This industry classification includes establishments engaged in both the transmission and distribution of natural gas. Establishments involved in natural gas transmission, but not its distribution to end users, are classified in SIC 4922: Natural Gas Transmission. Establishments involved in natural gas distribution, but not its transmission from supply regions to market areas, are classified in SIC 4924: Natural Gas Distribution.
Natural Gas Distribution
Pipeline Transportation of Natural Gas
Composed almost entirely of methane, natural gas is a combustible gaseous fuel used in residential and commercial applications. It is produced, transported, and consumed in measures associated with cubic feet. One cubic foot is equal to the volume of gas that could be contained in a cubic area measuring one foot in all three dimensions under a pressure of 14.73 pounds per square inch at 60 degrees Fahrenheit. Although the energy content of natural gas can vary depending on its precise chemical composition, 1,000 cubic feet of natural gas has the energy equivalent of approximately one million British thermal units (Btu). A Btu is a standard unit used to measure the amount of heat produced by an energy source.
By the turn of the twenty-first century, natural gas usage was becoming increasingly important in generating electricity. Much safer than nuclear energy and significantly cleaner for the environment than coal, natural gas took over as the energy source of choice in power generation plants and many industrial complexes. The effects of the Clean Air Act were expected to expand its role even farther. In addition, natural gas played a significant role in industrial cogeneration (retaining and distributing the heat energy produced by generating electricity).
During the early years of the 2000s, the natural gas industry was suffering from the effects of a sluggish economy, inconsistent deregulation, and upheaval in the energy industry as a whole, caused in part by the California energy crisis during 2000 and the demise of energy giant Enron after that company's fraudulent bookkeeping practices came to light. The situation led to large-scale sell-offs, downsizing, and a sharp decline in many companies' equity. Although natural gas makes up just one-third of the entire energy industry, because most energy companies have diversified interests that span the market, the beginning of the twenty-first century saw the industry weather a difficult storm of consumer and investor distrust. As a result, even though natural gas usage was expected to increase, production capabilities were declining.
Natural gas is transported and distributed under a myriad of federal and state regulations. Interstate pipelines fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC). Local distribution companies (called LDCs or gas utilities) fall under the domain of their state's public utility commission.
The complete natural gas distribution chain, from the point of production to the point of use, was historically controlled by monopolies. During the 1980s and early 1990s, deregulation brought increased competition and fragmented the industry. Before deregulation, producers supplied gas to transporters. Transporters provided gas, primarily under wholesale agreements, to distributors. Distributors delivered gas, primarily under retail agreements, to end-users. Following deregulation, the natural gas industry saw the expansion and extension of traditional roles, as well as the introduction of new participants such as brokers, independent marketers, marketing affiliates, and consultants.
Various segments of the natural gas industry are represented by trade associations. The American Gas Association represents the interests of local distributing companies. The Natural Gas Supply Association represents major gas producers. The Interstate Natural Gas Association of America (INGAA) represents pipelines. Some other related organizations are: the Independent Petroleum Association of America, representing small independent gas producers; the Domestic Petroleum Council, representing some large independent gas producers; and the Process Gas Consumers, which consists of industrial gas users.
According to INGAA, about 180,000 miles of interstate natural gas pipelines deliver gas throughout North America. INGAA members transport in excess of 90 percent of the nation's natural gas.
The natural gas industry originated in Titusville, Pennsylvania, in 1859. Former railroad conductor Colonel Edwin Drake struck oil 69 feet below the ground surface in the small town. The spot marked the first transportation pipeline in the United States, running just over five miles.
Because there was no easy way to transport natural gas into homes, it was used primarily to light city streets in the nineteenth century. The 1885 invention of the Bunsen burner, which mixed air with natural gas, allowed the use of the fuel's thermal properties. Gas producers responded to the discovery by promoting natural gas as a heating fuel for use in warming water or cooking food.
Natural gas was not, however, widely used until after World War II, when metallurgy advances, welding techniques, and pipe rolling greatly improved the methods of transporting the fuel. Thousands of miles of pipeline were laid from the post-war period through the 1960s, when natural gas began to be widely used in American industry as well.
Congress passed the Natural Gas Act of 1938, marking the first governmental regulation of the...