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Manufactured and Natural Gas Industry

Christopher Castaneda, California State University – Sacramento

The historical gas industry includes two chemically distinct flammable gasses. These are natural gas and several variations of manufactured coal gas. Natural gas is composed primarily of methane, a hydrocarbon composed of one carbon atom and four hydrogen atoms, or CH4. As a “fossil fuel,” natural gas flowing from the earth is rarely pure. It is commonly associated with petroleum and may contain other hydrocarbons including butane, ethane, and propane. In the United States, substantial commercial natural gas utilization did not begin until after the discovery of large quantities of both crude oil and natural gas in western Pennsylvania during 1859.

Manufactured Gas

Manufactured coal gas (sometimes referred to as “town gas”), and its several variants, was used for lighting throughout most of the nineteenth century. Consumers also used this gas as a fuel for heating and cooking from the late nineteenth through the mid-twentieth century in many locations where natural gas was unavailable. Generally, a rather simple process of heating coal, or other organic substance, produces a flammable gas. The resulting gas (a combination of carbon monoxide, hydrogen and other gasses depending upon the exact process) was stored in a “holder” or “gasometer” for later distribution. Coal based “gas works” produced manufactured gas from the early nineteenth century through the mid-twentieth century. Commercial utilization of manufactured coal gas occurred prior to that of natural gas due to the comparative ease of producing coal gas. The first manufactured coal gas light demonstration in the United States apparently took place in 1802. Benjamin Henfrey of Northumberland, Pennsylvania, used a “thermo-lamp,” reportedly based on European design, with which he produced a “beautiful and brilliant light,” Despite Henfrey’s successful demonstration in this case and others, he was unable to attract financial support to develop further his gas light endeavors.

Other experimenters followed, but the most successful were several members of the Peale family. Charles Willson Peale, the family patriarch, Revolutionary War colonel, and George Washington’s portraitist, opened a museum in Independence Hall in Philadelphia and subsequently transferred control of it to his son Rubens. Seeking ways to attract paying visitors, Rubens decided to use gaslights in the museum. With technical assistance from chemist Benjamin Kugler in 1814, Rubens installed gaslights. He operated and maintained the museum’s gas works for the next several years until his fear that a fire, or explosion, might destroy the building caused him to disassemble the equipment.

Rembrandt Peale in Baltimore

In the meantime, Rembrandt Peale, another of Charles’ sons, opened a new Peale Museum in Baltimore. The Baltimore museum was similar to his father’s Philadelphia museum in that it contained both works of art and specimens of nature. Rembrandt understood that his museum’s success depended upon its ability to attract paying visitors, and he installed gaslights in the Baltimore museum.

The first advertisement for the museum’s new gas light attraction appeared in the “American and Commercial Daily Advertiser” on June 13, 1816. The ad stated:

Gas Lights – Without Oil, Tallow, Wicks or Smoke. It is not necessary to invite attention to the gas lights by which my salon of paintings is now illuminated; those who have seen the ring beset with gems of light are sufficiently disposed to spread their reputation; the purpose of this notice is merely to say that the Museum will be illuminated every evening until the public curiosity be gratified.

Controlled by a valve attached to the wall in a side room on the second floor next to the lecture hall, Rembrandt Peale dazzled onlookers with his “magic ring” of one hundred burners. The valve allowed Rembrandt to vary the luminosity from dim to very bright. The successful demonstration of gas lighting at the museum underscored to Rembrandt the immense potential for the widespread application of gas lighting.

In his successful gas light demonstration, Rembrandt recognized an opportunity to develop a commercial gasworks for Baltimore. Rembrandt had purchased the patent for Dr. Kugler’s gas light method, and he organized a group of men to join him in a commercial gas lighting venture. These men established the Gas Light Company of Baltimore (GLCB) on June 17, 1816. On February 7, 1817, the GLCB lit its first street lamp at Market and Lemon Streets. The Belvidere Theater located directly across the street from the gas works became the first building illuminated by GLCB, and J. T. Cohen who lived on North Charles Street owned the first private home lit by gas. Rembrandt’s role at GLCB soon diminished, in large part because he lacked understanding of both business and relevant technological issues. Rembrandt was ultimately forced out of the company, and he continued his career as an artist.

The Gas Light Company of Baltimore was the first commercial gas light company in the United States. Other entrepreneurs soon thereafter formed gas light firms for their cities and towns. By 1850, about 50 urban areas in the United States had a manufactured gas works. Generally, gas lighting was available only in medium sized or larger cities, and it was used for lighting streets, commercial establishments, and some residences. Despite the rapid spread of gas lighting, it was expensive and beyond the means of most Americans. Other than gas, whale oil and tallow candles continued to be the most popular fuels for lighting.

1840s-50s: Use of Manufactured Gas Spreads Rapidly

Manufactured gas utilization for lighting and heating spread rapidly throughout the nation during the 1840s and 1850s. By the mid-nineteenth century, New York City ranked first in manufactured gas utilization by consuming approximately 600 million cubic feet (MMcf) per year, compared to Philadelphia’s consumption of approximately 300 MMcf per year.

Developments in portable gas lighting allowed for gas lamp installations in some passenger railroad cars. In the 1850s, the New Jersey Railroad’s service between New York City and Philadelphia offered gas lighting. Coal gas was stored in a wrought-iron cylinder attached to the undercarriage of the passenger cars. Each cylinder contained enough gas to light the two burners per car for fifteen hours. The New Haven Railroad also used gas lighting in the smoking cars of its night express. Each car had two burners that together consumed 7 cubic feet (cf) of gas per hour.

Challenge from Electric Lighting and Consolidation

Although kerosene and tallow candles competed with coal gas for the nineteenth century lighting market, it was electricity that forced permanent restructuring on the manufactured gas industry. In the early 1880s, Thomas Edison promoted electricity as both a safer and cleaner energy source than coal gas which had a strong odor and left soot around the burners. However, the superior quality of electric light and its rapid accessibility after 1882 forced gas light companies to begin promoting manufactured gas for cooking instead of lighting.

By the late nineteenth century, independent gas distribution firms began to merge. Competitive pressures from electric power, in particular, forced gas firms located in the same urban area to consider consolidating operations. By the early twentieth century many coal gas companies also began merging with electric power firms. These business combinations resulted in the formation of large public utility holding companies, many of which were referred to collectively as the “Power Trust.” These large utility firms controlled urban manufactured and natural gas production, transmission, and distribution as well as the same for electric power.

Manufactured gas continued to be used well into the twentieth century in many urban areas that did not have access to natural gas. Between 1930 and the mid-1950s, however, utility companies began converting their manufactured gas plants to natural gas, as the natural fuel became available through newly built long-distance gas pipelines.

Natural Gas

While the manufactured gas business expanded rapidly in the United States during the nineteenth century, natural gas was then neither widely available nor easy to utilize. During the Colonial era, it was the subject more of curiosity than utility. Both George Washington and Thomas Jefferson observed natural gas “springs” in present-day West Virginia. However, the first sustained commercial use of natural gas, albeit relatively minimal, occurred in Fredonia, New York in 1825.

After discovery of large quantities of both oil and natural gas at Titusville, Pennsylvania in 1859, natural gas found a growing market. The large iron and steel works in Pittsburgh contracted for natural gas supply as this fuel offered a stable temperature for industrial heat. Residents and commercial establishments in Pittsburgh also used natural gas for heating purposes. In 1884, the New York Times proclaimed that natural gas would help reduce Pittsburgh’s unpleasant coal smoke pollution.

1920s: Development of Southwestern Fields

The discovery of massive southwestern natural gas fields and technological advancements in long distance pipeline construction dramatically altered the twentieth century gas industry market structure. In 1918, drillers discovered huge natural gas fields in the Panhandle area of North Texas. In 1922, a crew located a large gas well in Kansas that became the first one in the Hugoton field, located in the common Kansas, Oklahoma, and Texas border area (generally referred to as the mid-continent area). The combined Panhandle/Hugoton Field became the nation’s largest gas producing area comprising more than 1.6 million acres. It contained as much as 117 trillion cubic feet (Tcf) of natural gas and accounted for approximately 16 percent of total U.S. reserves in the twentieth century.

As oil drillers had done earlier in Appalachia, they initially exploited the Panhandle Field for petroleum only while allowing an estimated 1 billion cubic feet per day (Bcf/d) of natural gas to escape into the atmosphere. As new markets emerged for the burgeoning natural gas supply, the commercial value of southwestern natural gas attracted entrepreneurial interest and bolstered the fortunes of existing firms. These discoveries led to the establishment of many new companies including the Lone Star Gas Company, Arkansas Louisiana Gas Company, Kansas Natural Gas Company, United Gas Company, and others, some of which evolved into large firms.

Pipeline Advances

The sheer volume of the southwestern fields emphasized the need for advancements in pipeline technology to transport the natural gas to distant urban markets. In particular, new welding technologies allowed pipeline builders in the 1920s to construct longer lines. In the early years of the decade, oxy-acetylene torches were used for welding, and in 1923 electric arc welding was successfully used on thin-walled, high tensile strength, large-diameter pipelines necessary for long-distance compressed gas transmission. Improved welding techniques made pipe joints stronger than the pipe itself; seamless pipe became available for gas pipelines beginning in 1925. Along with enhancements in pipeline construction materials and techniques, gas compressor and ditching machine technology improved as well. Long-distance pipelines became a significant segment of the gas industry beginning in the 1920s.

These new technologies made possible the transportation of southwestern natural gas to distant markets. Until the late 1920s, most interstate natural gas transportation took place in the Northeast, and it was based upon Appalachian production. In 1921, natural gas produced in West Virginia accounted for approximately 65% of interstate gas transportation while only 2% of interstate gas originated in Texas. The discovery of southwestern gas fields occurred as Appalachian gas reserves and production began to diminish. The southwestern gas fields quickly overshadowed those of the historically important Appalachian area.

Between the mid-1920s and the mid-1930s, the combination of abundant and relatively inexpensive southwestern natural gas production, improved pipeline technology, and increasing nation-wide natural gas demand stimulated the creation of a new interstate gas pipeline industry. Metropolitan manufactured gas distribution companies, typically part of large holding companies, financed most of the pipelines built during this first era of rapid pipeline construction. Long distance lines built during this era included the Northern Natural Gas Company, Panhandle Eastern Pipe Line Company, and the Natural Gas Pipeline Company.

Midwestern urban utilities that began receiving natural gas typically mixed it with existing manufactured gas production. This mixed gas had a higher Btu content than straight manufactured gas. Eventually, with access to reliable supplies of natural gas, all U.S. gas utilities converted their distribution systems to straight natural gas.

Samuel Insull

In the late 1920s and early 1930s, the most well-known public utility figure was Samuel Insull, a former personal secretary of Thomas Edison. Insull’s public utility empire headquartered in Chicago did not fare well in the economic climate that followed the 1929 Wall Street stock market crash. His gas and electric power empire crumbled, and he fled the country. The collapse of the Insull empire symbolized the end of a long period of unrestrained and rapid growth in the U.S. public utility industry.

Federal Regulation

In the meantime, the Federal Trade Commission (FTC) launched a massive investigation of the nation’s public utilities, and its work culminated in New Deal legislation that imposed federal regulation on the gas and electric industries. The Public Utility Holding Company Act (1935) broke apart the multi-tiered gas and electric power companies while the Federal Power Act (1935) and the Natural Gas Act (1938), respectively authorized the Federal Power Commission (FPC) to regulate the interstate transmission and sale of electric power and natural gas.

During the Depression the gas industry also suffered its worst tragedy in the twentieth century. In 1937 at New London, Texas, an undetected natural gas leak at the Consolidated High School resulted in a tremendous explosion that virtually destroyed the Consolidated High School, 15 minutes before the end of the school day. Initial estimates of 500 dead were later revised to 294. Texas Governor Allred appointed a military court of inquiry that determined an accumulation of odorless gas in the school’s basement, possibly ignited by the spark of an electric light switch, created the explosion. This terrible tragedy was marked in irony. On top of the wreckage, a broken blackboard contained these words apparently written before the explosion:

Oil and natural gas are East Texas’ greatest mineral blessings. Without them this school would not be here, and none of us would be here learning our lessons.

Although many gas firms used odorants, the New London explosion resulted in the implementation of new natural gas odorization regulations in Texas.

The New Deal era regulatory regime did not appear to constrain gas industry growth during the post-World War II era, as entrepreneurs organized several long-distance gas pipeline firms to connect southwestern gas supply with northeastern markets. Both during and immediately after World War II, a second era of rapid gas industry growth occurred. Pipeline firms targeted northeastern markets such as Philadelphia, New York and Boston, very large urban areas previously without natural gas supply. These cities subsequently converted their distribution systems from manufactured coal gas to the more efficient natural gas.

In the 1950s, the beginnings of a national market for natural gas had emerged. During the last half of the twentieth century, natural gas consumption in the U.S. ranged from about 20-30% of total national energy utilization. However, the era of natural gas abundance ended in the late 1960s.

1960s to 1980s: Price Controls, Shortages, and Decontrol

The first overt sign of serious industry trouble emerged in the late 1960s when natural gas shortages first appeared. Economists almost uniformly blamed the shortages on gas pricing regulations instituted by the so-called Phillips Decision of 1954. This law extended the FPC’s price setting authority over the natural gas producers that sold gas to interstate pipelines for resale. The FPC’s consumerist orientation meant that it had held gas prices low and producers lost their incentive to develop new gas supply for the interstate market.

The 1973 OPEC oil embargo exacerbated the growing shortage problem as factories switched boiler fuels from petroleum to natural gas. Cold winters further strained the nation’s gas industry. The resulting energy crisis compelled consumer groups and politicians to call for changes in the regulatory system that had constricted gas production. In 1978, a new comprehensive federal gas policy dictated by the Natural Gas Policy Act (NGPA) created a new federal agency, the Federal Energy Regulatory Commission (FERC) to assume regulatory authority for the interstate gas industry.

The NGPA also included a complex system of natural gas price decontrols that sought to stimulate domestic natural gas production. These measures soon resulted in the creation of a nationwide gas supply “bubble” and lower prices. The lower prices wreaked additional havoc on the gas pipeline industry since most interstate lines were purchasing gas at high prices under long-term contracts. Large gas purchasers, particularly utilities, subsequently sought to circumvent their high-priced gas contracts with pipelines and purchase natural gas on the emerging spot market.

Once again, dysfunction of the regulated market forced government to act in order to try and bring market balance to the gas industry. Beginning in the mid-1980s, a number of FERC Orders culminating in Order 636 (and amendments) transformed interstate pipelines into virtual common carriers. This industry structural change allowed gas utilities and end-users to contract directly with producers for gas purchases. FERC continued to regulate the gas pipelines’ transportation function.

The Future

Natural gas is a limited resource. While it is the most clean burning of all fossil fuels, it exists in limited supply. Estimates of natural gas availability vary widely from hundreds to thousands of years. Such estimates are dependent upon the technology that must be developed in order to drill for gas in more difficult geographical conditions, find gas where it is expected to be located, and transport it to the consumer. Methane can also be extracted from coal, peat, and oil shale, and if these sources can be successfully utilized for methane production the world’s methane supply will be extended another 500 or more years.

For the foreseeable future, natural gas will continue to be used primarily for residential and commercial heating, electric power generation, and industrial heat processes. The market for methane as a transportation fuel will undoubtedly grow, but improvements in electric vehicles may well dampen any dramatic increase in natural gas powered engines. The environmental characteristics of natural gas will certainly retain this fuel’s position at the forefront of all fossil fuels. In a broadly historical and environmental perspective, we should recognize that in a period of a few hundred years, human society will have burned as fuel for lighting, cooking and heating a very large percentage of the earth’s natural gas supply.


Castaneda, Christopher J. Invisible Fuel: Manufactured and Natural Gas in America, 1800-2000. New York: Twayne Publishers, 1999.

Herbert, John H. Clean Cheap Heat: The Development of Residential Markets for Natural Gas in the United States. New York: Praeger, 1992.

MacAvoy, Paul W. The Natural Gas Market: Sixty Years of Regulation and Deregulation. New Haven: Yale University Press, 2000.

Rose, Mark H. Cities of Light and Heat: Domesticating Gas and Electricity in Urban America. University Park: Pennsylvania State University Press, 1995.

Tussing, Arlon R. and Bob Tippee. The Natural Gas Industry: Evolution, Structure, and Economics, second edition. Cambridge, MA: Ballinger Publishing, 1984.

Citation: Castaneda, Christopher. “Manufactured and Natural Gas Industry”. EH.Net Encyclopedia, edited by Robert Whaples. September 3, 2001. URL