September 2017, Vol. 244, No. 9


Oil & Gas Officials Confident in Industry’s Bright Future

By Victoria L. Cann, Staff Writer, Exponent Telegram, Clarksburg, WV

West Virginia oil and gas officials continue to be optimistic about the industry’s future in West Virginia.

Scott Freshwater, president of the Independent Oil and Gas Association of West Virginia, said that even though the price of natural gas in the Appalachian basin is discounted right now because there is such an oversupply, there are factors that could boost the price.

“Whenever the Marcellus started, there was a premium – you were getting a bonus on your prices if you drilled in West Virginia, Ohio and Pennsylvania,” Freshwater said. “The price of natural gas is approximately $3, and West Virginia gas is $2.20; it’s severely discounted.”

With projects such as Dominion’s Atlantic Coast Pipeline and EQT’s Mountain Valley Pipeline in the works, Freshwater said industry officials hope to soon see the current transportation bottleneck reduced or eliminated, which would allow the region’s abundant supply of natural gas to reach markets on the East Coast.

Access to those high-demand markets should push the price of the Appalachian basin’s natural gas higher.

“With better pricing, it’s a win. Royalty owners receive more; it’s not just the producers,” Freshwater said. “We need to see pipelines to improve the basis pricing. We need to be creating a market here in West Virginia.”

He mentioned that he sees some concerns with surrounding states moving to natural gas for power generation, an area that West Virginia is lagging in.

“That is preventing us from burning our own natural resources, which further maximizes it in the state,” he said. “The more immediate need is to improve the pricing. We got good at finding natural gas, proving to be a very abundant supply. We just need to get it to markets and also create markets in West Virginia.”

Anne Blankenship, executive director of the West Virginia Oil and Natural Gas Association, said she is also optimistic about the oil and gas industry in West Virginia.

“Much-needed pipeline projects are proceeding and will allow for growth in the industry over the next few years,” she said. “End uses for oil and natural gas are becoming more of a focus and include the development of natural gas-fired electric generation facilities and projects that will result in the resurgence of our petrochemical industry in West Virginia.”

Natural gas creates the building blocks for the chemical manufacturing industry, which makes products people use every day, Blankenship said. The growth of the industry will be good for all of West Virginia, she said.

“The growth of our industry will promote the growth of the manufacturing industry, both of which will improve the local and state economies,” she said. “The natural gas industry already contributes greatly to our state economy in the form of severance taxes and property taxes.”

Al Schopp, Antero’s chief administrative officer and regional senior vice president, said that from his perspective, he is cautiously optimistic about what is likely to occur in the next few years. Although pricing has been all over the map this summer for gas, returning to $3 is sustainable for drilling programs, he said.

“One of the big keys is sustainability of the drilling programs. We are forecasting about a 20% production growth every year for the next few years,” he said. “The industry is driven by commodity pricing, and that’s what’s also important to the state because of the severance taxes.”

Those severances taxes are based on gross revenue, Schopp said, so when there is an uplift in pricing, there is also an increase in severance tax.

“It just needs to continue leveling and continue activity. The real goal is to get the spikes out, get rid of the boom-and-bust cycles,” he said. “Once that happens, jobs are sustainable and people can look forward to the future in two or three years instead of worrying about pricing and jobs.”

Schopp said the workforce is now well-trained and has a number of local employees, which bodes well for the industry.

“We aren’t paying a cost to ship people in and house them; we really are working with local people. The industry is maturing,” he said. “Some of the local subcontractors we have had now who worked on conventional well programs for three or four years now have experience working on the horizontal well programs we drill.”

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