On April 27 and 28, 2014, a group of SIPA students, led by Dr. Jonathan Chanis, traveled to Pennsylvania and West Virginia to meet with natural gas industry executives and visit a natural gas drill site.   The purpose of the trip was to talk with company officials about natural gas developments in the Marcellus and observe how this development affects the local community and the environment.  The students spent most of the visit with company officials and they were able to ask numerous questions.  The time at the drill site further aided the group’s understanding of natural gas development by allowing everyone to see firsthand the scale and scope of a drilling operation. While at the drill site, the students had the opportunity to talk with the drilling engineer and other workers.

Among the issues discussed in detail during the trip were:

• The steps necessary to drill a well and produce natural gas in the Marcellus;
• Average well costs and capital budgeting practices;
• The impact of “Act 13” being overturned by the Pennsylvania Supreme Court;
• Lease acquisition practices, especially the complexity of dealing with landowners whose mineral rights have been “severed” by a previous landowner;
• Drilling location siting practices; The gains in drilling efficiency (and the major decline in surface area footprints);
• The use and importance of drill casing; issues of methane migration; the importance of base line water testing;
• Hydraulic fracturing technology and the composition of fracking fluids; industry fracking fluid composition disclosure practices;
• Water usage and waste disposal; water recycling and “closed-loop systems”;
• Job creation and work forced management issues; workforce safety issues;
• Community attitudes toward drilling and natural gas production; industry – community relations; the impact of natural gas development on the local agricultural economy;

One of the clearest impressions many students formed concerned the significant impact natural gas development has on the daily life of the community.  Each student was able to see for him/herself the significant and continual truck traffic and evaluate how disruptive this movement is to daily community life.  Company officials openly discussed this issue and they reviewed how they attempt to minimize disruptions and work with local government and civic leaders to maximize benefits for all community residents, not just for those who have development leases.

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“This visit was a unique experience and it definitely added great value to our course of study at SIPA. As energy professionals, it is important to understand the magnitude of the positive and negative impacts natural gas drilling and production have on host communities.  We can read about this, but sometimes a field trip says more than a thousand words. I was particularly impressed by the openness of company representatives who responded frankly to the multiple questions posed by the group. However, while the company does seem to be making great efforts to minimize disruptions to the local community, one of the main problems I observed was that the state and local government is not conducting health or environmental impact assessments.   In a future visit, it would be interesting to talk to civil society representatives to gain multiple perspectives on the impact shale gas development on the region.”

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“The most significant aspect of the trip was being able to see the scale of the operations in person. It is one thing to participate with the abstract idea of fracking by studying it in the classroom, but seeing how the operations are carried out day to day, in the rolling hills of West Virginia, provides an entirely different context and understanding of the issue.”

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In the future, the Energy and Environment Concentration will encourage more such field trips, especially if it includes visits with community leaders and local government officials.

Post contributed by Professor Jonathan Chanis.  Besides sharing his knowledge and insight at SIPA, Professor Chanis has worked in finance for 25 years — most of this time has been spent trading and investing in the emerging markets and various commodities markets, especially petroleum.  Currently he is Managing Member of New Tide Asset Management, a proprietary vehicle focused on global and resource investing.