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 America's Natural Gas Supply Challenge 

During the 1990s, natural gas customers enjoyed relatively stable prices because supplies of natural gas exceeded market demands. Recently, though, customers have endured volatile natural gas prices because gas supply and demand are so tightly balanced that any change in market demand or available supply is reflected immediately in changing prices. 

Despite these price fluctuations, the American Gas Association (AGA) is confident that supplies of natural gas will be adequate to meet customers’ needs throughout the upcoming winter heating season. Natural gas utilities have a well-deserved reputation for reliable service, and many are already working to line up natural gas supplies for their residential, commercial and industrial retail customers for next winter. For example, energy utilities can purchase natural gas during the spring and summer months and store it underground for use on the coldest winter days.

The growing discrepancy between increasing demand for natural gas and available supplies could result in continued higher prices for natural gas consumers unless public policies and personal attitudes change about bringing fresh supplies of natural gas to market, according to a report by the American Gas Association. AGA’s report -- From the Ground Up: America’s Natural Gas Supply Challenge -- was issued in December 2002. 

Many of the wells that have produced abundant quantities of natural gas since the 1980s and 1990s are reaching a point of rapidly diminishing returns. Regrettably, technology alone cannot indefinitely extend the production life of mature producing areas. It’s like putting straws in a milkshake – whether you use one straw or six, sooner or later you draw it all out and have to go get more.

The American Gas Association (AGA) believes that the best way to keep prices reasonable for households, schools, factories, electric power-generation plants and other natural gas customers is to ensure that supplies meet anticipated demand. Increased natural gas supplies must come from two sources, according to From the Ground Up:

  1. Traditional supplies (onshore and offshore wells in the U.S. and Canada), which meet most current U.S. natural gas needs. Natural gas production will continue to “migrate,” such as to deeper waters of the Gulf of Mexico and to Rocky Mountain basins. Areas that are currently off-limits to gas production must also come into play.
  2. Non-traditional supplies, such as Alaska natural gas and liquefied natural gas (LNG), will help bridge the supply gap. In part, this will require construction of a pipeline to transport natural gas from Alaska to the Lower-48 states and promoting expansion or construction of LNG import and storage terminals.

Federal and state officials must take the lead in overcoming a pervasive “not in my backyard” attitude toward energy infrastructure development; and current restrictions on access to new sources of supply must be re-evaluated in light of technology developments that have reduced the costs, uncertainty and environmental impact of gas exploration and production. 

Congress can help increase natural gas supplies, expand the energy delivery system and promote greater energy efficiency by approving national energy legislation. The U.S. Senate will debate its version of energy legislation in June, and the U.S. House of Representatives approved its energy policy bill (H.R. 4) on April 11. 

Eight of 10 Americans put a high priority on Congressional passage of a national energy strategy, according to a survey conducted by Wirthlin Worldwide for AGA. The survey of 1,003 Americans was conducted from March 21 - 24, 2003.

 
 

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