Current Natural Gas Situation

Natural gas provides approximately a quarter of the nation's total energy supply, and according to the EIA Annual Energy Review 2006, between 1985 and 2005, natural gas consumption increased about 30%, from 17 Tcf to 22 Tcf. During this same period however, supply has stagnated. Since 1996, domestic production of natural gas has grown at an annual rate of well below one percent. This slow increase is due to a number of factors, a primary one being that existing and producing gas fields in the U.S. are slowly being tapped out. In order to maintain production, domestic producers are drilling more wells and extracting gas more efficiently from existing wells. Due to increased prices, the current rig count is near an all-time high, but wells are being depleted at an ever-increasing rate. Adding to the natural gas supply problem is the fact that gaining access to public lands, where most of the promising natural gas fields are, has become increasingly difficult.

The first step in natural gas production is to acquire a lease to develop a natural gas field, but this alone is not sufficient to begin drilling. Oil and gas leases on federal lands must also comply with the National Environmental Policy Act, the Clean Water Act, the Clean Air Act, the Endangered Species Act and other statutes and regulations. However, obtaining leases and complying with the law are often not sufficient to extract natural gas. Litigation has stifled access to natural gas sources as environmental groups have brought numerous lawsuits to prevent even preliminary, noninvasive exploration activities.

One place to turn for increased supply is Alaska, which has 18% of all domestic gas reserves. However, at this point in time, its gas is relatively inaccessible-there is, currently, no pipeline to transport it to the lower 48 states and the liquefied natural gas facilities in Alaska are limited. Solving this transportation problem will be neither cheap nor quick, but it will measurably improve supply.

Long-term supply outlook

Factors shaping long-term demand for natural gas:

• Because of its environmental and economic benefits, natural gas is the preferred fuel for more than 80 percent of new electric-generating capacity in the U.S.
• The U.S. Department of Energy's Energy Information Administration forecasts that natural gas demand will grow by about 22 percent between now and 2030, including a more than 62 percent increase for electric power generation (EIA Annual Energy outlook 2006).
• The new domestic fields being found are smaller and have shorter lives.

Short-term supply potential limited

There is no "silver bullet" fix to our current natural gas supply problem. In the short term, there is not much additional supply to be had. Some additional volumes of liquefied natural gas (LNG) might be imported and Canada might be able to provide a bit more supply. Our nation is suffering from the legacy of government policies that have discouraged the development of domestic natural gas supplies while, at the same time, encouraging consumption. And, substantial increases in supply cannot be expected in the short term as it takes a number of years to develop and produce new supplies and to build the pipelines needed to get the gas to consumers. What can be done in the short term is to emphasize energy efficiency and to conserve our energy use.

Government policies limit supply

While natural gas demand has grown, government policies have had the effect of restricting potential supply:

• Within the last decade, federal government moratoria have closed areas off the East and West Coasts and in the Eastern Gulf of Mexico. The moratoria prohibit any natural gas development until 2012 and affect an estimated 70 trillion cubic feet (Tcf) of U.S. natural gas resources.
• Even lands that are seemingly "available" for energy development have significant limits on development - in some cases, these restrictions result in removal from development.
  • A Department of the Interior study found that limits imposed on leases affected 36 percent of the lands in five key areas in the West - areas with about 15 Tcf of natural gas resources. And, this does not include additional restrictions that can be imposed after the leasing phase.

• Moreover regulatory and administrative barriers have impeded development of valuable natural gas resources under non-park, non-wilderness public lands in the Rocky Mountain West:
  • Many resource management plans are outdated. These plans (required by Congress) are a necessary step in preparing for lease sales and for managing development on federal lands.
  • The process for getting permits to drill has been fraught with delays. In many cases regional Bureau of Land Management (BLM) offices have been inadequately staffed. In addition, delays have become frequent in the permitting process for new wells. Although BLM's own regulations call for approval within 30 days, a backlog of more than 2,800 applications for permits to drill had developed, with many permits taking in excess of 130 days to process.
  • In passing the Energy Policy Act of 2005 Congress recognized the effect of these delays on our ability to develop valuable.natural gas resources in the West. In response to the directives of the Energy Policy Act, BLM has launched a series of initiatives to address staffing and permit processing concerns. Details may be found on BLM's website at http://www.blm.gov/wo/st/en/prog/energy/epca_chart.html.

• Litigation is frequently pursued by environmental groups to block development despite the lower emissions associated with clean-burning natural gas.

Meeting natural gas needs

As of May 2006, the U.S. oil and natural gas industry had nearly 25 percent more drilling rigs looking for new supplies than a year ago. Natural gas users can help alleviate the tightness in supply by using gas efficiently and eliminating waste. However, the ability to meet the nation's natural gas needs will continue to be in question until promising areas are opened for responsible exploration and production and impediments to development are removed -- and until our supplies are diversified, for example, through imports of LNG.