Natural gas producers in the U.S. have something to cheer beyond the recent apparent rebound in their commodity's price. Important parallel efforts are under way to ensure long term gas market growth.
The Interstate Oil and Gas Compact Commission (logcc) and U.S. Department of Energy are addressing one of two mostly unfounded but unfortunately widespread beliefs that threaten to keep gas from fulfilling its potential in the energy supply mix. They are trying to assure utility regulators about security of gas supply. They can do little about the other threatening belief, which is that developments such as these have nothing to do with producers.
MARKET GROWTH
Iogcc, an association of state oil and gas regulators, has taken the supply security issue straight to the people who need it. It has proposed that the National Association of Regulatory Utility Commissioners (Naruc) study gas issues and has offered to help. To utility commissioners, gas issues mean two things: supply and price. Producing states can offer plenty of information on those subjects, of course. But logcc has taken a proper approach in suggesting that Naruc conduct its own study. Credibility counts.
And Naruc is the right audience. State utility commissioners have more oversight responsibility than ever in the areas of service reliability and price. Many see gas only in the context of delivery interruptions of the 1970s. Those problems, as producers know, resulted from regulations, not reserves. Most of the regulations no longer exist. But many consumers and state regulators still have doubts about gas supply.
Producers may find gas shortage fears difficult to believe. They have been struggling with a deliverability surplus for a decade. To them the question is not whether the U.S. gas resource can support robust market growth but whether prices will justify sufficient exploration and development. Producers tend to take gas market growth for granted on the basis of the fuel's environmental advantages. But environmental advantages won't sell gas if consumers or regulators question deliverability. It is a big issue, compounded by consumer price fears aggravated when producing states deepened regulatory prorationing earlier this year.
The Naruc study proposed by logcc might help dispel some of the gas supply uncertainty lingering at the downstream end of the pipeline. And the recommendation comes while DOE and the Federal Energy Regulatory Commission are working toward comparable goals. A FERC-DOE task force study this month called for improvements in gas deliverability information available to the market. DOE in February held a gas issues seminar for Naruc and plans a similar conference in New Orleans next April.
POLITICAL THRUST
The DOE and logcc initiatives have a political thrust, of course. The Bush administration's energy strategy promotes new applications for gas. logcc considers gas so important to its member states' fortunes that it recently added the word "gas" to its name. By their initiatives with Naruc, DOE and logcc regulators show they recognize the threat to their policy objectives represented by excessive consumer fears about adequacy of gas supply.
Those gas market policy objectives match the long term interests of producers. Tomorrow's gas production levels may have less to do with reserves than with what utility managers and regulators as well as nonutility power generators think today about gas supply security. By now most consumers know gas burns clean and hot; what some still must learn is that it will be there when they need it.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
