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Low natural gas prices not good news for everyone

April 17, 2012
Salem News

In July 2008, the wellhead price of natural gas in the United States was $10.79 per 1,000 cubic feet. By last week it had plummeted to $2.08.

For many Americans, that is wonderful news. It is not a good thing for everyone in this part of the country, however.

Gigantic reserves of gas in the Marcellus and Utica shale formations have been unlocked during the past few years. Both formations underlie much of this area. Thousands of area residents have been involved in the feverish rush by gas companies to obtain leases to drill for gas and oil. Tens of millions of dollars in "bonus payments" have been handed out to those signing mineral rights leases.

But the really big money, those signing leases have been assured, is in royalty payments once gas is produced from the wells.

But royalties are percentages of the prices charged for gas. When they drop, area residents lose money.

In addition, lower prices have meant many companies have stopped drilling for "dry" gas that does not contain valuable liquids.

This, too, shall pass. Our nation's appetite for energy, including that produced from gas, is enormous. As some electric companies build new gas-fired power plants, it will grow.

Times are not good in the gas fields - but only for now. At some point, probably within a few years, prices will go back up. They always do.

 
 

 

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