements By Category

21. www.naturalgas.psu.edu www.pct.edu/msetc