Shale Production to Push Natural Gas Inventories to 29-Year High

Feb. 9, 2012

Abundant natural gas cuts storage withdrawals as Pennsylvania passes tax on Marcellus drilling.

Shale gas production, particularly from the Marcellus region, is expected to drive U.S. natural gas reserves to the highest level since 1983, the Energy Information Administration reported in February's short-term energy outlook.

The administration projects working gas in underground storage to reach 2,066 billion cubic feet at the end of March, up 31% from a year ago.

This mark would put 2012 inventories near the March 1983 record of 2,148 billion cubic feet.

Unseasonably warm temperatures and increased natural gas production from shale rock, especially in the Marcellus shale region, likely contributed to lower storage withdrawals, the administration reported.

The increased gas supplies in the Northeast reduced the need to bring up stored gas from the Gulf Coast.

Shale Gas Tax in Pa.

Meanwhile, Pennsylvania Gov. Tom Corbett was expected to sign a bill that would impose a "local impact fee" on companies drilling for natural gas in the state, according to news reports.

Pennsylvania is the largest natural-gas producing state that doesn't require a fee on gas-drilling activity, the Associated Press reports.

Many Pennsylvania Democrats complained the extraction fee is too low and doesn't give the state the authority to control drilling that towns in other oil and gas-rich states enjoy, AP reported.

The Marcellus Shale Coalition, which represents natural gas producers in the region, said the bill helps ensure Pennsylvania has "industry-leading, world-class shale gas regulations on its books," but cautioned that the legislation will increase drilling costs and future decisions.

"The legislation, while not perfect, provides the industry greater certainty to operate across Pennsylvania and takes a balanced approach to further strengthening the Commonwealth's forward-leaning health, environmental, and safety regulations, incorporating many of the recommendations of the Marcellus Shale Advisory Commission -- a broad-based group of interests across industry, government, and the conservation community," coalition President Kathryn Klaber said in a prepared statement. "Without question, it will further increase costs, in terms of both time and resources, at a time of historically-low natural gas prices, which will affect decisions made into the future."

About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.