On July 25th, the U.S. House of Representatives Natural Gas Caucus held a hearing entitled “State of the Natural Gas Industry: Challenges and Opportunities for American Job Growth.” The major themes of the hearing were that current natural gas prices are too low, that the low prices can be addressed by encouraging natural gas exports, and that natural gas is sufficiently abundant that increased export will not jeopardize the benefits from the low price that American industry currently enjoys. Here's a review:

The price is too low. Michael Watford, the CEO of Ultra Petroleum, explained that the current price for natural gas, $2.50-3.00 per cubic foot, is too low to sustain production in the long term. The low price is the result of an overabundance of supply without a parallel increase in demand. Rich Kolodziej, President of NGV America, explained that the federal government has instituted policies to encourage natural gas production, but has not done enough to spur natural gas consumption. Mr. Watford said that the ideal price to encourage long-term industry development is $5.00-6.00 per cubic foot.

Exporting natural gas can address the low price point. Gary Sypolt, the CEO of Dominion Energy, explained that there are significant opportunities to export natural gas to other countries that do not have significant reserves. The U.S. currently has the reserves, the technology, the expertise, and the human capital to lead the world in unconventional natural gas production and exportation, he said, but other countries will eventually catch up and will be able to frack their own shale formations. He asserted that constructing export facilities will create jobs and reduce the price volatility in the market.

Abundance means that all natural gas markets can be effectively served. Mr. Watford noted that energy companies are shifting their fracking operations from natural gas to oil, which generates higher returns at current prices. Doug Matthews, Senior VP of U.S. Steel Corporation’s Tubular Operations, and Mr. Kolodziej expressed concern that allowing natural gas export may jeopardize the competitive advantages their firms enjoy due to the low price point. However, Mr. Sypolt explained that rising natural gas prices will be mitigated by latent capacity coming on line in response, and that this additional capacity will allow producers to meet the needs of all four sectors of natural gas consumption (transportation, export, chemical, energy production).