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The economic possibilities of natural gas conservation: Antithetical results of prorationing regulation

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Abstract

State prorationing regulations for natural gas production are intended to conserve resources, prevent waste, and, if necessary, protect the rights of property owners. This paper examines the effects of conservation regulations on the stock of the resource and on production costs. Results indicate rules that do not consider the nature of the physical stock and how it is recovered, as well as the heterogeneous nature of the reservoir, may result in sub-optimal production paths for individual wells. Such inefficiencies increase production costs and may in some cases, reduce the recoverable stock; results antithetical to the intended goals of the regulation.

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Authors and Affiliations

  1. Department of Economics, University of New Mexico, 1915 Roma NE, 87131, Albuquerque, NM

    Janie M. Chermak

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  1. Janie M. Chermak
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Additional information

I'd like to thank Robert H. Patrick, Duncan Woodliff, and Bob Meyers for helpful discussions, Barry Douglas, Johannes Van Lierop, and participants at the 7th Annual Western Conference Advanced Workshop in Regulation and Public Utility Economics for insightful comments on a previous version of this paper, as well as two anonymous referees and the editor of the journal for helpful comments on an earlier draft. The usual caveat applies.

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Chermak, J.M. The economic possibilities of natural gas conservation: Antithetical results of prorationing regulation. J Regul Econ 10, 147–163 (1996). https://doi.org/10.1007/BF00133529

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