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Transportation Energy

Natural Gas

Natural gas supplies about 17% of the U.S.'s energy demands.Recent increased demand for natural gas has resulted in higher prices and created a more volatile market.Although natural gas could be a promising source of energy, uncertainties remain about the nature of natural gas deposits in the U.S. and how to extract the gas in an economically and environmentally effective manner.

Consumption: U.S. consumption of natural gas grew four-fold between 1950 and 2004.In 1999, the U.S. accounted for about 25% of the world's natural gas consumption. Growing demand by electric utilities has resulted in sharp increases in natural gas prices. Because of higher prices, consumption of natural gas in the U.S. industrial sector is projected to grow slowly, from 8.3 trillion cubic feet in 2003 to 10.0 trillion cubic feet in 2030.Only a very small percentage of natural gas consumption is for transportation, e.g. natural gas powered vehicles.However, that demand is expected to increase with more stringent emissions regulations, particularly for natural gas powered transit buses.However, the lack of a natural refueling infrastructure remains a barrier.

Supply:Canada is the source of almost 90% of U.S. natural gas imports. Unconventional natural gas production, which include tight sands, shale and coalbed methane, could lead to greater U.S. production.Even with added deepwater extraction in the Gulf of Mexico and unconventional natural gas production, North American sources cannot keep up with U.S. demand.The Alaskan North Slope holds significant natural gas resources, estimated to be between 200 to 300 trillion cubic feet (tcf).Currently, natural gas is being re-injected in order to support oil production because there is no infrastructure to transport it to market.

Alaska Natural Gas Pipeline: The major impediments to building the pipeline are the high cost of construction and lengthy construction period (estimated to be about 10 years).Uncertainty about siting and permitting, royalty payments, the pipeline's commitment to North American markets, and the environmental impact also have delayed progress. Construction of a gas line would increase supply and likely reduce prices and profits; thus deterring investment.To spur investment in the pipeline, Congress provided loan guarantees, accelerated depreciation, and tax credits to investors.It also enacted policies that protect investors from the risks of low prices and guarantee repayment to taxpayers when gas prices rise.

Liquefied Natural Gas: In 2002, LNG accounted for only 1% of total U.S. gas consumption.The Energy Information Association projects that imported LNG will account for about 21% of total U.S. gas supply in 2025. Trinidad, Algeria and Malaysia are the major sources of imported LNG. There are currently five active LNG terminals in the U.S. LNG faces opposition on a local level because it is hazardous while in transit and poses both safety and security risks.Recent proposals suggest locating the receiving facilities offshore, like the one located 116 miles off the coast of Louisiana which was recently approved by the U.S. Coast Guard.This could significantly reduce both the safety and security risks associated with unloading LNG from tankers.

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