Given the recent turmoil in the Middle East, and its effect on oil prices, it is natural to wonder about other sources of energy, and how quickly they can be utilized for the benefit of consumers. One of the areas investors are now turning to is natural gas. There are many deposits of the material across the United States. The most promising development comes in the form of Marcellus Shale. So what exactly is Marcellus Shale and why is it so important?

Marcellus Shale, also referred to as the Marcellus formation, is shale that occurs in the surface beneath much of Ohio, West Virginia, Pennsylvania, and New York. Small areas of Maryland, Kentucky, Tennessee, and Virginia are also underlain by the Marcellus Shale. It is one of the largest reserves of natural gas found in the country, and adds considerably to the natural gas supply. The reason the formation is so important lies in its economic significance. Shale gas is much cheaper than oil, and the Marcellus Shale significantly enhances our reserves. With such a large supply, the United States has a much better shot of reducing its dependence on foreign oil. Furthermore, new drilling technologies have enabled energy companies to gain access to large quantities of this gas, cheaply.

Natural gas can be used directly in automobiles, as well as for generating electricity. Increased drilling will also result in an upswing in jobs, especially in the traditionally poor rural areas of Kentucky, Louisiana, New York, Texas and many other states. The rise in jobs will help in lowering the high unemployment figure, in turn bolstering the slowly improving economy. In terms of the environment, natural gas is one of the fastest ways to cut down on greenhouse gas emission.

However, the project does have its drawbacks. One source of danger is blowouts, which occur when the upward force of the pressurized hydrocarbon deposit is greater than the downward pressure exerted by the drill. There are also fears of groundwater contamination, related to the process of fracking, in which water is mixed with sand and chemicals to help the natural gas flow to the surface. The problem lies in the fact that about half of the drilling fluid stays underground. Environmentalists worry about the effect of this fluid on residents living around the shale wells. That being said, given the current economic environment, as well as the uncertainty surrounding the Middle East, we believe that there will be some easing on the environmental regulation front. Various environmental agencies of shale states have started conducting reviews of hydro-fracking, and we expect state regulation to become less burdensome as time goes by.

One major drawback for natural gas utilities is that the glut in supply is leading to a decline in gas prices. With Marcellus Shale providing a considerable boost in reserves, this factor is likely to continue to exert downward pressure on prices. As a result, many companies are branching out into oil exploration and production, to bolster earnings. However, as the economy improves, and more companies move to use natural gas, it is likely that the rise in demand will lead to an upswing in natural gas prices, boosting profitability.

All in all, investors should keep an eye on this "super giant" gas field. As natural gas becomes more and more important for the energy needs of the country, Marcellus Shale is slated become an even more important issue for many natural gas utilities, such as NiSource (NI), Northwestern Natural Gas (NWN) and many others, in the months to come.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.