The growing glut of natural gas on the global market – spurred in part by increased exports of Liquefied Natural Gas (LNG) by U.S. producers over the last year – reminds us of the dynamic nature of the domestic natural gas market, and the role shifting public policies have played into that over the years.
My own frame of reference here begins during the summers of 1977 and 1978, when I earned college tuition money by taking summer jobs on pipeline crews in deep South Texas. In 1978, the Congress and the Carter Administration had become convinced by some really bad science that the U.S. would actually run out of natural gas in a few decades, and thus needed to conserve what little remaining reserves it had on-hand for home heating usage. Acting on this belief, then-President Jimmy Carter signed into law the Natural Gas Policy Act (NGPA) and the Fuel Use Act (FUA), both of which had major impacts on natural gas markets, and both of which inhibited investment in new natural gas-burning infrastructure.
The NGPA discouraged investment in drilling for new natural gas reserves by allowing the federal government to establish ceiling prices producers could receive for various categories of natural gas that were established under the law. The FUA was even more prohibitive on the demand side of the natural gas ledger, prohibiting utility companies from building new gas-fired power plants. The result? A Democratic Administration ironically actively encouraged the building of dozens of new coal-fired and nuclear power plants all over the United States, many of which are still operating, much to the chagrin of today’s climate alarm lobby.
Congress and President Ronald Reagan began de-regulating the natural gas market in 1985, completing the process in 1987, the same year that the FUA was also repealed. Thus, utilities were once again able to invest in new gas-fired generating capacity, but the long lead times inherent in such major projects did little to absorb the new natural gas production coming onto the market.
Natural gas prices, which initially showed strength upon de-regulation, soon collapsed as new supplies quickly began to out-pace demand. During the early 1990s, producers in the pipeline-constrained San Juan Basin found themselves often selling natural gas at prices below 50 cents per mcf.
During the latter half of the 1990s, investments in new gas-fired power plants, along with new investments in chemical, plastics and other major users of natural gas, began to catch up with supply and prices for the commodity in the U.S. grew stronger. But a series of supply disruptions from the Gulf of Mexico due to major hurricane events in the late 1990s and early 2000s once again led to fears of looming supply shortages in the early days of the George W. Bush Administration.
In 2003, Energy Secretary Spencer Abraham directed the National Petroleum Council to perform a study about the potential for natural gas in the U.S. to meet then-growing demands, and create a forecast through the year 2025. We must remember here that the Barnett Shale was in its early days of development, and most in the industry believed the potential for shale natural gas was likely to be pretty limited. Other of today’s huge shale plays – the Haynesville, Marcellus, Eagle Ford, et al – were yet to be discovered.
Because of the timing of this study – on which I chaired one of the committees – and the limited knowledge base surrounding shale natural gas at the time, the report projected stagnating production from conventional formations, low potential for shale natural gas, and a growing demand for LNG imports, which were projected to provide well over 10% of overall U.S. supply within a few years.
via Forbes.com: Energy News http://ift.tt/2mOxioq