AGF: EPAct 2005 Will Bring Some Relief to Natural Gas Market

March 8, 2007 // Published as a news service by IHS

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Passage and initial implementation of the Energy Policy Act of 2005 (EPAct 2005) has resulted in some progress toward meeting the current and future needs of natural gas customers, but more action is needed if the nation wants to balance natural gas supply and demand and save customers and the economy billions of dollars by 2020, according to an American Gas Foundation (AGF) study.

The study, titled The Energy Policy Act of 2005 and Its Impact on the U.S. Natural Gas Supply/Demand Imbalance compares the results of EPAct 2005 with various policy steps that elected officials, energy companies and communities could take to meet customers’ natural gas demands, then quantifies the potential benefits of those choices.

"Even after the enactment of the natural gas policy measures contained in EPAct 2005, we are at best one-third of the way toward achieving the natural gas supply and demand policy scenario outlined in our 2005 outlook," said Robert W. Best, AGF chairman and Atmos Energy Corp. chairman, president and chief executive officer (CEO).

According to Best, the study revisits the three natural gas public policy scenarios – existing, expected and expanded - first outlined in a January 2005 AGF report titled Natural Gas Outlook to 2020. It also measures the progress of natural gas recommendations contained in EPAct2005 against the impact of the more far-reaching supply and demand measures envisioned in the three scenarios. The study further revisits cost projections made in the 2005 AGF study and re-evaluates them in light of events in the natural gas market in the last two years.

Best said EPAct2005 represented an important first step in bringing energy policy in line with the nation's changing energy profile. However, in order to implement measures that would result in the most favorable expanded policies scenario for natural gas consumers, progress must be made to implement all the key provisions of EPAct plus additional policies must be created to address critical supply issues.

"Under the previous study's expanded policies scenario, both demand and supply issues ideally would be addressed in the next few years, saving natural gas consumers $200B by the year 2020," Best said.

The expanded policies scenario assumes the completion of measures to reduce natural gas demand, open more offshore and onshore natural gas resources to production, increase imports of liquefied natural gas (LNG) and build an Alaskan natural gas pipeline.

"The growing mismatch between supply and demand of natural gas has had a significant negative impact on the U.S. economy and consumers in recent years," Best said. He cited a 2005 U.S. Department of Commerce study estimating that higher natural gas prices between 2000 and 2004 led to lower gross domestic product (GDP) growth and a decrease in domestic employment of almost 500,000 jobs.

The study is available at http://www.gasfoundation.org.

Source: American Gas Foundation (AGF).