Wednesday, July 25, 2012

Gas Drilling Slowdowns But Gas Prices Are Rising: At What Price Do Drilling Rigs Head Back To PA?

No doubt booms bring challenges to communities, but most mayors would welcome them compared to the difficulties caused by economic slowdowns or busts.  Gas drilling is not going bust in Pennsylvania, but it is slowing down, and the slowdown negatively affects the economies of communities in the gas fields. See

Higher prices will bring back the drilling rigs that have been slowly leaving Pennsylvania since the second-half of 2011.  And gas prices have risen from a low of $1.90 in April to $3.17 yesterday. Less drilling and sweltering, record-setting heat across America, that drives up gas demand to run generation plants, are pushing gas prices back up.

As Erich Schwartzel of the Pittsburgh Post Gazette writes, there is no "magic" price at which drilling rig counts rise in Pennsylvania.  But more companies will increase drilling the closer the gas price gets to $4 and above.

As gas prices rise, natural gas demand will soften, because gas will lose market share to coal generation plants. Gas and coal compete for significant amounts of electricity generation demand, and rising gas prices may hit a coal-imposed ceiling.  Indeed, that may be happening to a degree at yesterday's gas price, and the competition between gas and coal to meet America's electricity demands means the timing of the return of $4 natural gas is uncertain.

As gas drilling slows and rising gas prices allow coal to regain some lost market share, the complicated dance between gas and coal creates diverse environmental and economic impacts. There are winners and losers.  But one thing remains true: gas is cleaner burning.

When gas loses market share, emissions of carbon, mercury, soot, sulfur dioxide, nitrogen dioxide are all going up.


  1. The rigs have moved from the gas fields to the oil fields, so the answer is more nuanced and needs to consider the price of oil and service costs. Meanwhile, the natural gas downturn has stretched producer balance sheets, so the price might be a bit higher than expected..

  2. They'll be back..with the expediated permit process declared as "LAW" by our governor and loyal "friend" of the gas industry...they will be back...Penn's Wood's IS the gettin place. Now, I'd like to have my second cup of java on the deck but the truck traffic, sand trucks, waste trucks, water trucks, dumptrucks etc have been non stop for a week now and it is not so pleasant out there. Don't you all have that? Shouldn't we share this experience? p.s. there are still explosive levels of methane at homes here in Dimock...and a few other little items in the water, nothing to worry about, it's all part of the glory of natural gas...oh I forgot, It's all naturally ocurring.

    1. I know that you are being sarcastic about all gas being naturally occurring. Gas migration happened at 18 homes in Dimock due to gas well cementing and design mistakes. Truck traffic is a separate issue. Trucks must be operated safely and regulators should oversee this part of the industry. Yet, those who lease their property should do so with their eyes open. There is going to be heavy truck traffic during the time gas wells are drilled. Those who lease are compensated or they shouldn't sign a lease. As for others who do not have lease or royalty income but still host the industry, they should benefit from a reasonable tax that insures all Pennsylvanians benefit from being citizens of the state that soon will rank third in total energy production...just behind Texas and Wyoming...both of which have no income tax and but significant energy taxes.