On July 22, the Governor's Marcellus Shale Advisory Commission released its long anticipated report ("Shale Report"), which was written in response to Executive Order 2011-01, calling for the formation of a Commission that would issue a report to the Governor with recommendations to "develop a comprehensive, strategic proposal for the responsible and environmentally sound development of Marcellus Shale."
A significant portion of the Shale Report deals specifically with proposals for new environmental regulations that would be imposed on natural gas drillers, including tougher civil and criminal penalties for violations. I'll address those in subsequent postings. Other sections of the Shale Report concern new protections for public health, safety and natural resources. I'll get to those as well in later postings. For now, I want to focus on the things in the Shale Report that might be of interest to real estate developers and ancillary businesses who aren't currently players in the Marcellus Shale industry.
For those people, the most important thing to glean from the report is the fact that the Marcellus Shale is generating an enormous amount of new economic development activity in Pennsylvania. In that regard, the Shale Report finds that the natural gas industry is "creating significant demands for housing, lodging, support business activity, and transportation." In other words, if you are a real estate developer doing business in Pennsylvania, "go west" or "go north" (since there is no Marcellus Shale gas in southeastern PA), and you may find new opportunities awaiting that you won't find in areas not experiencing the growth spurred by the exploration and development of the Marcellus Shale formation.
I've met with local economic development agencies across the northern tier of Pennsylvania and their message, as confirmed by the Marcellus Shale Commission's Report, is that they desperately need new single family housing, apartment buildings, hotels, motels and warehouses to keep up with the growing demands of the Marcellus Shale industry.
For example, Section 8.5.7 of the Shale Report specifically addresses the lack of affordable housing in north central Pennsylvania and how the growth of the Marcellus Shale industry has compounded the problem. The Shale Report states: "as the gas industry is expanding into communities, housing costs have risen to meet demand such that local residents can no longer afford housing." It further finds that while there are some gas companies that have constructed "company man camps for workers", many local residents, especially renters, have been forced to relocate "further away form their jobs and communities to find an affordable place to live."
For real estate developers who have previously built affordable housing or worked within federal and state programs designed to increase the availability of affordable housing, such as the Pennsylvania Housing Finance Agency or the federal Low Income Housing Tax Credit Program, building new homes or rental properties in the areas of Pennsylvania experiencing the Marcellus Shale boom could represent a significant new growth opportunity.
Real estate developers will also find it interesting that the Report recommends that the Commonwealth "identify strategic locations" to construct new "regional business parks" capable of tapping into existing infrastructure. The idea is that as Marcellus Shale related enterprises grow, the Commonwealth would like to channel that growth in the direction of brownfield sites or other properties close enough to existing roads, water and service services, to minimize the need for new infrastructure. In addition, the Report envisions specialty businesses, such as ethylene processing plants and co-generation facilities, being sited near gas sites to take advantage of natural gas byproducts that can be beneficially used for commercial purposes.
Finally, for those of you just waiting to buy a natural gas powered car but realize that there are no places to fill up, you'll be happy to know that the Shale Report recommends that Pennsylvania develop "Green Corridors" for natural gas fueled vehicles, including Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) fueling stations, located at least every 50 miles and within two miles of designated highways. For now, I'd recommend holding off on that purchase, but don't be surprised when you start seeing CNG and LNG fueling stations popping up along the Pennsylvania Turnpike, probably in the not too distant future.