DEP: Natural Gas Production Slowed in 2022

For the first time since unconventional gas well development arrived in Pennsylvania, the state saw a slowdown in production in 2022.

The state Department of Environmental Protection’s Oil and Gas Annual Report for 2022 showed that production reached approximately 7.45 trillion cubic feet of gas in 2022, down slightly from 2021’s 7.57 trillion cubic feet. Since 2014, production has increased annually for unconventional, or fracked, wells. However, Pennsylvania remains the second largest producer of natural gas in the U.S. behind only Texas.

The number of unconventional wells drilled rose in 2022, to 790, with 574 of those being unconventional wells. In 2021, a total of 648 wells were drilled, 518 of them unconventional. The slowdown in gas production has been previously noted by the U.S. Energy Information Agency and the state’s Independent Fiscal Office.

In 2022, natural gas prices took off, averaging $6.45 per million British thermal units (MMBtu) at the Henry Hub, a price benchmark. That price fell below $4 per MMBtu at the start of 2023 and continued its decline, reaching an average of $2.50 per MMBtu by the end of October. The increase was driven by increased domestic use and Europe’s need for alternate gas supplies after Russia’s invasion of Ukraine. However, prices have now cooled significantly due to last year’s warm winter resulting in an oversupply of U.S. natural gas that has producers slowing development of wells.

The number of DEP permits issued for new unconventional wells was down in 2022, at 748, compared to 770 a year earlier. The state record for well permits issues was 2,081 in 2015 at the height of the Marcellus shale boom.

The report also noted that DEP inspectors conducted the most compliance inspections at oil and gas sites in a single year since 2008. Those resulted in 8,010 violations, the vast majority being issued to conventional well drillers, which tend to be smaller companies that drill smaller, shallower wells vertically. A total of $1.769 million in fines was collected in fiscal 2021-22.

DEP’s goal for 2023 was to establish a long-term stable source of funding. Permit application fees now serve as the primary source of funding for DEP’s Oil and Gas Program, but the declining number has left a shortfall. While DEP is working to develop a more sustainable approach to funding the program, it has not yet been successful in getting the legislature to make changes.

The agency also continues to ramp up its efforts to plug abandoned or orphaned gas wells using money provided through the 2021 Infrastructure Investment and Jobs Act. Pennsylvania is eligible for up to $400 million in federal funding to plug abandoned wells, many of which were drilled before the state regulated the gas industry. The wells can leak methane, a potent greenhouse gas, and other pollutants into the atmosphere and groundwater. It is estimated that there are about 200,000 such wells around the state.

During 2023, the agency rolled out the program and in October celebrated the plugging of the 100th well this year, a huge increase over the average annual count when it faced underfunding in the state budget. The hope is to keep that momentum going and again increase the number of wells plugged next year.