There are risks facing the natural gas industry that could upset the current “gold rush” mentality, said speakers Tuesday at the National Association of Regulatory Utility Commissioners (NARUC) summer meeting in Los Angeles. Reserves estimates are but one concern.

Regulators, environmentalists and other stakeholders still preach a portfolio approach that avoids putting too much emphasis on one energy source, according to Timothy Alan Simon, NARUC gas committee chairman and a member of the California Public Utilities Commission. Simon was reminded by other speakers that reliable, third-party sources now project that U.S. gas use will climb to 30 Tcf annually by 2030, compared to current annual use of 23-24 Tcf.

“The thing that most concerns me is regulatory and political backlash that restricts the assumed availability of the resource [shale gas] as a result of a failure [by gas producers], particularly by some of the more fringe elements without a continuous record of environmental improvements,” said Ralph Cavanagh, energy program director at the Natural Resources Defense Council. Cavanagh said he is worried about the relatively small, inexperienced operators that may be getting into parts of the business.

“There has to be sustained and effective pressure on everybody from the regulators. This is also a job for the natural gas distribution companies on the procurement side to make sure the proper environmental safeguards are maintained throughout the extraction process.” If the producers cannot maintain the proper level of safeguards, then they are going to be at greater regulatory and political risk, Cavanagh said.

Simon asked whether “rushing” to embrace more natural gas development creates an “undue concentration for some states.” Cavanagh said the concern was a critical reason to “redouble and redouble again the emphasis on efficiency. If there are concerns about overloading the distribution systems and overemphasizing the gas side, then we have to be sure to maintain emphasis on efficiency.”

Cavanagh reminded regulators that the United States still gets more than 40% of its electricity from coal-fired power plants — not natural gas, which is now providing about 30% of the nation’s power. “Getting more of the less-efficient coal plants off the grid, and in process lowering power costs, for me, would be a high strategic priority,” he said.

Greg Staple of the American Clean Skies Foundation, a renewable energy advocacy group that supports more gas development, said efficiency should be pushed, but he also reiterated the need for “better understanding” of natural gas as a viable energy resource. Staple touted a report his organization released last March with the Bipartisan Policy Center on natural gas.

He said the report strongly recommends the responsible development of shale gas and managing the environmental issues associated with increased gas use. The 70-page task force report concluded that shale growth will bring more price stability and it recommended that government “encourage the development of domestic gas resources (see Daily GPI, March 28).

In terms of increased shale development, Staple said there is “a legitimate debate” ongoing over what parts of the business should be state regulated and what parts should be “federalized.” He said many argue that the federal Clean Air and Clean Water Acts are good resources for overseeing the growing sector.

“I think this debate will go on, and the Obama administration has tasked the Department of Energy to introduce a new report, recommending best practices in the industry,” said Staple, citing a 90-day report due after Labor Day and subsequent report when the U.S. Environmental Protection Administration finishes a two-year study of hydraulic fracturing practices. “This debate is going to be with us for some time to come.”

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