The Pennsylvania Marcellus Shale Workforce Needs Assessment is intended to supply baseline data to provide individuals, job seekers, communities, businesses, workforce and economic development professionals, and government officials at all levels with the ability to estimate the direct workforce requirements for Marcellus Shale development. Specifically, the assessment can help outline the key occupations associated with unconventional natural gas development and the number of direct jobs required to bring a Marcellus well into production in Pennsylvania between 2011 and 2014.
Over the course of nearly three years, the Marcellus Shale Education & Training Center (MSETC) has developed and refined the method used in this study to estimate the “direct” workforce requirements of the natural gas industry. Given the different development patterns across Pennsylvania, it is important to have a workforce model that is easily adaptable to changing development scenarios.
The methodology focuses on analyzing the types and numbers of workers needed to drill a single Marcellus Shale gas well and then uses the direct workforce data to achieve a total workforce requirement based on estimates of future well drilling activity. At the core of the MSETC model is a full‐time equivalent (FTE) calculation for each worker associated with drilling a single Marcellus Shale well. The model also incorporates changes in development practices (single vs. multi‐well pads), infrastructure development (pipeline), and differing natural gas properties (dry gas vs. high‐BTU gas). The flexibility of a per well model significantly increases the predictive power of the model and the usefulness for business and workforce planning.
The workforce estimates within the report were created using interviews, an online assessment, publicly available investor reports, and the Pennsylvania Department of Environmental Protection’s permit and well spud reports.
Marcellus Shale is a very large natural gas formation extending across 95,000 square miles and running through roughly two‐thirds of Pennsylvania and portions of New York, West Virginia, Virginia, Maryland, and Ohio. In Pennsylvania, development of Marcellus Shale began in Washington County in 2004. Over the next few years, the Marcellus development footprint quickly expanded to include significant portions of northeast Pennsylvania. Today, southwest Pennsylvania is increasingly being selected as a preferred location to establish Appalachian Basin headquarters for exploration and production, service, and supply companies. The hub of drilling activity in Pennsylvania has been more heavily concentrated in the northeast for 2010 and thus far in 2011.
The northeast region of Pennsylvania saw moderate growth during initial stages of Marcellus development with only 76 wells drilled in 2008. In the second half of 2009, development in the area began to ramp up quickly with 332 wells drilled. The core counties of the northeast region have quickly become a major Marcellus Shale development hotspot for the state of Pennsylvania, with 909 wells drilled in 2010, and more than 1,000 expected in 2011.
The Marcellus Shale resource also includes the northwest region of Pennsylvania; however, due to the shallower depth and thinner shale formation, most of the areas are currently considered outside the geologic “Marcellus Fairway”.
A number of energy companies have been drilling exploratory wells in the area, and several companies have announced plans to dedicate drilling rigs on the southern and eastern fronts of the northwest region. Permitting activity has increased in the region over the past few years, and drilling activity in the first four months of 2011 show continued growth and significant potential for commercial quantities of natural gas from the northwest region.
With the recent dramatic increase in interest in high‐BTU gas and the premium price commanded for liquids‐rich natural gas, the southwest region appears poised for a resurgence in shale gas development related to the Marcellus, Utica, and other Upper Devonian Shale formations.
A combination of limited natural gas infrastructure capacity and a need to develop lease holdings in non‐traditional natural gas areas of Pennsylvania appear to have resulted in a moderation of development growth in the region over the last few years. Natural gas infrastructure capacity would include a need for additional pipeline and processing facilities required to bring “wet” or high‐BTU gas to market. Although the pace of Marcellus development was slower in the southwest from 2008‐2010, companies active in the area have made public statements that they intend to dramatically increase activity within the southwest region in 2011 and beyond. In fact, rig counts and permitting within the first four months of 2011 show activity levels should eclipse 2010 development.
The 19 southeast counties of Pennsylvania are currently outside the Marcellus Shale footprint, but represent 28% of all Pennsylvania counties and 58% of the total Pennsylvania population (Census, 2010).
Even though outside the core Marcellus development area, the southeast portion of the state will still likely benefit significantly from Marcellus business and workforce opportunities. Without direct Marcellus drilling and completion activities in the southeast region, many of the workforce and business opportunities will likely provide services, support, and supply‐chain resources in support of energy exploration and production operations.
Most of these support businesses will be able to maintain their primary locations in the southeast region, but company field and operations staff will provide services within the Marcellus footprint. Being outside the Marcellus footprint does change the overall immediate visibility of the workforce impact, but the region will face many of the same challenges as other regions in Pennsylvania in attempting to take full advantage of Marcellus workforce and business opportunities.
A few of the key workforce challenges across Pennsylvania include understanding the geographic distribution of the Marcellus industry, developing a basic understanding of natural gas development, developing a diverse network of energy sector contacts, and taking advantage of natural gas safety and training opportunities.
Marcellus Shale development in Pennsylvania is expected to increase in coming years, but the strength of Marcellus growth will continue to depend on the commodity price of natural gas, natural gas inventories, natural gas infrastructure development, natural gas utilization, and the overall health of the economy. Additionally, many areas will likely see increased natural gas activity, but development is expected to continue to be uneven.
The current MSETC direct workforce assessment research suggests Pennsylvania drilling activity should increase significantly statewide. On a regional basis, the southwest and northwest portions of the state will see the largest increases with development in the northeast region moderating slightly. Current estimates for 2011‐2014 statewide drilling activity include 1,599 Marcellus wells in 2011; 1,888 wells in 2012; 2,009 wells in 2013; and 2,159 wells in 2014. The company drilling projections indicate a rough annual growth rate in drilling activity of 6‐18%, with a nearly 60% increase in overall activity by 2014.
To bring a single Marcellus well on line requires about 420 individuals across 150 different occupations.
Each phase of natural gas development includes different workforce demands and varies based on the utilization of multi‐well pads and the need for additional natural gas infrastructure. Utilizing 260 eighthour days or 2,080 work hours per year, the first Marcellus well drilled on a well pad will require 13.1‐13.3 full‐time equivalent (FTE) workers and 9.65‐9.85 FTE workers for each well drilled in succession on the same well pad.
For development of a single Marcellus well, the initial pre‐drilling phase of natural gas development represents about 18% of the entire workforce needed or 2.41 FTEs. The phase of natural gas development when the natural gas wells are drilled and the pipeline infrastructure is put into place is an extremely labor‐intensive process and represents about 80% of the workforce for a single well or 10.50 FTEs. Finally, natural gas compression and processing requires about 2% of the overall workforce or 0.2‐0.4 FTEs depending on dry, wet, or high‐BTU natural gas processing needs.
Based on the Marcellus development in 2010, the MSETC model would project roughly 14,777 direct jobs were required to complete 1,368 wells, an increase of nearly 12,248 new jobs over 2008 job levels.
Across the state of Pennsylvania, the total number of direct natural gas development jobs (not indirect or induced jobs) created by wells drilled between 2011 and 2014 is currently estimated to range between 18,596 and 30,684 FTE jobs, creating 9,800 to 15,900 new jobs over 2010 levels, depending on the total number of wells drilled.
This assessment is based solely on the employees directly involved in developing a well and placing it into production and does not consider indirect or induced employment impacts. The projections are not intended to serve as a measure of the total employment created by Marcellus Shale natural gas development or to estimate the economic impact of such development.
The findings of this report, therefore, should not be compared to employment estimates of other studies, which most are intended to project the overall employment and economic impact of natural gas drilling in Pennsylvania using “multipliers” to estimate job creation in sectors other than those directly associated with the bringing of a Marcellus well into production. This report provides the best estimate currently available of workers needed to bring a Marcellus well into production and projected growth in labor demands around high priority occupations for the oil and gas industry.
The utilization of multi‐well pads not only reduces the surface environmental footprint of a well pad, but also increases the efficiency of the natural gas exploration process and reduces the overall workforce needs by roughly 25%. The greatest multi‐well pad workforce impacts result from a roughly 73% decrease in the need for pre‐drilling occupations and a 16% decrease in drilling and completion jobs when two or more wells are drilled on the same well pad. If all Marcellus wells developed were single well pads, the workforce needs would increase labor demands by thousands of additional workers, but conversely the well pad surface footprint would also increase by six to ten times (depending on well spacing).
In actuality over 98% of natural gas exploration and development jobs are found in the pre‐drilling and drilling phase of bringing a well into production, and this segment of the workforce will no longer be needed once the process of drilling gas wells and affiliated infrastructure in an area is completed. In the oil and natural gas industries, this drilling phase period is often referred to as “the boom” as vast workforces are often suddenly required to perform tasks associated with natural gas development.
Conversely, the drilling phase can suddenly decline, which is often referred to as the “the bust”.
The majority of the pre‐drilling, drilling, and production phase jobs will be located in the vicinity of the well being drilled. Office workers and some geologic scientists, engineers, and supervisors will be located at energy, service, and support company offices, which may or may not be located near the vicinity of the well site or even within the region. In the development of Marcellus it is important to note that many of the drilling phase jobs will be geographically temporary, meaning a drilling rig moves from location to location, but the drilling phase jobs will continue to be stable jobs across much of the Appalachian Basin for an estimated 30 to 50 years.
In contrast to drilling phase jobs, jobs associated with the production phase are well defined as the management of an operating well, generally serve a fixed geographic area, and will last the lifetime of a producing Marcellus well. Even if drilling were to cease completely, the production phase jobs necessary to manage and maintain Marcellus wells would still be required for decades. In fact, many geologists
believe the wells created as part of the Marcellus Shale development will likely produce commercial quantities of natural gas for 30 years or more.
As the Marcellus Play continues to mature, the industry has definitely moved towards hiring more Pennsylvania residents. Early in the development of the Marcellus, the natural gas industry relied heavily on out‐of‐state employees with experience and knowledge developing high‐pressure natural gas.
Although Pennsylvania drilled its first oil well in 1859, fluctuations in the commodity market and the prospects of stronger commercial gas fields in other areas drew much of the industry talent to other states. When Marcellus exploration and production began to ramp‐up, there was tremendous pressure to find employees with some legacy natural gas knowledge. The early stages of development found as many as 70‐80% of the employees from outside Pennsylvania. Although there is still tremendous variability across energy, service, and support companies, this study’s interview and survey data indicates an average of 65‐75% of all new Marcellus workers are Pennsylvania residents.