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Growth of Pa. shale drilling cooled in 2015

| Wednesday, Feb. 17, 2016, 11:00 p.m.
Stephanie Strasburg | Tribune-Review
An EQT rig for extracting natural gas stands in the snow in Amwell, Washington County, on Thursday, Jan. 2, 2014.

The growth of Pennsylvania's shale gas production cooled in 2015 as companies dialed back drilling and shut off some wells because of low prices, state data show.

After several years of posting increases of 30 percent to 50 percent, producers last year increased the amount of gas they pulled from unconventional wells by 13 percent to 4.6 trillion cubic feet, compared with 4.07 trillion in 2014, according to figures published this week by the Department of Environmental Protection. Companies ended the year with 6,618 producing wells, 653 more than they had at the end of 2014.

“We're not surprised to see even in the slowdown there would be the potential for some slight uptick in volume” said Thomas Murphy, director of Penn State University's Marcellus Center for Outreach and Research.

He noted a trend that persisted as gas prices tumbled by 40 percent through the year and reached 16-year lows in December: less drilling, fewer well permits, and the fewest number of rigs in several years. Most major Marcellus and Utica shale producers slashed their spending plans for 2015 and 2016, and some laid off workers or stopped drilling until prices improve.

The lower prices and drilling slowdown cut into how much the state will collect this year in per-well impact fees. The Independent Fiscal Office in Harrisburg on Wednesday estimated the fees would total $185.5 million, a 17 percent drop from the $223.5 million collected last year.

The state Public Utility Commission will release official totals and disbursements to communities by July 1.

Although a few new pipelines have started taking more gas away to more lucrative markets, a glut remains as production outpaces demand, keeping a lid on prices.

“The market conditions over the past year and half or so, which continue to persist, are absolutely harsh. So, it's not surprising to see production figures leveling off as drilling and completions activities have slowed dramatically, even with pipeline takeaway capacity steadily expanding,” said Travis Windle, a spokesman for the North Fayette-based Marcellus Shale Coalition.

Although companies curtailed drilling, many continue to frack and bring online wells that they previously drilled. That combined with the fact that technology has increased the amount of gas companies get from each new well allowed for the small increase.

The top five producers last year remained the same from 2014: Chesapeake Energy, Cabot Oil & Gas, Southwestern Energy, Range Resources and EQT.

Some of their activity shifted, though. Although Susquehanna County remained the top producer in the state with 949 wells in December, Washington County moved to the No. 2 spot, surpassing Bradford County. Greene County remained No. 4.

Executives at several major producers said recently they were focusing activity on what they considered core areas south of Pittsburgh, while the top companies in the Northeast corner of the state said they were choking production from some wells there. New wells in the deeper Utica shale beneath Greene and Washington counties are pumping out huge amounts of gas as well.

“Companies are more apt to go where their best-producing wells and lowest cost structure is,” Murphy said.

Analysts have predicted an eventual rebound in prices once more pipelines come online and exports increase in 2017 and beyond.

“While the long-term outlook for natural gas remains very strong, especially across our region, data like this should serve as a reminder that we need policies that encourage continued investment and job creation in the commonwealth,” Windle said.

David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or dconti@tribweb.com.

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