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Since at least 1920, production of natural gas in the Appalachian states has fluctuated between 400 and 500 Bcf per year. Among the factors limiting expansion in drilling, recompletion of old wells, and introduction of new technology, such as that applicable to Devonian shale, has been the adverse wellhead prices paid to producers by purchases under regulations applied by the federal government under the Natural Gas Act of 1938.
After long debate and apparent deadlock, Congress passed the Natural Gas Policy Act of 1978. The provisions of the act include incentive pricing for stripper wells and for deep drilling, and the deregulation of all sales of gas from Devonian shale beginning November 9, 1979. Other aspects of the legislation, when fully implemented, should allow greater freedom to producers to bargain fairly with purchases of natural gas in most circumstances.
An analysis of the Act indicates its potential impact in spurring research efforts to commercialize natural gas production from Devonian shale and other unconventional sources, as well as accelerating exploration and development from conventional reservoir targets in the Appalachian region.
From projections comparing future prices and costs of Appalachian gas with costs of supplies from the Southwest, the Arctic, and foreign LNG, together with synthetic fuels, it is concluded that the "new economics" of Appalachian natural gas can revitalize the industry within the next decade, and can provide a regional solution to the predicted national energy supply deficit in the 1980s.
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