U.S. natural gas production is at an all-time high. According to the U.S. Energy Information Administration, domestic gas production will set a record in 2018.
This is great news in terms of benefits for consumers and U.S. power in global geopolitics as we continue to increase our ability to export. According to ICF, a consulting and technology services company, natural gas supply to U.S. LNG export terminals could reach 14.7 billion cubic feet per day (Bcf/d) in the next decade. Exports could rise to almost 23 Bcf/d shortly after 2040. The Panama Canal, which is critical to enabling U.S. Gulf Coast LNG exports to reach Asia, could carry as much as 30 million tonnes of LNG by 2020 – about five times as it did last year.
But all the news regarding natural gas is not good. In fact, we are becoming victims of our own success.
Oil production is booming in the Permian Basin and picking up elsewhere around the country as oil prices rise. Associated natural gas production is also rising here. But there is not enough pipeline takeaway capacity – resulting in significant bottlenecks in South Texas.
Rocky Mountain Natural Gas, in Colorado, Utah, Wyoming and New Mexico, is also pipelined constrained as producers in the region seek export options on the West Coast, like the proposed Jordan Cove LNG project, in Oregon. This overabundance of gas is hurting natural gas producers and threatening future production of gas and even of oil. In the Permian, it could shut in oil production.
The solutions are more infrastructure in the way of pipelines, from producing regions to market, and additional export options in the Gulf Coast and Pacific regions. We need more pipelines to be built and new markets, including exports, to take the gas, and we need this now. Globally, it appears that the markets exist and will exist for decades. New LNG facilities are coming on line along the Gulf Coast. But it is still not enough.
Environmental NGOs have been increasingly focused on thwarting U.S. pipeline projects, adding to the expense and delaying the completion of badly needed infrastructure. Getting past these hurdles is just part of the solution. Another part is improving and reforming our regulatory system. The Federal Energy Regulatory Commission (FERC) recently announced a Notice of Inquiry for certifying pipelines. The last time it reviewed its pipeline policies was in 1999, well before the impact of the shale boom. It will review its methodology for determining the need of individual pipelines, questions of eminent domain, environmental impacts and the certification process.
It should also consider the collective need to better move our gas resources to markets, in the U.S. and globally.
FERC’s policy review could be part of a broader public policy effort focused on the most effective ways to develop needed transportation infrastructure and markets for U.S. natural gas. President Trump is seeking to deliver campaign promises in three areas that merge when it comes to domestic natural gas: infrastructure development, regulatory reform and energy dominance.
The issues we are facing in terms of lack of gas takeaway capacity and markets are beginning to threaten crude oil production to the potential detriment of our energy dominance. Creative industry solutions, bolstered by sound public policies, are needed to ensure we continue to grow our nation’s energy revolution.
Jack Belcher is executive vice president for HBW Resources and consults energy and transportation clients on government relations, regulatory affairs, situational risk management, coalition building and stakeholder relations. He is also Managing Director of the National Ocean Policy Coalition.
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