Nick Snow
Washington Correspondent
WASHINGTON, DC, Jan. 18 -- US policymakers should expect heavier natural gas demand growth if they embrace alternatives to address global climate change, trade association executives said on Jan. 17.
"A dam is about to burst in Washington regarding global climate change," said Natural Gas Supply Association Pres. R. Skip Horvath. "We believe the voluntary steps we've taken are working, but we're going to be at the table discussing what can be done further.
"Specifically, we intend to link climate change with access—namely, if we're going to be asked to produce more of this clean-burning fuel, we need to be able to explore more areas," he said during the US Energy Association's third annual State of the Energy Industry conference.
Interstate Natural Gas Association of America Pres. Donald F. Santa Jr. agreed that global climate change legislation could increase domestic gas demand. "While we don't anticipate final action in this Congress, the debate has moved to a new stage," he said.
Noting that gas supplies 24% of the nation's energy, American Gas Association Pres. David N. Parker suggested that stronger demand will need to be addressed more aggressively through conservation and energy efficiency efforts. "Price volatility is our No. 1 issue. That's why we're seeking more supplies," he said.
William Cooper, president of the Center for Liquefied Natural Gas, said LNG probably will continue to play an increasing role despite demand having dropped somewhat in 2006. He cited a US Energy Information Administration report predicting increased LNG imports as more US firms switch from spot purchases to long-term contracts.
US must compete
"LNG is a global commodity. We will have to compete with other consuming nations, but we should not shy away from competition. As we emerge as a dominant consumer, the price of LNG should come down," Cooper said.
Horvath said that using the Henry Hub gas price as a contract reference is an encouraging sign. "But the bad news is that many [LNG] contracts are being written with a Henry Hub-plus figure," he added.
"Customers seem to be adjusting to $6 gas. But they're also reducing the amount they us—by about 1%/year for the last 25 years," said Parker.
Santa said that higher prices in some areas reflect limited pipeline capacity, a problem that could grow worse if construction supply and contractor availability tightens and the Federal Energy Regulatory Commission doesn't address pipelines' financial returns.
More public education is needed at the state and local level to combat opposition to building pipelines and other energy infrastructure, he added.
"Constant tweaks and additions to pipeline systems are essential as production moves farther out," Horvath said.
The outlook for construction of a gas pipeline from Alaska to the Lower 48 has grown cloudier, the four association officials agreed. "Two years ago, when Congress approved the loan guarantees, it looked more promising," said Parker.
"It's been delayed indefinitely. I'll be surprised if it happens in our lifetimes," said Horvath.
"It's important to remember that once it's approved, it still will take many years to construct," said Santa.
"But it will be needed," said Cooper.
Parker said it will be essential to secure more gas supplies. Some may say the bill Congress passed and the president signed into law doesn't go far enough, he said, "but it's important to remember that we got what we wanted, and there's no movement to reverse it," he said.
Contact Nick Snow at [email protected].
