New power production is still turning to natural gas.  Power producers continue to shut down coal and nuclear power plants and replace them with plants that run on natural gas.  Coal power production, which once represented 50% of all production in terms of MWs, declined 44% between 2011 and 2018.  A similar story can be told about nuclear power where seven of an existing 60 plants have closed since 2013 and ten more are expected to be retired in the next few years.  While renewable energy has expanded, natural gas represents the largest portion of new generation construction.  As a result, the generation now represents 35% of domestic natural gas demand, up from 31% just five year ago and is growing at a rate of 10%. 

New transmission to the East Coast will raise demand.  More than two dozen pipeline projects have been proposed in the Appalachia Basin according to a report by Energy In Depth.  The projects represent 23 bcf/d of natural gas (allowing for some duplication) as compared to current production levels of 31.6 bcf/d.  

Production in other areas is growing.  While the Marcellus stalls, areas such as the Permian and Haynesville Basins are expanding.  These areas typically report lower operating costs and less environmental restrictions.  With new pipelines being built to move Permian and Haynesville gas towards the Gulf Coast where they hook up with traditional pipelines running to the Northeast, Appalachia production will face additional competition.

Drop in demand comes despite colder weather out East.  Natural gas is predominantly used as a source of space heating.  Residential and commercial customers represented 29% of the natural gas consumed in 2018 and space heating represents the bulk of residential and commercial gas demand.  Temperatures during the December quarter were 5% colder than the trailing 10-year average in New England and 4% in the Mid Atlantic. 

Environmentalists are fighting back against pipeline construction.  Environmentalists won an important decision December 2018 when the Richmond, Virginia-based 4^th U.S. Circuit Court of Appeals put a stop to construction of the Atlantic Coast Pipeline.  A similar battle is being waged against the proposed Mountain Valley Pipeline.  Both pipelines would transport natural gas from Appalachia to eastern states.  Delays in the projects could result in excess gas supply in Appalachia, which would lower gas prices and discourage additional drilling.

Appalachia production is facing competition from other production areas, environmentalists and the economic reality of lower prices.  Still, it would be wrong to dismiss Appalachian producers who are working hard to lower drilling and operating costs.  The growth rate of natural gas production in the Marcellus Basin may slow, but the area remains an important source of supply for growth demand in the Northeast.

Sources

https://finance.yahoo.com/news/low-gas-prices-crush-appalachia-000000259.html, Nick Cunningham, Oilprice.com, January 9, 2020

https://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm, U.S. Energy Information Administration

https://www.eia.gov/petroleum/drilling/#tabs-summary-2, U.S. Energy Information Administration, December 16, 2019

https://www.eia.gov/petroleum/drilling/pdf/appalachia.pdf, U.S. Energy Information Administration, December 2019

https://www.eia.gov/petroleum/drilling/archive/2013/12/#tabs-summary-2, U.S. Energy Information Administration, November 22 2019

https://www.carbonbrief.org/mapped-worlds-coal-power-plantsMultiple Authors, CarbonBrief, March 25, 2019.

https://www.eia.gov/todayinenergy/detail.php?id=42075, U.S. Energy Information Administration, November 22, 2019

https://www.energyindepth.org/infographic-more-than-32-billion-being-invested-appalachian-basin-pipelines/, Nicolle Jacobs and Dan Alfaro, February 28, 2019