A veteran energy consultant told a national meeting of state regulators Tuesday in Portland, OR, that the United States in the years ahead can expect higher natural gas prices that will dampen demand and declining gas resource base.

“You never completely run out of oil and natural gas,” said Henry Groppe, a partner in the consulting firm of Groppe, Long & Little, speaking to a joint session of the natural gas and consumer affairs committees at the summer meetings of the National Association of Regulatory Utility Commissioners. “During my career we ran out of five-cent gas at the wellhead, and then some years later we ran out of 25-cent gas, and all I am saying now is that we have now run out of $2.50 gas.”

With the prospect for less supplies from Canada after its current peaks, $4/MMBtu supplies being a likely outcome, and continuing decline in the U.S. ability to replace the reserves used each year, Groppe said natural gas will lose its current competitiveness in the power generation and large industrial markets, which combined account for about half of the natural gas consumption in the nation.

“In recent years, if Canada had not had the surplus producing capacity and the transportation capacity and the willingness to export, we would have had a severe gas crisis in this country for many years,” Groppe said. “We think this year will probably be the year of maximum exports from Canada to the U.S. There will be difficulty continuing to meet export and internal requirements, particularly in connection with heavy oil recovery and oil-sands processes.

“We forecast that it requires a price in the $4 range in constant 2001 MMBtus to restrain consumption to match what we forecast as the available supply.” That includes, he said, U.S. production, Canada’s “maximum ability to export,” and an increasing level of liquefied natural gas (LNG) imports.

Groppe said his firm’s analysis, based on a historic perspective dating back to the early post-World War II years, anticipates that added nuclear generation (particularly at existing sites) will supply the bulk of the added power generation in the future. He predicted that an existing major energy operator will apply for a new nuclear unit at an existing site some time next year.

The Houston-based energy consultant who was introduced as having a “55-year perspective on the industry,” did not mention the role of supplies in north Alaska and Canada might have in bolstering dwindling onshore gas reserves, nor was he asked by the state regulators about those prospects.

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