A recent report by the Potential Gas Committee shows a dramatic increase in estimates for undiscovered natural gas resources in the United States. During today's OnPoint, Chris McGill, managing director of policy analysis at the American Gas Association, discusses the report and explains the large increase in supply estimates. He discusses the significance of the report to the overall energy discussion and also weighs in on the debate over hydraulic fracturing oversight.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Chris McGill, managing director of Policy Analysis for the American Gas Association. Chris, thanks for coming on the show.
Chris McGill: Nice to be here. I see your program regularly.
Monica Trauzzi: That's nice to hear.
Chris McGill: It's nice to be sitting here.
Monica Trauzzi: Chris, the Potential Gas Committee just released this new report on natural gas supply in the United States and the report shows that there have been significant increases in the number of undiscovered resources.
Chris McGill: Correct.
Monica Trauzzi: Thirty-five percent worth compared to the last estimates?
Chris McGill: Compared to the last estimate two years ago over a 500 trillion cubic foot increase.
Monica Trauzzi: So, what is interesting to this dramatic increase?
Chris McGill: The Potential Gas Committee is a group of a volunteers, geologists and engineers that look at the geology of the basins all over the country. As we look at the science of that technology changes, and principally associated with unconventional resources, there have been technology changes that have allowed the natural gas associated with these rocks to be produced. So now they're making it into the resource estimate because this estimate by the PGC is a technically recoverable estimate. And over the last several cycles we've seen significant increases in the resource base that come associated with these new technology developments.
Monica Trauzzi: So, what's the significance of this increase in resources to the overall energy discussion?
Chris McGill: Well, I represent or am a representative of the American Gas Association. We are distributors of natural gas to consumers. This news should matter to consumers, having a large energy resource base that is domestic, secure, reliable, all of those things are very important. The current energy discussion, frankly, is very much centered around wind power, solar power, alternatives to the traditional energy mix and yet we have a low carbon fuel in this country with an extraordinary resource base and the technology to develop it. We think that should be part of this discussion too.
Monica Trauzzi: So, specifically on the legislation, what are you hoping to see this year? We just saw energy legislation come out of the Senate Energy Committee. The House will have to have a chance to look at it as well. So what are you hoping to see in the final energy legislation?
Chris McGill: Well, to begin with we're hoping for policymakers to be aware of the fact that we're not running out of natural gas. We've gone through cycles of and that's in people's memories. I'd like the general public and policymakers to get over that. It's not true. Natural gas as a resource is there. We currently use natural gas in many applications; in your home, small businesses, industrial, even power generation and even transportation. Mr. Pickens has talked about that. So we have a diverse fuel in terms of its availability, a diverse fuel in how it's used. The technology to get it out of the ground is here now. The burner technology to be used efficiently and economically is here. My message is that natural gas is here now. We're not waiting for any "up the road" assumptions; it's here now and can be a part of the energy plan.
Monica Trauzzi: There's a lot of talk about making natural gas this bridge fuel to our future energy policy. In terms of supply though, can you quantify how many years of supply we actually have?
Chris McGill: Everybody likes to do that. Right now the future resource that is described by the Potential Gas Committee is one that's over 2000 trillion cubic feet. We produce 19 to 20 currently, so you get the nice even 100 years of supply. I would point out however that these recent additions have grown that vision of the years of supply from about 65 years a decade ago to 100 now. And prior to that, when people would ask me this question I would say 65 years. Well, I said that for 20 years. The resource base has been very dynamic. The availability of the gas has changed with the technology.
Monica Trauzzi: There are also concerns that we will just be switching from oil to natural gas and the natural gas markets will be impacted, much like the oil markets are in terms of pricing. What is the outlook for the pricing of natural gas and are we going to find ourselves in a situation where the markets are being manipulated because we are so addicted to this new source?
Chris McGill: I hate to use the word manipulation specifically, but we saw significant increases in natural gas prices last summer. It wasn't due to supply and demand fundamentals. It was primarily due to other things that were happening in the financial and commodity markets. Prices are down now. Fundamentals have taken over. That volatility of price is part of the energy marketplace. With respect to natural gas however, we import very little of our natural gas, one or two percent on the international market. The vagaries of the market are more North American for natural gas. I can't say that we can control that better, however it's isolated a little bit from the oil complex right now.
Monica Trauzzi: Final question here. There's been a big debate heating up over hydraulic fracturing. How much oversight should actually be by the government into the techniques that are used to extract natural gas?
Chris McGill: Well, I'd answer that question this way. First of all, the producers that use these techniques take a number of mitigating steps to try to ensure that groundwater, surface water, other potable waters, aquifers, are not impacted by the drilling operations. Having said that, local states and local areas regulate that process. People should follow the rules. People need to do things the proper way too, do them right. Regulations are there. They're in place. Our belief is that the state regulations that are in place are sufficient. If they need to be changed, then they need to be looked at on that local basis, because drilling operations are very local. Some drilling operations are much deeper than others. They require different processes to get the gas to the surface. So in general, I look at them being better managed at a local level rather than at a national level.
Monica Trauzzi: OK, we'll end it right there. Thanks for coming on the show.
Chris McGill: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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