An energy industry that has gas to burn -- and more help for cutting imports

Natural gas is a fairly benign fuel. Chefs love it. It's silent, odor-free, clean -- and more abundant today than scarcely believed possible a decade ago. Gas can fire electric turbines, heat homes, and fuel motor vehicles without side effects like acid rain, radioactive waste, and soot. And now that gas prices have been partly decontrolled, there's so much extra gas around on a permanent basis that the industry has given the surplus a name. It's called ``the gas bubble.''

What's more, events seem to have conspired to make natural gas the fuel of the moment. Nuclear power is stalled out, because of huge cost overruns and concern about waste. Coal and fuel oil are believed to contribute to acid rain. Hydro, solar, and wind power have merit, but they are not really able to stoke the turbines that light up New York, Los Angeles, and the cities, farms, and industries in between.

But it's easy and relatively cheap to build gas-fired generators. The fuel is priced low and burns clean. Other than home-safety concern with gas (which also exists with electricity), the only environmental side effect is the emission of carbon dioxide, which is thought to contribute to the ``greenhouse effect,'' the warming of the earth's atmosphere. Gas shares that with other hydrocarbons.

Contrary to earlier fears, there has been no fly-up in gas prices since the Jan. 1 decontrol of natural gas found after 1977. Prices, in fact, have fallen -- a trend now thought likely to last through the 1980s. Gas producers in the United States have been adding steadily to their proven and potential reserves with new discoveries, and Canada has a huge supply that it wants dearly to sell to its southern neighbor.

In short, there is a 2 trillion-cubic-foot-a-year surplus of gas in the US; 4.5 trillion if Canadian gas is added -- which, by the end of the decade, will probably occur.

Moreover, the expected completion of a string of nuclear plants in Texas and Louisiana in the next two years will free up another 0.5 t.c.f. of gas, says I. C. Bupp, director of analysis for Cambridge Energy Research Associates and author of a March 1985 report on the industry.

``There are no alternative uses to make that up,'' says Mr. Bupp. ``It guarantees the continuation of the gas bubble.''

Consequently, the natural gas industry is marketing aggressively. It wants to persuade utilities to switch back to gas or to go with ``combined cycle'' systems that employ both coal and gas. It wants to sign up more homes with gas for cooking and heating. It even wants buses in New York, Los Angeles, and other cities to try compressed natural gas so as to cut down on polluting diesel vapors -- and, by the way, to consume more natural gas.

``Marketing is the name of the game for us,'' says Louis R. Reif, president of National Fuel Gas Company in Buffalo, N.Y. ``Gas is a most acceptable fuel. Our marketing push is to get it into places now using coal and oil. We think natural gas can pick up a good share of the electric-generating market.''

Mr. Reif says the US could switch away from fuel oil (which is derived from imported oil), use more gas, and thus decrease foreign oil imports.

Analyst Bupp concurs: ``I'm very bullish about the use of gas in the utility system in the 1990s. It in many ways is the ideal fuel.''

Bupp notes that the high electricity rates that accompany atomic power could also prompt industrial customers to employ alternatives such as co-generation, which usually uses gas. But he concedes that would be a slow-building process.

The ``gas bubble'' seems ironic today, considering that as recently as the late 1970s it looked like this energy source was on the road to depletion. The energy crises of that decade, along with a series of cold winters, crimped natural gas supplies and caused lawmakers to mandate an end to natural gas as a boiler fuel in new utility plants. Use it for home heating only, they said.

In 1973, the federal government reported there was only a 12-year supply of natural gas in the US. Twelve years later, the Department of Energy has again assessed the natural gas supply in the US and found that there is still a 10- to 12-year supply of proven reserves. Breakthroughs in conservation or alternate energy could boost the supply even more.

``There was no geological shortage of natural gas,'' Reif says. ``There was an economic shortage.''

With deregulated prices, more and more gas has been found each year. The ratio of proven reserves to production climbed from 71 percent in 1979 to 102 percent in '84 -- meaning more reserves were added than gas used. And there are huge gas fields in western Canada, Alaska, and off the shores of North America.

Canada's leading natural gas exporter, TransCanada Pipelines Ltd., told a meeting of gas distribution companies in Boston this week that Canada will be ``aggressive'' in selling gas to US distributors. But TransCanada vice-president Art Douloff allayed fears among US gas producers that Canadian gas would flood in ``at fire-sale prices.''

TransCanada supports a pipeline proposal through Niagara Falls that would send more western Canadian gas into the US -- one of three competing proposals. All are tied up in US and Canadian government wrangling. Industry analyst Bupp says it could be the end of the decade before this is ironed out and more Canadian gas makes its way south. But just the prospect of its coming should keep prices steady.

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