Fed survey: Pa. shale gas boom regions robust

Kevin Begos, Associated Press

PITTSBURGH (AP) -- A Federal Reserve survey of regional economic trends says activity coinciding with the Marcellus Shale natural gas boom in Pennsylvania has been robust.

The Fed's latest Beige Book, a snapshot of business conditions in the agency's 12 regional bank districts, notes that eastern and central Pennsylvania banks in shale gas areas in the agency's Third District "described customers paying down loans with royalty money and avoiding further debt by paying cash."

In the Fourth District, which includes western Pennsylvania and Ohio, the survey says shale gas activity is expanding at a robust pace, while conventional oil and gas was steady. "Shale gas producers expanded payrolls, while employment at conventional oil and gas firms was flat," the Fed noted.

Natural gas production has boomed in many states over the past few years as advances in drilling opened up vast reserves buried in deep shale rock.

The Marcellus Shale is an underground gas-rich formation extending across Pennsylvania, West Virginia, New York, Ohio and Maryland. But most of the production so far is in Pennsylvania and West Virginia.

Ohio also has the Utica Shale, another formation rich in oil and gas. New York has placed a moratorium on shale gas drilling, citing environmental concerns.

Meanwhile, the boom also is creating some local economic worries.

"Dealers in the eastern part of the District are apprehensive about losing technicians to the shale gas industry, which may put upward pressure on wages," the Fed said.

Bryan Routledge, a professor at Carnegie Mellon University's Tepper School of Business in Pittsburgh, cautioned that the Beige Book contains anecdotal information about business trends, not hard numbers.

"But it is interesting that people are mentioning shale," Routledge said, calling the report a good example of how the Fed can get snapshots of possible new economic trends.

The Fed noted that the boom is about more than just drilling. Manufacturers and processors are starting to expand in the Fourth District, using the natural gas both for power and to make other consumer goods.

"Beyond the gas fields, energy projects are attracting substantial investment interest and loan opportunities for larger banks," the Fed noted.

On the other hand, the Fed said, coal production fell in the Fourth District and "was expected to decline further with a shift in demand toward low-priced natural gas and stricter environmental regulations."