Gas Industry Policy Options: An Analysis
Authors: Deman Leslie J. 
Published: December 2007

American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.

This paper was prepared for the 50th Annual Fall Meeting of the Society of Petroleum Engineers of AIME, to be held in Dallas, Texas, Sept. 28-Oct. 1, 1975. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor of the appropriate journal provided agreement to give proper credit is made. provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussions may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines.

Introduction

Energy policymakers in Washington have seemingly written off the gas industry as a significant contributor of future energy supplies. Major proposals as advocated by the FEA's Project Independence Report include (a) a "demand management" policy that substitutes nongas energy supplies for present uses of natural gas and b) concentrating energy assistance and development efforts around the electric utility industry. Such a policy approach appears to have been inspired by recent FPC reports that domestic natural gas production appears to have peaked and by forecasts that future production capability will decline.

Recent natural gas reserve addition trends tend to add credence to declining conventional supply forecasts, such declines reflecting current natural gas regulatory constraints and unstructured energy policies. It is our premise, however, that with both deregulation of newly discovered gas and federal policies promoting supplemental fuels, continued reliance on gas is likely promoting supplemental fuels, continued reliance on gas is likely to be a more economically and socially effective alternative than Project Independence proposals. Project Independence proposals. Natural gas currently accounts for over 40 percent of total U.S. energy production. Almost 60 percent of all households using electricity also use natural gas. Gas additionally supplies over one-half of the total nontransportation energy used by U.S. industry. While conservation will reduce some demands and while many nonpremium industrial gas users will change to other fuels, conversion to fuel oil, electricity or coal is virtually impossible for many existing gas consumers. Additionally, the cost of nongas energy supplies — even using new energy utilizing facilities — is likely to be more costly than new gas supplies.

This paper analyzes the options of a program combining deregulation of new natural gas with a positive supplemental fuels policy against the demand-management and spur-electricity options policy against the demand-management and spur-electricity options proposed by Project Independence. proposed by Project Independence. PROJECT INDEPENDENCE REPORT PROJECT INDEPENDENCE REPORT The report proposes that coal should be substituted directly or indirectly for oil and gas for residential, commercial and industrial uses.