Text of Peņa's Letter to NPC

Text of Peņa's Speech to Natural Gas Roundtable

Energy Secretary Federico Peņa has asked the National Petroleum Council, the oil and gas advisory committee to the Secretary, to revisit its 1992 study on natural gas. Deputy Secretary Elizabeth Moler will co-chair the study committee which will deliver the updated report to the Secretary in 1999.

The Secretary's request comes at a time when there is considerable debate within the natural gas industry over the likelihood that there will be sufficient production and delivery capabilities, as well as long-term affordable supplies, to meet rising demand.

"I understand that there are some concerns that producers might not be able to meet...expected demand," Secretary Peņa told the Natural Gas Roundtable on May 12 when he announced the planned NPC study. "We believe that advances in technology and access to new reserves will allow producers to meet the projected needs of the country.

"Greater light will be shed on this point," the Secretary added, "when we receive the results of a study on the natural gas market I requested from the National Petroleum Council. The Council's study will take about nine months to complete," Peņa said.

The NPC is now reviewing the Secretary's request and is expected to select a council co-chair and NPC members to participate in the study committee by June.

The initial proposal for the new report recommends examining several key areas: supply availability, critical technologies and infrastructure investments, the potential role of imports, and potential "bottlenecks" in the supply and delivery system.

In 1990 Energy Secretary James Watkins asked the NPC to study the constraints to expanding natural gas production, distribution and use. The NPC completed, The Potential for Natural Gas in the United States in 1992.

"That study was critical," Secretary Peņa said in his May 6 letter to NPC Chair Joe Foster, "in identifying natural gas as an abundant domestic resource that can make a significantly larger contribution to both this Nation's energy supply and its environmental goals."

Since the 1992 study was released, Secretary Peņa said, "the Nation has experienced five years of sustained growth in the use of natural gas. In addition, the study did not anticipate at least two major forces that are beginning to take shape, which will profoundly affect energy choices in the future -- the restructuring of electricity markets and growing concerns about the potentially adverse consequences that using higher carbon-content fuels may have on global climate change and regional air quality."

Natural gas demand is projected to dramatically increase in future years and concerns have been raised about industry's ability to meet this demand. Constraints on access to natural gas resources on Federal lands and pipeline capacity have been identified as factors that may limit natural gas supply.

"Accordingly," the Secretary said, "I am requesting that the Council reassess its 1992 study taking into account the past five years' experience and evolving market conditions that will affect the potential for natural gas in the United States to 2020 and beyond."

In the 1992 study the NPC consolidated its results into four key findings and two recommendations. The findings were:

• The natural gas resource base is abundant and can be produced and delivered at prices that allow both expansion of the market and continued development of the resource.
• The natural gas market is increasingly diverse, with new challenges and opportunities.
• Increased reliance on competitive market forces has improved the gas industry's ability to serve customer needs in a diverse and expanding marketplace.
• The gas industry faces significant challenges requiring proactive steps by industry and government.

The recommendations that emerged from the 1992 study were directed toward government officials and industry, respectively:

• Federal, state, and local officials need to allow competitive market forces to continue to develop and work.
• Industry needs to make the market work.

These findings were later reaffirmed in 1995 when the Council completed its study on Future Issues -- A View of U.S. Oil and Natural Gas to 2020, and presented recommendations to Energy Secretary Hazel O'Leary calling for a more flexible and responsive policy and regulatory framework to ensure that the U.S. oil and gas industry can fulfill its mission to provide reliable and affordable energy supplies in a manner reflecting shared societal concerns for environment, health, and safety.

In addition to this planned study on natural gas supply, NPC members and Department of Energy representatives have been discussing a possible NPC study on the long-term feasibility of the U.S. refining industry and its ability to deliver adequate supplies of clean products at reasonable and stable prices to U.S. consumers.

- End of TechLine -

For additional information, contact:
Hattie Wolfe, (202)586-6503 e-mail: hattie.wolfe@hq.doe.gov