Natural Gas: Achieving a Balanced Energy Future

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Natural Gas Achieving a Balanced Energy Future

• A Summary of Policy Proposals Supported by the
  Natural Gas Council

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Natural Gas Council Membership

• The members of the Natural Gas Council are senior
  executives from all of the major segments of the
  natural gas industry. These members represent the
  major North American natural gas trade
  associations.

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Natural Gas Policy RecommendationsJanuary 2004

• The following discussion points are based largely
  upon Balancing Natural Gas PolicyFueling the
  Demands of a Growing Economy, National Petroleum
  Council, October 2003
• For the complete report, visit http//www.npc.org

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Importance of Natural Gas

• Natural gas is a true energy value reliable,
  efficient and affordable.
• A clean-burning fuel
• Accounts for nearly 25 percent of all U.S. energy
  consumption
• A vital contributor to strong, growing economy
  and North American energy security
• Almost all (99 percent) natural gas consumed in
  U.S. is produced in the U.S. (83 percent) or
  neighboring Canada (16 percent).

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First Step

• Immediately adopt comprehensive national energy
  legislation to help synchronize federal policies
  and stimulate more efficient supply and demand
  responses to tight market conditions.

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Additional Recommendations

• Improve demand flexibility and efficiency
• Increase supply diversity
• Sustain and enhance infrastructure
• Promote efficient markets

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Recommendation 1 Improve Demand Flexibility
Efficiency

• Growing natural gas-fired power generation is
  reshaping demand.
• Natural gas use will grow, but other generation
  sources will compete.
• A balanced fuel portfolio is essential.
• Increase capability to utilize alternate fuels in
  power and industrial applications.
• Greater energy efficiency and conservation
  necessary vital short-term and long-term
  mechanisms for moderating price volatility.

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Recommendation 2 Increase Supply Diversity

• Increased access lowers costs to consumers.
• Encourage more domestic natural gas production by
  increasing access to non-park, non-wilderness
  federal lands. According to the NPC, access to
  these supplies could save consumers up to 300
  billion in natural gas costs during the next 20
  years.
• Revise tax and royalty policies that will allow
  producers to retain additional capital for
  reinvestment in new natural gas development
  projects.

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Recommendation 2 Increase Supply Diversity
(cont.)

• Consider modifications that will allow for more
  offshore natural gas development.
• Encourage supply diversity by recognizing the
  need for new, large-scale resources, such as
  liquefied natural gas (LNG) and Arctic natural
  gas are available could meet 20-25 percent of
  future demand.
• Arctic pipeline projects can deliver important
  supply additions, diversifying the nations
  energy portfolio.
• Government must remove permitting barriers for
  new liquefied natural gas (LNG) facilities.

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Recommendation 3 Sustain and Enhance
Infrastructure

• North Americas extensive infrastructure must be
  maintained.
• Sustaining capital will be an increasing share of
  total infrastructure investments.
• New pipeline capacity is driven by areas of
  supply growth.

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Recommendation 3 Sustain and Enhance
Infrastructure (cont.)

• Peak demands are becoming more pronounced.
• Barriers to long-term contracts inhibit
  infrastructure development.
• Research required
• Enhanced safety
• Improved replacement techniques with less
  disturbance
• Enhanced locating technologies
• Advanced environmental remediation

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Recommendation 4 Promote Efficient Markets

• Price volatility a fundamental aspect of a free
  market, reflecting variable nature of supply and
  demand.
• Regulators should support physical and risk
  management tools that allow market participants
  to moderate the effects of price volatility.
• NPC recommends
• Improved price transparency
• Market data reporting
• Greater liquidity

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Conclusion

• A balanced future that includes increased energy
  efficiency, immediate development of new
  resources, and flexibility in fuel choice could
  save 1 trillion in U.S. natural gas costs in
  the next 20 years.
• Public policy must support these objectives.