Natural Gas Supplies and Federal Policy Concerning the Use of Natural Gas

In testimony before a House committee, GAO discussed its views on natural gas supplies, Federal policy, and expectations for future supply levels. The gap between domestic natural gas production and consumption is expected to grow through the remainder of the century. Consequently, the natural gas supply slate is expected to show a shift from traditional dependence on conventional well production to a variety of other domestic supply sources, such as the Alaskan supplies, unconventional sources, and natural gas imports. To meet predicted demand after 1990, another major gas transportation system will be needed, and new natural gas fields and reserves will have to be discovered and developed. Shale and sand are considered the chief potential contributors to unconventional gas production in the midterm, if economic and technical uncertainties can be overcome. Limited imports from Canada and Mexico can also increase U.S. domestic supplies. GAO expects low supplies of either liquefied natural gas imports from OPEC countries or synthetic gas from coal or other energy sources. The National Energy Act of 1978 was established to prescribe gas consumption standards and is the current framework for Federal natural gas policy. Atlhough the gas policy is often clouded by confusion, it is attempting to hold down oil imports by allowing industries to consume a temporary excess of natural gas supplies. GAO concluded that: (1) utilities are making efforts to voluntarily convert existing boilers, and their efforts are outpacing the regulatory enforcement actions; (2) the electric utility industry projections show that approximately 97 percent of the generating capacity to be added between 1980 and 1989 will use energy sources other than oil or natural gas; (3) purchasers of large industrial boilers show a preference for coal or other alternatives to oil or natural gas, although the data are inconclusive because of the depressed sales of large industrial boilers; and (4) utilities generally expect to apply for exemptions from the prohibition on natural gas use, which starts in 1990.