Arkansas Energy Report: More U.S. electricity produced with natural gas

Editor’s note: The Arkansas Energy Report is produced monthly and is sponsored by the Arkansas State Chamber of Commerce/Associated Industries of Arkansas, and MISO (Midcontinent Independent System Operator). Talk Business & Politics makes every effort to use information current at time of posting.
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From electricity production to a drop in Arkansas severance tax revenue to news about drilling activity, natural gas is a frequently mentioned commodity in the July 2016 Arkansas Energy Report.

On Thursday (July 14), the U.S. Energy Administration said natural gas-fired electricity generation in the United States is expected to reach a record level this year, providing an average of 3.8 million megawatthours per day in 2016, or 4% higher than earlier forecasts in 2015.

Although natural gas had long been the second-most prevalent fuel for electricity generation behind coal, it first surpassed coal generation on a monthly basis in April 2015.

With respect to taxes from natural gas drilling, Arkansas ended fiscal 2016 with the lowest level of tax revenue from natural gas severance collections since the Arkansas Legislature raised the levy on production just as the Fayetteville Shale reached its peak in 2009.

For the period ended June 30, severance tax revenue for natural gas sales declined 59.5% to $31.8 million. On a monthly basis, June collections of $1.33 million were the second-lowest month in fiscal 2016 and down 82.5% from $7.6 million in June 2016.
In fiscal 2015, Arkansas recorded its highest yearly severance tax collections at $78.6 million, slightly better than $77.3 million in the previous year. Arkansas several tax collections have not fallen below $50 million since 2010, a year after the Arkansas Legislature raised the levy on natural gas production across the state.

The nation’s rig count continued to move upward in July as the number of rigs in operation in the U.S. rose by nine to 44) for the week ending July 8, according to oilfield giant Baker Hughes. Altogether, oil rigs were up 10 to 351, gas rigs down 1 to 88, and miscellaneous rigs unchanged at 1.

For the first half of 2016, the has been no drilling activity in Arkansas as Southwestern Energy Company, BHP Billiton and other Fayetteville Shale drillers have offered no indication they plan to send rig crews back in the unconventional shale play until natural gas prices rebound above $3 per million British thermal units (MMBtu).

Following are other highlights of this month’s Arkansas Energy Report.
• According to the U.S. Energy Information’s short-term energy outlook (STEO) released July 12, U.S. summer regular gasoline retail prices are forecast to average $2.25 per gallon, two cents lower than forecast in last month’s STEO and 39 cents lower per gallon than last summer, measured as April through September.

• Fossil fuels still dominate U.S. energy consumption despite recent market share decline. Three fossil fuels – petroleum, natural gas, and coal – have provided more than 80% of total U.S. energy consumption for more than 100 years.

• Overall, the U.S. rig count is down 423 rigs from last year’s count of 863, with oil rigs down 294, gas rigs down 129, and miscellaneous rigs unchanged at 1. The U.S. Offshore Rig Count is 19, unchanged from last week, and down 12 rigs year over year.

Link to this PDF for the complete Arkansas Energy Report.