Historical Trends and Current Production of Gas From Tight Formations (includes associated papers 16461 and 16645 )
Authors: Haas M.R. , Brashear J.P. , Morra F. 
Published: December 2007

Summary.
Low-permeability (tight) formations are an acknowledged majorsource of future U.S. natural gas supplies. The unproven recoverableresource potential, as estimated by the Natl. Petroleum Council (NPC), ison the order of 500 Tcf [14.2 × 10 m ] at prices and technologies currentat the time of the study. The NPC study and other analyses have pointed tothe significance of tight gas in future supplies, but the role it plays incurrent reserves and production has not been so clearly defined.
We have estimated the volume of gas produced from tight sands inrecent years, calculated ultimate recovery and proved reserves associatedwith this production, and compiled quantitative descriptions of 663 fieldscurrently producing tight gas. Data limitations constrained the study tothe western and southwestern states, which account for about 85% of U. Stight-gas production. To provide national tight-gas production volumes, however, estimates based on aggregate data were also made for Appalachia.

Introduction
In the late 1960's and early 1970's. low-permeability(tight) gas-bearing formations were recognized as the nextmajor source of natural gas. offsetting, the predictabledecline in conventional reserves. This realizationexpanded rapidly after the 1980 publication of a majorassessment of the tight-gas technical and economic Potential, conducted over 2 years by a multicompany, working groupof the NPC. NPC estimated that, given specifiedtechnology advances, as much as 500 Tcf- [14.2 × 10–12 m3 ]of tight gas could be produced at prices up to the gasequivalent of the world oil price.
Several studies, sponsored by the federal government, the NPC, and the Gas Research Inst. (GRI), haveanalyzed the overall resource and its potential response toeconomic and technological stimuli. An automatedversion of the NPC study data and methodology has beenconstructed to allow sensitivity analyses using updatedresource, technology, and cost data. None of these, however, quantified the actual role of tight gas in supplyin recent years. This role needs to be clarified todetermine whether tight gas is beginning to be produced in theamounts suggested by studies of its potential. Specifically, this paper distinguishes how much of recent gasproduction has come from tight formations. This study does not production has come from tight formations. This study does not address the extent to which estimates of the undiscoveredtight-gas resource may coincide with estimates ofnontight or conventional undiscovered resources.

Special Economic Incentives for Tight-Gas Production.
The Natural Gas Policy Act of 1978 (NGPA) graduallyphased out price controls on new gas and provided phased out price controls on new gas and provided incentive or decontrolled pricing for certain types of gasdeemed to be high cost, including gas from tightformations. To receive the incentive price established for tightgas, an operator must first secure the approval of stateregulatory bodies to designate an individual formation ina specific geographic area as "tight" in accordance withcriteria established by the Federal Energy Regulatory Commission (FERC).
In addition, in a provision of the Crude Oil WindfallProfit Tax Act of 1980, the Internal Revenue Service Profit Tax Act of 1980, the Internal Revenue Service provides for an unconventional gas tax credit in lieu of the provides for an unconventional gas tax credit in lieu of the incentive price in any tax year except those in which anincentive price is taken. This tax credit is a function ofthe price of oil so that declining oil prices are met witha corresponding increase in the tax credit. The intent ofthis provision, in effect a price support, is to minimizethe incentive to switch from tight gas to oil when oil pricesdecrease.
The nature of these two economic incentives-providingeither higher prices when gas is in short supply or taxcredits when it is not-creates a situation that isbeneficial to tight-gas producers. Regardless of gas marketconditions, these incentives are available only for gasproduced from wells in FERC-designated formations. produced from wells in FERC-designated formations. Thus, at all times, this encourages operators to seekdesignation for qualified tight formations. This study assumedthat, because of these available economic incentives, thoseareas designated as tight by the FERC will make up theareas where the majority of tight gas will have beenproduced in the past and will likely be produced in the near produced in the past and will likely be produced in the near future.
By Aug. 1984, FERC had approved 171 separatearea/formation designations throughout the U.S., mostlyin the west and southwest. where tight gas is known tohave been produced for some time.
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