Further natural gas extraction in Appalachia is unlikely to be profitable as the US energy system undergoes rapid decarbonization, according to a report from the Ohio River Valley Institute (ORVI), an independent think tank located in Johnstown, PA.
Risks for New Natural Gas Developments in Appalachia, issued March 23, was prepared for ORVI by the Stockholm Environment Institute US (SEI). Among key findings of the report are:
- The gas industry in the Appalachian region of Pennsylvania, Ohio, and West Virginia is vulnerable to sustained, low prices of domestic gas and natural gas liquids (NGL).
- Recent prices are not high enough to support widespread investments in gas and NGL infrastructure — including new gas fields, pipelines, and export terminals.
- Governments around the world, including the United States, have committed to deep decarbonization under the Paris Agreement. This suggests profound changes to oil and gas markets that would render new Appalachian gas fields unprofitable, on average.
The report is the first quantitative assessment of how Appalachia’s gas industry would fare in a low carbon future and is the most detailed publicly available analysis of the future prospects for natural gas development in the region. The authors analyzed 200 prospective gas projects in Pennsylvania, Ohio, and West Virginia.
The report’s lead author, Peter Erickson, a senior scientist and Climate Policy Program Director with SEI, stated:
“Our analysis shows that gas expansion in Appalachia is a risky investment. The calculations show that new gas developments face an array of serious financial risks that could render extraction from Marcellus gas fields unprofitable in the coming years.”
The report finds that a rapidly decarbonizing economy — a specific policy objective of the Biden Administration — would severely undermine the profitability of Appalachian gas development, resulting in reduced production. Lower gas production would in turn crimp the production of natural gas byproducts, like ethane, that serve as feedstocks for the region’s much-hyped petrochemical buildout, which is already facing stiff headwinds from competitor regions and an evolving market for consumer plastics.
Click here for a copy of the report.