Pennsylvania’s Shale Gas

Industry – What’s Ahead?

PIOGA/Independent Oil and Gas Producers

• PIOGA: largest and most diverse association of oil and gas businesses, over 750 members

• Represent conventional and Marcellus/Utica shale producers

• Pennsylvania activity:

Conventional natural gas/coal-bed methane well

Shallow oil wells Unconventional/Shale wells

Pennsylvania Oil and Natural Gas History

• Fueling Pennsylvania for more than 150 years

• 1859: Drake Oil Well near Titusville, “The start-up that changed the world”

• 1878: Haymaker Well in Murrysville, First commercial natural gas well in U.S.

• 350,000 vertical wells drilled

• 120,000 wells remain in production today

• 60 years of hydraulic fracturing

Marcellus Shale Formation

• Geological formation created about 380 million years ago in Middle Devonian age

• As formation aged and decayed, natural gas trapped in the shale

• Formation rests a mile or more below surface, thickness between 50-200 feet

• Approximately size of 95,000 square miles

• Reserves estimated at approximately 500 trillion cubic feet

Jobs, Jobs, Jobs

Over 250,000 jobs added in PA According to Raymond James analysts

90% of PA jobs added from 2005-2012 come from this industry

Among the highest paying jobs in the state

Impact of Shale Gas on Pennsylvania

In 2008, an Allegheny Conference on Community Development study found 26,500 jobs relating to the legacy oil and gas industry in Pennsylvania.

Several groups are claiming under 30,000 jobs exist from the shale industry today!

Seriously???!!!

Whose Numbers to Believe

Jobs Controversy?

One PA city has added 85 new companies just to service the Marcellus Shale industry in Pennsylvania.

Not to mention the existing hotels, restaurants, fuel dealers and other service and supply businesses that have benefitted and in many instances added employees to meet the needs of the industry.

New Business?

In 2007 Pennsylvania producers supplied 25%

of the Commonwealth’s natural gas needs.

In 2014 thanks to shale gas, Marcellus and Utica production account for 18% of the US natural gas supply!

Increased Natural Gas Production

In May 2008 natural gas prices were at $13.70

per MCF (thousand cubic feet). Today prices are at 2.71 per MCF, with PA

shale producers receiving far less at the wellhead.

Translates to lower gas prices delivered to residential, commercial and residential consumers.

Decreased Natural Gas Costs

Consumers have more discretionary dollars to spend

Businesses and manufacturers have lower overall energy costs

Chemical and Fertilizer Industries have cheaper feedstock.

Reduced carbon footprint

Business and Consumers Benefit

Benefits to the Commonwealth

Income taxesSales taxesLocal Impact Tax

State, Local and Federal

Higher Tax Revenues

Decreased energy costs encourage manufacturing rebirth

Natural Gas Liquids bring opportunity for Northeastern US chemical and plastics industry

Adds to Pennsylvania’s ability to attract new business development.

New Business Opportunities

Activists determined to stop fossil fuel development

Low commodity pricesRegulatory overreachTaxationInfrastructure

Challenges to the Future

The oil and gas industry has been targeted by anti-fossil fuel activists determined to destroy the industry.

They have mounted an effective disinformation campaign and galvanized a protest movement to undermine every effort to develop our resource base.

Anti-Fossil Fuel Activism

Can we run our economy on windmills and solar panels? No environmental impact on those energy forms – right?

How about biomass? We can convert more land to growing switch grass or just convert food plots instead –right?

No feedstock for chemical and plastics industry. We don’t need those for everyday uses or medical supplies or medicines nor anything else – right?

Then What?

Elected leaders buy into the misinformation, draft legislation, enable regulation and discourage the industry in fear the public will cost them their jobs.

Hysteria rules instead of common sense regulation and legislation and development is discouraged.

The Result

Decreased Activity Means Fewer Oil and Gas Jobs

Means Less Support JobsIncreased unemployment in related jobsLess development discourages investment in

manufacturing further damaging the job market.

Oil and Gas Impacts Jobs

Decreased Activity

Lower Tax Collections

Fewer Dollars Spent – Less TaxDecreased activity – Lower Impact FeesLess Investment in PA

Excessive taxation kills investmentExcessive regulation increases costs, lowers

investmentExcessive delays discourages investment

Government Policies Affect the Economy

The ultimate sound bite logic. How does that square with the taxes

other states have? What is the overall tax structure in each

state differ? What else is different in PA?

What other costs of business are in PA?

Every State has a Severance Tax

Setting a floor price far above what producers are getting for their product is patently ridiculous.

If you earn $40,000 per year should you be taxed at $100,000?

How about the Floor for Severance Tax

Shale plays across the nation have added production nationally which has created

an oversupply of natural gas. Natural Gas producers are receiving prices lower than those that would justify further drilling.

Then why drill?

Victims of our own Success

Please explain to me the fairness in taxing one extraction business different from any other.

Please explain to me how taxing any business in PA differently than any other is fairness.

Tax Fairness

Challenges to Pipeline and Facilities Construction is Major Impediment

Local Concerns - NIMBYAnti fossil fuel activists

Infrastructure

The future could and should be bright. PA should be able to attract jobs and

manufacturing to the Commonwealth Government could act as a partner

rather than a hindrance to developing this resource

Natural gas should be the foundation of economic rebirth to the Commonwealth

So What is the Future?

To change the should and could to will means PA must be competitive with other states

That will take cooperation between business and government

We must deal with the social license issue

Competitiveness

Pennsylvania has a future that should be the envy of any state – and many nations

Wonderful opportunity for jobs in industry and manufacturing

Stable EconomyKeep our kids at home!

If We Get This Right…