NPC study: good policy choices mean $1 trillion in energy savings

A new National Petroleum Council natural gas report to be unveiled Thursday predicts energy consumers could save $1 trillion in gas costs over the next 2 decades if the White House's energy policy strategy is adopted, industry and government officials familiar with the document said Wednesday.

Sept. 24, 2003

4 min read

Maureen Lorenzetti
Washington Editor

WASHINGTON, DC, Sept. 24 -- A new National Petroleum Council natural gas report expected to be unveiled Thursday predicts energy consumers could save $1 trillion in gas costs over the next 2 decades if the White House's energy policy strategy is adopted, industry and government officials familiar with the document said Wednesday.

The report is said to outline a portfolio of policy choices that Department of Energy officials will tout as a way to dampen market volatility, sources said.

The report predicts that "traditional" North American production will only be able to meet 75% of US demand by 2025. To meet new demand, policymakers will need to allow drilling in areas now off limits, encourage energy efficiency and LNG regasification plants, and promote more fuel-switching among industrial customers.

Report authors said, the key messages of the study are the following: North America is no longer gas self-reliant; the US must balance its energy policy to ensure that incentives to use gas match access to gas reserves, and future supply-demand balance requires energy efficiency and supply diversity.

The NPC report comes as the US Congress moves toward final negotiations over a comprehensive energy bill. Republican leaders hope to reach consensus on final legislation early next month, but parts of the bill are so controversial discussions could stall the process through the fall.

Drilling controversy
Anticipating criticism from environmental groups, the report is expected to point out the study only recommends that access to all moratoria areas be considered as part of a balanced gas future; it does not recommend one area over another or favor any companies' interests over another.

NPC study authors also will note that their analysis shows that new areas will need to be available for exploration and production in order to meet projected demand for gas.

With regard to leasing in the Arctic National Wildlife Refuge—a provision now in the House energy bill—the NPC study does not show any reserves or drilling in ANWR, nor does it address the conflicting positions taken by both sides in that debate.

NPC does maintain that the environmental impact of increasing gas supplies through many areas now off limits to drilling could be done safely and with a minimal impact.

The report is expected to note that while much of the resource base is indeed available for drilling, many areas that are restricted offer higher promise for economically recoverable fields. NPC also is expected to state that 205 tcf of the estimated 1,250 tcf of gas representing the technical resource value is restricted either by lease stipulation or drilling moratoria.

Report authors will note that the 1,250 tcf value is roughly twice the size industry expects to be able to recover economically, even with higher gas prices. NPC also will say that undeveloped areas such as the Rockies, the eastern Gulf of Mexico, and the other offshore moratorium areas offer the potential of larger fields. Outside of the Rockies and the gulf, production will not grow and will most likely decline slightly. The potential of larger field size discoveries in traditional producing areas is remote due to decades of development. In addition, these areas are very near to substantial growth markets like California and Florida that will need energy for their economies to grow and prosper, NPC is expected to say.

Even with more US gas production, gas imports—including LNG—will be needed, the study is expected to conclude. At least one West Coast LNG processing plant may be needed, with two on the East Coast by 2025. The US currently has four LNG regasification facilities.

Anticipated government response
US Sec. of Energy Spencer Abraham is expected to thank the NPC Thursday for its 15 month-long effort to examine the variables that could affect supply, demand, transportation and distribution of gas in North America through 2025. Abraham asked NPC last year to identify actions that can be undertaken to ensure adequate supplies of energy for consumers.

Abraham is expected to say that President George W. Bush's administration places the highest priority on developing an energy policy that ensures "a sound economic future in an environmentally responsible manner."

Contact Maureen Lorenzetti at [email protected].