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THE EXTRACTION STATE THE EXTRACTION STATE A History of Natural Gas in america CHARLES BLANCHARD University of Pittsburgh Press Published by the University of Pittsburgh Press, Pittsburgh, Pa., 15260 Copyright © 2020, University of Pittsburgh Press All rights reserved Manufactured in the United States of America Printed on acid-free paper 10 9 8 7 6 5 4 3 2 1 Cataloging-in-Publication data is available from the Library of Congress ISBN 13: 978-0-8229-4636-6 ISBN 10: 0-8229-4636-X Jacket design by Melissa Dias-Mandoly Contents Part I: Making Use of a Useless Byproduct, 1878–1954 Chapter 1: The Smoky City 5 Chapter 2: Going Back to Smoke 17 Chapter 3: The Rise of the Power Trust 30 Chapter 4: Regulation and Rejuvenation 56 Chapter 5: Wartime Pipes and the Postwar Boom 71 Part II: A Manufactured Shortage of Natural Gas, 1954–1992 Chapter 6: Regulation and Ruin 103 Chapter 7: Stopping a Freight Train 129 Chapter 8: The End of Abundance 151 Chapter 9: From Scarcity to Surplus 172 Chapter 10: The Gas Bubble and the End of Merchant Service 202 Part III: A (Mostly) Free Market and Its Discontents, 1992–2020 Chapter 11: Gas Becomes a Commodity 229 Chapter 12: The Dash for Gas 261 Chapter 13: Speculation on a Galactic Scale 283 Chapter 14: Shale 298 Chapter 15: Aftermath 319 Notes 353 Bibliography 379 Index 393 vi THE EXTRACTION STATE Part I Making Use of a Useless Byproduct, 1878–1954 If you were to ask a crowd which state is the historic home of the oil and gas industry, surely the overwhelming and emphatic response would be Texas. You might hear Oklahoma or Louisiana as well—what I’ll refer to collec- tively as the Southwest. And while it is true that those states became the most important in North American oil and gas, in its early days the young industry was centered in Pennsylvania, West Virginia, Ohio, and western New York—Appalachia. It was in Appalachia, in the second half of the 1800s, where the first oil and gas wells were drilled, the first gas pipelines were laid, and the first consumers switched from coal-derived manufactured gas to natural gas. I begin the story of the natural gas industry in the late 1870s. At this point the Industrial Revolution had made coal an important and widely used fuel in industry, though most people still used wood to heat their homes and businesses. The world’s first oil boom began in northwest Penn- sylvania in 1859, and thousands of prospectors had rushed to the region in search of black gold, much in the same way they had rushed to California a decade earlier in search of actual gold. The lucky struck oil. The unlucky struck nothing. The truly unlucky struck an uncontrollable, unstorable, and entirely unusable compound: natural gas. 3