Concern about natural gas supply rises

Burlington Free Press, May 24, 2003

By Brad Foss
The Associated Press

NEW YORK -- Although natural gas is primarily a winter fuel, the industry is generating an unusually high level of attention as summer rolls around because supplies are tight and prices are soaring.

This is traditionally the period when demand tapers off and the industry is able to replenish inventories with cheap fuel. This year, industry and government officials are worried that supplies might still be inadequate by the time the next home-heating season begins.

At the very least, the fuel being injected into underground storage facilities these days is unseasonably expensive, a cost utilities are likely to pass along to homeowners, industry officials said.

As with most issues confronting the energy business, this one intersects with environmental policy. Natural gas executives have for years complained that their ability to meet the nation's demand is impaired by regulatory red tape and a lack of access to federal lands, especially in the Rockies . Under the circumstances, officials believe that argument will now carry more weight in Congress.

The rumblings about the root causes of the shortfall -- dwindling domestic production coupled with a cold winter in natural-gas consuming regions of the country -- reached a wider audience this week when Federal Reserve Chairman Alan Greenspan raised them before Congress.

Greenspan described the difficulty the natural gas industry is having as a "very serious problem" that could have negative consequences for the rest of the U.S. economy, particularly the manufacturing sector, which relies on natural gas to generate power.

"Working gas in storage is presently at extremely low levels," Greenspan testified, "and the normal seasonal rebuilding of these inventories seems to be behind the schedule ... ."

The industry has pursued an intentionally cautious approach since the summer of 2001, when record-high prices prompted a flurry of drilling that resulted in a supply glut as the economy sputtered. As prices plummeted below $3 per 1,000 cubic feet, drilling activity dried up and chastened executives vowed to be more circumspect.

Sure enough, the surplus disappeared and supplies tightened. Other factors contributing to the rising price of natural gas have been increased exports to Mexico and a decline in Canadian production.

How this would affect Vermonters

Vermont Gas Systems Inc., the only natural gas utility serving Vermont , has asked state regulators for permission to raise rates by 10.6 percent Oct. 1. If the request is approved, the average customer's bill would increase by $8.25 a month. Vermont Gas serves more than 35,000 customers in Chittenden and Franklin counties.

The Public Service Board is holding a hearing on the request at 7 p.m. June 9 at South Burlington High School . Any person with a disability who requires special accommodation should call the board at 828-2358 no later than June 5.