The natural gas industry has quickly changed from one which was dominated by long term contracts between the producer and pipeline to one that is characterized by contracts of much shorter duration. Part of the reasons for this change are economic, and part are due to the changing regulatory structure surrounding the industry.

Over the last ten years the number of natural gas wells in the United States has steadily increased, from around 144,000 in 1977 to around 240,000 in 1987. See: Figure 1. While the number of natural gas wells has steadily increased the total amount of natural gas reserves in the United States has remained relatively constant. See: Figure 2. As a result, the reserves attributable to each natural gas well has declined from 989 MMcf per well in 1977 to around 588 MMcf per well in 1987. See: Figure 3.

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