Has Aqua America stolen the “anti-trucking company” mantle from Layne?

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In March, newly entrenched Layne Christensen CEO Rene Robichaud expressed to AWI his desire for Layne to become known as the “anti-trucking company” with regard to supply and treatment of water in the natural gas shale plays.

Recent observations by analysts suggest Aqua America may have beaten Layne to the punch on the supply side in the Marcellus Shale.

Last month, analysts at Brean Murray took a helicopter tour of the Williamsport, Pa., region – the area in which Aqua America and its joint venture partner Penn Virginia Resources (PVR) are constructing an 18-mile pipeline to supply water to drillers in the Marcellus. What the analysts saw was enough to compel Brean Murray’s Michael Gaugler to declare in a research note that Aqua and PVR had achieved a “virtual monopoly” of water supply in the Williamsport region, which holds particularly high volumes of recoverable natural gas.

Once the partners complete the third phase of the pipeline, which will enable water to be drawn from the Susquehanna River, the joint venture will be able to deliver lower-cost water to drillers while also removing fleets of gas-guzzling, carbon emitting water delivery trucks from Pennsylvania’s roads.

Aqua certainly has taken a shrewd approach to cornering the market for water supply in the Marcellus. It partnered with a company that, according to Brean Murray, has pre-existing rights-of-way for gas gathering, and built a water pipeline that runs parallel to a natural gas pipeline.

Layne, however, cannot be discounted. As Robichaud told AWI in March, Layne has more hydrological maps than anyone in the U.S. and myriad technologies to develop water sources. Low natural gas prices have hampered its foray into the shale business, but that trend is slowly reversing. Layne must act quickly – Aqua no doubt has drilling supply ambitions in Texas, another state in which it has a strong regulated presence.

Furthermore, Aqua is not the only investor-owned water utility that has designs on the shale market. American Water sold more than 250 million gallons of water to drillers in the Marcellus Shale during calendar year 2011, which produced about $1.6 million in revenues for American. It is not likely to stand quietly while Aqua expands its water supply foothold.