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The Seeds Of Coal’s Revival May Be Found In 32% Decline In PA Shale Drilling

The competition between gas and coal for electricity generation market share has been lopsided for the last two-years, as low-priced gas displaced large amounts of coal generation.  Indeed, in April, gas and coal each generated 32% of America’s electricity, a huge reversal of fortune for both. Yet, the seeds of coal’s partial revival may have been planted.

During the last year, gas drilling rigs have dropped sharply in the nation and Pennsylvania, where the rig count declined from 115 to 78 or 32% by July 6.  The Philadelphia Inquirer also reports new gas wells drilled in Pennsylvania fell by about 25% in the first quarter of 2012, when compared to same period of 2011. New permits for shale gas drilling are down too approximately 25%.

Drilling rig count, new gas wells drilled, and new drilling permits are all down 25% to 30%.  If sustained, these declines will eventually reduce gas production and supply, raising gas prices.  That describes coal’s partial road back from April’s 32% electricity generation market share.

While a further decline is possible in the coming few months, rising gas prices will shift some generation market share back to coal. How much market share coal gains and for how long any gains made can be sustained will be substantially determined  by the pace and size of gas price increases, as well as the pace and extent of coal plant retirements.