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March 21, 2012

CONTACT: K.E. Schwab



Marcellus shale opportunities ‘generational’


SLIPPERY ROCK, Pa. – Slippery Rock University students attending this week’s “Success Starts Here” lecture were told by John Applegath, vice president of the southern Marcellus Shale division of Range Resources, that they, their children and their grand-children could have job opportunities related to Marcellus shale.

           The industry is estimated to provide some 211,000 jobs. Some experts have predicted the natural gas drilling and operation boom will run between 50 and 75 years.

           Applegath outlined his company’s success – and future – in the western Pennsylvania region. He said Range Resources has elected to be involved in the leasing and drilling side of the natural gas industry, leaving the collection, distribution, delivery and marketing of the gas to other companies.

           John Buttermore, assistant professor in the School of Business, opened the session in SRU’s Advanced Technology and Science Hall by referring to recent newspaper articles that covered the debate on how large the Marcellus shale gas field actually is. “They are debating if there is 140-trillion cubic feet of natural gas or 500-trillion cubic feet. That is a nice argument to be having,” he said.

           The Marcellus shale find is primarily located across Pennsylvania, but extends into Ohio, New York and West Virginia, extending to the tip of Tennessee.

           “This year, we are focusing our lecture efforts on the opportunities of Marcellus Shale and related operations that are becoming a reality throughout Pennsylvania and surrounding states,” Buttermore said.

           Applegath’s lecture was the second in a series lectures sponsored by SRU’s School of Business devoted to the budding Marcellus shale expansion in Pennsylvania. SRU graduate Anthony Cialella, who is also a member of the School of Business’s Advisory Council, suggested the series focus. Joy Ruff, economic development community outreach manager for the Marcellus Shale Coalition, provided an overview of the industry in her February “Success Starts Here” address.

           “A quick history lesson. Everybody knows you can’t make oil and gas from shale on a regular basis. We have all heard that you can get oil from shale: You mine it up, grind, or something. But a regular well can’t make oil and gas from shale. It is in all the textbooks I grew up with. It is in all the textbooks that have been published up until about 2000. But, what happened was, a fellow named George Mitchell had a landholding with Mitchell Energy up around Ft. Worth [Texas] and he had a big thick shale section and he knew that his long-term contracts weren’t enough on the other regular zones to fill. But, he had a sweetheart deal and a long-term contract, so he had to find more gas to continue to make a real nice profit,” Applegath said.

           “So he started on working on getting oil shale gas out in 1982. And everybody said, ‘George you are wasting your money.’ But he was the one who actually proved it could be done. Barnett shale started taking off in the ’90s when horizontal drilling came in. And others started looking around for other places to drill. Range [Resources] unlocked the Marcellus shale in 2004, and we’ve got the upper Devonian above that, and the Utica [shale] below,” he said.

           Applegath showed 2010 Energy Information Administration slides from the federal government that outline the various shale zones in the U.S. He pointed to the large Marcellus and related Utica and Devonian shale finds in much the same region across Pennsylvania. The Marcellus deposit covers an estimated 30-million acres.

           “Right now, the Barnett (shale field) provides about 5 percent of U.S. natural gas supplies. The Marcellus is 10 times bigger in size,” Applegath said.

           He said the Marcellus ranks first in the U.S. in terms of size and potential production, exceeded only by the South Pars/North Dome field in Iran and Qatar, which hold an estimated 1,235-trillin cubic feet of gas. Other large fields are in Russia, Algeria and Turkmenistan. The U.S. Hugoton field ranks eighth in size.

           Nearby, Ohio has also experienced a boom in potential well drilling. This week, BP announced it had signed some 1,000 Trumbull County landowners to drilling leases worth $331 million. Trumbull County is just across the Ohio-Pennsylvania line from Mercer County.

           Range Resources is committed to efficient and environmentally sound drilling operations, Applegath said.

           The company has the potential and ability to develop all three layers of the underground shale, he said, explaining that the drillers initially pass through the Upper Devonian layer, located just above the Marcellus and lower Utica layers. Once into the Marcellus layer, the drill bit is turned horizontal and drills out more than 1,000 feet allowing the gas to be released from the rock. Natural pressure drives it to the wellhead at ground level.

           Additional efforts will allow the natural gas to be taken from the Devonian and Utica layers using the same infrastructure put in place as part of the initial drilling operation.

           He explained how the drilling heads can be controlled to drill straight down in a traditional oil or gas well-drilling operation, but then turned 90-degrees to drill horizontally, thus lessening the number of wells needed within a particular well field.

           “A total of 28 standard vertical wells would be required to develop a 640-acre drilling unit,” Applegath said. Such operations would disturb about 19 percent of the land or 96 acres. However, with horizontal drilling, the total surface impact would be less than 1 percent of the surface area of the field – and 18-34 wells would result, he said.

           A slide showing the general casing design of a Marcellus shale well was presented. Applegath described how cement is added near the steel casing to ensure ground water and lower-level water tables remain unaffected.         

           “Over 3 million pounds of U.S. steel and cement go into each well,” he said.

           Range Resources is committed to recycling water used in the production of the wells, Applegath said. “Nineteen point 2 million gallons of water are used daily in Marcellus shale well drilling, compared to nearly 1,550 million gallons used by public water systems, and 6,000-million gallons used daily in overall power generation,” he said.

           Gas obtained from the shale will primarily be used to heat homes, Applegath said. But, he added, it could also be used in transportation, plastics, fertilizers, pharmaceuticals and manufacturing glass and metals. Due to the recent success in finding growing supplies of natural gas, the wholesale and retail price, has dropped substantially. Applegath said that with the decline in wellhead prices, drilling has also dropped off, but would then rise as the price rises again following the laws of supply and demand.

           A Pennsylvania State University economic impact study shows Marcellus shale could have an $8 billion annual impact and 88,000-related jobs (while providing $785 million in state and local taxes). By 2020, according to the study, the impact could grow to an $18.8 billion economic impact and 211,000 jobs (with $1.8 billion in state and local taxes).

           Range Resources currently employs some 400 workers from its newly opened Canonsburg headquarters, but employs about 5,000 Pennsylvanians, Applegath said. There are jobs for geologists, geophysicists, land leasing personnel, data analysts, environmental health and safety workers, logistics people, engineers, clerical staff, office management workers, information technology positions, accountants, and purchasing, communication, gas marketing and sales personnel, among others, he said.

           “At Range Resources we work to be accountable, transparent and accessible, and we work with the public to address concerns,” Applegath said.

           Applegath joined Range Resources in 2011, but started his career in the oil and gas business in 1971, initially working offshore in the Gulf of Mexico. Since then, he has been an engineer, manager or executive working both domestic and international operations.

            From 1998 to 2001, Applegath and his wife, Suzan, lived in Guatemala City, Guatemala, where he served as president of Basic Resources. Following his retirement from Anadarko in 2003, he became an independent oilman and consultant working primarily in Texas and Oklahoma.

            He joined Range Resources as vice president for drilling so that he could move to Pennsylvania to get involved with the Marcellus shale development.

           SRU’s School of Business free, ongoing Success Starts Here series focuses on successful regional businesses as a way of encouraging students and others to consider starting businesses or pursing careers in western Pennsylvania. Two additional lectures in the Marcellus series are planned for fall semester.


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