ABSTRACT
An underlying premise to the Unconventional Gas Recovery (UGR) Program seems to be: given adequate technological solutions and proper economic incentive, the marketplace can accommodate any and all volumes of produced gas. My paper explores this hypothesis by examining the gas industry infrastructure as it exists today in the Appalachian Basin.
The UGR Program as structured by the Department of Energy (DOE) identifies four unconventional gas sources methane recovery from coal beds, eastern gas shales, western gas sands, and geopressurized acquifiers. The third category - western gas sands - may have evolved from a category which had been called "tight gas basins in a report written by Lewin and Associates, Inc. (published in summary form in The Oil and Gas Journal, June 12, 1978, under the title "Vast Potential Held by Four ‘Unconventional’ Gas Sources.)" On August 29, 1979 (Docket No. RM79-76) the Federal Energy Regulatory Commission (FERC) issued its Notice of Proposed Rulemaking in which it proposed to implement Section 107(b) and (c)(5) of the Natural Gas Policy Act (NGPA). Those sections of the NGPA charged FERC with setting incentive prices for gas produced under such conditions which present extraordinary risks or costs. The FERC has identified that gas produced from tight formations may indeed present such extraordinary risks and costs. Although the initial proposed rulemaking identified only western sand formations as qualifying for a tight sands definition, the tight sand definition guidelines would encompass - in some peoples’ minds - certain Appalachian sands.
Thus, it might be argued that three of the UGR programs (methane recovery from coal beds, eastern gas shales, and "tight sand formations") have particular relevance for the Appalachian gas producing, transmission, distribution, and gas usage industries. To proceed with the technology of UGR without a thorough knowledge of these industries may constitute a major oversight. Why invent a perfect mousetrap if no one wants it? It is conceivable that the technology to produce Devonian shales will be established someday and the price "right," but the gas not be produced for lack of a market. If such a conclusion seems incredible, I suggest that such a condition exists today. Conventional gas drilling programs in the Appalachian Basin are currently being either stabilized or reduced. Gas purchasers are not paying NGPA ceiling prices though we are all well aware that better than ceiling prices are being paid for other "commercial" sources of gas (Canadian, Mexican, LNG). The reason for such an apparent inconsistency lies not in any conspiracy theory or monopolistic domination, but in the history of Appalachian gas production and in its current industry infrastructure.
