CALGARY, Alberta--Growing American natural-gas production is squeezing Canadian gas exporters out of the eastern half of the U.S., a move that's depressing prices for Canadian producers much further west.

For decades, gas produced in western Canada has flowed to the Northeast U.S. through a long-distance pipeline that crosses the border into Vermont. At the same time, Canadian producers have sent gas into the western U.S. market, through a pipeline flowing from British Columbia to California.

But big new shale-gas finds in places like Pennsylvania, West Virginia and Ohio are increasingly satiating eastern U.S. markets. That's pushing gas--both U.S. and Canadian--further west, where it's creating a glut.

U.S. gas produced in the Rocky Mountains, for instance, is now being shipped westward by the new Kinder Morgan Energy Partners L.P. (KMP) Ruby pipeline. That's sending prices for Canadian producers lower.

"We've got Rockies gas coming in now ... and it displaces Canadian gas coming down," said Greg Stringham, a markets expert for the Canadian Association of Petroleum Producers.

Canada has long relied on the U.S. as a ready market for its extra gas. But that's changing after a revolution in gas extraction--including new fracturing and drilling methods--has resulted in new, accessible reserves in the eastern and southern U.S. Prices across North America have plunged.

U.S. natural gas prices recently traded down to 10-year lows, but Canadian natural gas prices have fallen even more. Prices at the AECO hub in Alberta, run by Canada's largest natural gas producer Encana Inc. (ECA), traded Thursday at $1.77 per million British thermal units, a 29% discount compared with the price of gas on the New York Mercantile Exchange futures market.

Canadian gas exports into the U.S. Northeast last year were down 42% compared to the ten-year average. And Canada is now exporting 16% less gas into the U.S. as a whole, compared to the peak in 2007, and at less than a fourth the average price it received back then.

Canadian producers are scrambling to find other options, including plans to build three liquefied natural gas export terminals to ship gas to Asia. The first of those won't be operating until 2016.

It's the latest ramification in a bigger realignment of energy infrastructure across the continent. The gas-distribution system, in particular, was built to send gas from producing areas in Texas and Canada through pipelines thousands of miles long to high-population markets on the coasts, said David Dodson, a spokesman for TransCanada's western U.S. pipelines division.

"And now, lo and behold, right there in the premium markets' backyards, they are finding unimaginable amounts of gas," Mr. Dodson said. "That's what's happening--rather than paying the tolls on these long-haul pipes, they're just buying it locally."