PA's Marcellus Drillers Show Half-hearted Commitment to U.S. Piping Industry

I think the Pittsburgh Post-Gazette does a good job of covering the natural gas industry in Pennsylvania, and I often find articles on their website that catch my attention. A couple weeks ago I saw a story on their website about the source of the steel pipe (casing) that drillers use to construct both the vertical and horizontal portions of their hydraulic fracturing natural gas wells here in Pennsylvania.

Prior to being elected to the state senate in 2010, Jim Brewster was mayor of McKeesport, a struggling post-industrial borough on the Monongahela River less than 10 miles southeast of Pittsburgh. Brewster learned last summer that the U.S. Steel plant in McKeesport, which produced pipe used in the natural gas industry, was about to shut down. U.S. Steel officials later told Brewster that a big part of their decision to close the plant, putting 175-200 workers in his district in the unemployment line, was that the oil & gas industry was buying a lot of foreign-produced pipe.

The Marcellus Shale Coalition, an industry group representing the natural gas industry in PA, released a report last summer indicating that 90 percent of the casing used by their members was manufactured in North America. But they acknowledged that not all casing diameters are readily manufactured in the U.S. or even in North America (North America is doublespeak for Canada, and Russian interests own several piping mills in Canada). So Sen. Brewster had his staff do some further research.

The senator’s staff looked at well completion records on file with PADEP going back to 2012 when drillers were first required to identify the country of origin for the steel casing they used in their gas wells.  I know from my own experience with the crews who drill environmental test wells that drillers are not necessarily very detail oriented. Many of them would be quick to tell you that their job is to make a hole in the ground, not to document how they did it. So I was not surprised to read that Brewster’s staff found well records for only 1,196 of 4,473 gas wells (26.7%) drilled between October 2012 and October 2014. And in those well records, only 709 records (15.9% of the total wells) were complete with the country of origin for their casings. Prior to passage of Act 13 in 2012, the country of origin of the casing used to construct gas wells was considered a business secret.  From the 709 complete well records, Brewster’s staff found:

• 348 wells used exclusively American-made steel (49.1%); 
• 133 wells used foreign-made steel (18.8%); and 
• 228 used a combination of U.S. and foreign-made steel (32.1%). 

Source:  MIT Research Study, Natural Gas, Chapter 2, cited on

http://oilprice.com/Energy/Natural-Gas/Why-Shale-Gas-is-the-Best-Hope-for-Our-Energy-Future.html

In fairness, sourcing the steel casing for gas wells is not as simple as backing a truck up to the local Home Depot.  It takes hundreds to thousands of feet of several diameters of casing to build just one horizontal well.  And under the duress of demand, the limited supply of some diameters of steel casing could drive some drilling companies to seek out foreign supplies. These wells might typically begin with a 20-inch diameter casing cemented into the ground down to about 100 feet.  Then a nominal 16-inch borehole is drilled through the 20-inch casing to about 1,000 feet, and a 16-inch diameter steel casing is cemented into place to that depth. Then as the well is extended deeper, the borehole is telescoped progressively smaller such that casings of 10 3/4 inch and 7 5/8 inch diameters are used.  By the time the well nears the depth at which it will begin to deflect from vertical to horizontal, a 5 ½ inch casing is used.  The horizontal runs, of which there are typically two extending from one initial vertical well bore, can run out 5,000 to 6,000 feet laterally. In Pennsylvania, the horizontal well bores are usually at depths ranging from 6,000 to 9,000 feet below ground. So each well pad uses tens of thousands of feet of steel casing to construct the wells below them.

source: U.S. Energy Information Administration (www.eia.gov)

With the miles of steel casing needed for just one fracking well, a commitment from drilling companies to U.S. piping manufacturers can translate into hundreds of U.S. jobs saved. It seems like a commitment to the U.S. economy should be important to an industry that promised us that developing the Marcellus Shale gas play in Pennsylvania would be the state’s pathway to energy independence. But with pipelines being planned in PA to transport our Marcellus gas to export terminals for overseas markets, it seems like PA is missing out on some of the jobs and some of the long-term supply of gas we were promised when this drilling boom began in earnest seven years ago.