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Low natural gas prices could impact state budget

CLARKSBURG, W.Va. — The recent drop in natural gas prices hasn’t really factored into the Legislature’s budgeting process during the current session, Senate Finance Chair Mike Hall, R-Putnam, said.

But should those prices remain depressed, the resulting decline in severance tax revenues could create budgeting challenges moving forward, he said.

“Right now, we are operating off of the governor’s projected revenue numbers, which includes severance tax revenues. There’s been no change in their projection in the last week or two,” Hall said. “If you’re doing this kind of stuff, you just can’t react to a short-term number, but what bothers them is if it’s protracted.”

A number of drilling and exploration firms active in the Appalachian basin recently announced plans to cut capital expenditures for 2015, citing the current price environment for natural gas in the region.

According to data from Natural Gas Intelligence, prices at the nearby Dominion South Point hub have dropped by more than 73 percent over this time last year. The price for natural gas at the hub currently sits at around $2 per million British Thermal Units (BTU), compared to a peak of closer to $8 per million BTU in the early part of 2014.

The prices for natural gas liquids produced out of the region — such as propane, butane and isobutane — have also dropped substantially along with the prices for crude oil, according to information provided by the U.S. Energy Information Administration.

“It’s brutal. It’s really bad,” Charlie Burd, executive director of the Independent Oil & Natural Gas Association of West Virginia, said. “I think (drillers) are going to be more conservative in their drilling approach for 2015…

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