Academic journal article Planning for Higher Education

Analyzing Whether a College/University Should Drill: For Natural Gas on Its Property: Institutions Deciding Whether to Drill for Natural Gas on Their Property Need to Consider Non-Financial Factors in Addition to Economic Considerations

Academic journal article Planning for Higher Education

Analyzing Whether a College/University Should Drill: For Natural Gas on Its Property: Institutions Deciding Whether to Drill for Natural Gas on Their Property Need to Consider Non-Financial Factors in Addition to Economic Considerations

Article excerpt

INTRODUCTION

PRACTICALLY EVERYONE IN THE UNITED STATES TODAY is aware of the surge of interest in drilling for and producing natural gas. It is a regular news item in the popular press. In 2010, the Chronicle of Higher Education published a front-page article, "Colleges Atop Gas-Rich Shale Weigh Offers from Drillers" (Carlson 2010), that described the decision facing many colleges and universities as to whether to authorize drilling for gas on their property. At that time, the authors of this article were engaged in research and analysis regarding whether drilling for gas should be initiated on a 400-acre property in a suburb of Cleveland (the "Biological Field Station") owned by Case Western Reserve University (CWRU) and located about 10 miles from the main campus. This article describes the process and methodology that were used.

DYNAMICS OF A GAS WELL

The rate of gas production from a well over time is a function of the amount of gas trapped in the reservoir being tapped, which directly influences the pressure in the gas reserve. As gas is released from the well, the volume decreases, causing the pressure in the pocket of remaining gas to decline until there is insufficient pressure to push recoverable amounts to the surface. This phenomenon produces a negative exponential pattern of gas production over time. Figure 1 shows a system dynamics diagram representing this phenomenon. The rectangular boxes represent "stock" or levels of inventory. The double-lined arrow represents the actual flow of materials or goods, and the valve-like symbol represents a controller of this flow. The single-lined arrows represent information flow, or signals, that actuate the valve and thereby the rate of flow of the material.

In our gas well example, the double line represents gas flow. The information arrow going from the reservoir of gas to the valve represents the pressure in the well based on the amount of gas still in the reservoir. The information arrow labeled "Extraction Rate" represents any external influence on the rate at which gas is extracted. For example, a well operator could keep the gas flow below what is possible in the case where the gas is only being used locally and the total available flow cannot be used. Similarly, if the gas is being pumped into a main commercial gas line, the capacity of the line could be exceeded at some point in time, thereby constricting the flow out of the well. These situations are rare in the region where data for this study were collected. There is normally a strong economic incentive to get all of the gas out of a well as rapidly as possible, especially when it is being operated by a for-profit company.

DATA ACQUISITION

Based on their previous investigations, geologists from the CWRU Department of Earth, Environmental, and Planetary Sciences felt that natural gas on the CWRU Biological Field Station property, if it existed, would be found in the "Clinton Sandstone Formation," which is located 3,500 to 5,500 feet below the surface. Anecdotal information indicated that wells drilled in the immediate area of the Biological Field Station ranged from being very successful and productive to dry holes. Data on all gas wells drilled in the State of Ohio are recorded and available to the public in an Ohio Department of Natural Resources database (Ohio Department of Natural Resources n.d.). This database contains the original data from all applications for drilling in the state and is kept up-to-date as the wells are drilled and production numbers reported. For purposes of this study, data were collected on wells drilled in an area approximately 10 miles in radius centered on the Biological Field Station.

For the period studied (through 2010), 347 permits for gas wells were issued in the region of focus. Of those, 224 were productive and 123, or approximately 35 percent, were unproductive. There were 43 wells that showed active production for at least 10 years, and these 43 were selected as the sample to be used to calculate the likely gas produced from a productive well for this study. …

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