Risks for New Natural Gas Developments in Appalachia

The report argues that new natural gas developments in Appalachia are high-risk investments due to low domestic prices and the global transition toward low-carbon energy. Analysis of 216 prospective gas fields indicates that average 2020 prices for gas and oil do not support widespread expansion. The authors highlight that deep decarbonization consistent with the Paris Agreement would likely keep gas prices below the $3/Mbtu threshold required for average profitability, potentially rendering new fields and associated petrochemical infrastructure, such as ethane crackers, unprofitable.

• The natural gas industry in Pennsylvania, Ohio, and West Virginia is highly vulnerable to sustained low prices for domestic gas and natural gas liquids (NGL), with recent prices being insufficient to support widespread investment in new gas fields, pipelines, and export terminals.
• Global decarbonization efforts aligned with the Paris Agreement are expected to fundamentally alter oil and gas markets, likely making new Appalachian gas fields unprofitable on average.
• Low-carbon energy transition scenarios suggest a significant decline in U.S. gas consumption, with most reviewed studies forecasting demand dropping to less than 20 TCF by 2040, compared to the U.S. Department of Energy's reference case of approximately 31 TCF annually.
• While LNG exports could provide a market for U.S. gas, their role in global decarbonization is limited; LNG use may peak before 2040 in 2°C scenarios, and export terminals may need to be shut down prematurely.
• New ethane crackers in Appalachia face substantial financial risk if oil prices remain at or below $40/barrel, as this lowers the cost of naphtha-based ethylene production globally, reducing the competitive advantage of ethane-based production.
• An analysis of 216 prospective new gas and gas-condensate fields shows that average 2020 prices (approximately $2/Mbtu for gas and $40/barrel for oil) fall below the breakeven frontier required for profitability.
• The financial risk for new developments is further increased by rising cost of capital; while the baseline analysis assumes a 10% discount rate, industry risk perceptions may have pushed hurdle rates to 15%, raising the bar for development.

APA

Erickson, P., & Achakulwisut, P. (2021). Risks for New Natural Gas Developments in Appalachia. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2021/03/risks-of-new-natural-gas-developments-in-appalachia-march-2021-final-3.9.21.pdf

Chicago

Erickson, Peter, and Ploy Achakulwisut. Risks for New Natural Gas Developments in Appalachia. Stockholm Environment Institute, 2021. https://www.sei.org/wp-content/uploads/2021/03/risks-of-new-natural-gas-developments-in-appalachia-march-2021-final-3.9.21.pdf.

Wikipedia

{{cite report |last1=Erickson |first1=Peter |last2=Achakulwisut |first2=Ploy |title=Risks for New Natural Gas Developments in Appalachia |publisher=Stockholm Environment Institute |date=March 2021 |url=https://www.sei.org/wp-content/uploads/2021/03/risks-of-new-natural-gas-developments-in-appalachia-march-2021-final-3.9.21.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{erickson2021risks, author = {Erickson, Peter and Achakulwisut, Ploy}, title = {{Risks for New Natural Gas Developments in Appalachia}}, institution = {Stockholm Environment Institute}, year = {2021}, month = mar, url = {https://www.sei.org/wp-content/uploads/2021/03/risks-of-new-natural-gas-developments-in-appalachia-march-2021-final-3.9.21.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }