MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Association for Energy EconomicsOctober 26, 2015

David SpigelmyerPresident

Marcellus Shale Coalition

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Marcellus – the largest unconventional shale gas play in U.S.

489 tcf of technically recoverable gas (T. Engelder ‘09)

16 bcf/day – 40% of all U.S. shale gas production

7 x increase in production (2010-2014)

PA – 2nd largest natural gas producer in U.S.

Shale Gas RevolutionShale Gas Revolution

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

STATE OF THE INDUSTRY

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

8858 unconventional wells

Drilled or in process of being completed

6326 unconventional wells producing natural gas

360 billion cubic feet/month

4 trillion+ cubic feet/year

20%+ of total U.S. production

Drilling Activity in PADrilling Activity in PA

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Drilling Activity in PADrilling Activity in PA

Source: PA Department of Environmental Protection

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MARCELLUSCOALITION.ORG | @MARCELLUSGASSource: Baker Hughes

Drilling Activity in PADrilling Activity in PA

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Appalachian Price CollapseAppalachian Price Collapse

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Governor Wolf - Latest Severance Tax Proposal

Voted Oct. 7th - included in amendment to HB 283

Key components:• Maintain existing impact fee• 3.5% additional severance tax based on value• 4.7 cents/mcf volume tax

Equivalent to over 14% total severance tax

Generate $97 million in FY ‘15-’16 (not $1 billion)

Also increase Personal Income Tax from 3.07% to 3.57%

Defeated 73 - 127

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Overview of Impact Fee

Authorized by Act 13 of 2012

Adopted by counties

Annual assessment per unconventional shale well (15+ years)

Collected & distributed by PA Public Utility Commission

Over $856 million collected since 2012

Revenue allocated between host communities & statewide environmental priorities

Benefiting Your CommunityBenefiting Your Community

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

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Benefiting PA CommunitiesBenefiting PA Communities

Year Distributed Amount2012 $204.2 m

2013 $202.5 m

2014 $225.8 m

2015 $223.5 m

TOTAL: $856 m

Impact Fee Revenues to Date

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Benefiting Pennsylvania Consumers

Electric prices down 40% since 2008

Natural gas prices for end-use customers down 46% -64% since 2008

Average annual savings > $1,200 per household

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MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Lower Purchased Gas Costs

*1st Quarter 2008 & PUC-approved rate for 2012 *Residential heating customer using 15 mcf/month

Utility PGC Rate / mcf % Change Customer Savings

2008* 2012* 2008-2012 Monthly

PECO $11.10 $5.49 51% $84.15

NFG $10.34 $4.82 53% $82.80

PGW $10.58 $4.71 56% $88.05

Columbia $10.25 $4.15 60% $91.50

Equitable $11.81 $5.56 53% $93.75

UGI $11.79 $6.38 46% $81.15

UGI Penn $10.66 $5.22 51% $81.60

Peoples $9.53 $3.39 64% $92.10

Reduced Energy CostsReduced Energy Costs

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Market Opportunities

Electricity generation, heating

Combined heat and power applications

Light and heavy duty transportation applications

Feedstock for industries and other liquids use

− Rebirth of manufacturing

Exports

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

The Ethane Factor

MARCELLUSCOALITION.ORG | @MARCELLUSGAS

Thank you!

Marcelluscoalition.org

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