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Pa.'s natural gas industry could be poised for rebound

| Saturday, Feb. 25, 2017, 5:12 p.m.
Justin Merriman | Tribune-Review
A common site throughout Washington County and other parts of Western Pennsylvania, an active gas drilling site sits on a small hillside surrounded by homes.
File photo from 2015 of an Apex Energy gas drilling site in Penn Township.
Dan Speicher | Tribune-Review
Apex Energy prepares the new Fatur well pad, at 617 Church Street in Salem Township, Pa. on Friday Feb. 03, 2017.

Jobs in the energy sector have steadily declined since early 2015 as an oversupply of natural gas and a lack of pipeline infrastructure drove down the price of natural gas and halted new development.

Pennsylvania's mining and logging sector, which includes natural gas production, lost about 15,000 jobs since January 2015, according to the federal Bureau of Labor Statistics.

Yet a study from the London School of Economics suggests continued low prices aren't all bad for some U.S. manufacturing sectors.

The November 2016 study says the shale revolution created an abundance of natural gas, causing prices to drop, lowering production costs for more energy-intensive manufacturing firms. The low-cost energy makes the manufacturers more competitive, which could mean more exports and trade, and potentially more jobs.

The competitive edge is caused by an oversupply of gas in the United States and the lack of pipeline infrastructure to transport it, the study says. Any difference in price between U.S. and European markets is unlikely to be rebalanced through international trade because the United States had an export ban on crude oil and natural gas until December 2015, and natural gas is difficult to transport over long distances because of its physical properties, according to the study.

However, a vigorous energy sector is preferable, said David Taylor, president of the Pennsylvania Manufacturers Association, a statewide trade organization.

“If the choice is between having the energy sector kind of limp along to keep prices low or to have a really strong, dynamic energy sector with robust infrastructure that is going to lead to slightly higher prices, the latter outcome is a better one,” he said.

Taylor supports transporting liquefied natural gas, which he considers a manufactured good that requires a multi-stage production process. The U.S. Department of Energy says LNG has a relatively high cost of production but, along with pipelines, is a primary way to bring natural gas to consumers.

Natural gas needs to be cooled to a liquid state for transportation and then reheated to its gaseous state. The multi-stage process creates jobs at the well pad through gas production, in the steel mill with massive heat exchangers that compress liquefied gas for transporting, and in research, development and administrative jobs at companies exploring new technologies, Taylor said.

“There are lots of jobs there,” he said.

Nowhere to go but up

The federal Energy Information Administration on Jan. 23 said it expects natural gas prices to rise in 2017 and 2018 because consumption and exports are expected to exceed production and imports.

“So from here, it looks like we have finally hit the bottom of the latest bust in energy prices,” said Mark Price, a labor economist with the Keystone Research Center, a left-leaning Harrisburg think tank. “The harder question to answer is whether the forecasted price increases will be enough to generate a surge of new drilling that will translate into a return of some of those shale jobs that have been lost.”

Adding to the outlook, he said, is that OPEC has been cutting production to try to boost prices. If that continues, it should drive up energy prices and feed more shale drilling, Price said.

The drilling rig count in Pennsylvania increased in the latter half of 2016 in response to the higher prices, he said.

David Spigelmyer, president of the Marcellus Shale Coalition, an industry trade group, said the increase in active drilling rigs is a positive sign for local job growth, but making Pennsylvania more attractive to investment will require cooperation from Harrisburg in terms of tax policy and pipeline build-out.

“If we get the economic equation right, manufacturing has the potential to be an even greater engine for job growth as more companies are attracted to the commonwealth by affordable, abundant natural gas,” Spigelmyer said.

Kevin Zwick is a Tribune-Review staff writer. Reach him at 724-850-2856 or kzwick@tribweb.com.

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