US Natural Gas Industry Research Articles

A Long Economic View on the FERC's New Policy Statements on Natural Gas Pipelines

I first contributed to this journal in October 1994, when it was called simply Natural Gas. In those days, great battles raged before the Federal Energy Regulatory Commission (FERC), including between natural gas distributors whose groups I represented—including the 22 distributors in New England, and the natural gas pipeline companies that had historically served them—including Tennessee, Texas Eastern, and Transco. NERA's close involvement generally in regulatory problems involving the 1938 Natural Gas Act (NGA) goes back to the 1950s—particularly the work of my late colleague and friend at NERA, Professor Alfred E. Kahn, on behalf of a group that would later be known as the Associated Gas Distributors (AGD). In such a way, NERA has wrestled with US natural gas industry problems under the NGA for over 65 years. We have the long perspective.

Responsibly Sourced Gas: Time to Change the Natural Gas Industry's Narrative

The majority of companies in the natural gas and liquefied natural gas (LNG) industry seem fixated on promoting natural gas as the clean “bridge fuel” to further deployment of renewable energy technologies. While natural gas emits far less carbon dioxide (CO2)than coal or oil used to generate power and heat, it is still a “fossil fuel” that contributes to the adverse effects on climate. Fossil‐fuel opponents are increasingly skeptical of the climate benefits reported by the US natural gas and LNG industry. These opponents often cite a study released in April 2020 that showed methane emissions from the Permian basin of West Texas and New Mexico, one of the largest oil‐producing regions in the world, are more than two times higher than federal government estimates.

Challenges of Decarbonizing the US Natural Gas Industry

The term “decarbonization” is very commonplace in global energy circle discussions and almost synonymous with the Paris Agreement reached at COP 21. I believe most US natural gas industry executives either largely discount decarbonization of natural gas or think the present gas narrative is sustainable because the United States withdrew from the Paris Agreement.

A Nonparametric Economic Analysis of the US Natural Gas Transmission Infrastructure: Efficiency, Trade-Offs and Emerging Industry Configurations

This paper presents a study aimed at measuring the efficiency of the transmission segment of the US natural gas industry from an economic perspective. The gas transmission infrastructure is modeled as an economic production function and a multi-stage modeling approach based on the implementation of Data Envelopment Analysis is employed to obtain an efficiency measure in a two-dimension performance space, i.e., cost and revenue-efficiency. This approach allows taking into account conflicting business goals. The study also performs cluster analysis to uncover homogeneous efficiency profiles relative to the gas transmission systems to explore determinants of efficiency rates, and trade-off situations. A sample containing 80 US gas transmission systems is used in the analysis. Results indicate that the transmission segment of the US gas industry has considerable inefficiencies, while average cost and revenue-efficiency scores are 0.324 and 0.301, and only three transmission systems achieve high scores on both efficiency dimensions. Cluster analysis identified seven configurations. In three of them there are no trade-off situations between cost and revenue efficiencies. However, only in one of them gas transmission systems have high efficiencies. The remaining four configurations exhibit trade-off situations having different intensity. Such trade-offs can be determined by the gas transmission infrastructure size.

Term Structure of Natural Gas Futures Contracts

This paper considers the possibility of the persistence of quasi rents in the US natural gas industry. We compare the term structure of gas and oil futures, and test for cointegration between gas and oil prices. The results indicate that natural gas yield curves are consistently higher than those of oil, reflecting possible higher risk premiums. The results also indicate that gas prices are cointegrated with and are driven by oil prices. This is consistent with the notion of oil price serving as market indicator for gas contracts with potential quasi-rents. Our findings are important in supporting the view that natural gas markets may maintain quasi-rents, despite evidence of long-term trends in improving market efficiency.

How the Natural Gas Industry Became What It Is Today

In many of the discussions I have had among both gas and electric advocates and policy makers regarding the function and business practices of interstate gas pipelines, it has become increasingly clear that many in both industries do not know how today's gas industry became today's industry. That makes sense. It has been 24 years since the Federal Energy Regulatory Commission (FERC) put into place the industry model we have today. To attempt to address this lack of knowledge, it is time for a brief history lesson. This history lesson is important for anyone participating in, or affected by, the US natural gas industry, which is pretty much everyone in the United States.

Natural Gas, 2016 and Beyond

Heading into 2016, the US natural gas industry is obviously in some distress.

Technical status and challenges of shale gas development in Sichuan Basin, China

Abstract During the past decade, shale gas developments have changed the energy structure in the US natural gas industry, and the exploration activities for shale gas are also increasing worldwide. According to the papers published in recent years, shale gas resources are quite abundant in China. With the successful experience obtained from North America, many state-of-the-art technologies are brought in and refined for field application. State-owned enterprise, private enterprises and foreign enterprises have all actively participated in the exploitation of shale gas. Compared with US, China faces many more challenges, both geological and above-ground, in the development of shale gas resources. This paper begins with the introduction of shale gas reserve distribution in China and the identified shale gas formation in Sichuan Basin. The following paper reviews the methodology employed in the geophysical prospecting, drilling and completion, and hydraulic fracturing process. Since China is in the early stage of shale gas development, there is a great technical gap between China and North America. Based on literature review, the major challenges faced in the exploration and production process are identified. What presented in this paper should be of particular interest to the personnels involved in shale gas production in China and countries that are about to set foot in shale gas business. It will also be of interest to researchers who are dedicated to developing these technologies to unlock unconventional gas resources in China.

Transparency of Retail Energy Pricing: Evidence from the US Natural Gas Industry

We test and cannot reject the hypothesis that retail pricing of natural gas is transparent for commercial and residential customers served by regulated local distribution companies in the United States. The periods of adjustment to a wholesale price change are 1.54 months for the commercial price and 1.69 months for the residential price. These findings support the view that regulated local distribution companies quickly adjust retail prices to fully capture any change in the wholesale natural gas price. Copyright © 2013 John Wiley & Sons, Ltd.

Natural gas matters: All industry segments working for success in growing gas‐fired generation

AbstractThis summer, the US natural gas industry celebrated an important milestone. It has been no secret that power generation is the most important growth market for the industry, with natural gas largely competing with coal as the preferred fuel. It was announced this summer by the Energy Information Administration that in April 2012, for the first time in history, the nation generated as much power with natural gas as it did with coal. Exhibit 1 shows the month‐by‐month convergence of the two fuels' total megawatts generated, from the beginning of 2010 until April.

Transportation corridors and cointegration of residential natural gas prices

PurposeThe US natural gas industry has gone through regulatory changes and consequently restructuring over the last 40 years, in an effort to be more market driven. The purpose of this paper is to present an economic analysis of price cointegration in the US natural gas industry as a result of industry restructuring.Design/methodology/approachIn particular, this paper tests if access to the same major pipeline transportation corridor translates to cointegration of residential natural gas prices.FindingsResults indicate a high degree of cointegration for States within the same transportation corridor and a greater percentage of State residential prices are cointegrated post the period of full wellhead deregulation (post 1993) versus the transitional period (1989‐1992). In fact, within the Southwest to Southeast transportation corridor, 100 percent of the price‐pairs examined were cointegrated.Originality/valueThe paper shows that the combination open access as a result of restructuring, complemented with an expansive and integrated transportation and distribution network, have likely increased the overall efficiency in the industry.

An ex-post welfare analysis of natural gas regulation in the industrial sector

The current structure of the US natural gas industry is a result of the evolution of regulatory policy over the past three decades which began with the deregulation of natural gas prices at the wellhead (NGPA of 1978) and culminated with the deregulation of interstate transportation of natural gas (FERC Order 636). Focusing on the industrial sector, this paper estimates the welfare and price effects associated with the changes in regulatory policy. Overtime, actual prices converge towards estimated equilibrium prices. Consequently, deadweight losses diminished. An estimated $15.47 billion (2003 dollars) of welfare loss had been incurred from 1977 to 2000.

Firm's pricing policy and efficiency wages

The basic efficiency wage model is analysed with real wages and cost pricing firm. The Solow condition implies that the effort wage output price elasticity is zero. Some empirical evidence from the US crude petroleum and natural gas industry and a sample of Finnish manufacturing industries does not reject this result.

The natural gas industry and interest rates: FERC Order 636

In discussing the impact of Federal Energy Regulatory Commission (FERC) Order 636, the latest rule on the restructuring and deregulation of the US natural gas industry, the effect of interest rates on the success of the FERC policy is often overlooked. The thesis of this paper is that interest rates play an important role in integrating seasonal gas markets and in stimulating investment in storage infrastructure. We propose a model to analyse the equilibrium condition for an efficient gas market. Also analysed are the implications of pipeline rate design of FERC 636 for gas despatch decisions.

Natural gas industry transformation, competitive institutions and the role of regulation: Lessons from open access in US natural gas markets

Open access pipeline transport transformed the US natural gas industry. In this paper we examine the role that transport rights played in the industry's transformation. We document the convergence of gas field prices, pooling area prices and city gate prices that has occurred since the adoption of open access. Our analysis suggests the most important reasons for this convergence to be the fact that direct dealing between gas suppliers and users has replaced the pipeline merchant; that gas transactions are made within a competitive market institution; and that transport trading has created an interconnected grid of pipelines in place of the closed and disconnected grid that preceded open access. This open and interconnected grid supplied the means for price arbitrage. These changes have made natural gas markets contestable. We draw general conclusions about the type of transmission rights that would complete the transition to a competitive gas industry. Our conclusions about the role of regulation in an industry organized around transferable transport rights extend to natural gas markets beyond those in North America.

Marketing impact on the natural gas industry

The purpose of this paper is to review marketing changes in the US natural gas industry and the impacts that these changes have had on the structure of the industry, especially natural gas prices. Further, the paper will review and discuss the economic analysis required to meet current business needs.

How the Gas Research Institute (GRI) Helped Transform the US Natural Gas Industry

In the 1970s, natural gas was thought to be “a fuel with no future.” To change this, the industry formed a research and development (R&D) arm called the Gas Research Institute (GRI). Since 1978, the GRI R&D program has resulted in 132 commercial products, processes, or techniques that have helped turn natural gas into “the fuel of the future.” In doing this, GRI achieved a project success rate of 30 percent—or over twice the US industry-wide average—and a benefit-to-cost ratio of at least seven to one. This success is widely credited to the use of the project appraisal methodology (PAM), a multiattribute, decision analytic scoring function and group advisory process. PAM can be credited with half of the benefits achieved. These benefits are at least $11 billion and as high as $132 billion.

Status report on the US natural gas industry

Major changes in the way in which the US natural gas industry operates are in progress, as the federal government adapts a free market philosophy to a regulated industry. The natural gas industry in the USA has moved from a period characterized by gas supply shortages and pessimism to an era of ample supplies, less regulation and more competition. Analyses of the prospects for gas production and use in this era have focused on problems left over from the past. These problems include adapting contracts and regulations to a more competitive market and dealing with pessimism about future supplies and markets. The impacts of deregulation in the field and at the point of use are profoundly changing the US gas industry. Issues of the future focus on changes associated with the regulation of the industry and changes in how natural gas is marketed and used.

Regulation and Long-Term Contracting in us Natural Gas Markets

This paper addresses the recent experience of the US natural gas industry with contracting and regulation-the so-called between producers and pipelines. We develop a simple model of contracting between a single buyer and seller, emphasizing the determination of price and minimum-purchase (take-or-pay) provisions. We find that take-or-pay provisions are likely to emerge in regulated and unregulated markets characterized by uncertainty, but that phased deregulation may well exacerbate the problem of contract adjustment. Our model is supported by empirical evidence drawn from recent samples of contracts between wellhead producers and pipelines.

Natural Gas from Seaweed: Is Near-Term R&D Funding by the U.S. Gas Industry Warranted?

This paper is the result of a study of critical factors the Gas Research Institute needed to consider in deciding whether to continue R and D funding of a Marine Biomass Project (MBP). The mission of this project is to determine the commercial feasibility of large marine biomass farms for methane conversion and to develop such farms if they prove viable. The paper develops a macroanalytic framework for R and D decision making in an innovative but high-cost and high-risk method of natural gas production. It identifies and analyzes principal factors having significant bearing on the US natural gas industry and against this background examines implications for R and D funding of the MBP. The study is based on an extensive review of secondary data sources on the economics and technology of natural gas production supplemented by personal discussions with a number of experts. This paper suggests that decisions on near-term R and D funding of the MBP should be based on careful study of the current, continuing, and projected developments in the US natural gas industry as a whole rather than on narrow and short-term considerations. 16 references, 6 tables.