Indiana, Pa. – Deep in the wooded hills of western Pennsylvania, a 50-foot-tall drilling rig rattles and whooshes as it drives sections of metal pipe into the ground, one after another.
Hard-hatted workers have been operating the machine for less than a day, but soon they will have bored through 4,000 feet of dirt and rock that promises a rich reward – natural gas trapped in prehistoric sediment.
Their company, Linn Energy LLC, carved out this small patch of earth just days ago, building a gravel road into a forest of maples and oaks. In another day or so, they will dismantle the rig, move it to another site and start drilling again.
Linn is among dozens of companies that have been drilling natural gas wells at historic rates across the Appalachian Basin, an area that includes swaths of Pennsylvania, West Virginia, Ohio, Maryland, Virginia and Kentucky.
Soaring prices and demand, along with modern drilling technology, are making such wells economically feasible.
The proliferation of drilling is not confined to the region, the birthplace of the commercial oil industry. Oil and gas firms have stepped up exploration and production in Texas, Colorado, Oklahoma and other states in recent years.
But Appalachia is relatively untapped and contains low-volume natural gas resources previously considered too difficult or expensive to exploit. It is also a premium market close to major cities such as New York and Philadelphia and a center for coal-bed methane, a fast-growing segment of the natural gas industry.
“You can run your economics now,” said Michael Linn, Linn Energy’s chief executive and a 26-year industry veteran. “The stabilized price, or at least the bottom part of the price, makes economic sense. That’s what’s kicked off this drilling.”
Natural gas prices have held steady at $6 to $8 per thousand cubic feet for about the past 18 months, Linn notes, while the relatively long life span of wells in the area make the prospect of drilling more attractive.
Area wells may produce gas for as long as 20 years, unlike those in the Midwest, which may last 10 years, or along the Gulf of Mexico, where wells may expire after seven years, he said.
The favorable conditions have enlivened the market. In Pennsylvania, about 3,600 drilling permits were issued in the first six months of 2006. If that pace continues, the number issued this year could eclipse 2005’s record of 6,042 by 20 percent.
“What’s happening is you’ve got a perfect storm,” said Linn, whose company has acquired or drilled more than 4,000 wells in Pennsylvania, Oklahoma, California, Virginia, West Virginia and New York since it was founded three years ago.
