Washington, DC�R. Skip Horvath, Natural Gas Supply Association (NGSA) president, told a Senate agriculture subcommittee Thursday that US producers are responding to higher natural gas prices with increased drilling.
Horvath said, "We are confident that natural gas [supplies] will meet winter market demand."
He said gas demand has grown in recent years while the price paid for gas service declined in real terms from $4.10/MMBTU in 1983, when the government regulated prices, to $3.05/MMBTU in 2000 (1998 dollars) under competition.
Horvath said, because the price of oil and gas collapsed in 1998 and 1999, industry spent less on exploration and production.
"Today, producers are individually responding to the market. The number of active natural gas drilling rigs is up 90% from April 1999, and 75% of the active US drilling rig fleet is engaged in drilling for natural gas. Thus, the supply of natural gas is expected to slowly increase.
"However, there is a lag between the time producers begin to drill and the time it takes to get that gas to market. It can take anywhere from a few months to several years to bring supply to market, depending upon the geographic location and point in the exploration and development cycle at which producers begin the process."
Horvath told the hearing that tight supply is not a sign of inadequate resources.
"We have an ample resource base of natural gas to supply the growing market. The National Petroleum Council estimates that 1,466 tcf of natural gas resources exists in North America. That number continues to grow as new technologies allow producers to extend the frontiers for development of existing natural gas resources."
Horvath warned that, if the government imposes price controls, it could create a gas shortage.
"A competitive, free marketplace works to everyone's advantage. Free markets have not always been allowed to work for natural gas, and consumers have suffered the consequences.
"For many years, the federal government regulated the price paid to natural gas producers. This intervention resulted in artificial shortages, and government officials wisely decided to let competition evolve instead."
Horvath said the government could help supplies by opening more federal lands to drilling.
"Much of the nation's resource base resides on federal lands or beneath federal waters that have drilling restrictions."
He said drilling is not allowed on the East and West Coasts, in 56% of the eastern Gulf of Mexico, and on 40% of federal lands in the Rocky Mountain region.