Word from US gas fields -- ample supplies seem here to stay
It was called a "bubble" because it was supposed to burst. But today's ample supply of natural gas in the United States seems here to stay, at least for the foreseeable future.
That, anyway, is the growing view in the energy industries and in Congress, where support is building for doing away with a strict measure passed less than three years ago to conserve natural gas.
The Powerplant and Industrial Fuel Use Act of 1978 prohibits the use of natural gas in new large-scale industrial boilers and orders utilities to stop using the fuel after 1990. The law had broad support when it passed and was seen as a necessary step to protect the 43 million American households from gas shortages like those that occurred throughout the mid-1970s.
Also, the restrictions on using natural gas were an attempt to force more industrial and utility use of domestic coal.
Today, however, there is more optimism about US natural gas resources, based on record drilling efforts and exploration in new areas made possible by higher prices [see related item in Inside Report, Page 2]. The fears of just a few years ago that the United States was running out of reserves have noticeably subsided. Indeed, the American Gas Association figures there is a surplus of available natural gas in the country right now that could reduce oil imports by more than 1 million barrels a day if federal hindrances to more gas use were lifted.
This changed view of natural gas, coupled with the general preference of the Reagan administration for less government involvement in the energy sector, is expected by a number of analysts to bring the repeal of those prohibitions against burning gas.
"It's amazing how dramatically the mood has changed on this issue," notes Lawrence Goldstein, research director of the Petroleum Industries Research Foundation. Mr. Goldstein does not necessarily subscribe to some of the bullish recent projections about US natural gas supplies, but he still thinks federal restrictions on gas use are not necessary.
"Anyone who looks at the natural gas industry must see that there is tremendous uncertainty about future supplies," he asserts. "But conservation will follow price increases better than anything else."
Under current law, most domestic natural gas prices will be decontrolled after 1985. The Reagan administration favors more rapid decontrol but has not yet decided on how, or whether, to seek legislation to that end this year. The Department of Energy has assembled a task force to study the issue, and some analysts expect the Reagan administration to outline its policy on natural gas within the next couple of months.
Congress has been holding hearings on repeal of the natural gas prohibitions of the fuel use act. Several US senators have introduced legislation to lift the restrictions.
"I think it is pretty clear the Senate would support repeal of the natural gas restrictions," assessed a staff member of the Senate subcommittee on energy regulations. But he indicated the issue could become more controversial if it is tied to faster decontrol of gas prices.
One effect of allowing utilities and industry to burn more natural gas would be to slow the use of domestic coal. Because of that, the National Coal Association has endorsed repeal of the Fuel Use Act prohibitions only if it is coupled with speedier decontrol of prices. Coal producers figure if gas prices are unrestrained they will rise so rapidly that utilities will turn to coal as a boiler fuel for economic reasons.
Some warn that the ultimate effect of the natural gas prohibitions will be to force greater use of imported oil. Utilities, under the law, must stop burning natural gas by 1990. But, given the environmental restrictions to burning coal, the capital costs of conversion, and the difficulty in many parts of the country of transporting coal, the prohibition on natural gas will "simply drive customers to oil," predicts Oklahoma gas producer Robert A. Hefner.
Mr. Hefner, managing partner of GHK Companies, a major Southwestern independent producer based in Oklahoma City, predicts that an unrestrained natural gas market can replace the equivalent of all the oil currently imported from the Persian Gulf by 1990. "There is no gas 'bubble' in the United States today. The re is a reliable, long-term increase in natural gas exploration, production, and additions to reserves," he insists.