Marcellus Shale

The Marcellus Shale is a layer of rock found in Pennsylvania, Ohio, West Virginia and New York. In addition, the Marcellus Shale, also known as the Marcellus Formation, …

The Marcellus Shale is a layer of rock found in Pennsylvania, Ohio, West Virginia and New York. In addition, the Marcellus Shale, also known as the Marcellus Formation, is found underneath small areas of Maryland, Virginia, Kentucky and Tennessee.

All the hype, though, isn’t about the rock itself, but rather the natural gas it contains. An estimate by State University of New York at Fredonia professor Gary Lash puts the amount of recoverable gas in the Marcellus Formation at 50 trillion cubic feet. "Using some of the same horizontal drilling and hydraulic fracturing methods that had previously been applied in the Barnett Shale of Texas, perhaps 10% of that gas (50 trillion cubic feet) might be recoverable. That volume of natural gas would be enough to supply the entire United States for about two years and have a wellhead value of about one trillion dollars," according to Geology.com.

The presence of the gas has long been known, but until recently, extracting it was not economical. The price of natural gas is rising (albeit much more slowly than the price of oil) and the methods used to extract the gas are becoming much more advanced. The new method of extraction that is being used is horizontal drilling. The costs for a horizontal well are much higher than their vertical counterparts, but the efficiency and production of the horizontal wells far out pace the verticals, so over the long term the horizontals perform much better.

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Now companies are scrambling to get a piece of the Marcellus Shale action. Companies have been offering substantial payments to landowners with parts of the Marcellus Shale under their property in order to lease their land. At first, companies were able to lease land for around $100 to $300 per acre, but now many landowners are becoming more aware and are uniting with their neighbors. This has driven payments as high as $2,500 an acre or more, in addition to royalties of 15 to 18 percent.

The emergence of the Marcellus Shale can be at least partially attributed to the successes companies have had in Fort Worth, Texas with the Barnett Shale. They were successfully able to extract natural gas from underneath the city using new drilling methods, which are now being utilized with the Marcellus Shale.

Sources:

http://www.nytimes.com/2008/04/08/business/08gas.html?pagewanted=1&_r=1&adxnnlx=1213635975-LjINDDAiXtTQiLMe4R/6GQ
http://en.wikipedia.org/wiki/Marcellus_Formation

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