Text of article pasted below. Three part video series available via link.

WTAP Parkersburg News Article 4/21/2016

Retired executive predicts drilling turnaround in 2018

The current state of the oil and natural gas industry: it remains a topic of discussion.

Not only has Marcellus and Utica Shale drilling led to lower gasoline prices, the prices of natural gas are well below what they were just seven years ago.

But recently-retired industry executive Mike McCown, who once worked in Wood County, says the price issue isn't the only reason for a recent drilling slowdown.

Another is the lack of pipelines to get product to market in West Virginia and across the country.

"Those pipelines will take that gas west to the Chicago market, to the south for all the power plants converting from coal to natural gas," McCown said. "That's a big opportunity, but we're going to have to wait until 2018 for that to be realized."

McCown added those same issues are factors in the status uncertainty of the ethane crackers proposed not only for Wood County, but for Eastern Ohio and Pennsylvania.

McCown spoke to a business leaders luncheon hosted by the group "Energy Speaks", in partnership with the Mid-Ohio Valley Chamber of Commerce.

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"Digging Deeper": A three-part series on shale drilling in the valley

PART ONE:

It's been called a "boom".

And, at least until last year, it was.

But people to whom we have spoken for this three-part series say, at the very least, activity in the Marcellus and Utica shale isn't what it was just a couple of years ago.

And you can find the reason why...every time you pass a gas station.

People still come to the Pleasants County Courthouse, looking for information on potential drilling sites. But most of the activity in the county is in this room, rather than on the land itself.

"For the year 2015, we had around 600 leases to oil and gas companies recorded," said Vickie Gorrell, County Assessor.

For the most part, are any of those in development?

Responded Gorrell: "Not as of this date."

That appears to be the case throughout the valley. In fact, 2015 is the firs t year this decade activity on drilling leases has declined.

An example: figures from the Washington County Recorder's office.

Recordings of various types of lease-related documents fell for the first time, after rising steadily since 2010.

"There's still a great deal of potential in the ground," said Dr. Ben Ebenhack, Associate Chair, Petroleum Engineering Department, Marietta College. "We have barely scraped the surface of that."

So the issue isn't the lack of shale deposits. Part of the answer can be found, say experts, in the falling gas prices we all enjoyed during the past year. the per barrel price of oil lately has been around $30, far below the $100 of just a couple of years ago.

Dr. Ebenhack says it will have to rise to at least $50 before activity can pick up again. He adds, however, the nation's-and the world's energy future, is in natural gas.

"As we shift from coal to more natural gas-fired power, that could eventually double the demand for natural gas in the United States."

Triad Hunter, whose Marietta office is located across the corner from the Washington County Courthouse, halted drilling altogether last year, and, according to Gary Evans., CEO of its parent company, Magnum Hunter Resources, has written off this year. But that doesn't mean drilling itself has stopped. He says, in fact, the Utica Shale, partly located in Noble County, is doing quite well.

"You're beginning to see great wells, because that dry Utica gas doesn't have to be processed," Evans says. "It goes right into the pipeline, and you get a higher value."

Wood County to date has had just one well drilled, and that was eventually capped. But a county commissioner who a year ago visited another boom state, North Dakota, remains optimistic about the future.

"It'll come back here; I have no doubt about that," says Wood County Commissioner Bob Tebay. "Like money in the bank, it's in the ground, and somebody's going to come get it one of these days."

And it's not just the Marcellus and Utica shale seeing the slowdown.
Drilling in the Williston region of North Dakota, visited by Tebay and other local officials just a year ago, has also seen activity decline among producers.

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PART TWO:

While shale drilling has been sparse in our immediate area, it's been a different story in counties both north and east of Wood County.

And while the activity has declined-particularly in the past year-they remain optimistic the "boom" of the early part of this decade will bring benefits for years to come.

Few area counties have seen the effects of shale drilling doddridge county has. An oil and gas processing plant, announced a few years ago, is in operation. And there are plans for a waste treatment plant in a few years. these developments have local leaders optimistic, if just cautiously.

"If anything is going to occur because of the plant, it probably is in the development stage now and we're not aware of it," says Gregory Robinson, Doddridge County Commissioner. "But we're hopeful."

Optimistic was more the feeling two years ago, when drilling plans were announced near the Pleasants County line. The economic impact was positive, before falling fuel prices brought a slowdown to the industry.

"We hope and pray that will continue, once prices come back up,"
says Jay Powell, Pleasants County Commissioner.

Impact in Wood County can be found mostly along interstate 77. Not because there's drilling activity in there, but because of activity in other counties.

"That momentum, obviously, helped increase our hotels, restaurants, businesses providing services to oil and gas," according to Jill Parsons, President, Chamber of Commerce of the Mid-Ohio Valley.

Bob Tebay, Wood County Commissioner, adds: "I've seen a new (motel) or two going in at the intersection of route 68 and interstate 77. It's not completed yet, so that's another one that will be added."

But development companies have a warning to one group benefiting from the boom: those who leased their property for drilling within the past few years.

"Landowners across this region have to realize we can't make money with leases paying $3-4-5-6,000 an acre like we did,"
says Gary Evans, CEO, Magnum Hunter Resources.

But even the least optimistic of people believe the slowdown in drilling of the past year isn't permanent.

Flite Freimann, Oil and Gas Attorney, says: " What you see is, in this pause, producers taking advantage, consolidating their holdings, taking a look at what they want to do, and revamping their plans moving forward."

Freimann points out there are three wells in Washington County either in production or about to come on line. But het adds that production from Middle Eastern and even European countries has contributed to a "glut" in the market; one that might take a while to sort out.

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PART THREE:

It's a term referring to the breakup of oil and natural gas into materials used in the manufacture of plastic.

In recent years, we've heard it in one word: cracker.

Cracker plants have been proposed for Pennsylvania and Ohio, and someday, one might be built in our own backyard.

It was the biggest economic development announcement this area had heard in decades: plans to build an ethane cracker on the site of the Sabic plant south of Parkersburg.

For more than a year, it was a development hailed by business and civic leaders as a "game changer" for the area.

"We were very encouraged by the announcement," recalled Jill Parsons, President of the Mid-Ohio Valley Chamber of Commerce. "We hoped that, by this time, we would see some type of activity. But we realize there are market conditions and things going on that are affecting the progress of that project. We just have to be patient and hope that comes to fruition."

To date, Sabic has closed and demolition of the complex is under way. But still, no firm date when construction will begin. Even the announcement of the construction date has been pushed back. The reason why may be the same as why oil and gas development activity has declined in the past year: falling energy prices.

But people connected to the cracker project won't say it's in jeopardy.
A statement by the Charleston-based public relations firm representing its developers says it continues to take what it calls a deliberate approach. it goes on to say…

"Under the current energy scenarios, the original configuration of Project ASCENT needs to be revaluated, and a final investment decision on the Project will require more diligence."

Even before development slowed down, there were delays while pipelines were being built to deliver the product to market. The drop in petroleum and natural gas prices further slowed drilling.

"The pipeline constraint hasn't really gone away," says Dr. Ben Ebenhack, Associate Chair of Marietta College's Petroleum Engineering Department But with the prices for oil and gas products, the incentive to move forward to get some product to market has diminished."

The slowdown, or pause, isn't anything new. Past spikes in drilling during the valley's history have seen eventual declines. But those connected to the current, or recent, boom believe it's not over yet.

"As long as you continue to see that midstream development, expansion at the Mark West facility, and companies putting in pipelines," says oil and gas attorney Flite Freimann, "you can rest assured there's going to be development in this area."

We reached out to the west virginia division of commerce for a comment on the status of the ASCENT project.

Our calls were not returned.

Even before it was announced, a cracker was proposed for the neighboring state of Pennsylvania.

More recently, others have been announced in Eastern Ohio.

None, however, have yet been built.

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