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RCED-85-49 1 (1985-06-13)

handle is hein.gao/gaobabfdz0001 and id is 1 raw text is:      RELEASED


 REPORT BY TF4TJ '


 General Accounting Office







 Problems Identified In FERC's

 Incentive Pricing Program For

 Natural Gas From Tight Formations


 Under the Natural Gas Policy Act of 1978, the Federal
 Energy Regulatory Commission established a program to
 provide an incentive price to producers of natural gas
 from tight geologic formations. A tight formation
 contains gas that generally seeps out slowly, under
 normal conditions. The incentive price--which is twice
 the price otherwise generally available--was designed to
 encourage producers to develop and produce natural gas
 from locations determined to present extraordinary risks
 or costs.

 GAO found that in the states ahd geologic formations it
 reviewed (1) tight formations were not extraordinarily
 risky or costly to develop, (2) FERC's criteria for
 designating formations were difficult to apply, and (3)
 much of the program activity occurred outside high-
 potential areas. Further, GAO found that little program
 activity occurred in undeveloped tight formations
 identified by FERC as having the greatest potential for
 increasing gas reserves.

 Because of the decontrol of certain natural gas prices as
 provided by the act and a related FERC ruling, the tight
 formation program will have limited application in the
future. Therefore, GAO is not recommending any program
changes.


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          NI                                                    GAO/RCED-85-49
                                                                 JUNE 13,1985

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