Gas producers fear regulation and tax uncertainties

Terrence Ruder is concerned that federal taxes and regulations could hamper the ability to tap into emerging natural gas fields that would allow the country to gain greater energy independence.

Ruder, the vice chairman of the Natural Gas Supply Association and senior vice president of Oklahoma City-based Devon Energy Corp., said their is a growing possibility that recent natural gas discoveries in the U.S. are just the beginning of what could be found.

“What we’ve seen so far from shale fields is just the tip of the iceberg. To facilitate a steady supply growth of gas from shale, we need a stable tax and regulatory environment,” Ruder told a Federal Energy Regulatory Commission conference on the US gas infrastructure.

He said natural gas from large shale play formations — like the Fayetteville Shale Play in north and central Arkansas — could provide 25 percent of the nation’s gas supply within 10 years. But he warned that a windfall profits tax and restrictive regulations could limit natural gas production at a time when more gas will be needed to help meet clean air requirements mandated by climate change legislation.

The Fort Smith area is home or an operating base for many companies active in natural gas exploration and production. Obviously, a growing natural gas production sector would benefit the Fort Smith regional economy.

Ruder made several interesting points in his testimony.

• Existing shale developments provide an estimated 6-8 billion cubic feed per day (bcfd) of gas, or 10-12 percent of projected 2008 U.S. demand.

• Over the next 10 years, U.S. shale gas production could double to 15-20 bcfd, with total reserve estimates at 250-750 (trillion cubic feet) tcf of gas.

• There are about 20 major shale fields across the U.S. that have the potential to or are currently producing gas, including the Bakken play in North and South Dakota and the Woodford in eastern Oklahoma.

Clay Bretches, vice-president, minerals and marketing, at Anadarko Petroleum Corp., also commented on the impact of an uncertain regulatory environment.

“(I)n the absence of a transparent and consistent regulatory environment, these (shale) projects may be delayed or worse yet, never get off the drawing board. …What we need is regulatory certainty that not only benefits the economics of the projects, but also provides adequate and on-time supply to consumers. Make no mistake about it, regulatory uncertainty strongly impacts price volatility,” Bretches said.

Link here to the report from the NGSA.