1,372,644
                                     1999
                                    86,369
                                    91,094
                                    177,463

                                   1,035,946
                                    296,114
                                    32,276
                                   1,364,336
                                     2000
                                    85,480
                                    91,516
                                    176,996

                                   1,050,802
                                    298,957
                                    27,561
                                   1,377,320
                                     2001
                                    52,386
                                    85,214
                                    154,877

                                   1,101,485
                                    290,456
                                    21,614
                                   1,413,555
                                     2002
                                    52,854
                                    80,551
                                    149,619

                                   1,136,479
                                    303,541
                                    22,559
                                   1,462,579
                                     2003
                                    50,149
                                    75,565
                                    139,901

                                   1,107,559
                                    301,827
                                    22,758
                                   1,432,144
                                     2004
                                    50,749
                                    76,258
                                    142,200

                                   1,156,863
                                    303,216
                                    24,734
                                   1,484,813
                                     2005
                                    46,234
                                    71,310
                                    131,348

                                   1,160,311
                                    300,663
                                    23,399
                                   1,484,373
                                     2006
                                    47,617
                                    81,103
                                    140,861

                                   1,182,884
                                    300,458
                                    20,420
                                   1,503,762
                                     2007
                                    46,658
                                    85,666
                                    147,235

                                   1,202,135
                                    301,171
                                    19,702
                                   1,523,008
                                     2008
                                    50,214
                                    84,914
                                    146,822

                                   1,204,162
                                    303,331
                                    20,318
                                   1,527,811
Source: U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration, Office of Pipeline Safety, Natural Gas Transmission, Gas Distribution, and Hazardous Liquid Pipeline Annual Mileage, available at http://ops.dot.gov/stats.htm as of Apr. 28, 2010.  Totals may not sum due to independent rounding.

      Table 2-8 splits natural gas pipelines into three types: distribution mains, transmission pipelines, and gathering lines.  Gathering lines are low-volume pipelines that gather natural gas from production sites to deliver directly to gas processing plants or compression stations that connect numerous gathering lines to transport gas primarily to processing plants.  Transmission pipelines move large volumes of gas to or from processing plants to distribution points.  From these distribution points, the gas enters a distribution system that delivers the gas to final consumers.  Table 2-8 shows gathering lines decreasing from 1990 from above 30,000 miles from 1990 to 1995 to around 20,000 miles in 2007 and 2008.  Transmission pipelines added about 10,000 miles during this period, from about 292,000 in 1990 to about 303,000 miles in 2008.  The most significant growth among all types of pipeline was in distribution, which increased about 260,000 miles during the 1990 to 2008 period, driving an increase in total natural gas pipeline mileage (Figure 2-1).  The growth in distribution is likely driven by expanding production as well as expanding gas markets in growing U.S. towns and cities.
Domestic Consumption
      Historical crude oil sector-level consumption trends for 1990 through 2009 are shown in Table 2-9 and Figure 2-4.  Total consumption rose gradually until 2008 when consumption dropped as a result of the economic recession.  The share of residential, commercial, industrial, and electric power on a percentage basis declined during this period, while the share of total consumption by the transportation sector rose from 64 percent in 1990 to 71 percent in 2009.

Table 2-9	Crude Oil Consumption by Sector, 1990-2009

                               Percent of Total
                                     Year
                                     Total
                                 (million bbl)
                                  Residential
                                  Commercial
                                  Industrial
                               Transportation
                                    Sector
                                Electric Power
                                     1990
                                     6,201
                                      4.4
                                      2.9
                                     25.3
                                     64.1
                                      3.3
                                     1991
                                     6,101
                                      4.4
                                      2.8
                                     25.2
                                     64.4
                                      3.1
                                     1992
                                     6,234
                                      4.4
                                      2.6
                                     26.5
                                     63.9
                                      2.5
                                     1993
                                     6,291
                                      4.5
                                      2.4
                                     25.7
                                     64.5
                                      2.9
                                     1994
                                     6,467
                                      4.3
                                      2.3
                                     26.3
                                     64.4
                                      2.6
                                     1995
                                     6,469
                                      4.2
                                      2.2
                                     25.9
                                     65.8
                                      1.9
                                     1996
                                     6,701
                                      4.4
                                      2.2
                                     26.3
                                     65.1
                                      2.0
                                     1997
                                     6,796
                                      4.2
                                      2.0
                                     26.6
                                     65.0
                                      2.2
                                     1998
                                     6,905
                                      3.8
                                      1.9
                                     25.6
                                     65.7
                                      3.0
                                     1999
                                     7,125
                                      4.2
                                      1.9
                                     25.8
                                     65.4
                                      2.7
                                     2000
                                     7,211
                                      4.4
                                      2.1
                                     24.9
                                     66.0
                                      2.6
                                     2001
                                     7,172
                                      4.3
                                      2.1
                                     24.9
                                     65.8
                                      2.9
                                     2002
                                     7,213
                                      4.1
                                      1.9
                                     25.0
                                     66.8
                                      2.2
                                     2003
                                     7,312
                                      4.2
                                      2.1
                                     24.5
                                     66.5
                                      2.7
                                     2004
                                     7,588
                                      4.0
                                      2.0
                                     25.2
                                     66.2
                                      2.6
                                     2005
                                     7,593
                                      3.9
                                      1.9
                                     24.5
                                     67.1
                                      2.6
                                     2006
                                     7,551
                                      3.3
                                      1.7
                                     25.1
                                     68.5
                                      1.4
                                     2007
                                     7,548
                                      3.4
                                      1.6
                                     24.4
                                     69.1
                                      1.4
                                     2008
                                     7,136
                                      3.7
                                      1.8
                                     23.2
                                     70.3
                                      1.1
                                     2009*
                                     6,820
                                      3.8
                                      1.8
                                     22.5
                                     71.1
                                      0.9
Source: U.S. Energy Information Administration, Annual Energy Review 2010.  2009 consumption is preliminary.

Figure 2-4	Crude Oil Consumption by Sector (Percent of Total Consumption), 1990-2009

      Natural gas consumption has increased over the last twenty years.  From 1990 to 2009, total U.S. consumption increased by an average of about 1 percent per year (Table 2-10 and Figure 2-5).  Over the same period, industrial consumption of natural gas declined, whereas electric power generation increased its consumption quite dramatically, an important trend in the industry as many utilities increasingly use natural gas for peak generation or switch from coal-based to natural gas-based electricity generation.  The residential, commercial, and transportation sectors maintained their consumption levels at more or less constant levels during this time period.

Table 2-10	Natural Gas Consumption by Sector, 1990-2009

                               Percent of Total
                                     Year
                                    Total
                                     (bcf)
                                  Residential
                                  Commercial
                                  Industrial
                                Transportation
                                    Sector
                                   Electric
                                     Power
                                     1990
                                    19,174
                                     22.9
                                     13.7
                                     43.1
                                      3.4
                                     16.9
                                     1991
                                    19,562
                                     23.3
                                     13.9
                                     42.7
                                      3.1
                                     17.0
                                     1992
                                    20,228
                                     23.2
                                     13.9
                                     43.0
                                      2.9
                                     17.0
                                     1993
                                    20,790
                                     23.8
                                     13.8
                                     42.7
                                      3.0
                                     16.7
                                     1994
                                    21,247
                                     22.8
                                     13.6
                                     42.0
                                      3.2
                                     18.4
                                     1995
                                    22,207
                                     21.8
                                     13.6
                                     42.3
                                      3.2
                                     19.1
                                     1996
                                    22,609
                                     23.2
                                     14.0
                                     42.8
                                      3.2
                                     16.8
                                     1997
                                    22,737
                                     21.9
                                     14.1
                                     42.7
                                      3.3
                                     17.9
                                     1998
                                    22,246
                                     20.3
                                     13.5
                                     42.7
                                      2.9
                                     20.6
                                     1999
                                    22,405
                                     21.1
                                     13.6
                                     40.9
                                      2.9
                                     21.5
                                     2000
                                    23,333
                                     21.4
                                     13.6
                                     39.8
                                      2.8
                                     22.3
                                     2001
                                    22,239
                                     21.5
                                     13.6
                                     38.1
                                      2.9
                                     24.0
                                     2002
                                    23,007
                                     21.2
                                     13.7
                                     37.5
                                      3.0
                                     24.7
                                     2003
                                    22,277
                                     22.8
                                     14.3
                                     37.1
                                      2.7
                                     23.1
                                     2004
                                    22,389
                                     21.7
                                     14.0
                                     37.3
                                      2.6
                                     24.4
                                     2005
                                    22,011
                                     21.9
                                     13.6
                                     35.0
                                      2.8
                                     26.7
                                     2006
                                    21,685
                                     20.1
                                     13.1
                                     35.3
                                      2.8
                                     28.7
                                     2007
                                    23,097
                                     20.4
                                     13.0
                                     34.1
                                      2.8
                                     29.6
                                     2008
                                    23,227
                                     21.0
                                     13.5
                                     33.9
                                      2.9
                                     28.7
                                     2009*
                                    22,834
                                     20.8
                                     13.6
                                     32.4
                                      2.9
                                     30.2
Source: U.S. Energy Information Administration, Annual Energy Review 2010.  2009 consumption is preliminary. Totals may not sum due to independent rounding.

Figure 2-5 	Natural Gas Consumption by Sector (Percent of Total Consumption), 1990-2009

International Trade
      Imports of crude oil and refined petroleum products have increased over the last twenty years, showing increased substitution of imports for domestic production, as well as imports satisfying growing consumer demand in the U.S (Table 2-11).  Crude oil imports have increased by about 2 percent per year on average, whereas petroleum products have increased by 1 percent on average per year.

Table 2-11	Total Crude Oil and Petroleum Products Imports (Million Bbl), 1990-2009
                                     Year
                                   Crude Oil
                              Petroleum Products
                                Total Petroleum
                                     1990
                                     2,151
                                      775
                                     2,926
                                     1991
                                     2,111
                                      673
                                     2,784
                                     1992
                                     2,226
                                      661
                                     2,887
                                     1993
                                     2,477
                                      669
                                     3,146
                                     1994
                                     2,578
                                      706
                                     3,284
                                     1995
                                     2,639
                                      586
                                     3,225
                                     1996
                                     2,748
                                      721
                                     3,469
                                     1997
                                     3,002
                                      707
                                     3,709
                                     1998
                                     3,178
                                      731
                                     3,908
                                     1999
                                     3,187
                                      774
                                     3,961
                                     2000
                                     3,320
                                      874
                                     4,194
                                     2001
                                     3,405
                                      928
                                     4,333
                                     2002
                                     3,336
                                      872
                                     4,209
                                     2003
                                     3,528
                                      949
                                     4,477
                                     2004
                                     3,692
                                     1,119
                                     4,811
                                     2005
                                     3,696
                                     1,310
                                     5,006
                                     2006
                                     3,693
                                     1,310
                                     5,003
                                     2007
                                     3,661
                                     1,255
                                     4,916
                                     2008
                                     3,581
                                     1,146
                                     4,727
                                     2009
                                     3,307
                                      973
                                     4,280
Source: U.S. Energy Information Administration, Annual Energy Review 2010.  * 2009 Imports are preliminary.

      Natural gas imports also increased steadily from 1990 to 2007 in volume and percentage terms (Table 2-12). The years 2007 and 2008 saw imported natural gas constituting a lower percentage of domestic natural gas consumption.  In 2009, the U.S exported 700 bcf natural gas to Canada, 338 bcf to Mexico via pipeline, and 33 bcf to Japan in LNG-form.  In 2009, the U.S. primarily imported natural gas from Canada (3268 bcf, 87 percent) via pipeline, although a growing percentage of natural gas imports are in LNG-form shipped from countries such as Trinidad and Tobago and Egypt.  Until recent years, industry analysts forecast that LNG imports would continue to grow as a percentage of U.S consumption.  However, it is possible that increasingly accessible domestic unconventional gas resources, such as shale gas and coalbed methane, might reduce the need for the U.S. to import natural gas, either via pipeline or shipped LNG.

Table 2-12	Natural Gas Imports and Exports, 1990-2009
                                     Year
                              Total Imports (bcf)
                              Total Exports (bcf)
                                  Net Imports
                                     (bcf)
                                  Percent of
                               U.S. Consumption
                                     1990
                                     1,532
                                      86
                                     1,447
                                      7.5
                                     1991
                                     1,773
                                      129
                                     1,644
                                      8.4
                                     1992
                                     2,138
                                      216
                                     1,921
                                      9.5
                                     1993
                                     2,350
                                      140
                                     2,210
                                     10.6
                                     1994
                                     2,624
                                      162
                                     2,462
                                     11.6
                                     1995
                                     2,841
                                      154
                                     2,687
                                     12.1
                                     1996
                                     2,937
                                      153
                                     2,784
                                     12.3
                                     1997
                                     2,994
                                      157
                                     2,837
                                     12.5
                                     1998
                                     3,152
                                      159
                                     2,993
                                     13.5
                                     1999
                                     3,586
                                      163
                                     3,422
                                     15.3
                                     2000
                                     3,782
                                      244
                                     3,538
                                     15.2
                                     2001
                                     3,977
                                      373
                                     3,604
                                     16.2
                                     2002
                                     4,015
                                      516
                                     3,499
                                     15.2
                                     2003
                                     3,944
                                      680
                                     3,264
                                     14.7
                                     2004
                                     4,259
                                      854
                                     3,404
                                     15.2
                                     2005
                                     4,341
                                      729
                                     3,612
                                     16.4
                                     2006
                                     4,186
                                      724
                                     3,462
                                     16.0
                                     2007
                                     4,608
                                      822
                                     3,785
                                     16.4
                                     2008
                                     3,984
                                     1,006
                                     2,979
                                     12.8
                                     2009*
                                     3,748
                                     1,071
                                     2,677
                                     11.7
Source: U.S. Energy Information Administration, Annual Energy Review 2010.   2009 Imports are preliminary.

Forecasts
      In this section, we provide forecasts of well drilling activity and crude oil and natural gas domestic production, imports, and prices.  The forecasts are from the 2011 Annual Energy Outlook produced by EIA, the most current forecast information available from EIA.  As will be discussed in detail in Section 3, to analyze the impacts of the final NSPS on the national energy economy, we use the National Energy Modeling System (NEMS) that was used to produce the 2011 Annual Energy Outlook.
      Table 2-13 and Figure 2-6 present forecasts of successful wells drilled in the U.S. from 2010 to 2035.  Crude oil well forecasts for the lower 48 states show a rise from 2010 to a peak in 2019, which is followed by a gradual decline until the terminal year in the forecast, totaling a 28 percent decline for the forecast period.  The forecast of successful offshore crude oil wells shows a variable but generally increasing trend.

Table 2-13 	Forecast of Total Successful Wells Drilled, Lower 48 States, 2010-2035

                             Lower 48 U.S. States
                                   Offshore

                                    Totals
                                     Year
                                   Crude Oil
                           Conventional Natural Gas
                                  Tight Sands
                                Devonian Shale
                                Coalbed Methane
                                   Crude Oil
                                  Natural gas

                                   Crude Oil
                                  Natural Gas
                                     2010
                                    12,082
                                     7,302
                                     2,393
                                     4,196
                                     2,426
                                      74
                                      56

                                    12,155
                                    16,373
                                     2011
                                    10,271
                                     7,267
                                     2,441
                                     5,007
                                     1,593
                                      81
                                      73

                                    10,352
                                    16,380
                                     2012
                                    10,456
                                     7,228
                                     2,440
                                     5,852
                                     1,438
                                      80
                                      71

                                    10,536
                                    17,028
                                     2013
                                    10,724
                                     7,407
                                     2,650
                                     6,758
                                     1,564
                                      79
                                      68

                                    10,802
                                    18,447
                                     2014
                                    10,844
                                     7,378
                                     2,659
                                     6,831
                                     1,509
                                      85
                                      87

                                    10,929
                                    18,463
                                     2015
                                    10,941
                                     7,607
                                     2,772
                                     7,022
                                     1,609
                                      84
                                      87

                                    11,025
                                    19,096
                                     2016
                                    11,015
                                     7,789
                                     2,817
                                     7,104
                                     1,633
                                      94
                                      89

                                    11,108
                                    19,431
                                     2017
                                    11,160
                                     7,767
                                     2,829
                                     7,089
                                     1,631
                                      104
                                      100

                                    11,264
                                    19,416
                                     2018
                                    11,210
                                     7,862
                                     2,870
                                     7,128
                                     1,658
                                      112
                                      101

                                    11,323
                                    19,619
                                     2019
                                    11,268
                                     8,022
                                     2,943
                                     7,210
                                     1,722
                                      104
                                      103

                                    11,373
                                    20,000
                                     2020
                                    10,845
                                     8,136
                                     3,140
                                     7,415
                                     2,228
                                      89
                                      81

                                    10,934
                                    21,000
                                     2021
                                    10,849
                                     8,545
                                     3,286
                                     7,621
                                     2,324
                                      91
                                      84

                                    10,940
                                    21,860
                                     2022
                                    10,717
                                     8,871
                                     3,384
                                     7,950
                                     2,361
                                      90
                                      77

                                    10,807
                                    22,642
                                     2023
                                    10,680
                                     9,282
                                     3,558
                                     8,117
                                     2,499
                                      92
                                      96

                                    10,772
                                    23,551
                                     2024
                                    10,371
                                     9,838
                                     3,774
                                     8,379
                                     2,626
                                      87
                                      77

                                    10,458
                                    24,694
                                     2025
                                    10,364
                                    10,200
                                     3,952
                                     8,703
                                     2,623
                                      93
                                      84

                                    10,457
                                    25,562
                                     2026
                                    10,313
                                    10,509
                                     4,057
                                     9,020
                                     2,705
                                      104
                                      103

                                    10,417
                                    26,394
                                     2027
                                    10,103
                                    10,821
                                     4,440
                                     9,430
                                     2,862
                                      99
                                      80

                                    10,202
                                    27,633
                                     2028
                                     9,944
                                    10,995
                                     4,424
                                     9,957
                                     3,185
                                      128
                                      111

                                    10,072
                                    28,672
                                     2029
                                     9,766
                                    10,992
                                     4,429
                                    10,138
                                     3,185
                                      121
                                      127

                                     9,887
                                    28,870
                                     2030
                                     9,570
                                    11,161
                                     4,512
                                    10,539
                                     3,240
                                      127
                                      103

                                     9,697
                                    29,556
                                     2031
                                     9,590
                                    11,427
                                     4,672
                                    10,743
                                     3,314
                                      124
                                      109

                                     9,714
                                    30,265
                                     2032
                                     9,456
                                    11,750
                                     4,930
                                    11,015
                                     3,449
                                      143
                                      95

                                     9,599
                                    31,239
                                     2033
                                     9,445
                                    12,075
                                     5,196
                                    11,339
                                     3,656
                                      116
                                      107

                                     9,562
                                    32,372
                                     2034
                                     9,278
                                    12,457
                                     5,347
                                    11,642
                                     3,669
                                      128
                                      92

                                     9,406
                                    33,206
                                     2035
                                     8,743
                                    13,003
                                     5,705
                                    12,062
                                     3,905
                                      109
                                      108

                                     8,852
                                    34,782
Source: U.S. Energy Information Administration, Annual Energy Outlook 2011.

      Meanwhile, Table 2-13 and Figure 2-6 show increases for all types of natural gas drilling in the lower 48 states.  Drilling in shale reservoirs is expected to rise most dramatically, about 190 percent during the forecast period, while drilling in coalbed methane and tight sands reservoirs increase significantly, 61 percent and 138 percent, respectively.  Despite the growth in drilling in unconventional reservoirs, EIA forecasts successful conventional natural gas wells to increase about 78 percent during this period.  Offshore natural gas wells are also expected to increase during the next 25 years, but not to the degree of onshore drilling.

Figure 2-6	Forecast of Total Successful Wells Drilled, Lower 48 States, 2010-2035

      Table 2-14 presents forecasts of domestic crude oil production, reserves, imports and prices.  Domestic crude oil production increases slightly during the forecast period, with much of the growth coming from onshore production in the lower 48 states.  Alaskan oil production is forecast to decline from 2010 to a low of 99 million barrels in 2030, but rising above that level for the final five years of the forecast.  Net imports of crude oil are forecast to decline slightly during the forecast period.  Figure 2-7 depicts these trends graphically.  All told, EIA forecasts total crude oil to decrease about 3 percent from 2010 to 2035.

Table 2-14	Forecast of Crude Oil Supply, Reserves, and Wellhead Prices, 2010-2035

                      Domestic Production (million bbls)

                                     Year
                                Total Domestic
                               Lower 48 Onshore
                               Lower 48 Offshore
                                    Alaska
                         Lower 48 End of Year Reserves

                                  Net Imports
                       Total Crude Supply (million bbls)

            Lower 48 Average Wellhead Price (2009 dollars per bbl)
                                     2010
                                     2,011
                                     1,136
                                      653
                                      223
                                    17,634

                                     3,346
                                     5,361

                                     78.6
                                     2011
                                     1,993
                                     1,212
                                      566
                                      215
                                    17,955

                                     3,331
                                     5,352

                                     84.0
                                     2012
                                     1,962
                                     1,233
                                      529
                                      200
                                    18,026

                                     3,276
                                     5,239

                                     86.2
                                     2013
                                     2,037
                                     1,251
                                      592
                                      194
                                    18,694

                                     3,259
                                     5,296

                                     88.6
                                     2014
                                     2,102
                                     1,267
                                      648
                                      188
                                    19,327

                                     3,199
                                     5,301

                                     92.0
                                     2015
                                     2,122
                                     1,283
                                      660
                                      179
                                    19,690

                                     3,177
                                     5,299

                                     95.0
                                     2016
                                     2,175
                                     1,299
                                      705
                                      171
                                    20,243

                                     3,127
                                     5,302

                                     98.1
                                     2017
                                     2,218
                                     1,320
                                      735
                                      163
                                    20,720

                                     3,075
                                     5,293

                                     101.0
                                     2018
                                     2,228
                                     1,323
                                      750
                                      154
                                    21,129

                                     3,050
                                     5,277

                                     103.7
                                     2019
                                     2,235
                                     1,343
                                      746
                                      147
                                    21,449

                                     3,029
                                     5,264

                                     105.9
                                     2020
                                     2,219
                                     1,358
                                      709
                                      153
                                    21,573

                                     3,031
                                     5,250

                                     107.4
                                     2021
                                     2,216
                                     1,373
                                      680
                                      163
                                    21,730

                                     3,049
                                     5,265

                                     108.8
                                     2022
                                     2,223
                                     1,395
                                      659
                                      169
                                    21,895

                                     3,006
                                     5,229

                                     110.3
                                     2023
                                     2,201
                                     1,418
                                      622
                                      161
                                    21,921

                                     2,994
                                     5,196

                                     112.0
                                     2024
                                     2,170
                                     1,427
                                      588
                                      155
                                    21,871

                                     2,996
                                     5,166

                                     113.6
                                     2025
                                     2,146
                                     1,431
                                      566
                                      149
                                    21,883

                                     3,010
                                     5,155

                                     115.2
                                     2026
                                     2,123
                                     1,425
                                      561
                                      136
                                    21,936

                                     3,024
                                     5,147

                                     116.6
                                     2027
                                     2,114
                                     1,415
                                      573
                                      125
                                    22,032

                                     3,018
                                     5,131

                                     117.8
                                     2028
                                     2,128
                                     1,403
                                      610
                                      116
                                    22,256

                                     2,999
                                     5,127

                                     118.8
                                     2029
                                     2,120
                                     1,399
                                      614
                                      107
                                    22,301

                                     2,988
                                     5,108

                                     119.3
                                     2030
                                     2,122
                                     1,398
                                      625
                                      99
                                    22,308

                                     2,994
                                     5,116

                                     119.5
                                     2031
                                     2,145
                                     1,391
                                      641
                                      114
                                    22,392

                                     2,977
                                     5,122

                                     119.6
                                     2032
                                     2,191
                                     1,380
                                      675
                                      136
                                    22,610

                                     2,939
                                     5,130

                                     118.8
                                     2033
                                     2,208
                                     1,365
                                      691
                                      152
                                    22,637

                                     2,935
                                     5,143

                                     119.1
                                     2034
                                     2,212
                                     1,351
                                      714
                                      147
                                    22,776

                                     2,955
                                     5,167

                                     119.2
                                     2035
                                     2,170
                                     1,330
                                      698
                                      142
                                    22,651

                                     3,007
                                     5,177

                                     119.5
Source: U.S. Energy Information Administration, Annual Energy Outlook 2011.  Totals may not sum due to independent rounding.

Table 2-14 also shows forecasts of proved reserves in the lower 48 states.  The reserves forecast shows steady growth from 2010 to 2035, an increase of 28 percent overall.  This increment is larger than the forecast increase in production from the lower 48 states during this period, 8 percent, showing reserves are forecast to grow more rapidly than production.  Table 2-14 also shows average wellhead prices increasing a total of 52 percent from 2010 to 2035, from $78.6 per barrel to $119.5 per barrel in 2008 dollar terms.

Figure 2-7	Forecast of Domestic Crude Oil Production and Net Imports, 2010-2035

      Table 2-15 shows domestic natural gas production is forecast to increase about 24 percent from 2010 to 2035.  Contrasted against the much higher growth in natural gas wells drilled as shown in Table 2-13, per well productivity is expected to continue its declining trend.  Meanwhile, imports of natural gas via pipeline are expected to decline during the forecast period almost completely, from 2.33 tcf in 2010 to 0.04 in 2035 tcf.  Imported LNG also decreases from 0.41 tcf in 2010 to 0.14 tcf in 2035.  Total supply, then, increases about 10 percent, from 24.08 tcf in 2010 to 26.57 tcf in 2035.

Table 2-15	Forecast of Natural Gas Supply, Lower 48 Reserves, and Wellhead Price

                                   Production
                                  Net Imports

                                     Year
                              Dry Gas Production
                           Supplemental Natural Gas
                            Net Imports (Pipeline)
                               Net Imports (LNG)
                                 Total Supply

                       Lower 48 End of Year Dry Reserves

            Average Lower 48 Wellhead Price (2009 dollars per Mcf)
                                     2010
                                     21.28
                                     0.07
                                     2.33
                                     0.41
                                     24.08

                                     263.9

                                     4.08
                                     2011
                                     21.05
                                     0.06
                                     2.31
                                     0.44
                                     23.87

                                     266.3

                                     4.09
                                     2012
                                     21.27
                                     0.06
                                     2.17
                                     0.47
                                     23.98

                                     269.1

                                     4.09
                                     2013
                                     21.74
                                     0.06
                                     2.22
                                     0.50
                                     24.52

                                     272.5

                                     4.15
                                     2014
                                     22.03
                                     0.06
                                     2.26
                                     0.45
                                     24.80

                                     276.6

                                     4.16
                                     2015
                                     22.43
                                     0.06
                                     2.32
                                     0.36
                                     25.18

                                     279.4

                                     4.24
                                     2016
                                     22.47
                                     0.06
                                     2.26
                                     0.36
                                     25.16

                                     282.4

                                     4.30
                                     2017
                                     22.66
                                     0.06
                                     2.14
                                     0.41
                                     25.28

                                     286.0

                                     4.33
                                     2018
                                     22.92
                                     0.06
                                     2.00
                                     0.43
                                     25.40

                                     289.2

                                     4.37
                                     2019
                                     23.20
                                     0.06
                                     1.75
                                     0.47
                                     25.48

                                     292.1

                                     4.43
                                     2020
                                     23.43
                                     0.06
                                     1.40
                                     0.50
                                     25.40

                                     293.6

                                     4.59
                                     2021
                                     23.53
                                     0.06
                                     1.08
                                     0.52
                                     25.19

                                     295.1

                                     4.76
                                     2022
                                     23.70
                                     0.06
                                     0.89
                                     0.49
                                     25.14

                                     296.7

                                     4.90
                                     2023
                                     23.85
                                     0.06
                                     0.79
                                     0.45
                                     25.15

                                     297.9

                                     5.08
                                     2024
                                     23.86
                                     0.06
                                     0.77
                                     0.39
                                     25.08

                                     298.4

                                     5.27
                                     2025
                                     23.99
                                     0.06
                                     0.74
                                     0.34
                                     25.12

                                     299.5

                                     5.43
                                     2026
                                     24.06
                                     0.06
                                     0.71
                                     0.27
                                     25.10

                                     300.8

                                     5.54
                                     2027
                                     24.30
                                     0.06
                                     0.69
                                     0.22
                                     25.27

                                     302.1

                                     5.67
                                     2028
                                     24.59
                                     0.06
                                     0.67
                                     0.14
                                     25.47

                                     304.4

                                     5.74
                                     2029
                                     24.85
                                     0.06
                                     0.63
                                     0.14
                                     25.69

                                     306.6

                                     5.78
                                     2030
                                     25.11
                                     0.06
                                     0.63
                                     0.14
                                     25.94

                                     308.5

                                     5.82
                                     2031
                                     25.35
                                     0.06
                                     0.57
                                     0.14
                                     26.13

                                     310.1

                                     5.90
                                     2032
                                     25.57
                                     0.06
                                     0.50
                                     0.14
                                     26.27

                                     311.4

                                     6.01
                                     2033
                                     25.77
                                     0.06
                                     0.38
                                     0.14
                                     26.36

                                     312.6

                                     6.12
                                     2034
                                     26.01
                                     0.06
                                     0.23
                                     0.14
                                     26.44

                                     313.4

                                     6.24
                                     2035
                                     26.33
                                     0.06
                                     0.04
                                     0.14
                                     26.57

                                     314.0

                                     6.42
Source: U.S. Energy Information Administration, Annual Energy Outlook 2011.  Totals may not sum due to independent rounding.

Industry Costs
Finding Costs
      Real costs of drilling oil and natural gas wells have increased significantly over the past two decades, particularly in recent years.  Cost per well has increased by an annual average of about 15 percent, and cost per foot has increased on average of about 13 percent per year (Figure 2-8).

Figure 2-8	Costs of Crude Oil and Natural Gas Wells Drilled, 1981-2008

The average finding costs compiled and published by EIA add an additional level of detail to drilling costs, in that finding costs incorporate the costs more broadly associated with adding proved reserves of crude oil and natural gas.  These costs include exploration and development costs, as well as costs associated with the purchase or leasing of real property.  EIA publishes finding costs as running three-year averages, in order to better compare these costs, which occur over several years, with annual average lifting costs.  Figure 2-9 shows average domestic onshore and offshore and foreign finding costs for the sample of U.S. firms in EIA's Financial Reporting System (FRS) database from 1981 to 2008.  The costs are reported in 2008 dollars on a barrel of oil equivalent basis for crude oil and natural gas combined.  The average domestic finding costs dropped from 1981 until the mid-1990s.  Interestingly, in the mid-1990s, domestic onshore and offshore and foreign finding costs converged for a few years. After this period, offshore finding costs rose faster than domestic onshore and foreign costs.

Figure 2-9	Finding Costs for FRS Companies, 1981-2008

After 2000, average finding costs rose sharply, with the finding costs for domestic onshore and offshore and foreign proved reserves diverging onto different trajectories.   Note the drilling costs in Figure 2-8 and finding costs in Figure 2-9 present similar trends overall.
Lifting Costs
      Lifting costs are the costs to produce crude oil or natural gas once the resource has been found and accessed.  EIA's definition of lifting costs includes costs of operating and maintaining wells and associated production equipment.  Direct lifting costs exclude production taxes or royalties, while total lifting costs includes taxes and royalties.  Like finding costs, EIA reports average lifting costs for FRS firms in 2008 dollars on a barrel of oil equivalent basis.  Total lifting costs are the sum of direct lifting costs and production taxes.  Figure 2-10 depicts direct lifting cost trends from 1981 to 2008 for domestic and foreign production.

Figure 2-10	Direct Oil and Natural Gas Lifting Costs for FRS Companies, 1981-2008 (3-year Running Average)

Direct lifting costs (excludes taxes and royalties) for domestic production rose a little more than $2 per barrels of oil equivalent from 1981 to 1985, then declined almost $5 per barrel of oil equivalent from 1985 until 2000.  From 2000 to 2008, domestic lifting costs increased sharply, about $6 per barrel of oil equivalent.  Foreign lifting costs diverged from domestic lifting costs from 1981 to 1991, as foreign lifting costs were lower than domestic costs during this period.  Foreign and domestic lifting costs followed a similar track until they again diverged in 2004, with domestic lifting again becoming more expensive.  Combined with finding costs, the total finding and lifting costs rose significantly in from 2000 to 2008.
Operating and Equipment Costs
      The EIA report, "Oil and Gas Lease Equipment and Operating Costs 1994 through 2009", contains indices and estimated costs for domestic oil and natural gas equipment and production operations.  The indices and cost trends track costs for representative operations in six regions (California, Mid-Continent, South Louisiana, South Texas, West Texas, and Rocky Mountains) with producing depths ranging from 2000 to 16,000 feet and low to high production rates (for example, 50,000 to 1 million cubic feet per day for natural gas).
      Figure 2-11 depicts crude oil operating costs and equipment costs indices for 1976 to 2009, as well as the crude oil price in 1976 dollars.  The indices show that crude oil operating and equipment costs track the price of oil over this time period, while operating costs have risen more quickly than equipment costs.  Operating and equipment costs and oil prices rose steeply in the late 1970s, but generally decreased from about 1980 until the late 1990s.

Figure 2-11	Crude Oil Operating Costs and Equipment Costs Indices (1976=100) and Crude Oil Price (in 1976 dollars), 1976-2009

Oil costs and prices again generally rose between 2000 to present, with a peak in 2008.  The 2009 index values for crude oil operating and equipment costs are 154 and 107, respectively.

Figure 2-12	Natural Operating Costs and Equipment Costs Indices (1976=100) and Natural Gas Price, 1976-2009

Figure 2-12 depicts natural gas operating and equipment costs indices, as well as natural gas prices.  Similar to the cost trends for crude oil, natural gas operating and equipment costs track the price of natural gas over this time period, while operating costs have risen more quickly than equipment costs.  Operating and equipment costs and gas prices also rose steeply in the late 1970s, but generally decreased from about 1980 until the mid 1990s. The 2009 index values for natural gas operating and equipment costs are 137 and 112, respectively.
Firm Characteristics
      A regulatory action to reduce pollutant discharges from facilities producing crude oil and natural gas will potentially affect the business entities that own the regulated facilities. In the oil and natural gas production industry, facilities comprise those sites where plant and equipment extract, process, and transport extracted streams recovered from the raw crude oil and natural gas resources. Companies that own these facilities are legal business entities that have the capacity to conduct business transactions and make business decisions that affect the facility.
Ownership
      Enterprises in the oil and natural gas industry may be divided into different groups that include producers, transporters, and distributors.  The producer segment may be further divided between major and independent producers.  Major producers include large oil and gas companies that are involved in each of the five industry segments: drilling and exploration, production, transportation, refining, and marketing.  Independent producers include smaller firms that are involved in some but not all of the five activities.
      According to the Independent Petroleum Association of America (IPAA), independent companies produce approximately 68 percent of domestic crude oil production of our oil, 85 percent of domestic natural gas, and drill almost 90 percent of the wells in the U.S (IPAA, 2009).  Through the mid-1980s, natural gas was a secondary fuel for many producers.  However, now it is of primary importance to many producers.  IPAA reports that about 50 percent of its members' spending in 2007 was directed toward natural gas production, largely toward production of unconventional gas (IPAA, 2009).  Meanwhile, transporters are comprised of the pipeline companies, while distributors are comprised of the local distribution companies.
Size Distribution of Firms in Affected
      As of 2007, there were 6,563 firms within the 211111 and 211112 NAICS codes, of which 6427 (98 percent) were considered small businesses (Table 2-16).  Within NAICS 211111 and 211112, large firms compose about 2 percent of the firms, but account for 59 percent of employment and generate about 80 percent of estimated receipts listed under the NAICS.

Table 2-16	SBA Size Standards and Size Distribution of Oil and Natural Gas Firms
                                     NAICS
                               NAICS Description
                              SBA Size Standard
                                  Small Firms
                                  Large Firms
                                  Total Firms
Number of Firms by Firm Size

                                    211111
Crude Petroleum and Natural Gas Extraction
                                      500
                                                                          6,329
                                                                             95
                                                                          6,424
                                    211112
Natural Gas Liquid Extraction
                                      500
                                                                             98
                                                                             41
                                                                            139
                                    213111
Drilling Oil and Gas Wells
                                      500
                                                                          2,010
                                                                             49
                                                                          2,059
                                    486210
Pipeline Transportation of Natural Gas
                                 $7.0 million
                                                                            61*
                                                                            65*
                                                                            126

Total Employment by Firm Size

                                    211111
Crude Petroleum and Natural Gas Extraction
                                      500
                                                                         55,622
                                                                         77,664
                                                                        133,286
                                    211112
Natural Gas Liquid Extraction
                                      500
                                                                          1,875
                                                                          6,648
                                                                          8,523
                                    213111
Drilling Oil and Gas Wells
                                      500
                                                                         36,652
                                                                         69,774
                                                                        106,426
                                    486210
Pipeline Transportation of Natural Gas
                                 $7.0 million
                                                                           N/A*
                                                                           N/A*
                                                                         24,683

Estimated Receipts by Firm Size ($1000)

                                    211111
Crude Petroleum and Natural Gas Extraction
                                      500
                                                                     44,965,936
                                                                    149,141,316
                                                                    194,107,252
                                    211112
Natural Gas Liquid Extraction
                                      500
                                                                      2,164,328
                                                                     37,813,413
                                                                     39,977,741
                                    213111
Drilling Oil and Gas Wells
                                      500
                                                                      7,297,434
                                                                     16,550,804
                                                                     23,848,238
                                    486210
Pipeline Transportation of Natural Gas
                                 $7.0 million
                                                                           N/A*
                                                                           N/A*
                                                                     20,796,681
Note: The counts of small and large firms in NAICS 486210 is based upon firms with less than $7.5 million in receipts, rather than the $7 million required by the SBA Size Standard.  We used this value because U.S. Census reports firm counts for firms with receipts less than $7.5 million.  **Employment and receipts could not be split between small and large businesses because of non-disclosure requirements faced by the U.S. Census Bureau.
Source: U.S. Census Bureau. 2010. "Number of Firms, Number of Establishments, Employment, Annual Payroll, and Estimated Receipts by Enterprise Receipt Size for the United States, All Industries:  2007." <http://www.census.gov/econ/susb/>

The small and large firms within NAICS 21311 are similarly distributed, with large firms accounting for about 2 percent of firms, but 66 percent and 69 percent of employment and estimated receipts, respectively.  Because there are relatively few firms within NAICS 486210, the Census Bureau cannot release breakdowns of firms by size in sufficient detail to perform similar calculation.

Trends in National Employment and Wages
      As well as producing much of the U.S. energy supply, the oil and natural gas industry directly employs a significant number of people.  Table 2-17 shows employment in oil and natural gas-related NAICS codes from 1990 to 2009.  The overall trend shows a decline in total industry employment throughout the 1990s, hitting a low of 313,703 in 1999, but rebounding to a 2008 peak of 511,805.  Crude Petroleum and Natural Gas Extraction (NAICS 211111) and Support Activities for Oil and Gas Operations (NAICS 213112) employ the majority of workers in the industry.
Table 2-17	Oil and Natural Gas Industry Employment by NAICS, 1990-09
                                    Year
              Crude Petroleum and Natural Gas Extraction (211111)
                    Natural Gas Liquid Extraction (211112)
                Drilling of Oil and Natural Gas Wells (213111)
               Support Activities for Oil and Gas Ops. (213112)
                     Pipeline Trans. of Crude Oil (486110)
                    Pipeline Trans. of Natural Gas (486210)
                                     Total
                                     1990
                                    182,848
                                     8,260
                                    52,365
                                    109,497
                                    11,112
                                    47,533
                                    411,615
                                     1991
                                    177,803
                                     8,443
                                    46,466
                                    116,170
                                    11,822
                                    48,643
                                    409,347
                                     1992
                                    169,615
                                     8,819
                                    39,900
                                    99,924
                                    11,656
                                    46,226
                                    376,140
                                     1993
                                    159,219
                                     7,799
                                    42,485
                                    102,840
                                    11,264
                                    43,351
                                    366,958
                                     1994
                                    150,598
                                     7,373
                                    44,014
                                    105,304
                                    10,342
                                    41,931
                                    359,562
                                     1995
                                    142,971
                                     6,845
                                    43,114
                                    104,178
                                     9,703
                                    40,486
                                    347,297
                                     1996
                                    139,016
                                     6,654
                                    46,150
                                    107,889
                                     9,231
                                    37,519
                                    346,459
                                     1997
                                    137,667
                                     6,644
                                    55,248
                                    117,460
                                     9,097
                                    35,698
                                    361,814
                                     1998
                                    133,137
                                     6,379
                                    53,943
                                    122,942
                                     8,494
                                    33,861
                                    358,756
                                     1999
                                    124,296
                                     5,474
                                    41,868
                                    101,694
                                     7,761
                                    32,610
                                    313,703
                                     2000
                                    117,175
                                     5,091
                                    52,207
                                    108,087
                                     7,657
                                    32,374
                                    322,591
                                     2001
                                    119,099
                                     4,500
                                    62,012
                                    123,420
                                     7,818
                                    33,620
                                    30,469
                                     2002
                                    116,559
                                     4,565
                                    48,596
                                    120,536
                                     7,447
                                    31,556
                                    329,259
                                     2003
                                    115,636
                                     4,691
                                    51,526
                                    120,992
                                     7,278
                                    29,684
                                    329,807
                                     2004
                                    117,060
                                     4,285
                                    57,332
                                    128,185
                                     7,073
                                    27,340
                                    341,275
                                     2005
                                    121,535
                                     4,283
                                    66,691
                                    145,725
                                     6,945
                                    27,341
                                    372,520
                                     2006
                                    130,188
                                     4,670
                                    79,818
                                    171,127
                                     7,202
                                    27,685
                                    420,690
                                     2007
                                    141,239
                                     4,842
                                    84,525
                                    197,100
                                     7,975
                                    27,431
                                    463,112
                                     2008
                                    154,898
                                     5,183
                                    92,640
                                    223,635
                                     8,369
                                    27,080
                                    511,805
                                     2009
                                    155,150
                                     5,538
                                    67,756
                                    193,589
                                     8,753
                                    26,753
                                    457,539
Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, 2011 , <http://www.bls.gov/cew/>

Figure 2-13	Employment in Drilling of Oil and Natural Gas Wells (NAICS 213111), and Total Oil and Natural Gas Wells Drilled, 1990-2009

      Figure 2-13 compares employment in Drilling of Oil and Natural Gas Wells (NAICS 213111) with the total number of oil and natural gas wells drilled from 1990 to 2009.  The figure depicts a strong positive correlation between employment in the sector with drilling activity.  This correlation also holds throughout the period covered by the data.

Figure 2-14	Employment in Crude Petroleum and Natural Gas Extraction (NAICS 211111) and Total Crude Oil and Natural Gas Production (boe), 1990-2009

      Figure 2-14 compares employment in Crude Petroleum and Natural Gas Extraction (NAICS 211111) with total domestic oil and natural gas production from 1990 to 2009 in barrels of oil equivalent terms.  While until 2003, employment in this sector and total production declined gradually, employment levels declined more rapidly.  However, from 2004 to 2009 employment in Extraction recovered, rising to levels similar to the early 1990s.

Figure 2-15	Employment in Natural Gas Liquid Extraction (NAICS 211112), Employment in Pipeline Transportation of Natural Gas (NAICS 486210), and Total Natural Gas Production, 1990-2009

	Figure 2-15 depicts employment in Natural Gas Liquid Extraction (NAICS 211112), Employment in Pipeline Transportation of Natural Gas (NAICS 486210), and Total Natural Gas Production, 1990-2009.  While total natural gas production has risen slightly over this time period, employment in natural gas pipeline transportation has steadily declined to almost half of its 1991 peak.  Employment in natural gas liquid extraction declined from 1992 to a low in 2005, then rebounded slightly from 2006 to 2009.  Overall, however, these trends depict these sectors becoming decreasingly labor intensive, unlike the trends depicted in Figure 2-13 and Figure 2-14.
	From 1990 to 2009, average wages for the oil and natural gas industry have increased.  Table 2-18 and Figure 2-16 show real wages (in 2008 dollars) from 1990 to 2009 for the NAICS codes associated with the oil and natural gas industry.

Table 2-18	Oil and Natural Gas Industry Average Wages by NAICS, 1990-2009 (2008 dollars)
                                     Year
              Crude Petroleum and Natural Gas Extraction (211111)
                    Natural Gas Liquid Extraction (211112)
                Drilling of Oil and Natural Gas Wells (213111)
            Support Activities for Oil and Gas Operations (213112)
                 Pipeline Transportation of Crude Oil (486110)
                Pipeline Transportation of Natural Gas (486210)
                                     Total
                                     1990
                                    71,143
                                    66,751
                                    42,215
                                    45,862
                                    68,044
                                    61,568
                                    59,460
                                     1991
                                    72,430
                                    66,722
                                    43,462
                                    47,261
                                    68,900
                                    65,040
                                    60,901
                                     1992
                                    76,406
                                    68,846
                                    43,510
                                    48,912
                                    74,233
                                    67,120
                                    64,226
                                     1993
                                    77,479
                                    68,915
                                    45,302
                                    50,228
                                    72,929
                                    67,522
                                    64,618
                                     1994
                                    79,176
                                    70,875
                                    44,577
                                    50,158
                                    76,136
                                    68,516
                                    64,941
                                     1995
                                    81,433
                                    67,628
                                    46,243
                                    50,854
                                    78,930
                                    71,965
                                    66,446
                                     1996
                                    84,211
                                    68,896
                                    48,872
                                    52,824
                                    76,841
                                    76,378
                                    68,391
                                     1997
                                    89,876
                                    79,450
                                    52,180
                                    55,600
                                    78,435
                                    82,775
                                    71,813
                                     1998
                                    93,227
                                    89,948
                                    53,051
                                    57,578
                                    79,089
                                    84,176
                                    73,722
                                     1999
                                    98,395
                                    89,451
                                    54,533
                                    59,814
                                    82,564
                                    94,471
                                    79,078
                                     2000
                                    109,744
                                    112,091
                                    60,862
                                    60,594
                                    81,097
                                    130,630
                                    86,818
                                     2001
                                    111,101
                                    111,192
                                    61,833
                                    61,362
                                    83,374
                                    122,386
                                    85,333
                                     2002
                                    109,957
                                    103,653
                                    62,196
                                    59,927
                                    87,500
                                    91,550
                                    82,233
                                     2003
                                    110,593
                                    112,650
                                    61,022
                                    61,282
                                    87,388
                                    91,502
                                    82,557
                                     2004
                                    121,117
                                    118,311
                                    63,021
                                    62,471
                                    93,585
                                    93,684
                                    86,526
                                     2005
                                    127,243
                                    127,716
                                    70,772
                                    67,225
                                    92,074
                                    90,279
                                    90,292
                                     2006
                                    138,150
                                    133,433
                                    74,023
                                    70,266
                                    91,708
                                    98,691
                                    94,925
                                     2007
                                    135,510
                                    132,731
                                    82,010
                                    71,979
                                    96,020
                                    105,441
                                    96,216
                                     2008
                                    144,542
                                    125,126
                                    81,961
                                    74,021
                                    101,772
                                    99,215
                                    99,106
                                     2009
                                    133,575
                                    123,922
                                    80,902
                                    70,277
                                    100,063
                                    100,449
                                    96,298
Source: U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, 2011 , <http://www.bls.gov/cew/>

Employees in the NAICS 211 codes enjoy the highest average wages in the industry, while employees in the NAICS 213111 code have relatively lower wages.  Average wages in natural gas pipeline transportation show the highest variation, with a rapid climb from 1990 to 2000, more than doubling in real terms.  However, since 2000 wages have declined in the pipeline transportation sector, while wages have risen in the other NAICS.

Figure 2-16	Oil and Natural Gas Industry Average Wages by NAICS, 1990-2009 ($2008)

Horizontal and Vertical Integration

      Because of the existence of major companies, the industry possesses a wide dispersion of vertical and horizontal integration.  The vertical aspects of a firm's size reflect the extent to which goods and services that can be bought from outside are produced in house, while the horizontal aspect of a firm's size refers to the scale of production in a single-product firm or its scope in a multiproduct one.  Vertical integration is a potentially important dimension in analyzing firm-level impacts because the regulation could affect a vertically integrated firm on more than one level.  The regulation may affect companies for whom oil and natural gas production is only one of several processes in which the firm is involved.  For example, a company that owns oil and natural gas production facilities may ultimately produce final petroleum products, such as motor gasoline, jet fuel, or kerosene.  This firm would be considered vertically integrated because it is involved in more than one level of requiring crude oil and natural gas and finished petroleum products.  A regulation that increases the cost of oil and natural gas production will ultimately affect the cost of producing final petroleum products.
      Horizontal integration is also a potentially important dimension in firm-level analyses for any of the following reasons.  A horizontally integrated firm may own many facilities of which only some are directly affected by the regulation.  Additionally, a horizontally integrated firm may own facilities in unaffected industries.  This type of diversification would help mitigate the financial impacts of the regulation.  A horizontally integrated firm could also be indirectly as well as directly affected by the regulation.
      In addition to the vertical and horizontal integration that exists among the large firms in the industry, many major producers often diversify within the energy industry and produce a wide array of products unrelated to oil and gas production.  As a result, some of the effects of regulation of oil and gas production can be mitigated if demand for other energy sources moves inversely compared to petroleum product demand.
      In the natural gas sector of the industry, vertical integration is less predominant than in the oil sector.  Transmission and local distribution of natural gas usually occur at individual firms, although processing is increasing performed by the integrated major companies.  Several natural gas firms operate multiple facilities. However, natural gas wells are not exclusive to natural gas firms only. Typically wells produce both oil and gas and can be owned by a natural gas firm or an oil company.
      Unlike the large integrated firms that have several profit centers such as refining, marketing, and transportation, most independents have to rely only on profits generated at the wellhead from the sale of oil and natural gas or the provision of oil and gas production-related engineering or financial services.  Overall, independent producers typically sell their output to refineries or natural gas pipeline companies and are not vertically integrated.   Independents may also own relatively few facilities, indicating limited horizontal integration.
Firm-level Information
      The annual Oil and Gas Journal (OGJ) survey, the OGJ150, reports financial and operating results for public oil and natural gas companies with domestic reserves and headquarters in the U.S.  In the past, the survey reported information on the top 300 companies, now the top 150.  In 2010, all 137 public companies are listed.  Table 2-19 lists selected statistics for the top 20 companies in 2010. The results presented in the table reflect relatively lower production and financial figures as a result of the economic recession of this period.
      Total earnings for the top 137 companies fell from 2008 to 2009 from $71 billion to $27 billion, reflecting the weak economy.  Revenues for these companies also fell 35 percent during this period.  69 percent of the firms posted net losses in 2009, compared to 46 percent one year earlier (Oil and Gas Journal, September 6, 2010).
      The total worldwide liquids production for the 137 firms declined 0.5 percent to 2.8 billion bbl, while total worldwide gas production increased about 3 percent to a total of 16.5 tcf (Oil and Gas Journal, September 6, 2010).  Meanwhile, the 137 firms on the OGJ list increased both oil and natural gas production and reserves from 2008 to 2009.  Domestic production of liquids increased about 7 percent to 1.1 billion bbl, and natural gas production increased to 10.1 tcf.  For context, the OGJ150 domestic crude production represents about 57 percent of total domestic production (1.9 billion bbl, according to EIA).  The OGJ150 natural gas production represents about 54 percent of total domestic production (18.8 tcf, according to EIA).
      The OGJ also releases a period report entitled "Worldwide Gas Processing Survey", which provides a wide range of information on existing processing facilities.  We used a recent list of U.S. gas processing facilities (Oil and Gas Journal, June 7, 2010) and other resources, such as the American Business Directory and company websites, to best identify the parent company of the facilities.  As of 2009, there are 579 gas processing facilities in the U.S., with a processing capacity of 73,767 million cubic feet per day and throughout of 45,472 million cubic feet per day (Table 2-20).  The overall trend in U.S. gas processing capacity is showing fewer, but larger facilities.  For example, in 1995, there were 727 facilities with a capacity of 60,533 million cubic feet per day (U.S. DOE, 2006).
      Trends in gas processing facility ownership are also showing a degree of concentration, as large firms own multiple facilities, which also tend to be relatively large facilities (Table 2-20).    While we estimate 142 companies own the 579 facilities, the top 20 companies (in terms of total throughput) own 264 or 46 percent of the facilities.  That larger companies tend to own larger facilities is indicated by these top 20 firms owning 86 percent of the total capacity and 88 percent of actual throughput.

Table 2-19	Top 20 Oil and Natural Gas Companies (Based on Total Assets), 2010

                             Worldwide Production
                                U.S. Production

                             Rank by Total Assets
                                    Company
                                   Employees
                           Total Assets ($ millions)
                            Total Rev. ($ millions)
                             Net Inc. ($ millions)
                             Liquids (Million bbl)
                               Natural Gas (Bcf)
                             Liquids (Million bbl)
                               Natural Gas (Bcf)
                               Net Wells Drilled
                                       1
 ExxonMobil Corp.
                                                                        102,700
                                                                        233,323
                                                                        310,586
                                                                         19,280
                                                                            725
                                                                          2,383
                                                                            112
                                                                            566
                                                                            466
                                       2
 Chevron Corp.
                                                                         64,000
                                                                        164,621
                                                                        171,636
                                                                         10,563
                                                                            674
                                                                          1,821
                                                                            177
                                                                            511
                                                                            594
                                       3
 ConocoPhillips
                                                                         30,000
                                                                        152,588
                                                                        152,840
                                                                          4,858
                                                                            341
                                                                          1,906
                                                                            153
                                                                            850
                                                                            692
                                       4
 Anadarko Petroleum Corp.
                                                                          4,300
                                                                         50,123
                                                                          9,000
                                                                           -103
                                                                             88
                                                                            817
                                                                             63
                                                                            817
                                                                            630
                                       5
 Marathon Oil Corp.
                                                                         28,855
                                                                         47,052
                                                                         54,139
                                                                          1,463
                                                                             90
                                                                            351
                                                                             23
                                                                            146
                                                                            115
                                       6
 Occidental Petroleum Corp.
                                                                         10,100
                                                                         44,229
                                                                         15,531
                                                                          2,915
                                                                            179
                                                                            338
                                                                             99
                                                                            232
                                                                            260
                                       7
 XTO Energy Inc.
                                                                          3,129
                                                                         36,255
                                                                          9,064
                                                                          2,019
                                                                             32
                                                                            855
                                                                             32
                                                                            855
                                                                          1,059
                                       8
 Chesapeake Energy Corp.
                                                                          8,200
                                                                         29,914
                                                                          7,702
                                                                         -5,805
                                                                             12
                                                                            835
                                                                             12
                                                                            835
                                                                          1,003
                                       9
 Devon Energy Corp.
                                                                          5,400
                                                                         29,686
                                                                          8,015
                                                                         -2,479
                                                                             72
                                                                            966
                                                                             43
                                                                            743
                                                                            521
                                      10
 Hess Corp.
                                                                         13,300
                                                                         29,465
                                                                         29,569
                                                                            740
                                                                            107
                                                                            270
                                                                             26
                                                                             39
                                                                             48
                                      11
 Apache Corp.
                                                                          3,452
                                                                         28,186
                                                                          8,615
                                                                           -284
                                                                            106
                                                                            642
                                                                             35
                                                                            243
                                                                            124
                                      12
 El Paso Corp.
                                                                          4,991
                                                                         22,505
                                                                          4,631
                                                                           -539
                                                                              6
                                                                            219
                                                                              6
                                                                            215
                                                                            134
                                      13
 EOG Resources Inc.
                                                                          2,100
                                                                         18,119
                                                                         14,787
                                                                            547
                                                                             29
                                                                            617
                                                                             26
                                                                            422
                                                                            652
                                      14
 Murphy Oil Corp.
                                                                          8,369
                                                                         12,756
                                                                         18,918
                                                                            838
                                                                             48
                                                                             68
                                                                              6
                                                                             20
                                                                              3
                                      15
 Noble Energy Inc.
                                                                          1,630
                                                                         11,807
                                                                          2,313
                                                                           -131
                                                                             29
                                                                            285
                                                                             17
                                                                            145
                                                                            540
                                      16
 Williams Cos. Inc.
                                                                          4,801
                                                                          9,682
                                                                          2,219
                                                                            400
                                                                              0
                                                                          3,435
                                                                              0
                                                                          3,435
                                                                            488
                                      17
 Questar Corp.
                                                                          2,468
                                                                          8,898
                                                                          3,054
                                                                            393
                                                                              4
                                                                            169
                                                                              4
                                                                            169
                                                                            194
                                      18
 Pioneer Nat. Resources Co.
                                                                          1,888
                                                                          8,867
                                                                          1,712
                                                                            -52
                                                                             19
                                                                            157
                                                                             17
                                                                            148
                                                                             67
                                      19
 Plains Expl. & Prod. Co.
                                                                            808
                                                                          7,735
                                                                          1,187
                                                                            136
                                                                             18
                                                                             78
                                                                             18
                                                                             78
                                                                             53
                                      20
 Petrohawk Energy Corp.
                                                                            469
                                                                          6,662
                                                                         41,084
                                                                         -1,025
                                                                              2
                                                                            174
                                                                              2
                                                                            174
                                                                            162
Source: Oil and Gas Journal. "OGJ150 Financial Results Down in '09; Production, Reserves Up." September 6, 2010.
Notes: The source for employment figures is the American Business Directory.

Table 2-20	Top 20 Natural Gas Processing Firms (Based on Throughput), 2009
                                     Rank
                                    Company
                            Processing Plants (No.)
                        Natural Gas Capacity (MMcf/day)
                       Natural Gas Throughput (MMcf/day)
                                       1
BP PLC
                                      19
                                                                         13,378
                                                                         11,420
                                       2
DCP Midstream Inc.
                                      64
                                                                          9,292
                                                                          5,586
                                       3
Enterprise Products Operating LP --
                                      23
                                                                         10,883
                                                                          5,347
                                       4
Targa Resources
                                      16
                                                                          4,501
                                                                          2,565
                                       5
Enbridge Energy Partners LP --
                                      19
                                                                          3,646
                                                                          2,444
                                       6
Williams Cos.
                                      10
                                                                          4,826
                                                                          2,347
                                       7
Martin Midstream Partners
                                      16
                                                                          3,384
                                                                          2,092
                                       8
Chevron Corp.
                                      23
                                                                          1,492
                                                                          1,041
                                       9
Devon Gas Services LP
                                       6
                                                                          1,038