Natural Gas Crisis Fuels Debate Across U.S.

"Increasing natural gas supply in the short run is not a realistic possibility. New pipelines, increased drilling, and the construction of new Liquefied Natural Gas facilities all require significant lead time. However, increasing the energy efficiency of our appliances, constructing new wind, solar and geothermal energy facilities, and cutting back on excess energy consumption can all occur within the next 6-18 months."
Carol Werner, Executive Director, Environmental and Energy Study Institute

"The United States has an abundant supply of natural gas, but outdated federal and state policies that govern exploration and production have kept supply flat while a host of policies promote increased use of natural gas, such as for electric-power generation. Consumers are literally paying the price for these contradictions in policies."
Wm. Michael Warren, Jr., American Gas Association Board of Directors.

A year ago the wholesale price of natural gas stood at about $3 per thousand cubic feet. It is now over $6 – and things are expected to get worse before they get better, most experts agree.

The price escalations and what to do about them have resulted in action, concern and debate from every corner of society –
Congress, government agencies, the Federal Reserve chairman, business and industry, utilities and their trade groups, low-income energy advocates, and renewable, conservation and environmental groups. The "natural gas crisis" is front-page news, with gas prices blamed for curbing or shutting down industrial production, costing jobs and preventing economic recovery.

The disaster facing low-income families this coming winter – families who haven’t yet recovered from last winter’s heating bills – has also been covered. (Click here for more information.)

Various entities have proposed short- and long-term solutions to the crisis, most of which fall into two opposing camps: more exploration and development of domestic gas reserves to greater reliance on energy efficiency, conservation and renewables. Here is a snapshot of the latest news and views:

• The Energy Information Administration, in its end-of July short-term market report, said that gas storage levels have
  accelerated, leading to good chances of storage reaching a normal level by the beginning of the heating season. Additionally, relatively mild summer weather in much of the country has depressed natural gas spot prices, but this is subject to change pending the remaining summer weather.

• On July 9 Department of Energy unveiled a "Smart Energy Campaign" with regional meetings and events and public service announcements to educate consumers on energy-saving steps they can take, with an emphasis on natural gas.

• The National Association of Regulatory Utility Commissioners (NARUC) polled its members and found that most are bracing for a difficult winter and are approaching gas price increases with a variety of tactics – from holding investigations, to researching alternative purchasing options such as hedging, to educating consumers through press releases, consumer alerts, and public meetings.

• At its July meeting, NARUC passed a resolution to develop a tool kit on anticipated natural gas price spikes for the use of state commissions in addressing high natural gas prices and high price volatility.

• The American Chemistry Council, which represents the leading comcpanies in chemical manufacturing, in a study released in June found that historically high natural gas prices have led to the loss of thousands of manufacturing jobs and are preventing the creation of more than 100,000 new jobs for Americans.

• The Alliance to Save Energy (ACE) called on the nation’s industrial leaders to take the "10 Percent Pledge" to reduce their energy use and costs by 10 percent "to help ease the natural gas supply and price crisis looming over the coming winter’s heating season."

• Both the Alliance and the American Council for an Energy Efficient Economy (ACEEE) have cited energy efficiency and conservation as the quickest, cheapest, cleanest ways to increase natural gas and other energy supplies. ACEEE has identified 15 cost-effective natural gas efficiency measures that would collectively save more than 10 percent of U.S. gas usage by 2020.

• These groups, along with other conservation and renewables groups, have issued proposals to jumpstart energy efficiency and renewable energy initiatives, including more funding for energy efficiency deployment programs, expanding and extending the production tax credit for renewable energy technologies, enacting an aggressive renewable portfolio standard, and creating a national public benefits fund.

• The American Gas Association has called upon Congress to "remove the unnecessary barriers to domestic natural gas development," by (among other things) expediting environmental review and permitting of natural gas pipelines and drilling programs, allowing more drilling in the lower 48 states, constructing an Alaskan natural gas pipeline to bring plentiful Alaska natural gas to the lower 48, greater production of coalbed methane, and more federal and state efforts to expand imports of liquefied natural gas.

• As part of its implementation of President Bush’s National Energy Policy, the Bureau of Land Management on August 7 issued new policies aimed at reducing or eliminating impediments to oil and gas leasing on BLM lands in parts of five Rocky Mountain states (Montana, Wyoming, Utah, Colorado and New Mexico). The policies, which take effect immediately, instruct BLM land-use planners to evaluate the necessity of current constraints on energy development in high-potential oil and gas areas, and are a major step toward implementing the Administration's long-standing goal of opening the West to increased exploitation of oil and gas resources.

• The National Energy Accessibility and Affordability Project (NEAAP) a project of the National Center for Appropriate Technology, in July made public its Residential Energy Efficiency Database, though which residential electric and natural gas customers can find out what programs their utilities offer, such as home energy audits, rebates for energy efficient appliances, and zero- or low-interest loans to upgrade insulation or replace old heating and cooling equipment. Database users can search for residential energy efficiency programs by state(s), utility name, utility type (investor-owned, municipal, etc.), program type (appliances, audits, financing, heating/cooling, lighting, special rates, and weatherization) or by keyword(s). Users of the database are invited to submit program corrections or additions through an online update form.
  

New from the National Regulatory Research Institute:

"State commissions act in anticipation of high natural gas prices next winter… Commissions want to make sure gas utilities go the "extra mile" to keep gas prices down…and inform customers what to expect next winter…New York, Kentucky, Arkansas, and Iowa take aggressive steps to warn consumers… Arkansas, Washington, Delaware, Indiana, Oregon, Michigan, Mississippi and Montana schedule public sessions…

Some commissions review gas utilities’ supply plans to make sure that they promote price stability through hedging strategies…Consumers need special protection in gas markets from economic losses caused by high or rising prices…For the vast majority of markets, customers can simply reduce consumption…Small customers regard natural gas as essential, with little opportunity for substitution in the short run…NARUC public information officers’ survey of state actions is at www.nrri.ohio-state.edu. "