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Fracking gives water authorities financial boost, study finds

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Thursday, Sept. 26, 2013, 12:51 a.m.
 

A number of public water suppliers are making money off of Marcellus shale fracking, but they're not getting rich.

At least not here in Southwestern Pennsylvania, according to new study from Penn State and West Virginia University.

A group of public water suppliers in Southwestern Pennsylvania earned anywhere from $52,000 to $1.4 million from selling fracking water to drillers in 2011, according to the study, “The Use and Value of Water for Marcellus Shale Gas Development.”

Public water suppliers are just one source of water for gas companies that also tap ground water, lakes and rivers, such as the Allegheny River.

During the use of a Marcellus shale gas well, gas companies pump water mixed with chemicals and sand under intense pressure to hydraulically fracture rock.

That “fracking” releases natural gas trapped within the rock.

Drillers need 2.5 million to 8 million gallons of water to develop a single, horizontal gas well, accounting for 10 percent to 20 percent of the total cost of developing a well, according to the study.

For most public water suppliers, the extra income from Marcellus drilling is just that: it's gravy, and it's unpredictable.

“The big issue that we brought out is the erratic nature of the demand, and it's very specific, as it's based on where the drilling pads are,” said Charles Abdalla, professor of agricultural and environmental economics at Penn State and one of the study's authors.

According to 34 water suppliers surveyed in Pennsylvania, they were “measured in their approach,” Abdalla said.

But they were unanimous in wanting to take advantage to make extra money, according to the study.

Other results:

• The average rate charged was $7.60 per 1,000 gallons — with a wide range of 58 cents per 1,000 gallons at the low end to the high of $16 per 1,000 gallons.

• Revenue was used for repayment of debt, infrastructure improvements and other expenses.

As gas companies will buy their water close to their wells, location and sprawl of the water system determines water sales.

Not surprising, the state's largest private water authority, Pennsylvania American Water, is doing well with demand from Marcellus shale drillers.

In 2012, the water company doubled the revenue from hydraulic fracturing contracts to about $3 million, with a 74 percent increase in sales in excess of 430 million gallons, according to Terry M. Maenza, director of communications for Pennsylvania American Water.

Additionally, the company added five new connections with shale-drilling companies and signed an additional agreement with XTO Energy, which covers a third pipeline extension in Butler County to support drilling operations.

The extension of the pipelines will provide public water is new areas and prevent fewer water truck hauls on Butler roads, according to Maenza.

Given the reach of the Municipal Authority of Westmoreland County — 121,000 customers in Westmoreland, Allegheny, Armstrong, Fayette and Indiana counties — it's not surprising that there are Marcellus drilling operations in need of water in its territory.

The authority expects to earn less than $375,000 for the fiscal year that started April 1 for water sales to gas companies.

“This is revenue that was unanticipated a few years ago,” said Chris Kerr, authority manager. “But for our authority, it's not operationally significant.”

Such water sales account for less than a half percent of the authority's budget with projected revenue of $75 million in this fiscal year.

For Tarentum's borough-owned water company, sales are a “hit-and-miss thing,” said Bill Rossey, borough manager for Tarentum. There are sales, but it's a small part of its water operation.

The borough earned about $5,000 last year selling water to another contractor who then sells it to the gas companies. The borough also gets a $1,000 “convenience fee” for each well that water haulers use to access a borough boat ramp on Wood Street to draw from the Allegheny River.

The Municipal Authority of Buffalo Township, which serves Freeport and Buffalo Township, earned about $4,000 last year for supplying water to a pipeline contractor that was installing the Big Pine Gathering System, a 55-mile network of natural gas pipelines through Butler, Armstrong, Indiana and Westmoreland counties.

“Any opportunity to sell water and generate revenue helps out our bottom line and we look forward that,” said Don Amadee, municipal authority manager.

Mary Ann Thomas is a staff writer for Trib Total Media. She can be reached at 724-226-4691 or mthomas@tribweb.com.

 

 
 


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