Economic Impact of Oil and Gas Production on the Allegheny National Forest

Tue Mar 24, 2009 5:20pm EDT

* Reuters is not responsible for the content in this press release.

WARREN, Pa., March 24 /PRNewswire/ -- Several articles have appeared in local
and regional newspapers relative to the issue of Forest Service approval of
new Oil & Gas development within the Allegheny National Forest.  I would like
to expand on the information presented from the perspective of the devastating
economic impact this moratorium or seizure of production has, and will
continue to have, on our regional economy.

It is important that this information be presented to allow the general public
to understand the positive impact commercial activities within the ANF have on
our regional economy, and the consequential negative impact this cessation and
the continued interruptions and delays of these activities will have across
the economy of Northwestern Pennsylvania.

It is equally important to remember that these operational directives have not
emanated from the local Forest Service offices.  Rather, these are directives
being imposed upon the local staff of the Forest Service who are obligated to
comply with the directives and management philosophies imposed upon them.

There are currently approximately 80 individual companies operating oil and
gas activities within the ANF.  These companies range from sole proprietors to
large, national operations.  For many of the smaller operators, the ANF
represents their only location of operation.  Inherent with shallow oil wells
throughout this region, the majority of total ultimate recovery from each well
is experienced within the first two years after the well is first brought into
production.  Long-term production yields taper off very quickly and remain
modest but stable for the life of the well which could extend 20 to 30 years.

A typical 10-year cost/revenue breakdown for a shallow well on the ANF is:


    Well drilling/completing costs       $150,000 ("up-front" costs)
    Ongoing operating costs              $120,000
    Service taxes                         $22,500
    Total revenues from sale of product  $450,000
    Income                               $157,500...an average of $15,750 per
                                          year.



Completion of a single well requires roughly 3,200 man hours.  This represents
1 1/2 workers' labor for one year.

The current delay in releasing well projects on the ANF, which have been fully
reviewed and permitted by the Pennsylvania Department of Environmental
Protection, affects approximately 100 new well sites.  Based upon the man
hours per well, the equivalent of 150 full time positions have been
eliminated.

This represents only the direct labor involved in the well development process
which includes excavation contractors, timber contractors as well as the
actual well drillers and fracture teams.  This does not take into account the
further negative impact on other jobs throughout the community that provide
goods and services to both these employees as well as the businesses
themselves.  Penn State University performed a study in 2008 on the impact of
oil and gas production activities and found that for every 100 jobs in the oil
and gas sector, an additional 23 direct support jobs, as well as 40
residential/retail support jobs are created.  Thus, a loss of 150 oil and gas
jobs could result in an additional loss of almost 100 indirect jobs within the
community.

As you can see, the impact of the oil and gas industry within Northwest
Pennsylvania and Warren County is profound.

Continuing to assess the impact of oil and gas coming from the ANF; let us
look at the impact this oil has on the operations of the American Refining
Group refinery in Bradford.

    --  20% of the refineries feed stock of crude comes from the ANF.



    --  At $50 per barrel, this represents $100,000 per day flowing from the
        refinery out to the individual producers



    --  Approximately 8,000MCFD of natural gas is drawn from the ANF.  At an
        average price of $6, this represents another $48,000 per day in
capital
        being inserted into the regional economy.



    --  Elimination of the ANF crude from the ARG facility could result in a
        staff reduction of up to 40 full-time employees.  Once again, this
does
        not include the commensurate reduction in community-based businesses
        supporting these direct workers.




The economics discussed to this point in the article have been based upon the
traditional, shallow oil and gas wells historically and currently being placed
throughout the region.  There lies significant new potential for this region
through the development of the Marcellus Shale gas formations as well.  It is
important that the region encourage and not discourage this expanding
development opportunity that has significant positive economic potential.

We have seen a dismissal of reliance on the hardwoods from the ANF by
furniture makers and timber sellers due to the unreliability of harvest
volumes.  Application of misguided regulatory policies to the development of
important Oil and Gas reserves could well result in additional regional
economic devastation easily avoided through sound science and prudent
management.

The argument being raised which has caused the current moratorium on
production within the ANF is based upon allegations made through lawsuits
filed against the Forest Service for not requiring enough in the way of
studies relative to the environmental impact of oil and gas well operations
within the ANF.  While several legal actions are at play relative to
activities within the ANF, it appears that the suit which is most directly
involved in this particular issue is that filed by 3 groups; Forest Service
Employees for Environmental Ethics, Allegheny Defense Project and Sierra Club.

The history of Oil and Gas operations throughout the region over the past
century shows a remarkable record of safety and lack of any substantive damage
to the surface, watershed or air quality in the region.  In fact, these
activities within the Browns Run and Morrison Run watersheds contributed to
the improvement of the watersheds leading to the reclassification of these
waterways from Cold Water Fishery to Exceptional Value.  These enhancements to
watershed quality levels were effected utilizing the 1986 Forest Plan
operational guidelines.

This situation has caused job losses throughout the region and will continue
to do so until the owners of the minerals lying beneath the surface of the ANF
are again provided access to their properties and are not prevented from doing
so in the future.  Each day that this situation continues causes irreparable
harm to our community.

This is an industry which is vital to Warren County.  This is an industry that
is serious about responsible treatment of the environment.  This is an
industry that deserves our respect and our support in their continuing fight
for survival.

The WCCBI will continue to work closely with Congressman Thompson, our elected
state legislators and the U.S. Forest Service, both at the local and national
levels, to see to it that the current moratorium is as short-lived as possible
and oil and gas activities within the ANF return to our mutual benefit.

SOURCE  Warren County Chamber of Business & Industry

James Decker, President/CEO of Warren County Chamber of Business & Industry,
+1-814-723-3050
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