The problem by using a boom, at least historically, is which bust often follows. But advocates of the natural gas industry say the Marcellus Shale gas field could make a boom without a bust -- a long-term operation providing jobs for decades to come.
The ancillary benefits will remain intact as well -- royalties to landowners, cheap and plentiful fuel for the region, and jobs in related industries, much as the automakers in Detroit sustain a spiderweb of interconnected glass, paint and steel companies. And even though the gas industry may appear far more fragmented than King Coal, there is enough stability among top producers that the natural gas rush won't devolve into a free-for-all that depresses prices below is actually profitable.
And right now, it's still a profitable enterprise, even with a glut of natural gas and low prices. The 2009 month, natural gas futures declined on milder weather forecasts in the eastern United States, and wellhead prices have been hovering around $4 per mcf (thousand cubic feet), could be up from last year but below the $11 mcf which being paid many years ago.
Between $2 and $3 per mcf, drillers were cutting production, but at $4 mcf, the Marcellus Shale play is profitable for that industry for a lot of reasons: among them, no severance taxes on the gas extracted from underground, and the cheaper price of transporting the gas to the cold Northeastern and Midwestern states where natural gas heats homes. Chesapeake Energy, which hopes so you can get 34 rigs in Marcellus play towards the end of 2011, says it makes a 40 percent pre-tax profit on Marcellus Shale wells when prices are at $4 mcf. Range Resources, in its third-quarter analysts' call, said its cost per well features $4 million, along with a 60 percent rate of return. Also using the prices go up, so, too, does the rate of return.
Deutsche Bank, which has an environmental unit that monitors gas prices, says the internal rate of return could easily hit 100 percent, before tax deductions, if prices go set up.
At $4 per mcf, natural gas also remains cheap enough to be an attractive choice coal. Natural gas is cleaner burning than coal, too, one of the causes that more than two full years have passed since ground was broken on a new coal-fired power plant in the State. And if the Obama administration is to succeed in its plan to limit carbon emissions nationally, 'a coal-to-gas switch will should a component of any climate stability target,' according to an up to date Deutsche Bank report.
'It's probably the biggest story in energy in the last several years,' said Nils Mellquist, an analyst with Deutsche Bank Climate Change Advisors.
By most accounts, the Marcellus Shale formation has the potential to be a seriously economic generator, particularly in southwestern Pennsylvania, the formation's unofficial head offices.
'It will create jobs, output, income, tax base and just about every other measure of activity in a significant way,' said Ray Perryman of the Perryman Group, a consultancy that has studied the economic impact of gas drilling in the Barnett Shale in north Texas.
Because exploration, and windfalls, will be cyclical, municipalities end up being cautious about building gas revenues his or her annual budgets, Mr. Perryman says. 'It is wise for public entities get a the funds methods that they do not become institutionalized,' he was quoted saying.
As with all forms of commerce and industry, a bust is possible: It happened when farmers swarmed like locusts to the great Plains and caused grain prices to tumble; it happened when oil prospectors flooded west Texas and northwestern Pennsylvania, then flooded while they were markets with plenty cheap crude that the upstart towns and oil companies wouldn't be.
Could that happen with the Marcellus Shale? Possibly. Future discoveries, and technology improvements, could render the Marcellus field less important than it now appears in order to become. As big as the Marcellus Shale is, scientists from the Ough.S. Geological Survey say lots of other natural gas deposits remain to be seen. The Arctic, for example, is thought to hold nearly a third with the planet's natural gas reserves, and, simply because the polar ice caps melt, those reserves will be to be able to tap. Israel united states natural gas reservoirs in the Mediterranean sea. And if U.S. companies get better at shipping liquefied natural gas, the Marcellus Shale's geographic advantages might not matter as much.
'Very large gas main resources are to be found in several areas outside the Ough.S., and the role of U.S. gas will be based the evolution from the market -- in particular the growth and efficiency of trade in liquefied natural gas,' according to 'The Future of Natural Gas,' a study by the Massachusetts Institute of Technical.