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<br />1-7 <br /> <br /> <br />1'\, .".., ') 1 'I <br />.... ,. < ,.-< m " <br /> <br />resultant projections were checked for reasonableness against three different <br />crude petroleum replacement cost analyses. <br />Natural gas prices were assumed to escalate rapidly throughout the <br />1980's and to attain crude petroleum equivalent pricing at the wellhead <br />(on a Btu basis) by the 1990 study year. (NGPA schedules decontrol to <br />become effective for most categories of gas between 1985 and 1987.) For <br />the last two study years, 2000 and 2020, natural gas at wellhead was <br />assumed to be priced equivalent to crude petroleum at wellhead on a Btu. <br />basis. <br />End-use natural gas and refined petroleum commodity prices were <br />estimated assuming a constant markup on a Btu basis. Electricity prices, <br />on the other hand, were estimated based on projected price escalation <br />rates for fuels and projected capacity and generation mix. Because of <br />the current disparity within the Study Area with regard to installed <br />coal-fueled generating capacity and the impact of current mix on future <br />price escalation, two sets of electricity prices were projected: an expected <br />band for most of the Study Area which assumed that a high proportion of <br />installed capacity was natural gas fueled, and low band projection for <br />those few areas which currently have a high proportion of coal fueled <br />generation. Electric rate class price projections were made based on <br />historical rate class price relationships. <br />Several of the states performed energy price sensitivity analyses for <br />their farm enterprise linear programming models to test the potential <br />impact of significantly higher energy commodity prices on future farm <br />profitability and energy consumption. Due to the range of local resource <br />limitations existent '1crosS the Study Area, which were incorporated into <br />the models, no uniform level of impact on aggregate farm profitability can <br />be predicted for higher energy prices. I n general, energy consumption <br />and agricultural profitability does decline under higher energy prices. <br />Depending on the relative contribution of irrigated agriculture to total <br />returns to land and management, the increased energy costs do not <br />necessarily result ill large decreases in farm income. This result is illus- <br />trated in Figure 1-3, which shows the change in returns to land and <br />