Natural gas industry high on future, despite current low prices

PITTSBURGH — Despite looming federal regulations and rock-bottom market prices, leaders in the natural gas business are confident the shale boom that’s helped revitalize economies from Pennsylvania to Wyoming is only just getting started.

Companies from across the sector, from multibillion-dollar outfits such as Chesapeake Energy to small-town hardware stores, have gathered in Pittsburgh this week for the annual Marcellus Midstream Conference, one of the largest industry meetings in the nation.

It comes at a time of uncertainty for oil and gas producers, who fear unprecedented regulatory crackdowns from the Obama administration and have seen their profit margins shrink as natural gas prices have sunk to near-record lows.

“This is going to be a huge year” for the sector, said Andy Birol, a small-business consultant whose clients provide products to drilling companies in the Marcellus Shale. He said 2012 could be the decisive year for the long-term fate of one of the richest known natural gas deposits in the world, stretching from upstate New York as far south as Kentucky.

“Government can’t make up its mind how, or if, it’s going to regulate” the industry, particularly the popular “fracking” process for gas extraction, he said.

Later this year, the Environmental Protection Agency will release a report about the safety of the practice, and many expect the study to call for new rules and regulations that could greatly hamper the industry. The agency is also undertaking a study of air emissions from well sites, and will release new pollution-control recommendations in about two weeks.

Both reports could have a major effect on companies that have seen business boom over the past several years, and could make drilling in the Marcellus and elsewhere much more difficult and expensive.

But firms also count on the ebb and flow of the political cycle, and remain confident that the industry’s long-term prospects are promising.

“I think that you’re going to see at least another 10- or 15-year boom,” said Eric Jarvis, a manager with Aggreko LLC, a power generation and temperature-control company that rents equipment to drilling firms and other businesses.

With an economy still struggling to recover from the Great Recession, Mr. Jarvis said political leaders and other critics should take a second look at the economic shots in the arm a drilling boom can generate.

“I think it’s very hard to argue with the idea of communities creating wealth of their own,” he said, referring to the small communities outside Pittsburgh and elsewhere in Pennsylvania, some of which have transformed from near ghost towns to vibrant hubs.

President Obama and other administration officials often speak in glowing terms about the natural gas industry and the economic impact it has had throughout the nation, but many in the industry, along with some Republicans in Congress, doubt their sincerity.

“The administration’s actions appear to be 180 degrees apart from what the president’s rhetoric has been,” Rep. Andy Harris, Maryland Republican, told The Washington Times last week. As chairman of the House subcommittee on energy and the environment, Mr. Harris and his panel is charged with keeping tabs on the EPA and its growing regulatory footprint.

Those rules, he said, are rooted in Mr. Obama’s “ties to radical environmentalists” who want nothing more than to see the oil and gas sector brought to its knees.

“It’s a thinly veiled attempt by the administration to put a stop to fossil-based fuels,” Mr. Harris said.

The EPA has come under fire for its release last year of a draft report blaming fracking for water contamination in Pavillion, Wyo. The study was released without being independently peer-reviewed, and has been held up by environmentalists as proof that the natural gas industry can’t be trusted.

They also point to recent reports of minor earthquakes in Ohio, tied to the disposal of fracking wastewater in wells near previously unmapped fault lines.

Instead of conducting unbiased investigations into those instances and others, Mr. Harris said the administration is using them as political cover to demonize the industry.

“The Environmental Protection Agency, instead of calming people, is truly fear-mongering,” he said.