From the perspectives of a midstream company, a gas processor and an economic development organization, natural gas development and production in Appalachia has the potential to earn five-star status.

Shale-gas prospects in the Marcellus and Utica plays at this point are a tasty appetizer. However, pipeline and processing standards must be improved before the main course can be served, according to panelists at Hart Energy’s DUG (Developing Unconventional Gas) East conference in Pittsburgh on Nov. 17.

“The natural gas industry has never, in the history of the supply side, been able to walk up to the public and to the private sector and say we have a 100-year supply of cheap fuel— never, ever,” said Jack Lafield, president and chief executive of Dallas-based Caiman Energy LLC, a midstream company. "Only in the past year or so has the industry been able to go out and stand behind this 100-year claim."

Lafield also serves as a member of the Marcellus to Manufacturing Task Force, a group that was created by West Virginia governor Earl Ray Tomblin to research and develop potential economic development opportunities related to Marcellus and natural gas byproducts such as ethane and ethylene.

Dennis Yablonsky, the chief executive of the Allegheny Conference on Community Development, an economic development organization, agreed. "We now have a fuel source that we've never thought about before in terms of price, cleanliness and longevity."

Lafield offered some insight into what may lie ahead in the Marcellus and the Utica. "From a forecast standpoint, what we've really focused on is the rich area of the Marcellus. As we looked at the area, we found that by 2015 or 2016 there would be in excess of 220,000 to 250,000 barrels per day of potential ethane available for export or for use in a new cracker facility. On the propane side, the northeast consumes about 40 million barrels of propane annually, of which 15% to 17% is produced locally. This region is a net importer of propane, so the real change now is going to be that locally produced propane will be 40% to 50% by 2015 or 2016," he said.

"All of this is from the Marcellus! From what we've heard, right next door there is a play that can be as big or bigger than the rich Marcellus. So if you take the numbers I just gave you and double those with a three-year lag, that could be the potential for the natural gas liquids (NGLs) in the area. A lot of people have talked about 3 billion cubic feet (Bcf) per day coming from the Marcellus by 2015 or 2016. Now we’re talking about maybe 3 Bcf per day coming from the Utica with similar qualities of gas, so those are pretty large numbers to work with."

Addressing Lafield's comments, Yablonsky said, "I think the estimates you made are probably conservative. I suspect that they'll get bigger and bigger as we go forward. And I think it would be a crying shame for this region and this country if we did not take advantage of this from an economic perspective."

A couple of years ago, Yablonsky's attempts to drum up interest in the Marcellus ran into a wall of skepticism. But now, he said, attitudes are changing.

"When I first started traveling around the country meeting with executives in the petrochemical industry, because we had a notion two years ago that the NGLs might be more significant than people were estimating, I had a hard time convincing anybody that there was enough ethane for a single cracker much less a pipeline to Sarnia."

There is no doubt that shale-gas potential has reeled in interest from producers. Shell Chemicals has designs to build a cracker in Appalachia, a commitment that underscores an enthusiastic outlook for production.

Shell Chemicals' Dan Carlson, who joined Lafield and Yablonski on the panel, said sites in Ohio, Pennsylvania and West Virginia are being considered for the cracker location. While Carson, general manager of new business development for the Americas, made it clear that Shell Chemical has many factors to weigh before determining a location, he said that a decision could come by the end of the year.

"A cracker is not a small thing. It's a multimillion-dollar investment that is going to be here for a long, long time. The crackers that we have down in the Gulf Coast were built in the mid-1970s, and 30 years later they are turning with no end in sight. We have to take a long-term view of the economics and the risks here to make sure we're comfortable. We want to have access to enough ethane for the long haul," Carlson said.

"A cracker of this scale, a world-class cracker, we're talking 60,000 to 80,000 barrels a day, maybe a bit more. And certainly, all of the numbers that are being bandied about would imply that there's more than ample supply to support a cracker in this region. Certainly, from a technical standpoint, the carbon in the ground looks really good, and the news is very exciting. But we're also paying attention to the non-technical issues associated with development projects like this. Having the right kind of regulatory environment will be important in putting an investment like this in this area," he said.

But potential is only that—potential—until pipelines and processing facilities can be ramped up, the panelists agreed. Lafield emphasized a need for improved infrastructure in the Marcellus and the adjoining Utica.

"There are 50,000 miles of pipeline in Appalachia, but 90% of it is a 50-pound system that is not built to handle shale development. The real need in Appalachia is brand-new facilities. In the rich areas of the Marcellus, it's not just pipelines that you need. You need processing facilities, and the lack of ability to move NGLs from the processing facilities requires the development of fractionators," he said. "Processing facilities need to be in place before drilling can really get started."

At this time, the Utica has no processing facilities, Lafield said, adding that Caiman's plant in West Virginia will be the only facility within the next 18 months that will be available for Utica gas to be processed.