Alpha Natural Resources becomes latest player in Marcellus

Staff and Wire Reports
Observer-Reporter

Coal mine operator Alpha Natural Resources has expanded its tiny natural gas business, drilling its first well in the Marcellus shale.

The company announced a joint venture this week with driller Rice Energy, which is headquartered in Southpointe. The companies are investing a combined $20 million in four wells this year and could drill as many as 100 in the Marcellus, a rock bed the size of Greece that lies about 6,000 feet beneath New York, Pennsylvania, West Virginia and Ohio.

Two things are driving intense interest in onshore natural gas, so-called unconventional plays.

Most energy companies, both producers and utilities, believe strict federal regulation of coal is coming. Utilities are swapping out coal-fired power plants for natural gas turbines because gas burns more cleanly than coal.

Second, those unconventional plays have been freed up by new technology and the nation's estimated gas reserves have jumped by 30 percent in the past two years.

It is expected that huge supplies of gas will mute at least one of the reasons why natural gas wasn't used more: price volatility.

Alpha's investment reflects growing interest by a variety of energy companies in onshore natural gas. Exxon Mobil recently bid $30 billion on big natural gas producer XTO Energy.

Alpha's competitor, Consol Energy, has increasingly focused on natural gas production in the face of stricter environmental regulation of Appalachian coal mines.

Alpha Chief Executive Kevin Crutchfield told analysts he's not ready to commit to transforming the company into a gas producer just yet.

"It's kind of a wait and see attitude, but it's a valuable resource and we want to begin to realize some value out of it," he said. "And with the passage of time, I think we'll make the strategic decision whether that's something we really want to grow in earnest or we're happy with sort of the foothold that we have."

Alpha, based in Abingdon, Va., acquired approximately 20,000 acres in the Marcellus shale when it bought Foundation Coal last July, acquiring Foundation's existing Emerald and Cumberland mines in Greene County, as well as proceeding with developing two additional mines - one in Holbrook and the other in Jefferson.

Besides the new wells, Alpha also is doubling the capacity of a gas processing plant it owns to 10 million cubic feet a day, Crutchfield said.

Alpha's news came in conjunction with fourth-quarter earnings.

Founded in 2005 by Daniel J Rice III, Rice Energy is actively involved in the unconventional resource plays of the Marcellus Shale and the Spraberry Trend in West Texas.

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