Marcellus Lesson 5: Marcellus Will Be a Boom, and a Bust, and Already a Cultural Collision!
If you are more confused than ever as to if, when, and how the gas boom will impact your business, you are absolutely lucid and sober. Every month brings new confusing signals and contradicting advances and setbacks. While the fundamentals aren’t changing, it is can be hard to reconcile the following:
Exciting Advances:
- Shell Corporation announces it will invest a $1 billion to build a cracker plant which will convert natural gas into plastics
- 7 coal-fired plants will be retired in WPA in anticipation of diminished reliance on coal
- Critical midstream pipelines to transport Marcellus gas across the US are being announced and funded.
- Governor Corbett signed the severance tax enabling PA municipalities to start benefitting from local gas well revenue.
- Shortages of housing, employees and skills continue to prove that the Marcellus footprint presents a short-term economic bonanza for those who can supply these scarce resources.
Concerning Setbacks
- Seismic concerns in the form of tremors in Eastern Ohio have spurred deep concerns and unclear scientific responses from both pro- and anti-drilling parties.
- There is a huge glut of natural gas in WPA creating the world’s natural largest gas storage field with 13,000 dormant wells.
- Low domestic prices of natural gas (around $2.00) continue to be less than half the breakeven cost of production given current market conditions.
- Weak state and local governments in most Marcellus shale states and counties mean gas drillers must lead in setting standards and assuming risks, liability and public distrust. In other words, they can be damned if they do and damned if they don’t.
- Portions of eastern Ohio have instituted moratoriums on new drilling, but have not taken steps to resolve issues or questions to settle differences.
I am more bullish than ever on the potential for companies who don’t work in or even understand the energy business. Every company in the Marcellus footprint can and must decide how they can benefit from the billions of dollars and thousands of jobs entering our region on a yearly basis. My focus will continue to be on helping growing businesses that are twice removed from gas drillers, landowners and energy giants.
And my growing client base aside, many small businesses are catching on and figuring out how to benefit from the Marcellus Shale. At the Hart Energy Marcellus Midstream Conference, I saw:
- Urgi-centers, selling health care and testing, are actually loading their services onto “health RV’s capable of delivering care to visiting remote gas drilling sites and fracking ponds
- Rental home services. With housing in tight supply and non-existent in Greene County, realtors and other parties are getting creative. Fractional rentals and room-rental brokers are setting up shop.
- Websites like www.themarcellushale.com are springing up offering visibility and educational opportunities for any and all who want to grow and learn.
- Luxury Port-O-Johns for upscale energy customer/client events at gas well sites is also a booming business.
So there is no silver bullet or straight line to opportunity in Marcellus but in anticipation of a future “Marcellus Lesson,” I am beginning to believe that the single biggest obstacle to growing a small business in the Marcellus Shale is the enormous clash between local and “outside business” culture. Specifically, how can a deeply proud and parochial region accept the inevitability of a profound, unstoppable economic change that brings both good and bad? In my workshops, interviews and client work, deep into rural areas in WV and PA, I have seen a level of distrust of outsiders as high as in any of the 68 countries I have visited. Incoming businesses and interlopers who want to start, grow and run businesses must learn to understand and respect the local values and culture of these rural areas. This will continue to be a challenge and underestimated by many newcomers to the region. But just as importantly, local business owners, citizens and governmental leaders will find themselves needing to compromise and open their hearts as well. There is work to be done and I will write more about this in coming months. Keep focused on Marcellus and how you can grow your non-energy business because of the shale opportunity.
Comments
3 Comments on Marcellus Lesson 5: Marcellus Will Be a Boom, and a Bust, and Already a Cultural Collision!
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Ken Kodger on
Fri, 4th May 2012 3:27 pm
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Andy Birol on
Fri, 4th May 2012 3:44 pm
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Larry Ciptak on
Sun, 5th Aug 2012 10:27 pm
You are correct that the natural gas revolution in this countrey will continue to go ahead for the benefit of all. I will add, as long as the Federal government is kept out of this business. The history of the Feds interverring with the nat. gas industry started in 1935 and until Reagan began the task of de-regulation in 1981; the Feds did nothing but cause customer anguish.
Thanks for your comments which I agree with. But nature abhors a vaccuum and the state is not doing their job nor are the locals. We’ll see…
Andy:
Your topic of “cultural collision” drew my attention. Companies drawn to the Marcellus are not practicing due diligence if they ignore or underestimate the mountain ethos of the working people in southern MS areas. Without local participation and tacit consent, the upcoming explosion of economic growth will backfire on very important levels.
A good book for people in the industry to read would be “Everything In It’s Path: Destruction of Community in the Buffalo Creek Flood” by Kai Erikson. The book is a sociological follow-up of the lives wrecked when the earth dam and mine tailings gave way during a 1972 disaster that wiped out small towns and severely disrupted and altered community life in the region. Some events–sudden or protracted–alter community culture forever.
To understand the true big picture involves more than knowing the national and global economic impact that Marcellus/Utica Shale will have. Everything falls in a historic context. There are strong undercurrents in small communities like Buffalo Creek and the hundreds of other old coal towns who are impacted by “growth” of that go far beyond the monetary. Their way of life, of community, feels threatened. Dangling money in front of them likely creates suspicion and mistrust.
Everything falls within a sociological context. People marketing shale production in these regions need to break through the cultural barriers and meet these folks at their level. “Everything In It’s Path” has a chapters on Appalachia and on the mountain ethos. The book is about six bucks on Amazon.com. For someone doing business in the region who wants to take into account the individual lives and communities that will be affected by shale, I highly recommend reading at least the first two chapters of the book.
These are the communities that are again being dangled a carrot of good fortune but who remember the dependence that resulted last time an economic boom showed up in the second and third decades of the twentieth century. Coal changed their lives profoundly, in a multitude of ways. For a proud and fiercely independent people of Scotch and Scotch-Irish descent, they eventually found themselves at the mercy of the coal companies and ironically accepted their fate with a large degree of resignation.
The big picture. The one that transcends material well-being. Tapping into the collective ethos of these communities is key to those on the front-lines developing business relationships with these folk.
Now I have another book I have to re-read. 
Larry Ciptak
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