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Regional natural gas price half of benchmark

An abundance of natural gas from shale has helped push down the wholesale price in Pennsylvania to about half of the national price for the fuel.

The gap is caused by a lack of pipeline capacity for carrying gas from the Marcellus and Utica shale formations, and it means savings for Ohio businesses and residents.

The Energy Information Administration reported yesterday that gas is often selling for about $2 per million British thermal units at trading hubs in Pennsylvania, while the benchmark price has been about $4 at the Henry Hub in Louisiana.

“Since the summer of 2012, rising growth in natural gas production in the Marcellus has outpaced growth in the region’s available pipeline takeaway capacity,” the agency said on its website.

Pipelines exist for moving gas short distances, but large pipelines to move it across the country are lacking.

Related: Study: Natural gas surge won’t slow global warming

Energy companies have proposed billions of dollars’ worth of pipelines to help relieve the bottleneck, but most of those projects are still in planning stages.

Once pipelines are built, the regional price gap likely will fade somewhat, said Sam Randazzo, a Columbus lawyer who specializes in energy issues.

“We just happen to have a lot of pent-up supply in our region, and that has had a more dramatic effect on prices,” he said.

Large businesses, especially those in or near the Utica and Marcellus regions, can get a direct benefit right now by purchasing gas from suppliers who are selling for much lower prices than the national benchmark.

For central Ohio households, the benefit is there, but not as directly. The local utility, Columbia Gas of Ohio, uses the Louisiana benchmark price as the key component of the retail price. That price is lower than it would be without the glut of gas entering the market from the Utica and Marcellus, but it is not as low as the wholesale prices in the Marcellus and Utica regions.

The Marcellus is a gas-rich rock formation deep beneath Pennsylvania and several adjacent states, including the eastern edge of Ohio. The Utica, which is deeper than the Marcellus, has yielded gas and oil in the eastern and southeastern parts of Ohio and in adjacent states.

 

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