Natural Gas--Another Manufactured Crisis?

Could the natural gas "shortages" and steep price increases have been avoided? That is the question Jeff Donn asks in Promise of natural gas barely flickering.

On the brink of the 21st century, a group of energy experts peered into the future of natural gas, and what they saw was quite rosy -- and quite wrong.

To satisfy growing demand, producers could crank out a third more natural gas over the next decade at "competitive prices." It could "power our economy" for decades beyond. Or so said the National Petroleum Council in its 1999 report.

But natural gas prices soon headed skyward, with prices charged by producers spiking late last year at nearly five times 1999 levels. This past winter, though starting off warm, saw the average gas-heating household spend a record $867, a 17 percent increase, according to federal data. As for that predicted robust supply, the country's annual gas output has strangely slipped by 3 percent over the past six years.

So what went wrong?

The industry largely blames old fields and self-defeating government policy, and such explanations are widely accepted. The trouble is, they don't explain the breakdown very well.

Skeptics are beginning to suspect other powerful forces -- ones at work within the industry itself.

[....]

Industry leaders say they're trying to fix things, but declining gas fields and harder-to-reach new ones are limiting output. "You've got to drill more wells, you've got to run faster, just to replace what has declined," says Bobby Shackouls, CEO of producer Burlington Resources and past chairman of the Petroleum Council.

While government policy turned less-polluting natural gas into the fuel of choice for new electric plants in the late 1990s, federal rules kept drillers away from vast stretches of public land, the industry complains. Then came last year's hurricanes.

However, most drilling restrictions were imposed years ago and added no new impediments to output during the price run-up, say federal energy officials. And the hurricanes only added the latest insult to a market with much bigger, older injuries.

Also, other trends should have cooled off prices. Yes, gas-fired generators did use almost 1 trillion more cubic feet of natural gas last year than in 1999. But at the same time, factories cut back, using almost 1.5 trillion less, federal data show.

Plenty of gas to be had.

The country is not running out either. There's enough natural gas to last beyond 65 years -- much longer than oil, according to the best forecasts.

Despite the federal barriers to drilling, the amount of economical, ready-to-capture gas -- under existing wells within reach of pipelines -- rose 15 percent during the four years ending in 2004, according to the latest federal data. The American Gas Association, a group of utilities, has made a preliminary estimate of another 4 percent rise last year.

"There's a lot of natural gas in the world," says Jerry Langdon, an executive at producer and marketer Reliant Energy.

So what's the problem? Is it tinfoil hat time?

Despite their protests, maybe some producers aren't really trying, industry critics suspect. Maybe they're happy to take it easy and rake in record yearly profits. Many natural gas producers are the same companies benefiting from rocketing gasoline prices in recent years -- familiar petroleum names like Exxon Mobil, Chevron, Shell and BP.

Sound familiar? A great life for the larger energy producers, blame the environmentalists while you take record profits to the bank. And don't forget, George W. Bush wants them to keep all those profits so they can develop new energy sources. Ya- right!