Flawed government policies prohibiting natural gas development in many areas are to blame for US gas shortages at a time when rising gas demand is expected to continue its increase, charged the National Petrochemical and Refiners Association July 10 in written testimony before the US Senate Energy & Natural Resources Committee hearing.
"Our experience with high natural gas prices and short supplies last winter was a reality check for the nation's flawed policies, and we must act now to correct the situation," NPRA said. Otherwise, policymakers will have to accept responsibility for the ultimate effect of short natural gas supplies and rising prices on the US petrochemical and refining industries: lost jobs, a worsening trade balance, and further loss of US industrial leadership, it said.
"There is no Organization of Petroleum Exporting Countries to blame for this natural gas supply crisis." NPRA said, stressing that the current natural gas shortfall is not a resource problem: "The United States has an abundant supply of domestic gas."
In its testimony, NPRA called upon the government both to support conservation measures and to expand the areas of exploration available for domestic development.
The hearing comes at a time when many government, industry, and private experts agree that US natural gas demand by 2020 will rise by as much as 60% from today's levels.
It remains unclear whether domestic gas production can increase enough to meet this new demand, NPRA said. However, "NPRA believes the current policy of limiting natural gas supply while encouraging gas use because of its environmental benefits—mostly in the generation of base and peak load electricity—has created and could extend both higher gas prices and continued volatility," the association added.
In addition, because 70% of petrochemical producers in Western Europe and Asia use naphtha as a feedstock, while 70% of US petrochemical and basic chemical producers use more-costly natural gas and natural gas liquids, the high cost of gas is driving petrochemical production and expansion projects overseas, further weakening the US economy, NPRA charged.
Additional displacements will occur if the current and prospective gas price and supply situation is not addressed promptly, it cautioned. "Although recent data indicate a larger-than-normal storage rate over the past few weeks, we should not be lulled into complacency because favorable weather patterns have led to what may be only a temporary increase in these daily gas storage levels."
Solutions
NPRA contends that in the short term, it may be difficult to make significant changes in supply. However, efforts can still be made to mitigate demand by encouraging conservation and energy efficiency.
"NPRA urges both Congress and the [Bush] administration to act to improve energy efficiency and conservation in the use of natural gas and power," especially as the nation enters the summer cooling season. "If natural gas supplies become extremely tight, federal and state governments should allow electric utilities and industrial facilities to switch to alternative fuels in order to conserve natural gas supplies. Action taken now to anticipate problems would be even more helpful."
Addressing long-term supply, NPRA called for a frank and open public debate followed by swift action, saying that Congress must evaluate and change current policies that inhibit development of additional domestic natural gas supplies.
NPRA urged increased access to public lands onshore and on the Outer Continental Shelf, with increased developmen opportunities. "New and promising domestic areas for development must be open for exploration and production. Alaskan natural gas should be brought to market in the Lower 48 as soon as possible," it advised.
NPRA asked Congress to consider all of the findings and recommended policy options it developed as an active participant in the National Petroleum Council's study to develop recommendations and policy options addressing the long-term future of natural gas as one of the key elements of the nation's energy portfolio.
In the interim, NPRA suggested that Congress and the administration focus on current and future supply-oriented policy initiatives. It said they should focus on all energy options, including gas supply source diversity; modernization, expansion, and permitting of infrastructure, including LNG facilities and pipelines, development of new technologies, and natural gas market transparency and efficiency.
"It is clear that natural gas will play an increasingly important role in America's energy future, but we must analyze, clarify, and now correct policies to maximize the available supply of this key resource," NPRA concluded.