Tuesday, April 17, 2012

Yes (West) Virginia, There is a Shale Drilling Boom and it Currently Resides in Your Northern Counties

For some time now we have been hearing about a Marcellus Shale drilling boom in West Virginia.  There has been buzz about the tremendous reserve of natural gas thought to be contained in the Marcellus Shale that lies under most of the State.  We have heard buzz about the possibility of attracting an ethane cracker plant and what that might mean for the re-birth of the manufacturing industry in West Virginia.  Additionally, one of the hottest topics of debate during the 2011 regular legislative session was the need for permanent regulations addressing Marcellus Shale drilling in order to provide some certainty and predictability for the industry and protections for surface owners.  This debate continued to rage after a proposed Marcellus bill died in the 2011 regular session when the House of Delegates failed to put it to a vote.  (http://wvgazette.com/News/201103121278).  A regulatory bill was eventually passed, however, in a special legislative session that occurred in December of 2011(http://www.youtube.com/watch?v=wb4AEO1O2cg). 

Were it not for the debate in the legislature, the intense media coverage, and the various presentations in and around Charleston, however, those of us living in Charleston and points south would hardly notice any real "boom" in Marcellus Shale drilling in West Virginia.  But a recent trip to Morgantown for a couple days of depositions last week convinced me that a Marcellus Shale boom is alive and well in West Virginia and resides primarily in the northern counties. 

The first evidence I encountered of the increased drilling activity and the economic impact it is likely having come when I attempted to book a hotel for two nights in Morgantown, a Wednesday and a Thursday.  My past experience has been that hotel rooms in Morgantown are widely available for week nights such that booking a room on short notice is typically no problem, particularly this time of the year when WVU's football and basketball seasons have ended and before any commencement activities are taking place.  When I foolishly waited until Wednesday morning to book my room, however, I quickly realized this might no longer be the case.  I called just about every reputable hotel in Morgantown - Fairfield Inn, Spring Hill Suites, Hilton Garden Inn, Waterfront Place, Holiday Inn, Hotel Morgan, and others - and none of them had any rooms available.  The Holiday Inn reservation agent informed me that it had a few rooms available in Fairmont, but admitted that the price would be increased by nearly $30 due to the increased demand (no doubt a hard lesson in economics for me)!  Fortunately, I was finally able to get the last room available at Eurosuites.  In addition to my troubles getting a hotel room, I later overheard several other lawyers involved in the deposition complaining of the same troubles. 

Given that I knew this type of demand for hotel rooms in Morgantown this time of the year to be unusual, I asked the booking agents at several of the hotels what kind of special event was responsible for this sharp increase in demand.  They all confessed that they were aware of no such events.  When I arrived at the Eurosuites on Wednesday night and then the next morning at the Fairfield Inn where the depositions were taking place, it was clear to me why there were no hotel rooms available:  the parking lots contained a considerable number of vehicles emblazoned with the names of oil and gas companies.

Beyond the increase in demand for hotel rooms, the Marcellus Shale boom in the northern counties was evident by the visible drilling-related activities taking place.  Beginning from around the Jane Lew exit on Interstate 79 I started to see a large number of oil and gas vehicles traveling the interstate.  There were countless sand trucks, pumper trucks, water trucks, wastewater trucks, trucks hauling excavation equipment, trucks hauling drilling equipment, and passenger vehicles bearing the names of several oil and gas exploration, drilling, construction, and consulting companies.  Additionally, when I stopped for lunch in Fairmont on my way home Friday afternoon, I observed a constant stream of oil and gas vehicles pass by.  Interestingly, one of the larger vehicles carrying an oversized load had a State Police escort.

Finally, the Marcellus Shale boom was evident in the construction activities I witnessed in the hills along the interstate north of Jane Lew.  There were several areas where pipeline contractors were digging trenches for the construction and placement of natural gas pipelines.  There were also several areas where it was evident that pipelines had been freshly constructed and covered over. 

There is no doubt that substantial drilling activities are taking place in northern West Virginia.  Based upon my experience last week, it is further evident that the increase in drilling activities is likely leading to considerable positive economic impacts.  Hopefully, it is just a matter of time before the boom and its apparent economic impacts make their way south!

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