This is called capping. The problem for producers is that most of their costs are fixed, so it is a disaster to shut down production.  Production usually continues even when prices are too low to make profits because of the desperate need for revenue.  However, when storage is full, there is nowhere for buers to put the gas, so in this case at least some producers must cap or flare, probably those who are distant from major pipelines and must pay a premium to transport their gas.

Why flare? because raw gas contains valuable non gas liquids, and these liquids can be separated and sold for at least a little revenue even as the gas is flared.  Flaring used to be a widespread practice... maybe we'll see this again if a few procuders get desperate enough.

  The extraction rate of natural gas can be regulated by either changing to a smaller orifice on the wellhead (hole that lets the gas out) or by shutting in the production. Since Natural Gas has almost always been in oversupply in the US, all oil and gas leases-the contract with the mineral owners-allow for shut-in periods by the producers
   Flaring ended as a normal practice in the 1960'sn the US, but some producers flare gas overseas because no market exists and they lack the wells and equipment for reinjection.

Lots of the new gas wells are unconventional gas from shale and coal bed methane. They produce a lot of water because of the huge frac jobs. Does anybody know whether the watre will cause formation damage on a shut-in well?  

Yes, natural gas wells are very easy to control, and that is why production figures do not tell the complete story.  Also, gas drillers can take option on tracts and then just wait to drill it (this is happening out west right now) so you can't assume that just because the gas is not being drilled, it is not there.

The idea of "flaring" natural gas in this day and age is absolutely barbaric.

Roger Conner  known to you as ThatsItImout