Direct Economic Impact of a
Marcellus Shale Well
Bill Hefley, Ph.D.
33rd USAEE/IAEE North American Conference
26 October 2015
Abstract
•
•
This paper examines the direct economic impact of a Marcellus Shale well located in
Southwestern Pennsylvania. This study seeks to fill a critical information gap on the
impact of gas drilling and extraction from Marcellus Shale deposits deep
underground: an assessment of the economic impacts – emphasizing the direct
economic impact, rather than just focusing on the perceived benefits and impacts
affecting the region or the induced or indirect impacts on the economy of the region.
The induced effects are additional economic activity of all other unrelated firms and
households caused by the economic activity of the direct impacts and the indirect
impacts, while the indirect effects are additional economic activity of the value chain
network caused by the economic activity of the direct industry.
Our goal with this study was to provide a realistic picture of the direct costs of
natural gas drilling in the Marcellus Shale of Southwestern Pennsylvania. This study
examined the direct effects of a single Marcellus Shale well, developed using
horizontal drilling and hydraulic fracturing, in Southwestern Pennsylvania. By using
a single well as a standard unit of measure, this study can provide insights by
understanding the direct spending in preparing, drilling, fracking and moving into
production a single Marcellus Shale well site.
2
Value Chain Economic Impacts
Direct
effects
Induced
effects
Indirect
effects
Your Homework Assignment
for this week
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This research project began in student
(graduate and undergraduate) project
courses in supply chain management at
the University of Pittsburgh.
Characteristics of our
typical wellhead
• Located in Southwestern Pennsylvania,
drilling into the Marcellus Shale deposit
• Vertical shaft drilled to kick-off point at
approximately 6,000 feet
• Single horizontal lateral, of approximately
4,000 feet
• 11,000 foot total measured depth (TMD)
• A well site of 300 ft. by 500 ft. = 3.5 Acres
• vsd
Estimated total cost of a
Marcellus Shale well
ACQUISITION & LEASING
PERMITTING
SITE PREPARATION
VERTICAL DRILLING
$2,191,125
$10,075
$400,000
HORIZONTAL DRILLING
FRACTURING
COMPLETION
PRODUCTION TO GATHERING
Total
$663,275
$1,214,850
$2,500,000
$200,000
$472,500
$7,651,825
CONCLUSIONS
• Addressed direct economic impact
– Studied in comparison both vertically and horizontally
integrated value chains
• Other topics for future consideration and analysis:
– Developing a Marcellus ecosystem
– Impact of changes on the economic model, such as
drilling taxes or fees
– Impacts of workforce development
– Understanding the indirect and induced economic
impacts
Final Report
• Report is available at:
http://d-scholarship.pitt.edu/10484/
-AND IN http://www.springer.com/us/book/9783319114989
Contact Details
Bill Hefley, Ph.D., CDP, COP
Clinical Professor
Naveen Jindal School of Management
University of Texas at Dallas
800 W. Campbell Rd
SM 33
Richardson, TX 75080 USA
jindal.utdallas.edu/faculty/william-hefley
+1-972-883-5006
William.Hefley@utdallas.edu
Questions?