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Despite Drilling Downturn, PA Natural Gas Production Grows

On August 1, 2016, The Pennsylvania Department of Environmental Protection (DEP) released its 2015 Oil and Gas Annual Report (Report).[1]  In additional to natural gas production details, the Report provides information on natural gas data trends in Pennsylvania and details on DEP inspections.  2015 was a difficult year for the natural gas industry as it faced record inventory levels, declining prices, and decreases in newly drilled wells.[2]  DEP confirms Pennsylvania was not immune to the national downturn in natural gas drilling with only 1,070 newly drilled wells in 2015 – more than a 50% decrease from the 2,163 new wells drilled in 2014.[3]

However, as the natural gas industry struggles to cope with a downturn in drilling, Pennsylvania maintains its position as the second-largest natural gas producer in the United States.[4]  Pennsylvania was responsible for 4.6 trillion cubic feet of natural gas production in 2015 – a 13% increase from the 4.05 trillion cubic feet of natural gas produced in 2014.[5]  While Marcellus Shale is still the main source of production, the Utica and Point Pleasant shales also contributed to Pennsylvania’s 2015 natural gas output.[6]

In addition to providing details on natural gas drilling and production, the Report highlights DEP’s regulatory compliance activities in 2015.  While the number of well inspections increased in 2015, it wasn’t all bad news for the natural gas industry with DEP reporting a decrease in the number of violations associated with both unconventional and conventional wells.[7]  Even more good news for natural gas producers is that DEP’s collection of fines and penalties related to noncompliance was down to a little over $3.41 million in 2015 – a substantial decrease from the approximate $7.14 million in fines and penalties assessed in 2014.[8]

DEP concluded its annual report with a forecast of DEP initiatives for 2016.  These initiatives include: implementing a methane reduction strategy through gas leak detection and repair measures; revising regulations for subsurface activities associated with oil and gas exploration and development; evaluating the existing oil and gas fee structure; and developing an electronic reporting mechanism for well operators.[9]  These state DEP initiatives come on the heels of the newly enacted federal initiatives of the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA).  For more details on PHMSA’s new regulations, see our “PIPES Act Update” and stay tuned to our blog for more up-to-date information as DEP begins implementation of its 2016 initiatives.

[1] Pennsylvania Department of Environmental Protection, 2015 Oil and Gas Annual Reportavailable at  (2016).

[2] U.S. Energy Information Administration, Average annual gas spot price in 2015 was at lowest level since 1999available at (January 5, 2016).

[3] 2015 Oil and Gas Annual Report, at p. 13.

[4] Id. at p. 5.

[5] Id. at p. 6.

[6] Id. at p. 8.

[7] Id. at p. 19.

[8] Id. at p. 21.

[9] Id. at pp. 29-31.

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