U.S. gas groups confident of 30-tcf market

Natural gas industry groups have told a U.S. Senate committee they are confident the U.S. industry could supply a 30-tcf market within the next 10-15 years.

Testimony came from the American Gas Association, Interstate Natural Gas Association of America, and Natural Gas Supply Association.

AGA view

Paul Elbert, president and CEO for natural gas at Consumers Energy Co., Jackson, Mich., testified for AGA.

Elbert told a Senate energy committee hearing on natural gas supply and infrastructure, "The consumption level of 30 tcf is achievable from a gas supply and delivery perspective.

"Growth of this magnitude is desirable, and it should be vigorously promoted by both legislators and regulators. This is because natural gas offers benefits in terms of consumer economics, environmental impacts, resource efficiency, and national security."

He said, "The magnitude of the projected growth is substantial, but not unlike the growth experienced since the mid-1980s. Gas consumption increased by 35% between 1986 and 1997ellipseIncreasing consumption from the 1997 level of 22 tcf to 30 tcf would require very similar growth of 36%."

Elbert said much of the additional demand would come in the electric power generation sector-both electric utility plants and independent power producers.

But he said that, even if gas demand for electricity generation doubles by 2010, as AGA predicts, this sector will account for only 20-25% of total gas consumption. Most gas consumption (75-80%) will remain in the residential, commercial, industrial, and transportation sectors.

"The projected increase offers challenges to natural gas producers, pipelines, and local gas utilities, but they are challenges that can be met."

Elbert said Congress should increase funding for federal gas research programs, adopt fair standards for gas in federal energy efficiency programs, revise Department of Transportation and state rules governing pipeline and distribution lines to reduce costs and improve safety, enact fuel-neutral environmental standards, eliminate disincentives for expanding or improving distribution lines, and remove impediments to the construction of utility pipelines.

Ingaa view

Ingaa agreed that the U.S. gas industry needs more flexibility to meet a 30-tcf market.

Keith E. Bailey, chairman, president, and CEO of Williams, testified for Ingaa. He said, "In today's environment, a 36% market expansion is not a given. We will have to work to develop the 30-tcf U.S. market, raising the value of gas service and keeping our project costs down."

Bailey said that, to meet the challenge, U.S. interstate natural gas pipelines will need access to capital through competitive rates of return, increased regulatory flexibility, and an expedited certificate and construction process at the Federal Energy Regulatory Commission.

Producers' view

NGSA said that gas producers can meet growing market demand but face serious obstacles.

Richard Sharples, NGSA chairman and Anadarko Energy Services Co. president, said the collapse of natural gas prices has undermined producers' ability to spend adequately for gas exploration and production.

He noted that producers' cash flows have been reduced and shareholder returns are down, reducing the attractiveness of gas producing companies to investors and resulting in less infrastructure development.

Sharples said gas producers don't need a federal handout, only regulatory policies that promote a robust industry and guard against further erosion in the industry's investment attractiveness.

He said, "Our success in growing the supply to meet (future) demand-indeed our very viability-depends not only on concerted industry management efforts, but also on sound and forward-looking legislative and regulatory actions."

Sharples said gas producers have requested royalty in-kind legislation, an end to the moratoriums on offshore drilling, and no renewable energy standard in electricity deregulation legislation.