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Report Defines Gas Policies Needed to Maintain U.S. Self-Reliance

Issue 11 and Volume 107.

A recently published report by the National Petroleum Council identifies two scenarios by which the U.S. can remain self-reliant for its supply of natural gas. The report analyzes supply, demand, and the infrastructure for natural gas in North America in the near, mid, and long term (through 2025). The report’s recommendations are intended to preserve the critical benefits of natural gas to the North American economy and environment.

The analysis, conducted by the National Petroleum Council (NPC), states that current higher gas prices are the result of a fundamental shift in the supply and demand balance of natural gas. It says that North America is moving to a period in which it will no longer be self-reliant in meeting its growing natural gas needs because production from traditional U.S. and Canadian basins has plateaued.

The solution, says the NPC, is a balanced portfolio that includes increased energy efficiency and conservation; alternate energy sources for industrial consumers and power generators – including renewables; gas resources from previously inaccessible areas of the U.S.; liquefied natural gas (LNG) imports; and gas from the Arctic region.

Under what the report terms the reactive path scenario, there must be continued improvements in energy efficiency and conservation coupled with the enactment of enabling legislation for the Alaskan gas pipeline. Local siting opposition to new LNG terminals must be overcome. LNG project permit applications should be processed within one year, says the report. And there must be a streamlining of permitting processes to allow increased drilling and development activity in the Rocky Mountains.

A second scenario — termed the “balanced future” scenario — builds in the effects of policies promoting supply development and allows greater flexibility in fuel-switching and fuel choice. The scenario calls for specific measures to improve demand flexibility and efficiency, increase supply diversity, sustain and enhance infrastructure, and promote efficiency of markets. The report notes that regulatory barriers to long-term contracts for gas transportation and storage impair infrastructure investment, expected to average $8 billion per year in order to sustain the reliability of the existing infrastructure. Among the uncertainties with the potential to impact the supply/demand balance for each scenario are weather, economic growth, and regulation of carbon dioxide emissions.

The NPC says that all of the report’s recommendations require action and are necessary to create a more favorable outcome for consumers and the economy. The complete report may be accessed from the NPC site at www.npc.org.