Natural Gas in the Appalachian Basin

- And we are gonna get started this morning.

Good day, and thanks for joining us.

I see the participants lining up here coming in.

Again, if you don't mind going into the chat pod and introducing yourself.

Do you have anybody with you?

Are you looking at pretty weather or is it a little bit overcast and any snow on the ground?

My name's Jon Laughner.

I'm with the Penn State Extension's energy team, working with property owners, legislators, regulators, entrepreneurs to understand the implications of regional energy development and activity.

I also get the pleasure of being the team lead for the TOPCORP oil and gas regulator training program.

If you're not familiar, TOPCORP is a consortium of the University of Texas at Austin, the Colorado School of Mines and the Penn State University.

We've conducted through TOPCORP about 48,000 hours of training for 37 different government agencies in about 32 states and four Canadian provinces.

We've had the opportunity as a team to visit and gain insights from regulators, operators, industry people, government officials, both domestically and internationally.

Today's webinar takes a look at natural gas and oil production in the Appalachian Basin.

And we define that loosely as Ohio, Pennsylvania and Virginia.

As a side note, we are recording this webinar.

And if you have any colleagues or someone else that you think might be interested in it, we as somebody that's registered to participate in the webinar today, we will send out a link to this webinar in the next few days.

And you're welcome to share that as you like.

We also are glad to have questions.

If you have a question that any of us can answer, I've got some colleagues here today that will pitch in where they can.

Dan Brockett is our leader here on the energy team.

Thanks, Dan.

Dana Olendyke is our technical wizard and she keeps us operating efficiently.

And Joe Conklin is on our energy team, does a lot with utility scale solar, solar in general in Pennsylvania and energy efficiency.

So I thank my colleagues for being a part of this and being here too and supporting this effort.

And again, they'll try to answer questions as they come in.

If you get a question, if you have a question, please put it in the Q&A area.

That makes it much easier for us to kind of look through and see what questions are out there.

And we're gonna start today's webinar just looking at, hey, Dan, I hope you have it open because I'm, oh, there we go.

Thanks, somebody did something.

Looking at more of a bigger picture of energy.

And I love looking at 23, 24, 25, 26 years and prognosticating what we're going to, what we're going to be doing.

But the Energy Information Administration of the US suggests that over the next 20 some years that renewables, petroleum products and natural gas will be the sources of energy that will lead the growth of sources for energy.

For energy consumption.

And, you know, we see the blip there of COVID.

Almost everything was a little reduced during that period of time.

And we've seen some continued growth since then.

And we'll talk a little bit more about that.

The historical trends suggest that, and show that particularly Marcellus has been a real growth product over the years since about 2004, when the first well was drilled and has shown a tremendous amount of growth.

And in general, when we look at the slide or the graph on the left-hand side, we see that shale gas, again, over the next 20 some years is where a lot of the growth in energy is going to come from and it's provided it to date and looks like it will continue to do so.

Now, kind of, you know, taking all of that in stride, contrast that with an article out of a local newspaper here in Western Pennsylvania, Greenville, Pennsylvania that was highlighting another article.

Anybody remember "Good Housekeeping"?

So there was an article in "Good Housekeeping" in April of 1922 that suggested that because so many people are enjoying the benefits of relatively inexpensive natural gas, and it was convenient to use, and that it is by nature, as this writer says, we're not producing more, that we are gonna run out rather fast of natural gas and the price of natural gas is going to increase as the supply diminishes and we'll need to find some other source to light and heat our homes.

And so I love looking at the historical perspective and bringing something else into it.

Looking again, coming back to today and looking at electric generation.

So again, looking out over the next 20 years, the thought is that renewables and natural gas are where the growth is gonna be for electricity generation and where the energy is gonna come from to provide that.

And I show this in contrast to what is nationally consumed for electricity production.

And these are 1922 figures, or excuse me, 2022 figures that renewables in the US in general provided about 21 and a half percent.

In Pennsylvania, it's 14.

I'm gonna go jump right down to the bottom part of that picture where in the US, almost 40% of electricity is produced by natural gas.

We had a blip in August and it went up to the mid 40%.

But Pennsylvania in general provides, natural gas provides 54 and a half percent of the energy source to produce electricity.

And as you can see, just above that, the coal figures in general across an average across the United States, 19 and a half percent of the electricity is generated by coal.

Pennsylvania has closed so many coal plants over the last decade.

Some being retooled for natural gas, others closed completely a new generation put on that was natural gas.

So the figures are a little bit different.

And I should mention right here that the Pennsylvania, while we're talking about the Appalachian Basin, I needed to pull something out in a particular area and Pennsylvania was what I chose to pull out as that.

And again, talking about generation and a good 50, almost 55% of generation in Pennsylvania comes from natural gas.

We export close to 34% of the electricity that we produce into our neighboring states.

West Virginia is the only neighboring state that has an excess of electricity generation that can export some.

So we have excess generation and we're exporting it to our neighbors that don't have the same amount of generation.

And we're gonna talk a little bit more about that when it comes to pipelines and why maybe that's the case.

So let's go back in history just a little bit.

And that is that the first commercial oil production, oil well in the US.

Now, I know if you're a Canadian that you might have a different perspective on this.

Or if you're a New Yorker, you might also have a different perspective on it.

Fredonia comes to mind.

But Edwin Drake, and I think that somebody gave him the Colonel title to make him sound more important as the founder here.

But in good old Titusville, Pennsylvania, Northwestern Pennsylvania, used a tool that got him three feet a day and he must've been a man of patience.

And at 69 and a half feet found oil.

And they knew there was, they expected to find oil because of the seeps and along the streams.

And so that was what kind of clued them in to begin with.

And this is a little picture of what the Northwest Pennsylvania oil boom looked like.

Hillsides of derricks hoping to punch a hole down into a reservoir that would provide oil.

And the first well stimulation, we talk a lot about stimulating a well and how that happened.

We'll talk a little more in depth about that later on.

But started with nitroglycerin and the brave souls that were on the way, the horses and men that carried the nitroglycerin from a, they gradually learned that they should produce it very close to the well that they were going to be stimulating.

But pouring it down the well and detonating it was a dangerous job career to have.

And I think in many cases, sadly, it was a very short career.

And interesting to me, it wasn't until the 1950s or early '60s that the Department of Transportation banned the transportation of nitroglycerin across our highways.

But I credit Dan Brockett with this and some colleagues that he ran into up in Northwestern Pennsylvania that search out old oil and gas wells in that area and looking for them to identify where they are and add them to the list of wells that need plugged.

And here's a hemlock casing put into the ground for some early production.

And Dan, I don't know the year, but I'm guessing that this thing has to be a hundred years or more old sitting there in the ground.

And that was some of the legacy of drilling wells in Western Pennsylvania.

And as it would happen again in Western Pennsylvania, south of where the original oil well or Colonel Drake drilled that well, Range Resources drilled the first horizontal Marcellus well in Western Pennsylvania and Southwestern Pennsylvania, Washington County in 2004.

And that is what started the Marcellus and Utica boom of the Appalachian Basin.

So we credit Range Resources with that.

And I know many of you, I know there's a lot of experience here in the audience.

And so I ask you to bear with us.

This will be a repeat and old knowledge for many of you.

And by the way, because of the experience in this room with us all here today, feel free to add any comments that you might wanna add, any correction or addition that you might wanna make to this in the chat pod.

We welcome that and we'll all learn from it and appreciate hearing from people with a vast array of knowledge that is beyond what may be being shown here.

So we talk about natural gas and oil wells as conventional, unconventional, and we wonder sometimes what that means.

Conventional oil wells, conventional vertical wells, we often re-turf to that are a couple thousand feet deep, maybe drilling a well down into a reservoir, oftentimes sandstone, that has captured the petroleum product and is ready to be extracted up as soon as the wells drill.

As opposed to the unconventional shale drilling that we know today most commonly, again, the first well that Range drilled was an unconventional well into the Marcellus shale, five, 6,000 feet under the surface.

Unconventional being the vertical part down to the layer that has the petroleum product, the hydrocarbon, and making a turn and going horizontally through the layer of shale and bringing the petroleum product out of that longer lateral horizontal portion of the well.

So that's what we classify as an unconventional.

And we probably have all seen these maps over time.

I show it only to show the large footprint of the Marcellus and Utica shale, as opposed to some of the other regions that have shale plays.

And that's not to say that the size is all that matters when it comes to production.

And we'll see that in just a few minutes.

This just brings it down into a little more finer definition.

So I mentioned early on that we talk about the Appalachian basin being Ohio, Pennsylvania, West Virginia.

And while that's the case, the Marcellus and Utica shale flow up into New York and where the names for the shale layers came from.

The Marcellus and Utica are both towns in New York state.

On the right-hand side is the exposure of a Marcellus shale on an upcropping.

And again, found initially first in New York state and named in the region that it was found.

And hence why we got the names for the two shale layers.

And while we talk about Marcellus and Utica all the time as the significant ones, and they are, there are other shale plays, shale layers underneath the Appalachian basin that also hold hydrocarbons.

It's just so far industry has found the Marcellus and Utica shales to be the most prolific, to produce the most, and they fine-tuned and honed their technical skills and drilling expertise for those two shales and are really quite good at it.

However, you will find well pads in the Appalachian basin that have wells on them that will access a few of the other shale layers that are exhibited here.

Most of the Utica and the Mount Pleasant shale, excuse me, the Utica and Marcellus shale are generally the furthest, the deepest ones that are accessed.

The other ones are a little shallower in depth, but, and have not proven to be as prolific, but some companies have tried and experimented to see what they might do.

And that all leads to further exploration and knowledge in the future.

And again, speaking of unconventional wells, we look at the vertical portion and the horizontal portion.

We're gonna talk about fracturing later on.

That is what unlocked the power of the Marcellus and Utica shales, was the ability to fracture using hydraulic fracturing techniques instead of nitroglycerin, which produced the same results, fracturing the fine shale, granulars and allowing the gas to escape through those crevices that were created through the fracture.

So in the late 1800s, nitroglycerin was used to produce those fractures and allow the escape of the hydrocarbon to the surface.

Today, much safer using hydraulic fracturing techniques that is a liquid-based and power-based to produce those fractures.

And again, unleashing the molecules of hydrocarbons to come to the surface.

And in doing so, instead of nitroglycerin, there's large amounts of water and large amounts of propens or sand or a ceramic propens is sometimes used.

There are multiple kinds, but sand has generally been the propens of favor.

Companies have experimented with others.

Some are just awfully expensive.

Sand is generally fairly available in different parts of the country and trucked or trained into the location where the hydraulic fracturing is taking place.

And in the small, many, again, many of you are very familiar with this.

The upper picture just shows the fracturing going away from the horizontal borehole, bore well, and showing the fracture.

And oftentimes we think about the fracture length as being three, four, 500 feet away from the borehole.

And that that's the area that is stimulated by the fracture and that natural gas or oil is released through the small crevices, cracks in the, through those fractures and brought to the surface.

And the bottom graph, thanks to science direct for this, shows a little bit of that fracture in the yellow is being the sand, yellow circles being the sand going in there and propping open the fracture after it's been made, holding it open so that the natural gas molecules can escape and come to the surface.

And you don't have to go very far in the Appalachian Basin to see remnants of conventional drilling.

And I think of a field that I walked through in Westmoreland County that had a conventional well about every quarter mile, about every thousand feet was another small pad with a conventional well.

It was on, this field was on a hillside.

A farmer was farming around each of those well pads, small as they were.

And that was what, that was the industry prior to George Mitchell in Texas putting together hydraulic fracturing and horizontal drilling and coming up with a way to do it much more efficiently, particularly from a land space that will now allow you instead of having multiple wells, every thousand feet in the field that I was in to having one well pad that you could have multiple wells on it going different directions and bringing the hydrocarbon to the surface from a much larger area, with a much less disturbance of the soil, of the surface.

Looking at the, looking at Marcellus Shale, we're gonna talk about Marcellus and Utica here again through a moment, a graphic showing the general area where it's at in the Appalachian Basin.

We're gonna talk a little more, I won't dwell on the wet gas, dry gas line, but I'll ask you to take note of that.

And also the depth, you'll see that it, that the Marcellus Shale gets deeper as you go kind of to the east and southeast.

And you will, we'll look and see how that, what the implications of that are when we look at the placement of wells and how, where they've been drilled.

Contrast that with the Utica Shale that is much deeper than the Marcellus Shale.

And you can see it kind of centers at least the deepest parts of it in Southwestern Pennsylvania and Northeastern Pennsylvania.

And up to 12, 13, 14,000 feet deep in places.

And often those are very prolific places for production of natural gas.

As opposed to looking over into, and I guess I talk about natural gas particularly, but we can't forget that there's also an oil window in the Utica Shale particularly.

And when we get over into Eastern Ohio, Utica particularly, and I'll just call out Columbiana County as a county that has, I don't know, 138 or so wells that are almost all dedicated to oil.

They produce 100 to 150,000 barrels a month in that area, in that county from those Utica wells.

So I don't wanna not talk about oil, but oil is not as significant in the Appalachian Basin petroleum as natural gas is.

But it's certainly important, and particularly in Eastern Ohio, in those Eastern, Southeastern counties, Utica Shale is very prolific in producing oil.

And there's some companies over there that are doing a fantastic job of drilling, using new techniques and bringing oil to the surface and marketing it.

I mentioned our colleague, Jim Ladley.

This was last updated in 2019, 2020, but I show it to show the development of drilling across the Appalachian Basin over the last 10 or 12 years.

Very much focused in the Western portion of West Virginia into Southeastern or Southwestern Pennsylvania, catty-corner up across Pennsylvania into Northeast Pennsylvania.

Now, it looks like there must not be any Marcellus, despite the, it must not be any Marcellus in New York State, despite the map I showed earlier that showed Marcellus going up through New York, up towards Ontario.

And I'm guessing most of you know that there's a ban on the amount of hydraulic fracturing in New York State that has precluded development in New York State.

And just as a note to that, I've read recently that some companies are testing the waters, suggesting that perhaps there are other ways to extract natural gas from the Marcellus shale rather than using a liquid.

And that there are other gases that you might use to hydraulically fracture.

And I've seen them kind of testing the waters in New York State to see how far they might get with that.

But for now, there's just not, there's just isn't a significant drilling in New York State.

While there's Marcellus shale there, it is not being produced, natural gas is not being produced in that area.

And again, kind of as a, to give us a little flavor, Pennsylvania has, or we have 630, what is that?

Some wells are drilling rigs, land-based drilling rigs in the United States.

20 of them as of last week were in Pennsylvania, 12 were in Ohio, nine were in West Virginia.

And as a general statement, over the last month, each of the three states has lost, well, Pennsylvania and Ohio have lost a rig or two, West Virginia gained one or two in that same time period.

So it's been kind of stable, but fluctuating up and down one or two over the course of the last several months.

This slide and data is from a month or two months ago.

And I only show it to give some context to that number of how many drilling rigs are in the Appalachian Basin, and how many there are in some of the other significant basins across the US.

The Bakken has 41, right about where the Appalachian Basin is today.

The Niobrara, similar.

And the outlier, of course, is the Permian Basin with 350 drilling rigs.

Now, most of those are oil, are drilling for oil in the Permian Basin.

Ancillary to that, they're producing a lot of natural gas out of those oil wells as well.

So, just for context though, Permian is certainly the King Kong of drilling rigs in a basin.

And we always like to say, for those of us in the Appalachian Basin, that we are the largest natural gas producer in the United States.

And as a basin, we are.

As a state, Pennsylvania, West Virginia are in the top five.

Ohio is in the top 10.

So, individually, by state, we can't say, but as a basin, we can claim to be the largest producer of natural gas in the United States.

And looking at this production, from year to year, in most basins, it's either plateaued, held steady, and this is a prognostication by the Energy Information Administration that in the Appalachian Basin, we'll see an increase of production in this coming January.

Now, just to counter that a little bit, the January 2024 prognostication is less than what this December, December 23, is producing.

So, we're gonna see a slight decline, at least anticipated, a slight decline in the Appalachian Basin from this month, December 23, to January 24.

Although, year over year, there's a bit of an increase.

Looking at the right slide, you can see, I love to look at how the history of this over the last five years, that in 2018, there were, by quarter, you might have 200 wells drilled.

And this data goes through 22, we're down in the low 100s, 133 for the second quarter.

And if you look a little more, we continue, in the Appalachian Basin, we continue to increase the number of producing wells that are, oh, excuse me, that's Pennsylvania, but we continue to increase the number of producing wells, that top line under, that goes across opposite horizontal.

We continue to increase the number of producing wells and not decrease, which you need to do in shale plays.

I'll take a quick look here at the production and the rig count, and I wanna mention that, and reference this top slide again in the next few minutes, that it looks like over the last couple of years, we've plateaued in production, and it really has.

In the Appalachian Basin, natural gas has plateaued.

And there are a couple of reasons for that, and we'll delve into them in just a minute.

But the science that's been learned, the technical skills and experience that have come into play really speak to that we use the number of drill rigs as a measure of production, and that was really important 10 years ago.

And you could speak towards production 10 years ago by saying we had 40 rigs as opposed to 50 rigs, so production was so much higher.

Technology, science, creativity, the innovativeness of the industry and of scientists, researchers, this bottom graph shows, while the rig count has continued to go down over time, production per well has gone up per rig, has gone up.

And that is a combination of a bunch of things.

The easy answer there is longer horizontal legs, longer laterals that can produce more.

But instead of counting the drilling of a new Marcellus well in weeks or a month, industry now counts the drilling of a Marcellus well in days.

So the production of rigs has tremendously increased.

What you do underground, the technology involved has dramatically increased as well.

The knowledge that has been gained has driven innovativeness, and again, has driven this production per rig up higher.

And so the actual number of rigs, while it's still a measure, doesn't speak totally to the production.

And it's because of this greater production per rig figure.

Now, I mentioned then that, maybe two slides ago, that the number of wells that we have continued, the producing wells continue to increase.

That's really important, particularly when we look at the decline curve, which is the amount of gas produced at the beginning, at the day the well was drilled and started producing gas over time.

And it may produce gas at a very high level on day one, and for the first 150, 200 days, 250 days.

And then it makes that sharp, sharp decline in production.

And gets down after a year and a half or two years, that you're almost, you're at almost a plateau, maybe a slight declining plateau over time.

However, those wells are continuing to be productive and produce.

And so, but what you need is, you need to continue to have, which that previous table of number of producing wells showed you need to have, you need to continue to have new wells brought online to make up for the loss of production as new wells are brought online, to make up for that dramatic loss over time.

And so again, and I give credit to Jim Ladley again, for producing this and it's a valuable slide to give us some ideas.

And so having said all that, there are other impacts other than that the technology has allowed us to do things that we haven't done in the past.

Some of the impacts are to the state, to the community, to the region.

And I wanted to highlight those right here in a couple of slides.

The Pennsylvania Independent Fiscal Office does this report and they stopped reporting by county with this report.

So this is the last report that they reported by county, but it shows the value to Pennsylvania landowners in this particular slide.

And that over an eight year period, landowners in Pennsylvania through gas royalties received over $10 billion.

That's $10 billion that went into landowners pockets that they could invest retirement, they could invest in a new roof, they could invest in new equipment that provided and brought economic development opportunities into counties.

And by county, again, this is a little dated, but it's the best information available.

By county, we can see in that bottom bullet, Washington County in Southwestern Pennsylvania, royalty payments in that came in at 264 million.

I mean, these counties received, of course, these are counties that had a lot of natural gas produced.

So they would be higher than other counties in the state, but a lot of influx of capital of dollars into those counties directly into the pockets of landowners.

Now, that was landowners.

How about the state?

Pennsylvania, as many of you know, does not have what we call a severance tax in about 2013, legislators passed an impact fee.

And that impact fee was in many minds was to take the place of a severance tax.

I'm not sure it does.

And there's a lot of argument about that.

So just that that was the minds of some people.

And the impact fee is based on the number of wells, it's on a per well basis, and it's on the price of natural gas and production.

You can see, excuse me, a large drop.

Total revenues, that line, total revenues shows, I think in '21 and in '22, when natural gas was priced at four, five, $6 at MCF.

And in this past year, it was priced closer to two and a half to three and a half dollars.

It greatly reduced the impact fee dollars that came into the state.

However, it's still a significant amount of money.

And those dollars are collected by the state and go to various agencies within the state.

Most of us are familiar with conservation districts or the conservation commission.

A fair amount of money goes into theirs.

Communities and municipalities, counties and municipalities also get a fair amount.

And oftentimes you'll read an article in the paper about some act 13 impact fee funds coming into a community and developing a park.

So the money does flow to the, the majority of the money flows to those areas that have the largest impact from natural gas production.

Now, we're gonna take a deep dive to the right here and say, okay, we've talked about drilling.

We've talked about the number of wells that have been drilled, how many are still being drilled, but there's another impact.

And that is also to the community that you move the gas away from an oil well.

And how do you do that?

You do it through a pipeline.

And Pennsylvania is blessed with a bunch of pipelines.

Pennsylvania was the quarter from in the 1980s, 1990s into the early 2000s, a quarter for natural gas to flow from the Gulf coast, from the Southwest into the Northeastern part of the country.

And so we had already a nice group of natural gas pipelines flowing through the state that satisfied Pennsylvania's needs, but also went into, as I mentioned, those other Northeastern states where natural gas is needed and consumed.

It's a highly intricate and there's a lot of work that goes into a pipeline.

It's, there's a lot of planning.

There are a lot of permits.

There are a lot of regulations that are followed to do all the things that are mentioned here to satisfy and make sure that the right things are being done.

Oftentimes it's a hundred foot right of way.

Top soil is removed, piled on one side, a subsoil is removed, put on the other side and the pipes installed, it's back filled, but there's still implications to the surface and to particularly to agricultural land.

So this picture graphically shows, as you look across this road, there's tall green, really nice dark green corn on either side.

And then right in the middle is this pale yellow, stunted, short corn growing.

Our agronomists at Penn State say that you, this is probably a four to five to six year period before this area that is a hundred foot right of way for a pipeline will be back into full production.

So it has implications to property owners.

It has implications to all of us as community members because it's an invasive type of operation just by nature of needing to put pipe in the ground and the excavation that goes with that.

And companies work hard to make that right.

Mistakes happen.

And that's why we have regulatory agencies to watch over and make sure that the things are done and done properly and to everyone's satisfaction.

So we have used this slide many times.

Some of you may have seen it.

It's just a graphic showing that oftentimes what we see is that there's a lot of consternation about a pipeline, particularly in those areas where there's no real benefit either because the pipeline is just flowing through the community and not providing gas into that community or there aren't any Marcellus or Utica wells in that community that are benefiting from the use of the pipeline as opposed to the picture on the right where you're in shale country.

There are wells in the community.

People are receiving royalties.

There are right of ways that are being bought and it's a quite different scenario and it's a different perspective, right or wrong.

There's not a right or wrong.

It's a different perspective that we each have living in a community that may not have any, what we call, see as a direct benefit and as opposed to where there is a direct benefit because there's well drilling going on.

And as an example of that, I pulled these two out, these two examples out as evidence and some of the struggles that pipeline companies and have endured.

The Atlantic Coast Pipeline and please take note of the Atlantic Coast Pipeline for a moment and because I'm gonna reference it again in a moment, was canceled in 2000.

It was going to be a 600 mile pipeline.

At the time it was canceled, it was already $3 billion over its projected price tag.

Now, many of you are very familiar with the Mountain Valley Pipeline.

It's made a lot of news over the last year or two.

The Senator from West Virginia was involved.

Legislators were involved.

The Supreme Court was involved.

It's a 300 some mile pipeline, West Virginia to Virginia.

And the purpose for getting to Virginia was to tie into another significant pipeline that was going to feed some power plants in Virginia and North Carolina and probably beyond.

It was expected to be completed in 2018.

And now the latest that I've seen is that the company expects it to go into service the first quarter of '24.

It's already two and a half billion dollars over budget.

It's years over and dollars over what was expected.

And those two examples are what has caused some of the problems with production in the Appalachian Basin.

I'm going to talk a little more about that.

So we had a large increase in capacity of pipeline between 2008, 2020.

Graphically, the numbers there show that.

I'd like to quote Toby Rice, who is the EQT CEO, who says that the Appalachian pipeline capacity has hit a wall, that there is no more capacity.

There's no more production that can leave the area because there's no more pipeline capacity that can carry it away.

I mentioned the Atlantic Coast Pipeline.

Here we go.

So looking at the Appalachian Basin production and the pipeline capacity to move natural gas away from here into areas that need it.

And I'm not saying Pennsylvania doesn't need it.

And we're gonna talk a little bit about some other uses, perhaps in the Pennsylvania region that can use the Marcellus Utica gas.

But at this graph, the blue is the production.

And so we go up to this 2022, 2023.

Production is right at the capacity that the pipelines that are in the ground have to move production away from here.

If you go into, and when this graph was made, as you can see, they inserted the Atlantic Coast Pipeline capacity and that if the Atlantic Coast Pipeline and its new capacity came online, that it would allow additional production to take place.

That's the solid blue line.

Without it, the dotted blue line is what the expected production will be until some other use within the basin can take place.

Again, you can only produce what you, the only way to move it is through a pipeline.

And if there isn't pipeline capacity, there's no way to move it.

A company isn't gonna drill a well if they can't sell the product.

And you've got to have a market for your product.

If you don't have a market for your product, there's no reason to drill a well.

These are, I'm gonna show you a couple examples here.

You may have seen one or two of these in the past showing the need for, the perceived need for pipeline capacity out of the Marcellus region into the Northeast that has a lack of both, they have lack of pipeline capacity, but they have a growing need for natural gas.

And this is an example from just about five years ago.

Right now, some of you might remember the early blizzard of 2018.

And instead of what, instead of paying the $3 and 20 cents a million British thermal units, BTU, gas was brought in from offshore, Lick-Flight Natural Gas.

And the consumers paid a terrific toll that day for natural gas because there wasn't capacity to get natural gas, which was at the Marcellus, in the Marcellus region, very close, but no pipeline to get it there.

And this comes from a news article last year that showed the idea that we continue, despite having, we produce in the United States more natural gas than we consume.

We have about a 13% overcapacity.

And so that's, the 13% is leaving as Lick-Flight Natural Gas offshores.

But there are areas of the Northeast that again are constrained by pipelines, don't have pipelines, have not permitted pipelines into the area.

And so instead are buying Lick-Flight Natural Gas for their consumers, for their businesses, industry, that are being imported from other countries.

So what's the state of the pipeline industry?

The Federal Energy Regulatory Commission shows that there are eight natural gas pipelines, either currently under construction or in a planning stage.

Some of those are right now being held up for permitting issues.

But where are they going?

They're not going into the Northeast.

They're gonna carry the excess natural gas down to the Gulf Coast.

In most cases for export as an LNG product to another country.

Now, we talk about natural gas and that's the major production here in the Appalachian Basin.

But I ask you to note the wet and the dry lines along the map earlier.

And that's because part of the natural gas supply is the natural gas produced in the Appalachian Basin goes beyond just natural gas or methane.

It goes beyond that and produces other products.

And we talk about those as either wet gas or natural gas liquids.

And they are the ethanes, the propanes, the butanes, the isobutane, natural gasoline.

And up until now, the two most...

Actually, I think this past year, the most exported products of petroleum were both ethane and propane.

So while we export a lot of other things in petroleum products, ethane and propane in 2023 are the number one by volume export petroleum product.

So there's a lot of it produced in the Appalachian Basin.

And if I would take the time to go backwards, many of you are familiar with the Mariner pipeline that runs east to west out of Southwestern Pennsylvania over to the Maryland, Baltimore area.

That pipeline carries both propane and ethane to the plant on the coast.

And they're sold offshore and exported to other countries.

So in the natural gas liquids or in the wet gas that comes up with the methane, we have these other products that have value.

Oftentimes, ethane is priced at about a 25% premium to natural gas.

So it's valuable if you can separate it out and sell it as an additional product.

Excuse me.

Here's another look at those kind of magical lines that we draw on maps that show kind of generally the Marcellus.

So east of that line, Marcellus wells typically produce mostly methane.

To the west of that line, Marcellus produces methane, ethane, propane, butane.

And the same true if you go to the west and northwest, the Utica lines and both the Utica wet and Utica dry.

And this is the reason that we have a Beaver County, Western Pennsylvania, shell polymer plant built and producing polymer here in Western Pennsylvania.

It's because I believe Range Resources may have been the first company to move ethane to the east coast and ship it overseas.

Because we had an excess of ethane.

There wasn't a real market for it because we had so much of it.

Everybody was backed up with ethane.

I believe I have mentioned here the Propase PTT cracker.

It looks like maybe that one has moved off the shelf and maybe built in another country.

It doesn't seem to be much progress on that.

But we do have the shell cracker here in Western Pennsylvania.

So by volume, taking a look at this, the hydrocarbons, the natural gas liquids that flow with methane, with natural gas, it is the propane and ethane in wet gas that are the major components.

So the other components, the other tanes that come up with, the other ames that come up with it are a little less than that.

But propane and ethane are the two major hydrocarbons besides that.

This graph just shows the areas of the United States where ethane's produced.

We produce a lot, but not as much as the Southwest.

And the projections for this year are 460 barrels a day to export.

It's a huge amount that we leave here with.

And here we are showing in the Appalachian Basin.

And again, it's pretty much focused in Western and Northwestern Pennsylvania.

The amount of natural gas liquids or condensate that are produced.

And again, why Royal Dutch Shell decided to build an ethane cracker plant in Western Pennsylvania and Beaver County.

Looking at that map, and I didn't mention it earlier.

Why aren't there any wells in Pittsburgh, which is Allegheny County?

Is there no Marcella Shale or Utica in Allegheny County in the county that Pittsburgh's based in?

Well, we know that there is, and there are a few wells.

And you may know that CNX has the lease on the Pittsburgh Airport.

I believe it's about 9,000 acres.

They recently drilled, I believe, four more wells on the Pittsburgh Airport property, which the royalties flow to the county.

I believe that they may be the first Marcellus Wells that go underneath a runway.

And that's, I think, what is notable about those new four wells on the Pittsburgh International Airport is first ones that go under a runway.

And I've mentioned the Shales ethane plant.

This is an aerial view of it.

It consumes about 800 acres.

The actual footprint of the plant is just under 400.

It went into production this past year.

It brings, so again, we like to talk about the financial impacts, and it's brought money into the county, into the local community, into local taxes.

There were about 8,000 to 9,000 people construction, during the construction of the plant.

It has a full-time payroll of about 600 employees.

So it's significant and insignificant in the number of people that are ancillary to the actual full-time workers on the plant grounds, but beyond that.

So let's quickly, as we get close to the end here, I'll give you some optimism that we're getting close to the end, that some of the trends that we see.

Old news, the invasion of Ukraine, but it led to fuel switching.

It also led to some demand destruction.

And we saw that in the production in the Appalachian Basin and other basins across the US.

The decline curves are dramatic.

We know that you can't slow drilling down much if you wanna maintain production because of those demand curves.

Technology continues at a rapid pace, whether it's robotics or using the cloud.

And do you think that we found the last shale?

Probably not.

And virtually, if it's not every day, every week or every month, we learn about a new shale outside of North America that someone that has tested some wells in and discovered that there's value in the shale that they are exploring.

Wearable technologies.

Industry is focused on safety.

And so you see a lot of things related to employees in the wearable technologies that are really new and groundbreaking and watching over the people that work in the industry.

I mentioned that short of the ability to move natural gas out of the Appalachian Basin to regions where it's needed, there are some proposals, and I guess we can argue about how real they are, but there are some proposals for different projects in Pennsylvania and in the Appalachian Basin.

There's also the infrastructure law of last year put about $7 billion into energy hubs.

The acronyms, the ARCH2 and the MOC2 each have a billion and three quarters of dollars that will be invested in these areas.

The ARCH2, which is in West Virginia, Ohio, Pennsylvania will produce hydrogen fossil fuels.

That's important to the Appalachian Basin.

The MOC2, Pennsylvania, Delaware, New Jersey will be...

Its proposal was to repurpose existing fossil fuel infrastructure and produce a renewable hydrogen.

Renewable hydrogen.

And moving on, I just go back to that.

What we haven't talked about is the trend of marketing a certifiable green natural gas or a certifiable renewable natural gas.

There's all kinds of terms being put out there for those kinds of fuels that an agency or a organization is certifying as something just a little bit perhaps better in the green environment.

Drilling trends I mentioned, shorter times to drill a well, costs are decreasing, longer bores.

20,000, three, four, five years ago, somebody said you were drilling 20,000 foot ladder.

You were just crazy.

And now it's more of the standard than it is the aberration.

More proppant, more frack stages.

And this is all a result of companies willing to experiment and on a well experiment with more frack stages using a different proppant.

And in this case, more proppant, which means it's more expensive.

But what they found is that it also produces a greater amount of hydrocarbon from that same well.

And so what does that mean?

That means you'd had an increased production per rig.

That's what those drilling trends above lead to is that's why the rigs are more productive.

And fracture cluster spacing is something that's evolving.

And this table just shows kind of what happens if you get the clusters, the frack clusters too close, you overstimulate one area, under-stimulate another area.

What industry is trying to find is that fracking cluster in the wellbore, in that horizontal wellbore that gives you the most production and with the most efficiency.

Okay, this is, okay, we're at our time here.

I'm going to just mention that orphan wells have received a lot of attention legislatively because Pennsylvania and the Appalachian Basin has a lot of orphan wells.

There's a lot of money flowing into the Appalachian Basin to plug orphan and abandoned wells, millions and millions of dollars.

And in contrast to, I'll bring us back around to the beginning, in contrast to, wow, we keep using natural gas, we're not gonna have any natural gas, that we gotta figure out something different.

We're gonna have to find a new energy source because we're using up the natural gas and it's not going to be, nature doesn't allow it to be replenished.

But here we are in the lower 48 and look at natural gas production.

And it continues to increase.

And we are continuing to increase at a rate greater than the five-year average.

And that's a credit to the scientists and industry and the technicians that figure out the secret sauce that makes the whole industry more efficient and brings us natural gas and oil products in a more efficient and safer way.

So with that, I'd thank you all for attending and hope you have a great Merry Christmas.

If there, I don't know, Dan, if we had any questions that were, I know we're over time, we can either respond to them later or address them.

Maybe you already have.

- Trying to type some answers and I apologize.

They aren't the greatest answers, but Jon, a couple of them really stand out here.

You mentioned New York state and it seems like a trend may be coming our way.

Someone talked about the injecting carbon to use that to fracture and carbon capture and storage.

And certainly it looks to me like that's a direction the industry is exploring hard.

Can you touch on that a little bit?

- Dan, the comments you've just made are probably about the amount of knowledge I have about it.

So I don't know if I can expand on that.

The little bit that I've understood from it was that a company or two were testing the waters with that idea as a way to access the Marcellus Shale and produce natural gas in New York where they couldn't use high volume liquid fracturing.

- Yeah, yeah.

And it seems though, Jon, like we might see carbon capture and storage outside of using that as a fracturing method, right?

So it's something we're keeping our eye on.

We're not seeing that as a common practice yet in Pennsylvania, but stay tuned.

We're hearing that it's coming our way soon, right?

Maybe, a lot of science to work out there.

Someone else asked, "Where else are we seeing shale production across the world?" Not my area of expertise, certainly, but we know that Russia, China, Argentina, Libya all have significant shale oil resources, whether they, you know, how easy those things, how far they'll be developed is, you know, who knows?

So that's about right.

And then we did have a question, "Anticipating future prices, future production of natural gas in the Appalachian Basin." Go ahead and guess the impossible, Jon.

- Well, my guess is based on an article or two that I read just yesterday, I believe.

And it was not very optimistic if you're a producer, but the common point was, industry goes through a cycle of overproducing low prices.

Low prices drive less production and eventually then higher prices.

And, but this prognosticator thought that if we saw $3 an MC up next year, that you might count yourself as a producer, lucky, as a consumer, you're probably dancing, you know, in your living room.

- Sure, okay.

There's some other questions here.

We will try to maybe type them out if you wanna stick around, if not.

Appreciate everybody coming today.

Happy holidays, Merry Christmas to everybody.

Thank you, Jon.

Great job today, appreciate it.

- Thanks, Dan.

And just as people are leaving, I don't know if Joe's still here, but I know he's got a webinar coming up in January.

I don't know if you or he can promote that at all.

- Yeah, Dan, well, Dan and Jon, we do have a Hydrogen 101.

Actually, I don't think that's the actual title of it, but there is a hydrogen webinar scheduled for January 18th.

You caught me flat footed, I didn't have it.

So yeah, it is January 18th from noon to one.

It is on our website.

Just give me a second here.

- And as they've registered for this one, they'll get a notice about it.

So that'll be an email that they'll receive in their email inbox.

- Yeah, I was actually looking up some stuff on the internet.

Anyways, I didn't have that up.

- I just put it in the chat. - Oh, there you go.

Thank you, Dana. - Perfect.

Thanks, Dana.

Okay, again, thank you all.

Have a great Christmas holiday and we'll see you at the next webinar.

Thanks again. - Thank you. Thank you.