How to End It: Natural Gas
Easterbrook, Gregg
How to End It: Natural Gas by Gregg Easterbrook Where do you always find something? In the last place you look. Till you look in that last place, it's "lost." Natural gas has been "lost" for...
...pipeline charges, not the "price of gas," account for 60 percent...
...You almost have to apologize for hitting gas so often...
...Twenty-five years of unintentional price controls kept drillers from discovering the deep-gas bonanza below, helping usher in the "energy crisis...
...Another source of perpetual confusion is the terminology used by energy companies...
...And here is the kicker—leasing federal lands for gas production will mean royalties for the Treasury...
...Here comes a surprising fact of gas...
...Technologically, this was considered impractical until a few years ago...
...But gas supplies are not expiring, or even scarce...
...But the official administration position held that there was only 237 trillion cubic feet, with little potential for more...
...Say a pipeline costs $ 1 million a year...
...As Rep...
...Big Oil's Bane But what's to prevent the gas business from becoming another empire like oil, with a handful of big companies dominating supply and pumping up prices...
...In natural gas, it looks that way...
...The Sun Belt factory shift leeching Northeast cities was hastened by the cheap, clean fuel available only down South...
...Producers, you maybe shocked to learn, reacted by supplying even less gas to national pipelines...
...Kerr- McGee's Gray formed his own company, Canadian Hunter, out of a conviction that Elmworth could be the biggest field of them all, even though shallow-drilling oil companies had written it off as hopeless...
...If Mexico has approximately the same amount of gas as other oil-bearing lands, it could easily find 1,000 TCF in a few years, gas industry experts believe...
...this leverage does not exist in gas...
...This exotic substance is a fountain of controversy among geologists...
...The pipeline intended to carry this gas across Canada and into the U.S...
...Charles Knudsen, started making trouble...
...Figuring in vast gas surpluses recently found in Canada and Mexico, it looks as if there is enough to power North America for at least a century—thousands of trillions of cubic feet of something supposedly "gone...
...That percentage, FTC says, is about the median for all manufacturing, and below the levels needed for monopolistic strangulation...
...It contains 23 categories of different prices for different classes of gas, an arrangement "incomprehensible even to a computer," one gas company executive said...
...Thus independents are the great equalizer, playing a freemarket role that goes far beyond their romantic stereotypes...
...Gas producers could petition for a price increase only by telling FPC that stocks were declining...
...All this set the stage for something called MOPPS, or Market-Oriented Program Planning Study, the first major action Carter asked of his new Department of Energy...
...Eventually general panic set in, although all you had to do was examine the South's within-state market to see a rosy picture...
...Reserves are those areas that have been disturbed by bores, mapped, and quantified...
...A former Exxon geologist, he looked at some sketchy results from exploratory deep-drilling for natural gas and couldn't believe his eyes...
...Gray, who is making a great deal of money by trumping even optimists like Mines, puts reserves at 1,400 TCF, a 75- year supply...
...Deep-drillers rapidly found vast amounts of gas in a formation called the Overthrust Belt, which parallels the Western slope of the Rockies...
...In the early days, you practically had to bribe a pipeline to come in and take the gas off your hands," said David Foster of the Natural Gas Supply Association...
...Yet when people hear that the official reserves figure for natural gas is 11 years, they panic...
...Given this, it is actually possible for the cost of gas to increase while the price to the consumer declines...
...A series of dubious court decisions ruled that controls should be extended from the pipelines to the wellhead price, and handed price authority to the Federal Power Commission...
...Gray believes that, as price increases and drills improve, this single field will produce 400 TCF—more than Schlesingers gloomsday prediction for the rest of time...
...Big Oil, which has gobbled up the coal and uranium businesses with gusto, stays sour on gas...
...There are more than a million miles of gas pipelines in place, most of them along the Eastern seaboard...
...Basically, the only trick is to drill deep— anywhere from 15,000 to 30,000 feet...
...Apparently, natural gas can dissolve into salty brine formations under the Gulf of Mexico and other bodies of water...
...market...
...Obviously, a customer served by a pipeline utility could not negotiate on a price any more than he could bargain for telephone rates...
...Gas was there, in abundance...
...Equally important, gas does not involve high production costs...
...The cost of a pipeline is fixed and doesn't vary much with volume, unlike the costs of oil delivery trucks, which are variable and almost exactly linked to volume...
...David Stockman says, "Ninetyseven percent of the potential gas-bearing deposits in this country have never been disturbed by a bore...
...In his dedicated pursuit of doomsday, Schlesinger rebuffed Mexican officials who offered long-term contracts for gas...
...They found several fields that, in one place alone, contained more gas than DOE said existed in the entire world...
...Other gas is known to be preserved in the Devonian shale formations of the Appalachians...
...Although gas currently supplies about one quarter of the country's energy needs (with oil supplying one half and coal, nuclear, and hydro covering the balance), its contribution is declining...
...Doubling from 20 to 40 TCF would require new construction, he says, but "the pipelines would still not be a factor...
...But anything that sits still—factories, utility power stations, buildings—can use natural gas just as easily as oil...
...This could be done, this magazine's investigation shows, within the decade, and allowing for decades more of gas from domestic sources...
...Mexico's flaring off the gas to be rid of it because, again, the U.S...
...The "reserve" of beer is only a few weeks, yet we press on regardless...
...and most of all, only preliminary reports, reports too sketchy for oft-burned regulators to believe, of the deep-gas bonanza...
...This decline has the blessing of most government policy-makers, who still believe gas to be "gone...
...This made it seem like the gas companies had been withholding...
...The plan is to ship Albertan gas to Chicago via the prebuild, then later extend the line to Prudhoe Bay to reach the vast Alaskan reserves...
...Schlesinger said he didn't care where the numbers came from, as long as they were bad...
...Carl Erickson of the American Gas Association says that a 50-percent increase in gas consumption, from 20 to 30 TCF yearly, "would be no problem for the existing lines, all of which operate under capacity...
...Good...
...During the government-imposed natural gas shortage of 1977, when southern gasmen refused to sell to regulated interstate pipelines because free-market intrastate pipelines were paying three times as much, Northeasterners acted with righteous fury...
...Big Oil often finds confusion rewarding...
...All the DOE wanted to hear was bad news," said James Gray, former head geologist at Kerr-McGee...
...Pipes to factories and utilities forbidden to burn natural gas have not, thankfully, been ordered torn out and shipped to Riyadh as modern art...
...One posted a price increase to four cents per MCF...
...It can limit the percentage of federal leasing rights any one firm can hold...
...The Anadarko Basin, underlying most of Oklahoma, bulges with such gas...
...This means Washington can take a simple, easy step against the formation of a menacing Standard Gas conglomerate...
...In 1978, natural gas prices were partially decontrolled in a desperate effort to wring out a few more years of this "vanishing" fuel...
...That expense is pro-rated over whatever amount of gas flows through the pipe...
...It usually means the end of his strike, or the fouling of his petroleum...
...Because that's exactly what it is...
...Gas that stayed within its stateof- origin sold for whatever the market dictated...
...numbers are always spooky...
...There is no reliable test except drilling...
...Mexico, so far, has found at least 100 TCF of gas reserves, all as the accidental result of oil drilling...
...Gas is not only clean to burn, but clean to mine...
...and Canada seemed to give up hope...
...As one veteran geologist points out, "You can never tell until you actually strike something with a drill...
...Years ago, oilmen sank bores into the geopressure zones...
...Gas exploration and production are relatively easy fields to jump into...
...Even Mother Teresa would have asked for more...
...As pipeline companies developed, Congress imposed controls on their delivered price to customers...
...The only things to roll were heads...
...That is, they want it now...
...Independents have a particular type of desire for money that serves true marketpricing perfectly...
...Now they say they don't want it because there's a gas glut on the U.S...
...A mapped and quantified field of gas that could be produced for $2 per MCF would not have appeared on anyone's "reserve" charts a few years ago when gas was selling for less...
...They studied it carefully...
...The result was that the volume of gas carried by national pipelines fell...
...Coal miners, for instance, have been dying in methane explosions for years...
...isn't interested...
...Methodically drilling deep for the first time, prospectors made strike after strike...
...The country is using 19 trillion cubic feet a year (TCF), about a quarter of total U.S...
...energy production, with no prospect of supply interruptions...
...They spoke of shiny solar collectors to heat the swimming pools of the rich, never pausing to reflect on how many old folks used to die during every cold spell...
...Big Oil controls oil in part by owning the refineries that all small wildcatters must selL to...
...After they ran dry of oil, they began to fill with water...
...Many old wells, sucked clean of cheap gas near the surface, have been drilled deeper and show promise of producing more than they did in their earlier lives...
...They erected huge torches—called "flares"—to burn it off...
...Even if that's all there is, and U.S...
...The secret words are "reserves" and "resources...
...But voter pressure for cheap gas was considerable...
...Gas pipeline companies are utilities, and all utilities are regulated...
...Add reserves of 200 to 500 TCF in Canada...
...Congress recently passed a law that, incredibly, bans construction of new boilers to burn natural gas, and stipulates that most industrial users of the fuel stop by 1990...
...But at least the competitive potential of this factor exists, complicating Big Oil's monopolistic dreams...
...It encouraged the few deep-drillers, leading to the discoveries of natural gas abundance...
...His was the grumpiest voice of doom, but surely not the only one...
...Southern producers weren't worried about supplies...
...Canada is using 1.5 TCF, also about a quarter of its power...
...Most specialize in exploration or production, leaving pipeline companies the job of transmission and sales...
...Natural gas has been "lost" for years...
...So much natural gas has been found over the past few years that it's now entirely possible to double U.S...
...But then enterprising geologists let a few wells run their course to see what would happen...
...This is the main reason it is so much cheaper than oil...
...Matters came to a head three days before the Chicken Little speech...
...Oil companies gave in on this issue, being more concerned with far-more-profitable oil anyway...
...By selling fast, they insure that supply is not artificially restricted...
...But it had the opposite effect...
...One official noted, "First they told us they didn't want the pipeline, because there was no more gas...
...Gas drilling has yet to begin in earnest," says Gray...
...Experts disagree on how common this phenomenon will turn out to be, or how much it will cost to exploit...
...A formula for ending the alleged "energy crisis" lay on the coffee table of every politician and government official in America...
...To sell oil, all you need is a truck...
...How could you have gotten the inside track on drilling breakthroughs in the making...
...So oilmen decided to offer pipeline companies the deal of the century—gas at the wellhead for three cents per thousand cubic feet (MCF), a gas measure that equals one-sixth a barrel of oil, or the equivalent of 18 cents per barrel...
...So the watery wells were capped and forgotten...
...Resources" are those deposits believed to be present, but not confirmed...
...The history of natural gas shows how confused regulatory policy both springs from this belief and creates evidence that seems to support it...
...Some producers deliberately falsified records to make it appear they were running short...
...Washington reads only the signs by its front door," said a major gas company executive...
...It is basically stripped of moisture and compressed...
...Reserves are essentially a producer's inventory, what he has in stock for delivery...
...When a drill pierces the lens, gas rushes upward to escape the pressure...
...McElvay said he expected a single deposit in Louisiana, something called the Tuscaloosa Trend, might have gas resources of 24,000 trillion cubic feet—more than a thousand years' supply at current consumption rates...
...They found gas only by accident, looking for oil...
...Therefore, the only true answer to "how much...
...They knew industry would buy gas, but the logistics of moving it were bothersome...
...Suppliers would undercut each other to get business, the same way they do in aluminum siding and human-hair wigs...
...Joining the Reserves So how much is enough...
...But so much has been found in accessible locations, available using today's technology at prices lower than oil, that there is little doubt gas can replace oil as our chief energy source...
...We don't have any car factories here, but nobody offers us Chevies for less than they cost to manufacture, the producers countered...
...Pipeline companies were slow in getting organized...
...It's now at $2.55 per MCF, or about 40 percent the equivalent price of oil...
...Consumers were outraged, and filed suit...
...Several obstacles stand in the way of such progress...
...By the mid-1970s, gas within Texas and Louisiana was selling for about $1.50 per MCF...
...It soon became obvious that the FPC would seldom authorize a profitable price, so the fledgling gas exploration ground to a halt...
...The official 11-year figure comes from the sleek oracles of DOE...
...The business is mostly made up of smallish firms, few of them integrated...
...and most intriguing, frozen beneath the polar caps...
...But the law, while it has eased the pain, is still designed with a terminal patient in mind...
...So far he has found about 150 TCF of reserves in Elmworth...
...They don't grasp that in gas, unlike oil, exploration has just begun...
...They absolutely fumed when you said, 'Let the good times roll.' I told them I thought energy was here to stay, and it would be even better than before because it would be cheap, pollution- free gas...
...Care to explain that...
...Transmission charges per unit of gas soared...
...Of course, if Congress got religion and lifted controls tomorrow, the first effect would be for prices to rise (though experience with the within-state market shows prices would not rise to the blackmail price of oil...
...There was much, much more gas than he predicted...
...Rapidly expanding the use of natural gas would require only true decontrol of its price and lifting of legal barriers that actually penalize natural gas users...
...They say there's a glut at the same time they're ordering people to convert off gas to fight a shortage...
...To sell gas, you need a pipeline...
...consumption of this 'Vanished" fuel...
...Nobody worries that we will "run out" of the Seville Biarritz, even though cars are made from energy, hydrocarbon- based plastics, and non-renewable metals...
...It was first found, years ago, as the by-product of oil exploration...
...The tight sands hold at least 300 TCF...
...Lincoln Center had no natural gas, therefore there must be no more gas...
...Since President Nixon threw out the first softball to start the "energy crisis" game in 1973, natural gas has been the target of even more doomsday predictions than oil...
...How to End It: Natural Gas by Gregg Easterbrook Where do you always find something...
...Unfortunately, in the present imitationdoomsday system, this phenomenon has only been observed working in reverse...
...But that's not all there is...
...government studies doctored to make the shortage appear worse...
...Gray thinks there are similar as-yetunsuspected major fields in the U.S...
...They have always gone out of their way to use the most confusing words possible...
...Coal-seam gas in known coal deposits might hold 850 TCF or more of methane...
...They didn't know about the deep gas any more than the industry did...
...It probably holds great deep-gas resources too, but is largely unexplored...
...They also pressed for laws guaranteeing that first-priority gas use would be for home heating...
...The release of water lowered pressure enough for gas to pop out of the brine...
...The greatest single impediment, informed Canadian officials say, is lack of interest from Washington...
...It would also provide statistical pylons on which to rest a gloom-and-doom fireside chat Carter planned to give, what later came to be called the Chicken Little speech...
...Big Oil's objection to gas development is obvious—the fictional energy crisis, driven by OPEC supply constriction and political panic, is the only thing keeping energy prices so high...
...This pleased voters who worried about freezing in the dark...
...It's an exaggeration to say we can lay our hands on a thousand years' worth of gas," one prominent gas executive said, "but not by much...
...There, lens-like shields of sandstone compress gas into small, hard-to-hit domes...
...When I came back, the answering machine had offers for $25 million...
...A company called Transco Exploration is profitably taking 60 billion cubic feet a year out of its field in the Trend...
...If OPEC were broken and energy were understood to be plentiful, the free market would react by driving energy prices down...
...The gas cannot be employed to run cars, for it cannot be handled or carried like oil...
...The figure has nothing, utterly nothing, to do with when we "run out...
...But the federal-court-imposed price controls applied only to interstate commerce...
...After he was widely criticized for his imperious manner with the Mexicans, Schlesinger tried to save face by signing a later pact...
...It costs him money to hold reserves—money to drill for them, money to lease the land they lie under...
...Devonian shales have another 1,000 TCF of reserves (of an inconvenient nature, because it flows up slowly...
...A few years ago Gray's drills started hitting and haven't stopped...
...General Motors likes to keep a 50-day supply of cars on hand...
...There was a small band of drillers and geologists who, willing to gamble that decontrol was coming, kept looking for the gas bonanza...
...Northeasterners argued that access to cheap gas was their right, in part because no cheap gas was located in their states...
...Vincent McElvay, head of the U.S...
...Weighing that evidence, Energy Secretary James Schlesin- ger said in 1977 that gas should be considered "gone...
...So if this million-dollar pipe carries only a single MCF a year, the transmission charge to the consumer is $1 million per MCF...
...The Colorado School of Mines, which has repeatedly outguessed experts in the past, puts our current reserves at 1,100 TCF, or a 55-year supply...
...A further source is "unconventional" gas pockets, formations just being probed against the promise of decontrolled prices...
...In part this is because people tend to assume that all of the earth's crust has been explored and analyzed...
...But producers lost interest in filling them...
...Some probably understood that controls were making their own problems worse...
...Gas discoveries continued only by accident at oil rigs...
...No sensible businessman would go on forever stacking up reserves—inventory—for their own sake...
...Cheap energy is gone, he had been convinced, and the expensive stuff may not be with us long either...
...And they used it as the model for the rest of the country's energy policy...
...There are numerous other categories for unexplored areas that seem promising, which is most of the globe...
...When the bores finally went down, every one seemed to strike...
...What it means, in fact, is that 11 times what we need this year could be rammed into the system now...
...Canada is willing to sell us 1 TCF a year of natural gas via a "prebuild" section of the Alaska Highway Pipeline...
...They think this means the country will run out in 11 years...
...Unlike oil, gas is not refined...
...There is one other factor that makes the beauty of all this shine...
...Skill is required, but capital costs are manageable, and financing is readily available to independents...
...So when the Gas Policy Act hiked prices in November 1978, vast amounts of gas suddenly were reclassified as reserves...
...Meanwhile, customers became rather accustomed to getting their gas nearly free...
...The gas market right now is glutted—a glut likely to increase, industry sources say, despite official contentions that it is "temporary...
...Knudsen concluded, based on healthy skepticism about the early deep-drilling and conservative estimates of what was in the "reserve" supply—gas already proven and hooked into the system—that there was at least 500 trillion cubic feet of gas in the U.S...
...For details of an anti-oil conversion program, see "Why Not the Cheapest?," page 31...
...The reasoning was sound...
...The best of all possible fuels, clean and cheap, natural gas was supposed to be as lost as the Seven Cities of Gold...
...But Congress meant only to control the delivered price at the end of the pipe, not the wellhead price of gas as it came from the ground...
...This was supposed to be their revenge on the mustachetwirling gasmen who were tying them to the tracks...
...They hit what one geologist called "mind-blowing" gas deposits in places no one had bothered to check before—under the Arctic, below the Gulf of Mexico, in formations of solid stone...
...Officially the prebuild line has cleared planning hurdles, but practically it is years away...
...Since independents are closely held, the bosses get immediate money gratification...
...By setting a low limit, it would insure a large, diverse group of competitors anxious to cut each other's throats at the bargaining table...
...The about-face in natural gas supplies has a maddeningly simple cause...
...Pipelines to Northeast factories and homes continued to be built, and for a while prospered on the artificially cheap gas...
...There is another formation, similar to the Overthrust Belt, running alongside the Appalachians...
...Look Down, Young Man In 1978, a new law called the Natural Gas Policy Act partially decontrolled the price of gas...
...But that accounts for only about 40 percent of the final cost to the consumer...
...Official "how much...
...Following the trendy "zero-energygrowth" line, Carter economists concluded that people would turn against energy only if the price skyrocketed...
...but instead of deciding to look for it, they circled the wagons to protect what was left...
...Pipelines are utilities with regulated charges...
...They're the easy part...
...Gas is flowing again, at a profit, to the Northeast...
...Its leaders demanded even stiffer price controls...
...That evidence consisted of years of declining gas in the national (or "interstate") pipeline market...
...Then someone looked in the last place...
...No one believed them...
...By taking care of people's interests for them, selfless government had managed the impressive feat of providing homeowners with less energy for more money...
...is "who knows?," which is hardly reassuring...
...Its existence would be well-known to the company that found it, but never reported in official surveys...
...Thus, it is impossible for Big Oil to stop thousands of independents and significant numbers of medium-sized companies from going into competition over gas...
...The resources in Alberta, Canada's Northwest Territories, and the Arctic might equal all these...
...Production costs sometimes exceeded the controlled price...
...They didn't contemplate the Yugoslav proverb, "By the time the fat man is thin, the thin man is dead...
...Hundreds of TCF of gas have been found and "capped"—sealed over—in other parts of Alberta and around the Prudhoe Bay oil fields in Alaska...
...The reason is that until recently, there was a tremendous body of evidence suggesting to the casual observer that natural gas really was disappearing...
...Even though Knudsen had done the right thing, it turned out, in retrospect, that he was wrong...
...Often there was none to be had...
...After the water was pumped out, gas began to flow—in staggering quantities...
...gas company figures that were deliberately distorted to make gas seem scarce, as part of a campaign against price controls...
...The bulk of it is too far down to be of any use today...
...There are even—say this softly, so as not to jinx them—independent entrepreneurs...
...One is the belief that an "energy crisis" exists at all...
...Geological Survey...
...Distinguished With a Pipe A technical drawback could be the ability of the pipeline system to handle gas transmission increases of the magnitude the situation suggests...
...Carter's programs extolled the positive side of zero-growth—conservation to stop gluttonous waste and frivolous use—but also the negative side, that sacrifice was somehow good...
...This made it in their interest to play along with the gas-crisis charade...
...In the name of consumer protection, they demanded a further rollback in the federally controlled gas price...
...Supplies get transferred into the magic "reserves" column only when the price justifies bringing them out...
...They're still in place...
...question makes even the most optimistic energy assessment seem like a good reason to pack the pup tents and tuna cans and head for the hills...
...Because gas, unlike oil, has been price-controlled at levels that often made it unprofitable, prospectors didn't look for it...
...Natural gas is so plentiful there is no reason not to use all we need...
...Geologists once operated on the deeply-rooted assumption that, since gas was the product of decomposed plants and animals, it "had" to be near the surface and life-giving sunlight...
...Perhaps it was alluded to in classified documents, or whispered about in closed Senate hearings...
...It is, in fact, the main reason there's no "energy crisis" at all...
...Transco's field, the first geopressure deposit to be explored systematically, is believed to hold at least 6 TCF...
...If you have to negotiate with the government over a controlled price, you do better if you can confuse them into thinking you are hurting...
...Current natural gas policy seems guaranteed to make energy scarcer, pollution greater, industrial productivity lower, subservience to OPEC indefinite, and prices higher—in short, everything we've come to expect from Washington...
...Administration officials began to talk as if living in an energy-scarce society would actually be desirable...
...They did not have complex sociological motives or write memos on policy initiatives...
...Another productive new basin is the Elmworth Field of Alberta, the Canadian province above Montana...
...Also, it would spoil the fun of believing that the sky was falling...
...It was in this spirit that the gas-banning Fuel Uses Act of 1978—which demands conversion away from gas—was passed...
...Remember, the consumer pays more to the pipelines than to the gas producer...
...Regions like the Tuscaloosa Trend contain something called "geopressurized gas...
...Existing pipes have sufficient rights-of-way so that few virgin lines would be cut...
...They began to look on the "bribe" rates as the natural order of things, not a temporary oddity of economics...
...I'd never seen such disappointed faces in my life...
...And, if you bothered to check, you saw that the market-set price was less than the OPEC-dictated price for an equivalent amount of oil...
...Increased loads in a pipeline can drop the pro-rated transmission charge faster than the raw-material wellhead price increases...
...They just assumed that the gas stopped where the oil stopped...
...The price-control mechanisms of the Federal Power Commission saw to it that even open-minded regulators could get nothing but pseudo-information...
...Also, FTC says that vertically integrated companies, which both produce and market gas, are rare...
...As Fred J. Cook explains in a recent issue of The Nation, MOPPS's boss, Dr...
...They just wanted to get rich...
...Independent gas drillers either went into oil, or opened car washes...
...Total costs to Easterners rose even as their purchases declined, because of the pipeline- loading factor...
...Here is another reason why Big Oil and Congress are prejudiced against gas, because it is another point at which oil and gas part company in a manner that favors the consumer...
...consumption is doubled, as this magazine suggests, it would supply our needs for 35 years—time enough to set in place permanent energy solutions...
...Does this sound to you like some sort of miracle solution, some simple-minded panacea for a complex problem...
...they were worried about surpluses...
...All these figures say nothing for the "resources"—unfound gas and all the new "unconventional" prospects...
...Geopressure formations in the Trend alone, it's now believed, may ultimately yield 60,000 TCF...
...Too little, Too Chicken Matters dissolved to theater of the absurd by the time the Carter administration took office...
...It is possible that the hitherto unknown deep gas is below nearly every part of the country, straining for eons to roar to the surface and end what we like to think of as a "crisis...
...Oilmen considered it a nuisance...
...Drillers in the field seemed to be hitting natural gas everywhere, in unfathomable quantities...
...It also, in effect, was another one-way ticket South for industry...
...If natural gas were said to be plentiful, it would block Carter's efforts to raise American oil prices to the OPEC blackmail price—foiling a profit windfall for oil companies and a tax windfall for government budget "balancing...
...They were too busy applying for memberships in the Club of Rome to notice...
...Knudsen talked to Dr...
...Oil still offers a much higher return, so everyone's looking for that...
...Other new sources of gas are springing up...
...That was enough to last 25 years, even if another puff of clear gold were never found...
...Prudhoe Bay has resources of at least 60 TCF on land and another 300 TCF offshore...
...Schlesinger ordered MOPPS rewritten to predict doomsday...
...There is not much reason to fear the despoiling of the wilds in gas expansion...
...And economically, it was considered pointless, since any deep gas you might find would cost more to produce than the regulated price...
...Water is the oilman's foe...
...Assuming any kind of rational management, gas production in parks should not cause environmental insult...
...present ones would be enlarged or "twinned" like bridges...
...There was no pretense that three cents represented a reasonable price for fuel...
...President Carter pronounced the benediction, telling industrial users to abandon the fuel...
...Research for his article was funded in part by a grant from the Fund for Investigative Journalism...
...A major company, which generally has access to cheaper loans, can afford to sit on a strike and see what happens...
...Unexpected gas is also being found in numerous "deep basin" formations...
...Competition has little, if any, relevance...
...But it was for an insignificant amount of gas...
...Gregg Easterbrook is an editor of The Washington Monthly...
...With gas prices still controlled, not much work was going on in the field, especially where the harder-to-reach deep gas was concerned...
...Last time I needed $15 million I put the word out and left town for three days," said a Denver independent driller...
...But these results could be dismissed as preliminary...
...Meanwhile, federal regulators began to assume that the national market, which touched them personally, was an accurate indicator of what was in the ground...
...But politicians pressed for the popular controls anyway...
...Carter zealously believed (out of, no one doubts, sincere motives) that the "energy crisis" was genuine...
...Although Big Oil would doubtless respond to such developments by trying to buy up gas companies and restrict supply, it would have problems it does not encounter in oil or coal...
...You won't believe what you're seeing when the gas starts to flow in 1985...
...If the pipe instead carries a TCF, the transmission charge drops to one tenth of a penny per MCF...
...McElvay was later fired, too...
...That was all there was to it...
...It contained a comprehensive article about deep gas finds likely to be made under higher prices...
...This also means that no elaborate, expensive, timeconsuming refinery construction is required of the gas competitor...
...The frantic weekend rewrite session, one informed observer said, involved "basically making numbers up...
...People also find it hard to understand that drilling is basically guesswork...
...Clear Gold It's easy to believe energy policy is nonsensical, but not that things are so far gone Congress is actively scheming to make matters worse...
...By the early 1950s, some producers wanted to enter natural gas as a business in its own right, instead of a by-product of oil...
...Surely some clandestine source, some operative versed in international intrigues, would have sold you this information if you had connections...
...N«o amount of looking can find it, the experts said, because it isn't there...
...Where, it turns out, natural gas is nearly as abundant as rock itself...
...natural gas producers want protection so their prices don't fall...
...Most of the rich new reserves like the Overthrust Belt and Montana's Williston Basin are under federal lands...
...This lesson was not lost on the regulators...
...The results have been astonishing...
...Then after a while, as many competitors jumped into the field, prices would start back down...
...This law, passed in the Chicken Little spirit with hands clasped over heads, was intended to ration remaining gas by making its price exclusionary...
...This, coupled with new understanding of the tectonic-plate nature of rock formations—which shows that, through time, whole continents have been tossed about like divots—suggests that the gas may keep going deeper and deeper down...
...Price-controlled gas was "selling" in Boston for 50 cents, selling in the sense that 50 cents was the posted price...
...Below 15,000 feet in the earth's crust...
...The "how much...
...The Northeast, seat of government, smelled conspiracy...
...Some Congressmen protested that such regulation had never been intended...
...The Department of Energy said that gas had gone on to glory, declaring it "probable that reserves will be exhausted by the late 1980s...
...Unfortunately, the price-rationing idea found a receptive audience both with Big Oil and energy reformers...
...Natural gas has been asking for trouble from the very start...
...The current wellhead price for gas is $2.55 per MCF...
...Normal market mechanisms were bringing it out and setting the price, with producers under-bidding each other to win contracts...
...The Belt is sometimes called a shallow deposit because some of its gas is above 15,000 feet...
...Of course, Big Oil has shownitself to be remarkably resourceful when it comes to deflecting challenges...
...The gas you smell around the kitchen stove is deliberately tagged in pipelines with nose-wrenching aromas, as a precaution to warn of leaks...
...It will not allow gas to be truly decontrolled until 1985...
...You can't sink a deep well without hitting the stuff," says Roger Gordon of Seek Resources, an independent drilling firm...
...Oil deposits seldom occur below 10,000 feet, so no one drilled any deeper, except as a geological curiosity...
...The law also sets higher prices for gas extracted with more expensive rigs— essentially, a reward for inefficiency...
...Every government agency in the U.S...
...It cannot "spill" because it is colorless, odorless, and tasteless...
...So the real boom in gas production won't come until then...
...Only a few companies, like Tenneco, do all these...
...Or, you could have tripped over the November 1978 issue of National Geographic...
...Under the federally imposed price of $2.55, guess what everybody sells for...
...But until now, no company has tried to bring out the methane before the coal...
...MOPPS was to outline the next generation's energy future...
...is mired in regulatory squabbling...
...But recent evidence suggests that gas may actually be the result of primitive anaerobic bacteria that secreted hydrocarbons, or even compounds formed in the lifeless atmosphere of prehistory...
...Here we were offering to sell it, and they said they couldn't use it because there wasn't any...
...in "tight sands" throughout the west, slate-like slabs of rock that must be cracked open with hydraulic pressure...
...What may be below 30,000 is not known...
...Three years ago, Washington made the loss official...
...So within-state or "intrastate" production blossomed, mostly in Texas and Louisiana where gas was easiest to find...
...Compared to other industries, where a low inventory is a badge of success, the reserves figure is astounding...
...This will be a welcome change from paying tributes to OPEC, by way of military expenses in the Persian Gulf and revenues lost to Big Oil's foreign tax gimmicks...
...The Colorado School of Mines had been saying for years that the Overthrust Belt would be lined with gas...
...Whenever an independent finds gas, he wants to sell immediately, either to get more capital for more exploration, or just to wallow in the profits...
...It will no doubt attempt to manage independents by buying their strikes with the up-front money independents want...
...According to a 1979 Federal Trade Commission study, the eight largest gas producers control less than half the market, about 45 percent...
...It creates an ideal situation—higher payments to producers, to encourage them to explore for more, and lower prices to consumers...
...This "bribe" got the pipeline companies rolling...
...Knudsen was canned...
Vol. 12 • October 1980 • No. 8
