Natural Gas Policy Act of 1978 explained

The Natural Gas Policy Act of 1978 (NGPA) is federal legislation that had been enacted as a response to US natural gas shortages of 1976–77. It was enacted for the following motivations:

The NGPA:

The Natural Gas Policy Act (NGPA) was the first building block in a plan from the Carter Administration to increase energy supply while reducing domestic consumption of energy.[2] It preceded the Energy Security Act that President Carter would sign into law in 1980.[3]

In the 1970s, natural gas was persistently in short supply throughout the 1970s, largely because of following:

Based on this type of energy setting in the 1970s, Congress enacted the NGPA. The act was intended to raise natural gas rates to market clearing levels.[4]

Effect on natural gas supply

The NGPA set prices based on where natural gas was old, new, or of high cost. New gas paid a higher price than older gas, which in turn encouraged oil and gas producers to produce from new sources of natural gas. However, this pricing system created a risk for higher prices for consumers as well as inhibiting production for the existing vast old gas reservoirs.[5]

Wellhead price controls

The wellhead price controls found in the act had a direct effect on natural gas industry commerce. The following are the sections of the NGPA Title 1, Wellhead Price Controls:

Section 108. Ceiling price for stripper well natural gas

Stripper wells are wells that are marginally productive. In recent history, stripper well production makes up about 8.2% of United States natural gas production.[6]

The NGPA defined a stripper well as essentially a well that produces less than 60 Mcf (60,000 cubic feet) per day during any 90-day interval. However, there was an exclusion or exemption for wells that had the application of what is defined as enhanced recovery in the NPGA. Nonassociated natural gas (gas from different geological zones) which is produced from a stripper well that actually exceeds 60 Mcf during any 90-day production period may continue to qualify as stripper well natural gas if the increase in this well production was the result of the application of recognized enhanced recovery technique

References

  1. Web site: Glossary Practical Law . 2024-03-20 . content.next.westlaw.com . en-US.
  2. MacAvoy . Paul W. . The Natural Gas Policy Act of 1978 . . 19 . 4.
  3. S.932 - 96th Congress (1979-1980): Energy Security Act | Congress.gov | Library of Congress
  4. Our Experience Under the Natural Gas Policy Act of 1978, and Its Relevance to the Natural Gas Wellhead Decontrol Act of 1989 . University of Arkansas at Little Rock Law Review . 12 . 2.
  5. Web site: Mobil Oil Exploration and Producing Southeast, Inc., et al.,petitioners, v. Federal Energy Regulatory Commission, Respondent, 885 F.2d 209 (5th Cir. 1989) . 2024-04-26 . Justia Law . en.
  6. Web site: 2019-12-10 . Stripper Wells - National Stripper Well Association . 2024-05-10 . en-US.

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