X-Message-Number: 21947
From: "Mark Plus" <>
Subject: U.S. told don't rely on gas from Canada
Date: Wed, 11 Jun 2003 08:53:11 -0700


U.S. told don't rely on gas from Canada

Wednesday, June 11, 2003 - Page B1

WASHINGTON -- The United States shouldn't look northward to ease its 
worsening natural gas supply crunch because Canadian production won't be 
able to keep up with soaring demand south of the border, a U.S. 
congressional committee has heard.

Canada has filled half of all new U.S. gas demand for a decade now, but the 
well is running dry, Harold Kvisle, president and chief executive officer of 
TransCanada Corp. of Calgary, warned the energy and commerce committee 

"Our industry is now running flat out," Mr. Kvisle explained. "There's not 
much more production increase available for export."

Expansion of the oil sands projects at Fort McMurray, Alta., will suck up a 
large chunk of the natural gas production coming on stream in Western 
Canada, he noted, because the process of producing oil from the sands 
consumes large quantities of the fuel.

"We see production growth flat-lining and there is a very significant 
increase in demand -- in no small part because of the oil sands 
development," Mr. Kvisle said.

Canada supplies about one-sixth of U.S. natural gas consumption, currently 
running at 21.6 trillion cubic feet a year and growing.

"We can't blame Canada, like the kids from South Park did," quipped 
committee chairman Billy Tauzin. "Canada is trying to get gas to us to the 
extent they can."

The hearing comes amid growing concern about the United States' dependence 
on rising and volatile natural gas prices. In the past year, North American 
prices for natural gas have doubled and inventories have dwindled to the 
lowest level in nearly 30 years.

U.S. Energy Secretary Spencer Abraham has directed the National Petroleum 
Council to devise a strategy to deal with the natural gas supply crunch -- a 
game plan that could include strict conservation measures.

A long delayed energy bill now before Congress lavishes hefty subsidies on 
natural gas producers to help them build a $15-billion (U.S.) pipeline 
across Alaska and the Yukon. But the pipeline wouldn't start delivering gas 
to the U.S. market until 2020.

Both Senate and House versions of the bill provide loan guarantees for the 
pipeline's construction, but require a trans-Alaska route.

Mr. Kvisle and other witnesses at the hearing played down the near-term 
impact that tapping vast gas reserves in Alaska or Canada's Mackenzie Valley 
would have on easing the current supply crunch.

The only way to work out the growing imbalance in the United States between 
tight supplies and soaring demand is to curb consumption -- or destroy 
demand, as Mr. Kvisle put it.

"There is virtually nothing that can be done to increase the supply of 
natural gas," he told the committee. "This is a multiyear process, and big 
projects -- whether it's LNG [liquefied natural gas] importation or natural 
gas from the north -- take a long time. The mid-term market balancing 
mechanism will in fact be demand destruction."

Testifying at the same hearing, U.S. Federal Reserve Board chairman Alan 
Greenspan warned that rising and volatile natural gas prices have put 
domestic gas-consuming industries "in a weakened competitive position."

Among the largest users of natural gas are fertilizer makers and electric 

Mr. Greenspan noted that some gas users are already turning to alternative 
sources because of the problem.

He spoke at length about the enormous potential LNG offers.

Mr. Greenspan said North America will forever be condemned to a volatile and 
inefficient natural gas market unless it can secure "unlimited access to the 
vast world reserves" just as it has with oil.

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