Natural Gas Prices Will Stay High

Even As Gulf Coast Recovers, Demand Still Outpaces Supply

(AP)  Progress is being made in restoring offshore natural gas facilities shut down by hurricanes, but gas prices will remain high as demand outpaces supply, the head of the Federal Energy Regulatory Commission said Tuesday.

Even with recovery of operations along the Gulf Coast, "I don't think they'll go back to the level they were a few years ago," said FERC chairman Joseph Kelliher.

He said that shut-in, or halted gas production along the Gulf has gone from 54 percent of normal output three weeks ago to 32 percent, representing significant progress but also pointing to the remaining damage that has disrupted supplies and driven up heating fuel costs.

Twenty percent of U.S. natural gas supply comes from the offshore Gulf.

Kelliher, who took over as FERC chairman this summer, said the agency plans to make aggressive use of investigative powers under the recently enacted energy law to prevent market manipulations such as those by Enron several years ago.

He would not comment when asked if FERC is currently engaged in undisclosed investigations.

The Energy Department's Energy Information Administration recently predicted that households heating primarily with natural gas can expect to spend about 50 percent more this winter.

Kelliher said the final figure depends on further recovery for offshore facilities, the weather and conservation efforts. He said a winter 10 percent warmer than the last would more than offset gas production losses, but if the winter is 10 percent colder it could double the price effect of the gas loss.

Most of the natural gas used in the United States comes from American production. Most of the imports come from Canada.

On Monday, FERC temporarily waived several rules to expedite the construction of natural gas infrastructure and mitigate supply disruptions caused by the hurricanes.

Kelliher said that natural gas storage facilities have expanded by only 1.4 percent since 1988 while gas demand has gone up 24 percent.

The agency is also pushing ahead with plans to construct new gas pipelines and build new terminals to process liquefied natural gas. LNG import capacity could quadruple when those new facilities come on line, he said.