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U.S. natural gas prices fell to their lowest point in more than two years ($2.989 per million British thermal units-BTUs), as new drilling techniques unlocked vast new stores of natural gas from shale formations and other so-called unconventional reservoirs. Unusually mild temperatures across much of the U.S. have also reduced demand for gas to heat homes and offices. Natural gas for February delivery settled Friday at the lowest closing price for the commodity since September 2009. It closed below $3 in the winter for the first time in nearly a decade.

The sub-$3 levels for gas prices in the winter really point to the incredible amount of nonconventional gas that has come onto the market the last two years. Production levels, a mild winter and the gas in storage have combined to crush natural gas prices this month.
 
Natural gas traded as high as $13 per million British thermal units in July 2008. But in recent years, domestic production boomed, with horizontal drilling techniques and hydraulic fracturing, or "fracking," helping producers unleash a flood of gas from shale formations in Pennsylvania, Arkansas and elsewhere.

Natural gas production in the lower 48 states hit a record 71.3 billion cubic feet a day in October, according to the U.S. Department of Energy.

Cheap gas hurts energy company profits. Chesapeake Energy Corporation is the second-largest U.S. producer of natural gas after Exxon Mobil Corporation.

The Environmental Protection Agency recently ordered power plants to cut emissions of pollutants by 2016. Gas producers envision plants ditching coal for cleaner-burning gas. If the U.S. is going to make a very large move on its greenhouse gas reductions, natural gas will be a big part of that. (WSJ, 12/31/2011)