Defusing an Energy Crisis

Californians have bad memories of the rolling blackouts of 2001, which were triggered in part by pipeline companies’ manipulation of natural gas supplies and prices. New warnings about a nationwide natural gas shortage naturally raise hackles on the West Coast: Is this simply a ploy to raise prices again? If only it were that simple.

Federal Reserve Chairman Alan Greenspan says he worries that static domestic production and inadequate natural gas imports could impede economic recovery. The solution, however, is not a slow, expensive increase in domestic extraction but more efficient use of current supplies and better facilities for taking advantage of plentiful gas available for importation.

Oil companies used to burn off natural gas as a worthless byproduct. But the environmentally friendly fuel, unlike coal, does not lead to sooty local pollution and faraway acid rain. It has become an increasingly important fuel for power plants, home heating, industry and public transit, as well as a component of nitrogen farm fertilizers. But increased demand has not been matched by production. Seventy percent of domestic gas now comes from older wells reaching about 5,000 feet. Tapping larger reserves at 15,000 feet gets a lot more expensive.

Energy Secretary Spencer Abraham says the supply of natural gas on hand in underground storage areas is two-thirds of last year’s and that Midwestern consumers can expect an increase of nearly 20% in their heating bills this winter. The oil and gas industry is pressuring Congress, which is debating an energy bill, to allow it to extract gas from such places as the mountains of Utah and Montana and off the coasts of Florida and Alabama.

Rather than extract domestic gas from fragile environments and difficult depths, the United States should encourage construction of coastal terminals to receive and distribute natural gas imports. Vast untapped reserves exist abroad, especially in Peru and Central Asia. But only four natural gas terminals -- three on the East Coast and one in the Gulf of Mexico off Louisiana -- currently exist. Since the late 1970s, no new terminals have been built. The first new ones, which are being constructed by California-based Sempra Energy, are scheduled for completion in 2006 and 2007 near Puerto Vallarta, Mexico, and in Cameron, La. They will supply up to 1.2 billion and 1.5 billion cubic feet of gas a day, respectively -- enough to meet California’s needs, but not the nation’s.

Natural gas may never be cheap again, but conservation and the capability to import more would allow prices to stabilize within a few years.