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Natural Gas Production in Region Now Flat or Declining

Natural gas production in four key Pennsylvania counties declined slightly in 2022, a recent U.S. Energy Information Agency (EIA) report found, while overall production in the Appalachian Basin remained flat. Those four counties – Washington, Greene, Susquehanna, and Bradford – accounted for 40 percent of Pennsylvania’s production, contributing 13.9 billion cubic feet per day (Bcf/d) to the 34.7 Bcf/d total. While production in the Marcellus shale has risen every year since unconventional drilling began, it is now flattening and could soon see a decline. A recent state Independent Fiscal Office report providing its revenue outlook for 2023 found that the number of new wells spud in the first half of this year was 22 percent lower than last year. And that, coupled with lower natural gas prices, will mean a projected decline in impact fee revenue for Pennsylvania counties and municipalities with drilling activity. Washington was the top-gas producing county in the state in 2022, while Greene was the fourth-highest. Susquehanna and Bradford were No. 2 and 3 respectively. Those counties receive significant Act 13 impact fee revenue, part of which goes to municipalities within the counties. The EIA report found that in 2022, Pennsylvania’s natural gas production decreased 0.4 Bcf/d in 2022 due to productivity declines and natural gas takeaway capacity. “Until last year, output had increased every year since 2013 on the back of drilling efficiency gains,” the report indicates. Of the top four counties, only Greene County increased its gas production in 2022 compared to the previous year.

Reports from the EIA and Reuters also indicated that production of natural gas is expected to slow or decline in basins across the country in the coming months. The declines are attributed to a recent drop in gas prices, higher-than-average inventory storage, and softening demand.

Impact fees in Pennsylvania reached an all-time high in 2022 due partly to the high average annual price of $6.64 per million cubic feet that fell drastically to $2.76 per mcf at the end of the year. The EIA recently reported that the price has fallen an additional 34% in the first half of 2023. “Relatively mild temperatures, record production (in 2022), and higher-than-average inventories reduced natural gas prices,” the report states. A warm winter meant that more gas was available to restock storage inventories that were depleted during the European energy crisis after the Russian invasion of Ukraine and increased U.S. exports of liquefied natural gas. The IFO has projected that impact fees to counties and municipalities will be significantly lower for 2023 than for 2022, and state and local officials need to keep this ongoing volatility in mind as they prepare their spending plans.

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