Summary: Pursuant to a congressional request, GAO studied the profitability of natural gas production under the Natural Gas Policy Act of 1978.
GAO observed that the federal agencies and trade associations which it contacted do not collect data that show profits earned through natural gas production activities. Natural gas and oil expense data are combined because producers incur common expenses during exploration, and natural gas and oil are often extracted from the same wells. GAO found that no single method of separating common costs is the accepted standard for the industry. Therefore, profit estimates differ depending on the method used. In addition, natural gas producers use two basic accounting methods for costs incurred during exploration which result in different reported profits for combined oil and gas activities. GAO examined three studies that estimated natural gas producer profitability and found that the studies were not comparable. One study estimated a 10.3 percent return on investment while the other estimated that the 24 largest natural gas producers received profits before taxes of $10.2 billion in 1982.
