Data on the production of gas from wells in Pennsylvania are available from Pennsylvania Department of Environmental Protection. (1) I have just completed a preliminary analysis of some of these data, on horizontal wells in the Marcellus shale region of the state. Well production data were separated into six groups. The groups represent wells that started production in each of six different periods; the one-year period from July 2009 through June 2010, and the six-month periods from July 2010 through December 2010, January 2011 through June 2011, July 2011 through December 2011, January 2012 through June 2012, and July 2012 through December 2012. Cumulative production records were developed for each well, and the average cumulative production curve for each of the six groups was determined. The data are pictured in the chart above.Several things are clear from these data:
a. Although projection into the future of non-linear trends such as these is uncertain, if the trend of production per well continues in a consistent manner, average production per well is on track to equal at least 3 billion cubic feet (Bcf) over a 30-year period.
b. Production appears higher from wells that began production after the first period pictured, which ended in June, 2010. Wells that show production for 5, 4, 3, 2, and 1 periods show higher production than the first group, which has production data for 6 periods. Perhaps this is due to increasing efficiency on the part of the gas companies, or to more recent wells being concentrated in better producing areas.c. Although not apparent from the chart, there is much variation among the wells. For example, in the group that began production between July, 2010 and December, 2010, the 90th percentile total production, as of the end of 2012, was 4.25 Bcf, while the production total at the 10th percentile was only 0.62 Bcf.
d. Also not apparent from the chart, but clear from a closer look at the data, is that some companies’ wells are significantly more productive than the wells of other companies. This could reflect greater expertise on the part of these companies, either in selection of drilling sites or in drilling and hydrofracturing methods, or both.Are there implications of these data? In my view, there are at least two conclusions that can be drawn:
1. Actual production trends are consistent with predictions of significant long-term production of natural gas from shale formations.
2. Over the long term, increased production of natural gas could result in continuing increases of greenhouse gas (GHG) concentrations in the atmosphere. Especially problematic could be leaks of raw natural gas, a potent GHG.It is becoming clear that emissions of GHGs could result in potentially catastrophic climate change that cannot be remediated within a human time scale. In the face of robust future production of natural gas, arguments for a carbon tax are looking better and better. Bipartisan support for such a tax seems to be gaining momentum. Former secretary of state George Shultz and Nobel laureate economist Gary Becker make a strong case for a carbon tax in an editorial that appeared in the Wall Street Journal last month. (2) They argue that a revenue-neutral carbon tax would benefit all Americans by eliminating the need for costly energy subsidies while promoting a level playing field for energy producers.
I plan to discuss carbon taxes in more detail in future blogs.
(2) Shultz, George, and Gary Becker, 2013, Why We Support a Revenue-Neutral Carbon Tax, Wall Street Journal, April 7, 2013 (on line), April 8, p. A19 (print); http://online.wsj.com/article/SB10001424127887323611604578396401965799658.html