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

There is no “magic” price at which shale gas drilling rig counts will rise again in Pennsylvania. But more companies will increase drilling the closer the gas price gets to $4 and above.

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–derry-well-sites-empty-as-low-gas-prices-stop-marcellus-shale-drillers.

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.

John Hanger’s Facts of the Day, 25 July 2012