LOS ANGELES, June 10 (UPI) -- Federal Reserve Chairman Alan Greenspan Tuesday dumped icy cold water on the notion that natural gas will be able to keep the U.S. economy humming without the uncertainty that accompanies dependence on foreign oil imports.
Testifying before the House Energy and Commerce Committee, Greenspan said the nation appeared destined -- or doomed -- to include not only gas produced in North America in its energy mix for the 21st century, but also on increasing volumes of liquefied natural gas, or LNG, from overseas.
"Given notable cost reductions for both liquefaction and transportation of LNG, significant global trade is developing," Greenspan told the committee. "High gas prices projected in the American distant futures market have made us a potential very large importer."
The quest for energy independence remains as elusive today as it did in the 1970s when a little-known coalition of Middle East states rudely made Americans aware of the global nature of energy markets and the United States' dependence on oil from overseas as witnessed by long snaking lines at gas pumps around the country.
The United States now faces a potentially similar relationship with overseas gas producers as it becomes more apparent that it simply won't be possible to meet the nation's growing appetite for clean-burning gas to produce not only heat for homes but also electricity and the raw material for fertilizer and petrochemicals.
Greenspan told the members that a sizable LNG infrastructure would acts as a "safety valve" to supplement domestic gas supplies during shortages; however many of the major sources of LNG are nations that have their own political turmoil, including the Middle East, Algeria, Indonesia and the former Soviet Union.
Not all is lost, Greenspan said, noting that LNG sources can be found in extremely stable regions as well and are not concentrated heavily in one particular area as is the case with crude oil and the Middle East.
"There is a much greater dispersion of natural gas reserves throughout the world that shouldn't be subject to the types of problems we have when three-fifths of our crude reserves currently exist in a very small area of the world (the Middle East)," Greenspan said. "I recognize there are security problems with natural gas supply, but they are less than for oil because we have significant reserves of natural gas in areas which are not serious problems with respect to national security."
The American Gas Association estimates that U.S. natural gas consumption will grow 50 percent by 2020, and Tuesday's hearings -- held on the eve of the Energy Department's emergency summit on natural gas supplies -- concluded that there is a lot more to increasing gas supplies than simply opening up protected lands to exploration.
Witnesses from the energy industry testified earlier in the day that the nation's gas infrastructure, particularly pipelines and underground storage facilities, currently are inadequate to handle a major increase in domestic production, and the current regulatory climate makes investing in such projects unattractive to Wall Street.
"Investing in energy infrastructure is distinctly unprofitable," Goldman Sachs energy economist Jeffrey Currie told the committee. "A combination of regulation, taxes and indirect market intervention has made the return on capital in the energy industry a break-even proposition at best."
While the political debate continues over the need to speed up permits for new pipelines and remove restrictions on energy exploration on protected federal lands, the U.S. Energy Information Administration is predicting a major increase in the amount of LNG imported to the United States.
LNG is natural gas that is super-cooled and converted to its liquid state so it can be hauled aboard specially designed tankers from overseas to terminals where it is returned to its gaseous state and shipped inland by pipeline.
The EIA noted this year that world LNG trade grew more than 50 percent between 1995 and 2001 and predicted the annual U.S. consumption of LNG would grow from the current level of around 200 billion cubic feet to 200 trillion cubic feet in 2025.
A stumbling block is the fact there are only four LNG terminals in the United States. New facilities are in the planning stages in both the United States and Mexico, however they face regulatory hurdles and must rely on there being pipelines to move the gas to market once on shore.
Once the LNG infrastructure is increased and melded into the nation's overall energy grid, U.S. companies will be able to expand the number of LNG suppliers they have relationships with and take advantage of price competition -- at least until the suppliers form their own OPEC and start trying to manage the market themselves.
In the meantime, however, Greenspan sees LNG as a means of removing the current supply restrictions and keeping natural gas as the preferred fuel of the future.
"That gives us the capability of making other judgments as to what are the tradeoffs between the environment and domestic energy production," Greenspan averred. "If we do not have that international safety valve, then of course we'll face some very tough decisions."
