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After the Boom: This slice of shale country does not look busted

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Essential Energy Insights - September 17, 2020

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After the Boom: This slice of shale country does not look busted

This is the firstarticle of a three-part series looking into what Marcellus Shale gas extractiondid and did not do for one of the leading counties in the shale boom and whatcomes next for residents, business and industry.Part two chroniclesone of the first groups to hurt after the boom ended.Part three tells thestory of a big driller's faith in the county.

Pennsylvania Route 29 from Tunkhannock north to the New Yorkborder used to be a dismal tour of rural poverty, with collapsed barns and rustedcars in the front yards of houses with peeling paint.

The stretch of highway cuts right through the heart ofSusquehanna County's 1,201 Marcellus Shale natural gas wells and past the pipeyards and workshops of the third-largest gas producing county in the state.

Today, many houses are new with fresh paint and a late-modelpickup out front.

The difference: one monster shale boom that took gasproduction from near zero to over 3.4 Bcf/d in seven years.

As the boom built, Route 29 was jammed with tractor trailerscarrying sand, water and more drilling rigs into the county as drivers forCabot Oil & GasCorp., Carrizo Oil& Gas Inc., ChiefOil & Gas LLC, WPX Energy Inc., Southwestern Energy Co. and battled togridlock in the small towns and along the county roads. At the peak in October2011, they serviced 19 massive rotary rigs and six to 10 smaller rigs inSusquehanna.

The Susquehanna County courthouse in downtown Montrose, Pa.

Photo by Staci Wilson, Susquehanna County Independent

Now there is only one operating rig, and many wonder whetherSusquehanna is ready for a bust. But people in the county wonder whether a bustis even in the works.

Drivers in this county in the state's northeast corner stillencounter water and sand trucks but at a far more leisurely pace. What used tobe a half-hour gear-grind through the county seat Montrose takes about sixminutes if you do not stop at the new Pump N Pantry across from DiazManufacturing Co.'s packed parking lot.

Cabot has not laid off a worker yet despite low gasprices and still hires the occasional graduate of the oil and gas program itendowed at the local community college, but Adam Diaz has tripled his workforcesince 2012 and has plans to hire 50 more employees to build his custom woodkitchens and doors.

Diaz bankrolled his purchase of what then was a dilapidatedcabinet factory with money he made hauling trash and wood for all the producerswho rushed into town. He does not do much business in the area now afterdrillers have slashed capital spending to the bone, but he got his start duringthe boom.

There is no arguing that the boom did Susquehanna Countygood. Between 2008 and 2014, the county's economic output increased nearly 30%from 2009 to 2011 and then remained at that elevated level for a few years,according to numbers from the National Association of Counties and U.S.Department of Commerce's Bureau of Economic Analysis. Meanwhile, per capitaincome increased 25% from 2008 to 2014 and unemployment was 5.5% in 2015, withjob growth still happening in the county. All this despite an estimated700-plus out-of-state roughnecks and rig workers moving on down the road asrigs were laid down in the gas price downturn.

In 2010, those workers packed the biker bar at the Emberzpizza parlor on Route 167 on the way to the interstate east of Montrose,enjoying high-paying work while the rest of the U.S. economy limped along afterthe Great Recession.

Emberz is closed now, but across the street in what had beena sad little strip mall with a state liquor store and a Family Dollar, there isa brand-new full-service Price Chopper grocery store and a repaved parking lot.

The farther you are from the county, the more talk you hearthat low natural gas prices are going to take away the genie that grantedSusquehanna's wishes. But in Montrose, folks are confident that prices willcome back.

"When the planets realign again," gas will resumemaking outsize contributions to the county economy, County Commission ChairmanAlan Hall said during an interview in the Greek Revival courthouse overlookingthe four-block-square downtown. "I think it will be back."

The shale gas boom caused booms in a variety of indicators of economic activity in Susquehanna County, while government spending has remained flat.

The natural gas boom paid for many improvements to officialSusquehanna County, Hall said, ticking off what $14 million in new per-wellimpact fees had helped pay for as it freed up tax revenue: a fully fundedpension plan, the rehabilitation of the courthouse, conversion of countyoffices and the hospital to natural gas, and no tax increases since hiselection in 2009.

In addition, Susquehanna paid off all its debt and sockedthe remaining $10 million into the capital reserve fund for a rainy day.

"Without a doubt, this county would be in very direstraits if this [gas boom] hadn't happened," Hall said.

Most of the boom-time cash from lease bonuses and$4/Mcf-plus gas royalties stayed inside the county as farmers paid off theirmortgages and cleaned up their properties, local journalist Staci Wilson said.

"This is a community that has been depressed a longtime," Wilson, the editor of the weekly Susquehanna County Independent,said April 20. "The old-timers were pragmatic, cynical even. Theyremembered the leasing from the '70s when nothing happened. So they used theroyalties to pay off the farm."

Wilson told of a Dimock farmer bragging that he would be thefirst in the family to pass the farm on to his descendants mortgage-free.

"Gas is here to stay, not in the same numbers as 2008to 2013. We're just waiting for the next step, but the county is self-sustaining,"Wilson said, noting that her newspaper has been in the community for twocenturies.

For now, it is small business that has been hurt by thespending drop, Wilson said. Retail stores are hurt the worst, she said."Some of the retailers are saying things are much slower. The servicecompanies, they haven't reported any significant changes, not to the sameextent."