Pennsylvania s Marcellus Resource Recent Trends, Future Impacts

Pennsylvania s Marcellus Resource Recent Trends, Future Impacts

Source: Energy Information Administration, 2009 U.S. Energy Consumption

73 MW solar farm in Thailand Source: 12/3/10 Wall Street Journal, Sharp Corporation

Change in Our Energy Future Energy consumer to producer/exporter. Value-added??

Emerging Trends -NG for power generation increased 3% -2/yrs -Most gained from coal-fired plants --permitting? --New EPA rules? -Estimates of 35% by 2030 vs. 22% in 2010 -GHG emission reduction of 44% by 2030 -climate legislation?? -political implications alternatives %?? -possible nuclear policy changes Source: Deutsche Bank

Utilization A New Future?? -PA s public policy for energy? --Public initiatives --Private efforts --New funding? -Power generation -conv. vs. fuel cell -Feedstock --industrial use --plastics, paper, steel, glass all seeking options --new employment opportunities

Transportation Transportation fuels --$8M in new alternative fuel usage -21 new projects in PA -CNG for private/public use ex. Towanda -refueling corridors East/West, North/South Gas To Liquids technologies -diesel -other more efficient fuel chemistry -engine modification and/or redesign -research initiatives -- Commercialize?

Marcellus Shale Economic Impact ~60+ companies looking at Marcellus --est. $8 B+ spent in 10 --est. value of Marcellus -$1.5T --Royalties to PA landowners $250 billion? -- 1.2 bcf/d in Aug 10 to 5 bcf/d+ (est) in 2015 --International interest. --Lowest cost shale?? Other shales?? --New trend?? --movement towards NG liquids

Marcellus acreage locations TLM: 6 rigs running IPs: 2.3-6.0 MMcfe / d (30-day) Erie Wyoming UPL: 2 rigs running IPs Avg: 7.5 MMcf / d Range: 3-4-10.4 MMcf / d Chautauqua Livingston Yates Steuben Allegany COG: 5 rigs running Recent IPs: 2.6-16.1 MMcf / d Epsilon (EPS) CHK Farm-out Schuyler Otsego Cortland SWN Drilling Schoharie Chenango Tompkins Delaware Broome Cattaraugus NFG Drilling Erie Warren Tioga Chemung Ulster McKean NY Tioga Susquehanna Potter Crawford Elk Forest Wyoming Clarion OH Lawrence REXX Drilling Clinton Indiana Armstrong Beaver Range Res. (RRC) 13 Rigs (6 spudder) IPs up to 26 MMcfe / d Hancock Allegheny Westmoreland Brooke EQT: 30-Day Rates 15.8 MMcfe / d 14.3 MMcfe / d Washington Ohio Fayette Marshall Wetzel Tyler Pleasants Harrison Wood Wirt Bedford Somerset Franklin Fulton Doddridge Ritchie CHK: 3 rigs Lewis Taylor Barbour Morgan Preston Garrett Tucker Mineral Hampshire WV Columbia Montour Monroe Carbon Northumberland Snyder Schuylkill APC: Mifflin RRC: 2 wells PA 3 rigs running Blair 13.5 MMcfe / d (7Cambria Huntingdon Juniata day) Dauphin Berks Perry Lebanon REXX Drilling Recent well: 3.3 MMcfe/d (14-day) Cumberland Monongalia Marion Union Centre Greene CXG: 30-Day Rates 1.6 MMcfe / d 0.8 MMcfe / d 3 IPs: 5 10 MMcf / d Luzerne 7 wells drilled Lycoming Clearfield XCO Drilling Butler CHK: 14 rigs Lackawanna NFG (Seneca) Pike Sullivan Cameron Jefferson Sullivan Wayne Bradford EOG / NFG JV: 2 rigs running Venango Mercer York ATLS Adams Drilled 17 Horizontals IPs: 3-10 MMcfe/d 170+ Verticals Avg IP: 2.2 MMcfe/d Berkeley MD Jefferson CRZO vert activity Grant CHK: 8.7 MMcfe / d CHK: 8.7 MMcfe / d CHK: 8.7 MMcfe / d Hardy Lancaster Northampton NJ Lehigh Bucks Montgomery Chester Philadelphia Delaware DE Legend Antero APC / Mitsui Atlas COG CHK Chief / Enerplus CNX / CXG Carrizo East Resources ECA EnerVest EOG Epsilon EQT EXCO Hess / NFX NFG (Seneca) PDC Range Rex / Williams Samson Stone SWN TLM UPL XOM / XTO DC 9 Source: Credit Suisse, company filings, company presentations and Wall Street research.

Wet/Dry Gas in PA

Marcellus Production Data Source: Powell Shale Digest 3/18/11

Other Shale Targets

Pricing Differences

Change in State Sales Tax Collections, by County Level Marcellus Drilling Activity July, 2007- June, 2010 Sales tax dollars go to the state - none remains at the local level (except in a few urban counties) Counties with more than 150 wells since 2007 include: Bradford (482 wells) Tioga (387 wells) Washington (305 wells) Greene (179 wells) Susquehanna (174 wells) Counties by Number of Marcellus Wells Between 2007 and December, 2010 Source: PA Department of Revenue Statistical Supplements for the Tax Compendium

Change in Rights, Royalties & Patents- State Personal Income Tax Collections, by County Level Marcellus Drilling Activity, 2007-08 Counties by Number of Marcellus Wells Between 2007 and 2008 Source: PA Department of Revenue Statistical Supplements for the Tax Compendium, Tim Kelsey - PSU

Wells Drilled

Major Pipeline/Storage Expansion

Bradford Co Pipeline Development

Impacts on Business/Communities Local businesses -New business ventures --ex: 75 to 100 new in Wmspt area -New business models -Satellite offices -Brownfields development -Hotels/airports -Job migration Local Communities -Road and traffic impacts --costs/agreements --reconstruction --industry spent est. $200M in 10 -emergency response -human services -water and sewer infrastructure -landfill utilization -workforce -current research to determine impacts

2010 Survey of Businesses Bradford and Washington Counties Bradford County Most active Marcellus drilling county 60,384 residents in 2009 1,345 businesses Washington County Third most active Marcellus drilling county 200,505 residents in 2009 5,082 businesses Source: Ward & Kelsey, PSU 2011

2010 Survey of Businesses Bradford and Washington Counties Survey to 1,000 businesses in each county All tourist-related businesses Plus random selection Responses from 619 (response rate of 31%) Conducted by Marcellus Shale Education & Training Center (Penn State Cooperative Extension & Penn College) Funded by PA Dept of Community & Economic Development Source: Ward & Kelsey, PSU 2011

Impacts on Businesses, 2010 Bradford & Washington Counties Because of natural gas drilling Percent responding Yes All Responses Bradford County Washington County Have your business activities changed? 17% 22% 9% Have your annual sales increased? 28% 32% 23% Have your annual sales decreased? 3% 3% 2% Has the number of regular non-gas customers increased? Has the number of regular non-gas customers decreased? 7% 10% 3% 3% 3% 2% Source: Ward & Kelsey, PSU 2011

Effects on Worker Retention & Hiring Bradford & Washington Counties Has Natural Gas Drilling Affected the ability of your business to find and hire qualified employees? All Responses Percent responding Yes Bradford County Washington County Somewhat easier to find 0.4% 1% - Somewhat more difficult to find 5% 7% 1% Affected your ability to retain your workforce? Much more difficult to find 4% 6% 1% Turnover has increased 5% 9% 1% Turnover has decreased 0.4% 0.3% 0.5% Source: Ward & Kelsey, PSU 2011

Impacts by Type of Businesses, 2010 Bradford & Washington Counties Percent responding Yes Business Activities Changed? Annual Sales Increased? Bradford Wash. Bradford Wash. Construction 35% 16% 27% 15% Wholesale Trade 28% 20% 33% 50% Retail Trade 25% 8% 44% 28% Financial, Insurance, Real Estate 28% 10% 50% 40% Business Services 20% 6% 33% 16% Eating & Drinking Places 29% 0% 38% 33% Hotels & Campgrounds 80% 50% 100% 50% Source: Ward & Kelsey, PSU 2011

Hotel Taxes Collected 700,000 600,000 500,000 456,378 525,702 674,083 400,000 300,000 200,000 100,000 269,810 222,524 171,903 345,411 2008 2009 242,000 2010 193,882 0 Bradford Lycoming Tioga

Traffic Increases Changes - Bradford County Traffic 5-Year Average vs. 2010 Counts 7000 6726 6000 6304 6008 5706 5-YR AADT AVG 5-YR TRUCK VOLUME 2010 AADT COUNTS 5000 2010 TRUCK VOLUME 4000 3565 3691 3947 3000 3101 2000 1000 310 1300 247 1460 274 1260 277 967 0 SR 14, Seg 0310 South of Troy SR 6, Seg 0320 West of Burlington SR 6, Seg 0420 East of Burlington SR 6, Seg 0500 West of SR 220 & Towanda AADT is Average Annual Daily Traffic Source: PennDOT

Number of Crashes Traffic Changes - Safety 100 Heavy Truck Crash Statistics Comparing 2008 vs. 2010 80 60 40 20 0 76 50 56 48 29 14 7 1 Bradford Lycoming Sullivan Tioga 2008 Crashes 2010 Crashes

Source: Norfolk Southern Railroad

Rail Car Traffic 6,000 5,700 5,000 4,767 4,000 3,000 2,000 1,000 0 2,471 2,000* 2,130 1600 841 80 411 Bradford Lycoming Tioga 2008 2009 2010 * estimated One railcar equals 4 truck loads

Airport Traffic Williamsport Regional Airport --7% increase in passengers from 2008 to 2009 --14% increase in passengers from 2009 to 2010 --24 % increase in passengers in last 6 months of 2010 In first two months of 2011, a 27.7% increase in passengers vs. the same period of 2010 On the corporate side, saw a 60% increase in corporate traffic from 2009 to 2010 Additional 72% increase in aircraft that weigh 35,000 lb or more from 2009 to 2010 (includes planes like Gulfstream V s, regional jet type) Airport surveys indicate 32 % of the people are gas related. Current airline went from 35 seat to 50-seat aircraft recently. Second airline with connection to TX currently proposed.

Airport Travel (cont d) Bradford County Airport Jet A fuel sales doubled in 2010 over 2009 Air traffic has steadily increased over the past three years Since 2010, now have 4 helicopters based at the airport Elmira Corning Regional Airport Deplanements increased 14% in 2010 from 2009 One gas company has a charter flight that lands about 2 times/month A new parking lot was added in 2009 Already need more space, parking revenue up.

Employment trends?

Change in Total Employment, by County Level Marcellus Drilling Activity September, 2009- September, 2010 Counties by Number of Marcellus Wells Drilled in 2010 Source: PA Department of Labor & Industry, Tim Kelsey - PSU

Pennsylvania Rig Count 103 on March 18, 2011 vs. 73 one year ago

What does this mean in terms of direct jobs? Number of Workers Medium or 'Likely' Scenario: Estimated SW PA Marcellus Shale Workforce Requirements By Phase 12000 10000 Pre-Drilling Drilling Production 8000 6000 4000 2000 0 2009 2010 2011 2012 2013 2014 Year

What specific direct jobs are required? Natural Gas Workforce Requirements By Category Semi-Skilled Tech. 6% Landmen/Realty 5% Supervisors 5% Inspectors 1% Engineers 3% X-Ray 1% Welders 3% General Office 20% CDL 10% Gen. Labor 20% Timber Logging 1% Cartog/GIS 1% Lawyers 4% Heavy Equipment 17% Paralegal 1% Geologists 3%

Web Resources: www.marcellus.psu.edu www.msetc.org www.naturalgas.psu.edu