This strategic primer highlights the joint economic and security interests the United States and Europe have regarding the export of liquefied natural gas (LNG). It details the major transatlantic connections underlying the export debate.
During the recent Republican and Democratic presidential nominating conventions, ACSF distributed more than 60,000 copies of a special eight-page newspaper supplement about America’s shale gas story and the Foundation’s policy work. This unique advertising supplement was prepared by ACSF in conjunction with the Washington D.C.-based Politico newspaper and was inserted in the local Tampa Bay Times and Charlotte Observer newspapers provided to all convention participants. More than 30,000 copies of the supplement were also distributed in Washington D.C. as part of a post-convention issue of Politico.
This map was originally published in Politico’s presidential nominating convention newspapers.
- Shale Gas Basins: Energy Information Administration, May 9, 2011, http://www.eia.gov/oil_gas/rpd/shale_gas.pdf
- Frac Sand Production: ICF International.
- New Major Gas-Fired Power Plants: SNL Financial, accessed June 12, 2012.
- Included are all planned natural gas-fired power plants with construction costs estimated to exceed $100,000,000.
- New Gas Processing and Fractionation Plants: Oil and Gas Journal, May 7, 2012.
- New Petrochemical and Other Plants: ICF International
- Existing and Planned Public LNG/CNG Filing Stations: Department of Energy, Alternative Fuels and Advanced Vehicles Data Center, accessed June 1, 2012, http://www.afdc.energy.gov/afdc/fuels/stations.html
- Included are all existing and planned public CNG and LNG fueling stations (no private/fleet only fueling stations).
- Planned LNG Export Terminals: Federal Energy Regulatory Commission, July 17, 2012, http://ferc.gov/industries/gas/indus-act/lng/LNG-proposed-potential.pdf and http://www.ferc.gov/industries/gas/indus-act/lng/LNG-approved.pdf
- Included are all export terminals that are either approved and under construction or proposed to the FERC.
On March 22, the American Clean Skies Foundation and the Bipartisan Policy Center released the final report of a jointly convened task force of environmentalists, consumer advocates and natural gas users that looked at natural gas markets.
Read the complete 70-page report (Adobe PDF document, ~5MB).
Key Task Force Findings and Recommendations
- Recent developments allowing for the economic extraction of natural gas from shale formations reduce the susceptibility of gas markets to price instability and provide an opportunity to expand the efficient use of natural gas in the United States.
- Government policy at the federal, state and municipal level should encourage and facilitate the development of domestic natural gas resources, subject to appropriate environmental safeguards. Balanced fiscal and regulatory policies will enable an increased supply of natural gas to be brought to market at more stable prices. Conversely, policies that discourage the development of domestic natural gas resources, that discourage demand, or that drive or mandate inelastic demand will disrupt the supply-demand balance, with adverse effects on the stability of natural gas prices and investment decisions by energy-intensive manufacturers.
- The efficient use of natural gas has the potential to reduce harmful air emissions, improve energy security, and increase operating rates and levels of capital investment in energy intensive industries.
- Public and private policy makers should remove barriers to using a diverse portfolio of natural gas contracting structures and hedging options. Long-term contracts and hedging programs are valuable tools to manage natural gas price risk. Policies, including tax measures and accounting rules, that unnecessarily restrict the use or raise the costs of these risk management tools should be avoided.
- The National Association of Regulatory Utility Commissioners (NARUC) should consider the merits of diversified natural gas portfolios, including hedging and longer-term natural gas contracts, building on its 2005 resolution. Specifically, NARUC should examine:
- Whether the current focus on shorter-term contracts, first-of-the-month pricing provisions and spot market prices supports the goal of enhancing price stability for end users,
- The pros and cons of long-term contracts for regulators, regulated utilities and their customers,
- The regulatory risk issues associated with long-term contracts and the issues of utility commission pre-approval of long-term contracts and the look-back risk for regulated entities, and
- State practices that limit or encourage long-term contracting.
- As the Commodity Futures Trading Commission (CFTC) implements financial reform legislation, including specifically Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Pub. L. 111-203), the CFTC should preserve the ability of natural gas end users to cost effectively utilize the derivatives markets to manage their commercial risk exposure. In addition, the CFTC should consider the potential impact of any new rulemaking on liquidity in the natural gas derivatives market, as reduced liquidity could have an adverse affect on natural gas price stability.
- Policy makers should recognize the important role of natural gas pipeline and storage infrastructure and existing import infrastructure in promoting stable gas prices. Policies to support the development of a fully functional and safe gas transmission and storage infrastructure both now and in the future, including streamlined regulatory approval and options for market-based rates for new storage in the United States, should be continued.
“The fact that a diverse Task Force like this could reach a consensus on these particular findings and recommendations was unexpected,” said Task Force co-Chair Gregory C. Staple, CEO of ACSF. “This consensus suggests that, although we may have a stalemate on many other energy issues, there is at least one important area — natural gas — where progress is within reach.”
With storage and potential import capacity at a record high, the Task Force predicted a relatively stable price horizon for natural gas through the next decade. Greater use of long-term contracts and other hedging arrangements are recommended to mitigate remaining price variability. Federal and state regulators are urged to avoid measures that limit these financial tools.
The Task Force members represent natural gas producers and distributors, consumer groups and large industrial users, as well as independent experts, state regulatory commissions and environmental groups. During the yearlong work, the Task Force commissioned 11 background papers from leading industry and academic experts.
Interest has grown recently in natural gas as a cleaner, low-carbon, low-cost alternative to other fossil fuels in the electric power and industrial sectors. In his State of the Union address, President Obama called for a federal clean energy standard for generating electricity that could be fulfilled through the use of natural gas.
Task Force Members
Sponsoring Task Force Members
Gregory C. Staple
Task Force Co-Chair
Chief Executive Officer
American Clean Skies Foundation
Task Force Co-Chair
Bipartisan Policy Center;
President & CEO
U.S. Commercial Director, Energy Business
The Dow Chemical Company
The Williams Companies
Vice President, Energy Policy and
Spectra Energy Corporation
Senior Attorney and Co-Director,
Natural Resources Defense Council
Senior Vice President for Policy and Planning
American Gas Association and on behalf of the
American Gas Foundation
Director, Gas Services
West Virginia Consumer Advocate Division
Chief Economist, Planning and Strategy
Senior Director, Energy Policy, Planning
Pacific Gas & Electric Company
Additional Task Force Members
Arkansas Public Service Commission
Former Chair, Board of Directors
Analysis Group, Inc.;
Former Assistant Secretary of Energy
Vice President, Transportation and Business Development
Chesapeake Energy Marketing
Ross School of Business
University of Michigan;
Former Group Vice President, Corporate Affairs,
Ford Motor Company
In The Press
Natural Gas Now Viewed as Safer Bet: New York Times, March 21 2011.
Congressmen Reed and Boren Hail Study on Natural Gas Markets: March 31 2011
NATURAL GAS: Utilities must embrace long-term contracts, market forces: E&E News, March 22 2011
Task Force: Shales, Price Stability Keys to Growing Gas Role: NGI’s Shale Daily, March 23 2011
US Faces ‘Good Problem’ as Gas Glut Stabilizes Prices: SNL Energy Finance Daily, March 24 2011.
Task Force: Dodd-Frank Could Impede Risk Management, Hedging: SNL, March 23 2011.
Stable price remains the key to shifting power sector from coal to natural gas: ClimateWire, March 23 2011
Report calls for increased use of natural gas: NewsOK, March 23 2011
Task force recommends natural gas shift: TulsaWorld, March 23 2011
Shale revolution enabling regulators to fight gas price volatility: SNL Natural Gas Report, February 15 2011.
Natural Gas Price Volatility: Lessons from Other Markets
M.J. Bradley & Associates, LLC
The report draws lessons from markets in the U.S., Europe, and Asia to determine (1) how natural gas markets are structured in the largest consuming regions of the world, (2) the effect that exposure to natural gas prices has had on corporate performance, and (3) how natural gas price movements relate to those of other commodities.
Long-term Contracting for Natural Gas
This paper defines the objectives and elements of long-term contracts; traces the evolution of natural gas contracts; assesses the economic value of long-term contracts; analyzes the relationship between long-term contracts and natural gas price stability; and examines natural gas contracts for regulated entities.
Managing Natural Gas Price Volatility: Principles and Practices Across the Industry
Steve H. Levine and Frank C. Graves
The Brattle Group
This paper describes gas market risk characteristics; identifies risk management principles and tools for managing price volatility; describes risk management processes and controls, and analyzes limitations in managing price volatility; and compares industry hedging practices.
Staff Memo: Water Impacts Associated with Shale Gas Development
How might water availability challenges constrain efforts to expand shale gas production? This memo summarizes the main water impacts associated with shale gas development in order to address this central question.
Introduction to North American Natural Gas Markets: Supply and Demand Side Drivers of Volatility Since the 1980s
Navigant Consulting, Inc.
This paper examines the history of chronic natural gas price instability across three periods from 1976-2010, and identifies fundamental changes in supply and demand that could influence natural gas markets going forward.
Impact of LNG and Market Globalization
Rice University’s James Baker Institute for Public Policy
This paper seeks to answer central questions about LNG and market globalization: What are the potential impacts of North American LNG imports and exports on natural gas price volatility? Given the relative abundance of shale gas in North America, is there any reason to believe that LNG imports will rise in the coming years? In the US, how do LNG, the domestic shale gas resource, and domestic storage interact? If there are any potential adverse impacts of globalized gas trade and increased LNG imports, are there policy options available to mitigate the adverse impacts?
Abundant Shale Gas Resources, Short-Term Volatility, and Long-Term Stability of Natural Gas Prices
Stephen Brown and Alan Krupnick
Resources for the Future
This paper examines the extent to which natural gas prices are likely to remain attractive to consumers. The authors examine how the apparent abundance of natural gas and projected growth of its use might affect natural gas prices, production and consumption, using NEMS‐RFF to model a number of scenarios through 2030.
FASB Accounting Rules and Implications for Natural Gas Purchase Agreements
Bente Villadsen and Fiona Wang
The Brattle Group
An overview of FASB accounting rules and their implications for natural gas contracts; normal purchases and sales exemption and fair value accounting treatment of natural gas contracts.
Staff Memo: The Impact of EPA Utility MACT Rule on Natural Gas Demand
Jennifer Macedonia and Lourdes Long
A background on the MACT Standards and the results of BPC modeling to analyze the impacts of the MACT rule on electric utility generation and natural gas demand.