The Rocky Mountain region continues to periodically suffer from weak gas prices because its infrastructure is relatively immature, and has not kept pace with the region's rising gas production, say A.G. Edwards & Sons analysts Mike Scialla and Greg McMichael in a recent report. Presently, gas production in the northern Rockies is 5 billion cubic feet (Bcf) per day, but takeaway capacity is 3.4 Bcf per day. Local demand is highly seasonal, with the market mainly comprised of residential heating for Front Range communities. Industrial customers do not take enough gas to compensate for the lack of demand in summer months. This past summer, chock-full gas-storage reservoirs and infrastructure problems plus weak demand combined to cause a price blowout in the northern Rockies. Rockies gas was selling for $1.80 per million Btu less than Gulf Coast gas in second-quarter 2002, and as much as $3 less during the third quarter. Historically, the average basis differential during the past 10 years has been approximately 50 cents per million Btu. The situation may be alleviated this year. An expansion of the Kern River Pipeline system, which currently transports 860 million cubic feet per day from Opal, Wyoming, to markets in central California, will take an additional 1.75 Bcf per day from the Rockies beginning in the second quarter of 2003, catapulting the region's takeaway capacity to 4.3 Bcf per day. Additionally, Northwest Pipeline is expanding its regional system by 175 million cubic feet per day. That work is scheduled for completion in the fourth quarter. The increased capacity out of the northern Rockies should have a significant impact on the basis differential for the next two years, particularly during the summer months, the analysts say. Producers can look toward enjoying higher wellhead prices in 2003 and 2004. Nonetheless, the fix is short-term. "Given the region's potential for robust supply growth, we believe relief could be temporary, so comparable expansions will be required within the next three years to prevent future basis blowouts," they conclude. -Peggy Williams