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Natural Gas Industry


NATURAL GAS INDUSTRY. Before being used for energy purposes, the natural gas seeping from the earth produced "burning springs" that were of ritual and religious significance to early Greek, Persian, and Indian cultures. The British first commercialized natural gas around 1785. In the United States, natural gas was primarily a curiosity until the middle of the nineteenth century, but thereafter its importance as an energy resource increased significantly. As early as 1626, French missionaries recorded incidents of Indians igniting natural gas springs off Lake Erie and its surrounding streams. Early explorers noticed natural gas being emitted from the ground on both the east and west coasts of the United States. Gas springs were found near Charleston, West Virginia, as early as 1775. In 1796, M. Ambroise and Company, Italian fireworkers in Philadelphia, made the first recorded demonstration of burning natural gas in the United States. It aroused so much interest that in 1816 Rembrandt Peale put natural gas on display at his famous museum in Baltimore. But perhaps the best-known natural gas well during these years was in Fredonia, New York, discovered in 1824 by William A. Hart, a local gun-smith. This spring was used to fuel thirty streetlights in the village and led to the founding in 1858 of the Fredonia Gaslight and Waterworks Company, which undertook commercial exploitation of this new source of energy. During the next fifty years scores of promoters developed similar natural gas wells in Ohio and Indiana, supplying factories as well as homes. By 1900 natural gas had been discovered in seventeen states, and the value of the gas produced in the United States amounted to $24 million annually.

During the first four decades of the twentieth century the natural gas industry grew, but its expansion was held up by a lack of suitable transportation. Increasing production of petroleum after 1900 boosted available natural gas enormously, since it appeared as a by-product. In 1920 the total annual value of natural gas produced had reached $196 million. Producers still faced serious problems in transporting the gas to the large urban centers that constituted their most lucrative markets. Ten years later engineers developed seamless electrically welded pipes that were capable of transmitting natural gas cheaply and efficiently over long distances, but in the midst of the Great Depression, investors were loath to develop such new pipelines to any appreciable extent.

World War II inaugurated a tremendous boom in natural gas consumption and production, as this energy resource became the foundation for a major new industry. In the ensuing thirty years, prosperity and population growth stimulated investors to build thousands of miles of new pipelines from the vast natural gas fields in the Southwest to the great metropolitan areas of the East, the South, the Middle West, and the Far West. Natural gas quickly displaced coal and fuel oil in millions of homes and factories. It was far more versatile, and also cheaper, than its competitors. Gas could be used as readily for heating as for air conditioning and refrigeration. Moreover, it was cleaner and more convenient to use than coal or fuel oil and much easier to transport. Many industries came to utilize natural gas as a source of energy, including cement and synthetics manufacturers. In 1950 the natural gas industry served 8 million users with an income of about $1.5 billion. In 1960 it had 31 million customers and revenues totaling about $6 billion. By 1970 natural gas producers supplied more than 42 million individuals and corporations, who paid $11 billion for the product. Between 1950 and 1970 the number of natural gas wells in the United States more than doubled, totaling about 120,000 in 1970. At that point, the natural gas industry had emerged as one of the ten most important in the nation. In 1999 the industry had almost 62 million customers and earned over $46 billion for providing natural gas to them. By 2002 the number of natural gas wells in the United States had increased steadily to over 306,000. Roughly 85 percent of the natural gas consumed in the United States is extracted within the country, with the remainder mostly imported from Canada and Mexico.

This period of intensive growth was accompanied by increasing federal regulation of the industry. In the years between 1914 and 1938, state governments had been the prime regulators of gas production, seeking to reduce the excessive waste that was then so common. But their regulations varied greatly and frequently were not enforced. Thus, representatives of the industry as well as conservationists prevailed upon Congress in the New Deal era to extend federal control over the interstate transmission of natural gas. Their efforts resulted in the Natural Gas Act of 1938, which placed responsibility for national regulation in the hands of the Federal Power Commission. Since locally produced gas often mingled with gas crossing state boundaries, the commissioners found it difficult to determine clear boundaries of federal jurisdiction. Between 1942 and 1970, both the Federal Power Commission and the federal courts aggressively extended federal control over virtually all natural gas produced in the United States. In particular, the Supreme Court decision in Phillips Petroleum Company v. Wisconsin (347 U.S. 672 [1954]) greatly expanded the Federal Power Commission's authority over the industry. Despite protests from natural gas producers that federal regulation was hampering their expansion, the natural gas industry became one of the most closely government-regulated industries in the nation. The Clean Air Act Amendments of 1990 require municipal fleets with ten or more vehicles to replace all retired autos with "clean fuel vehicles." Taxi cabs, school buses, transit buses, street sweepers, and delivery trucks have been increasingly replaced with or converted to natural gas vehicles. The number of natural gas fueling stations is increasing rapidly, providing fuel that is, on average, one-third the cost of gasoline. Today there are over 110,000 natural gas vehicles on U.S. roads.


De Vany, Arthur S., and David Walls. The Emerging New Order in Natural Gas: Markets Versus Regulation. Westport, Conn: Quorum Books, 1995.

Herbert, John H. Clean Cheap Heat: The Development of Residential Markets for Natural Gas in the United States. New York: Praeger, 1992.

Ingersoll, John G. Natural Gas Vehicles. Lilburn, Ga.: Fairmont Press, 1996.

MacAvoy, Paul, and Robert S. Pindyck. The Economics of Natural Gas Shortage, 1960–1980. New York: American Elsevier, 1975.

———. The Natural Gas Market: Sixty Years of Regulation and Deregulation. New Haven, Conn: Yale University Press, 2000.

Nash, Gerald D. United States Oil Policy, 1890–1964: Business and Government in Twentieth-Century America. Pittsburgh, Pa.: University of Pittsburgh Press, 1968.

Gerald D.Nash/h. s.; a. e.

See alsoAir Pollution ; Automobile Industry ; Coal ; Conservation ; Energy Industry ; Energy, Renewable ; Heating ; Petrochemical Industry .

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