ABSTRACT
In this paper we have attempted to develop a microanalytical model of new natural gas supply response using a careful analysis of West Virginia geological, petroleum engineering and economic data. The model equations were estimated statistically, using covariance analysis model for pooling crosssections of time series data. The regression results support the a priori expectations that higher natural gas prices has a positive effect on drilling activities. There is also an indication that expected wellhead price has a positive effect on the finding rate of new reserves. The contentions that increasing tax rate and increasing reserves-production ratio from preferred level have negative effects on drilling activities were confirmed. The empirical results also show that the margins of substitution in these geologic environments, are not well known.
