The People of America's Oil and Natural Gas Indusry

America’s Natural Gas Progress and Its Discontents

Mark Green

Mark Green
Posted February 10, 2016

Yesterday, we took a look at the effects of the U.S. energy revolution on domestic oil production and the impact of that production on U.S. oil imports – and the resulting progress for America in terms of increased economic and consumer benefits and energy security. We argued that Obama administration policies risk retreating from progress that’s the result of the historic, game-changing shift in the U.S. energy outlook, thanks to America’s energy revolution.

Today, a look at natural gas, where the impacts of the energy revolution are no less significant.

First, a chart that compares U.S. dry natural gas production since 2006 (shown in orange) with the U.S. Energy Information Administration’s 2006 forecast for natural gas output (blue):

output      

The area between the two lines shows the measurable impact of the energy revolution on natural gas output. In 2006 output was at 18.5 trillion cubic feet (tcf). Last year, production topped 27 tcf. The growth is largely a tribute to shale development – natural gas safely produced from shale and other tight-rock formations with advanced hydraulic fracturing and horizontal drilling.

The increased availability of affordable, reliable, cleaner-burning natural gas is a major factor in lowering consumer power costs, with more electricity generated from natural gas-fired generators than coal-fired generators during five months last year, EIA says. When all of the data for 2015 is in, natural gas could own the largest share of power generation for the year, an historic shift. Obviously, surging domestic natural gas production is benefiting millions of Americans right where they live.

Now let’s look at the global trade impacts. The chart below shows that as domestic natural gas production has risen, U.S. net imports of liquefied natural gas (LNG) have declined to the point of almost disappearing:

imports  

In 2006, U.S. LNG imports (blue line) totaled about 0.583 tcf, and it increased in in 2007. The chart also shows that EIA in 2006 estimated the United States would need to import lots of LNG over the next decade to meet domestic needs (orange). Based on EIA’s forecasts and others, it was believed the U.S. would have to build a number of LNG import facilities.

But the shale energy revolution happened instead. As the chart shows, net imports fell to about 0.07 tcf in 2015. The area between the two lines, again, we’ll call progress. In addition to the economic and consumer benefits of increased production, this is progress in terms of energy security. The more natural gas America produces here at home, the less reliant the U.S. is on overseas suppliers.

Not only that, but the U.S. – the world’s leading producer of natural gas and oil – is positioned to be a major player in the global LNG marketplace. If the U.S. seizes the opportunity. A big part of this would be expediting the process for federal approval of domestic LNG exports to non-Free Trade Agreement countries. Unfortunately, while some export projects have been approved the past couple of years, final non-FTA authorizations for more than 20 facilities remain under review at the Energy Department. With Iran announcing plans to export LNG within two years, change is coming to the market. U.S. policy should recognize the competitive nature of the marketplace by sparing domestic export applications from unnecessary delay.

Yet, America’s natural gas success story, which is helping lower U.S. carbon emissions, is at risk from administration policies. EPA and the Bureau of Land Management are each advancing regulations on methane emissions, despite the fact U.S. emissions have decreased significantly (more on this in a future post). The proposals overlap each other and would duplicate state regulations already in place. Regulation and Washington red tape that hinders access to natural gas reserves could squander the progress that’s been made and future opportunity as well. Erik Milito, API director of upstream and industry operations:

“The shale resurgence has been a uniquely American story for many reasons, including American engineering and ingenuity, production and transportation infrastructure, private mineral ownership, sanctity of contracts, and regulatory and legal certainty in the areas where we have seen increased domestic production of oil and gas resources.  It is truly the free market model at work … Smart energy policy is imperative for the continued success of this market-based model.”

Let’s be smart. Americans can help ensure the right vision on energy, the right energy choices, are pursued by voting for energy this year – to lock in the progress that’s been made and build on it in the years to come.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.