Subscribe to Blog ContentWhile natural gas companies have experienced growth in recent years, it's now facing a challenge as its volatility catches up with the industry. It's bad enough that in the summer of 2008, natural gas companies cut down on drilling activity and leases when prices started dropping. Since then, prices have fallen again. A pattern has emerged that natural gas prices do what oil prices do in terms of going up or down.
These realities force natural gas companies to reassess their operations and tighten decisions. In the past, leases come with high bonuses. Those bonuses have shrunk to around $5,000 per acre or less. Natural gas companies also need to carefully decide where to operate.
Strong future expected for natural gas drilling
Despite the latest challenges, industry experts believe natural gas drilling activity still has a strong future because of the economic and environmental benefits. Natural gas isn't going away. Rather, natural gas companies need to change their way of doing things and be more selective in their decision-making.
You might be interested in reading U.S. Department of Energy's primer on Modern Shale Gas Development in the United States: A Primer. DOE's web site explains, "The Primer provides regulators, policy makers, and the public with an objective source of information on the technology advances and challenges that accompany deep shale gas development." The primer contains information about development of modern shale gas, related regulations and environmental impacts. DOE also reports that natural gas has an important job to do in support U.S. energy needs.
The primer reports that natural gas, coal and oil make up of 85 percent of the total nation's energy. Natural gas is 22 percent of that and expects to remain there for the next 20 years. Some people worry about the effects of natural gas drilling activity on drinking water and the report addresses that.
Natural gas drilling “loopholes” justified or not?
President Barack Obama also contends that tax breaks for domestic drilling contain "unjustifiable loopholes." Independent Petroleum Association of America believes that removing these tax breaks will increase America's dependence on foreign oil and decrease U.S. energy production.
Congress originally put the drill activity tax breaks in place to feed capital in a high-risk business. It's easy to lose a lot of money in drilling and end up with a dry hole. The tax breaks help business overcome this massive risk, which continues today. Drillers not only deal with federal legislation, but also local and state government. In Texas, for example, Tarrant County passed a bill that requires notifying local officials about drilling applications in the Barnett Shale, which could delay drilling.
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