Down, down goes the price of natural gas, hitting $1.95 for a thousand cubic feet on Friday, March 30 at the Henry Hub, as demand is swamped by supply. Those rock bottom gas prices are reducing the number of drilling rigs and gas well starts in Pennsylvania. In the first two months of 2012, well starts declined from 342 to 269 or approximately 25%, according to the folks at www.marcellusgas.org.
While well starts fell, MarcellusGas.Org reports that permit approvals actually increased 6% in the first quarter of 2012, compared to the same period in 2011. But an excellent comment to this posting says permits too have fallen, raising questions about the comparative period permit data offered by MarcellusGas.Org.
Putting aside permit trends, total permits approved are listed at 9,758 and total number of wells drilled is listed as 5,508.
The number of violations is also down significantly--30% decline in the first quarter of 2012, compared to the same period in 2011. Total violations in 2010 were approximately 1200 and then 1100 in 2011. Were a 30% decline from 2011 totals be sustained for the full 2012 year, total violations would fall below 800.
What is the cause of the sharp decrease in violations in the first quarter of 2012? While improved company performance or changes in enforcement could be factors, probably the decrease in operating drilling rigs and the number of well starts is the prime explanation, but the trend bears watching. The 30% decline in violations tracks closely the 25% drop in well starts and 15% decline in drilling rigs operating in Pennsylvania. Less business activity should reduce the number of violations, all other factors being equal.