July 16, 2012 / 9:04 PM / 5 years ago

UPDATE 1-Natgas drillers' water use cut due to Pennsylvania drought

* Commission suspends permits in most areas since 2008

* Talisman says fracking reduced due to low gas prices

* Carrizo Oil & Gas planned around dry season

By Jeanine Prezioso

NEW YORK, July 16 (Reuters) - Natural gas drillers in Pennsylvania have had to stop withdrawing water from certain streams due to a severe drought, a water regulator said on Monday.

The Susquehanna River Basin Commission (SRBC) said it has suspended permits to siphon water from the river's streams in the highest number of areas than at any time since it began issuing permits to gas producers in June 2008 allowing them to draw river water for operations.

The SRBC, which manages the river as a water source, said the suspensions affected around 30 companies, not all of them gas companies, that rely on some 64 water withdrawal areas in 13 Pennsylvania counties and one New York county.

Water is an integral part of the natural gas drilling process known as hydraulic fracturing or "fracking" and gas production in those areas has grown rapidly in the last three years.

However, four gas producers said the suspensions did not affect them as they had already reduced operations because of seasonal planning or low gas prices, or are using alternative water sources.

Many gas producers either keep water in reservoirs, recycle water or plan operations around the dry season because the process of hydraulic fracturing is so water intensive.

In fracking, water is mixed with chemicals and flushed into a horizontal well at high pressure to hold open cracks created in rocks, allowing gas particles to rise to the surface.

A spokesman for Carrizo Oil & Gas said the company schedules well completions around periods of expected dry weather.

"Carrizo currently has no well completion operations in Susquehanna County due to scheduling around the seasonal dry period," he said. "We will be completing wells in Wyoming County and return to Susquehanna later in the year after the end of the dry period."

Fracking has allowed gas drillers to draw out huge amounts of previously untapped gas reserves, causing a glut of the fuel in the United States that pushed prices early this year to the lowest level in a decade.

Talisman Energy, which had suspended some operations in April due to thin water supplies, said low natural gas prices were the reason it has reduced drilling activities now.

"With the low natural gas prices our frac activity is slower and therefore our consumption of water is also low as a result," Pam Tragesser, a spokeswoman for Talisman Energy in The Woodlands, Texas, said in an email.

Talisman also uses a "large percentage" of recycled water for its operations when needed, Tragesser said.

New York Mercantile Exchange natural gas prices sank to a 10-year low this spring, at times reaching below $2 per million British thermal units, or less than half the 2011 average of around $4 per mmBtu.

The nation's first and second most prolific gas producers, respectively, XTO Energy, owned by ExxonMobil, and Chesapeake Energy each said their operations were not affected by the latest suspensions of water permits.

"The suspension and drought have had minimal, if any, impact on XTO's operations, with no changes to our drilling program," said Jeff Neu, a spokesman for XTO Energy in Fort Worth, Texas.

If needed, XTO will "use alternative permitted water sources," he added.

A Chesapeake Energy spokesman made reference to an emailed statement from April, during another period of drought, that said the company plans ahead for such restrictions by "withdrawing water during high-flow intervals and storing it for later use."

Pennsylvania has been a focal point for natural gas drilling in the United States. The state sits atop the Marcellus Shale, a large natural gas basin, and heavy production from that basin has aided in pushing prices lower.

Cabot Oil & Gas, Southwestern Energy and EXCO Resources were also listed as having operations in the suspended water withdrawal areas.

Representatives for those companies did not immediately reply to requests for comment.

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