Has natural gas production peaked in Appalachian Basin?

(This story was updated on Sept. 8.)

SALEM, Ohio — Since 2008, 22 counties in Ohio, Pennsylvania and West Virginia have been the source of 40% of the nation’s natural gas — but now this boom in natural gas extraction might be over. 

Using data from the federal Energy Information Administration, the Ohio River Valley Institute concluded that the natural gas industry in the Marcellus and Utica shale region hit peak production in 2022, levels that won’t be equaled again for decades. This means the economic growth and local prosperity promised by the Shale Gas boom will likely never come.

The report, an update of a similarly damning 2021 report, is being criticized by industry sources who called the data cherry-picked and off-base. They say it ignores all the good the industry has done in local communities.

“What we would tell (them) to do is look at the DNR data, which is actually reported data, not a guess, not an estimate, not a projection,” Mike Chadsey, public relations director for the Ohio Oil and Gas Association, told Farm and Dairy.

What the report says

Gathered from the EIA’s Annual Energy Outlook 2023, the report from the environmental think tank states that natural gas production in the 22 gas-rich counties in Ohio, Pennsylvania and West Virginia reached its peak in 2022 and won’t reach the same amount until 2045. As a result, by the year 2050, the report states, “Appalachia’s share of U.S. natural gas is expected to decline… to 37.5%.”

Instead, production in the Permian and Haynesville basins in the south and southwest will surpass Appalachia, becoming the next top dog in the country for producing natural gas. 

One of the reasons why is location, according to Sean O’Leary, the author of the report. Both basins are on the border of the Gulf of Mexico and have easy access to export terminals. The Appalachian region has to transport natural gas via pipelines to export terminals on either the East Coast or elsewhere.

Another reason natural gas production is expected to drop is the Russia-Ukraine war, which spurred countries in Europe and elsewhere to move from natural gas toward renewable energy. Natural gas power plants in the U.S. are also being retired as quickly as they are being built, which will equal minimal domestic growth moving forward.   

Even when natural gas production was rising, the report says employment, income and population numbers in the region declined.

Between the years of 2008 to 2019, gross domestic product, or GDP, in the 22 most active gas-producing counties in Ohio, Pennsylvania and West Virginia,  grew three times more than the GDP of the United States and more than four times the rate of Ohio, Pennsylvania and West Virginia as a whole.

However, employment, income and population did not see the same success as GDP.

According to the report, federal data shows that the number of full-time jobs between 2008 to 2019 in the most fracked counties dropped 2.1% — worse than the combined states of Ohio, Pennsylvania and West Virginia, which saw a job increase of 3.8%. The population also fell by 4.6%, while the combined population in Ohio, Pennsylvania and West Virginia climbed 2.1%. 

The report attributed this massive growth in GDP, but lack of growth in employment, income and population to the fact that “natural gas extraction is one of the least labor-intensive activities in the U.S. economy with less than 10 cents of every dollar earned allocated to labor.” 

Industry response

Chadsey, of OOGA, says to disregard federal data and look at the quarterly state production data operators turn in to the Ohio Department of Natural Resources Division of Oil and Gas, which he says shows “production continues to go up, quarter over quarter, year over year.”

A missive from Energy In Depth, an online publication run by the Independent Petroleum Association of America, points to a 2023 Cleveland State University and JobsOhio study that shows oil and gas has invested more than $100 billion into Ohio’s economy, “acting as an essential economic lifeblood to the Buckeye State.”

Mandi Risko, with Energy In Depth, said ORVI ignored critical factors supporting growth, like millions of dollars in impact fees paid by operators in Pennsylvania and ad valorem, or property taxes, paid in Ohio. She added that the report’s “cherry-picked data is hardly reflective of what the Appalachian communities have experienced” and “leaves out the what the poverty and economic rates would be without oil and gas.”

Jobs. Industry sources referred to an Ohio Department of Jobs and Family Services Ohio Shale April 2020 report. Data from ODJFS shows that in Ohio, between the years of 2011 and 2019, employment grew in all areas except the Northwest region, where there was little drilling activity. The West, Northeast and Southeast all saw a significant increase in shale-related jobs.

The natural gas industry was not spared impacts by the COVID-19 pandemic. It too saw a drop in employment rates. In March 2020, Ohio had an unemployment rate of 5.5%, higher than the U.S. average of 4.4%. Nevertheless, Ohio gas-producing counties experienced worse unemployment rates than the U.S. during this time, despite natural gas production soaring, the ORVI report said.

“It can be argued that the Appalachian natural gas boom did to a degree help protect job growth in the Frackalachian counties from the worst ravages of the Great Recession. But it can be equally persuasively argued that the gas industry helped drive job loss in the years prior to and during the COVID recession,” O’Leary said.

According to the latest available data from the American Petroleum Institute, gathered in 2021, Pennsylvania employed 423,700 people in the natural gas industry, Ohio employed 351,530 and West Virginia employed 73,120. 

Regardless of how the numbers are interpreted and by whom, Chadsey said members of the Ohio Oil and Gas Association and others in the industry “call St. Clairsville and Cambridge and Salem home.”

So we have every incentive to make sure that we’re doing operations responsibly. This is home for us and that’s often forgotten in this conversation,” he said.

(Reporter Liz Partsch can be reached at epartsch@farmanddairy.com. Editor Rachel Wagoner contributed to this report and can be reached at rachel@farmanddairy.com or 724-201-1544.)