The Haynesville shale may be the biggest natural gas play in the U.S. today. “Some think it may be one of the biggest gas fields in the world,” says Questar Corp. chairman, president and chief executive Keith Rattie in the webinar “’Inconvenient’ Realities Of Energy, And The Role Of Natural Gas hosted by and now available on demand for review.

“And the irony here is that, until mid-March of 2008, very few people in the industry and certainly nobody in Washington had ever heard of the Haynesville shale.”

The Salt Lake City-based integrated gas company is among gas producers operating in the northwestern Louisiana/northeastern Texas play, holding a position in what is proving to be the “sweet spot” of the producing trend.

“The Haynesville shale is perhaps one of the best illustrations of that stunning breakthrough in our ability to exploit the resource base in this country,” Rattie says in describing whether the U.S. has sufficient natural gas supply to support conversion of more U.S. energy demand off oil and coal to natural gas.

“What we’ve seen in recent years is that technology that was first adapted to exploit gas in the Barnett shale in the Fort Worth Basin in Texas has now been applied to a series of major new shale plays that just a few years ago most observers thought would never be commercially viable.

“We have the Fayetteville shale, the Haynesville shale, the Marcellus shale and, in Canada, there are the Horn River shales. You’re going to see horizontal drilling technology and, in particular, multi-fracture-stimulation technology applied to rock that we thought was unproducible just a few years ago.”

At the current rate of U.S. natural gas consumption, many gas-market observers suggest North America hosts a 100-year supply of proven, producible reserves.

Rattie says, “Over time, that number will prove to be conservative. Many policy-makers are hung up on the fact that natural gas supplies are finite, and that of course is true, but human ingenuity is not (finite) and over time, the smart people in our industry, using advances in technology, are able to extend our natural gas resource base.”

Since 1980, the U.S. has consumed more than 600 trillion cubic feet of gas and the known resource base today is at least three times what it was believed to be then, he says. “If we are having a conversation like this 20 years from now, we will find that, during the next 20 years, we will probably, in this country, use another 500 to 600 Tcf of natural gas and our resource base will be even greater than when we started out.”

Currently in Washington, the coal lobby is winning in “a game of trying to buy enough votes. And the game is getting rigged; the coal industry is better at playing that game than the natural gas industry. And my concern right now is that we’re going to see legislation that has the unintended consequence of allowing the continued use, and perhaps greater use, of coal to the disadvantage of natural gas.

“If you left the playing field level…natural gas will win. But politicians will have a way of gaming the rules so market-based outcomes are not always the ones that are realized.”

The natural gas industry can win on the product’s favorable environmental profile.

“Many (environmental) groups despise drilling for natural gas more than they fear the impact of climate change. It’s a sad reality. What we as a natural gas industry have to do is reach out to responsible environmental groups. We have, as an industry, every right to claim the moral high ground on this issue.

“We find, produce and deliver a clean, safe and environmentally friendly fuel to 65 million American homes and businesses in this country. And by choosing not to develop our most environmentally benign fuel—and I stress that word “fuel”—the unintended consequence is that we are going to burn more coal, import more oil and run our aging nuclear plants harder than ever.”

Aggressive climate-change policy will be difficult to effect if the Obama administration wins in its quest to eliminate oil and gas producers’ tax credits for intangible drilling costs (IDCs).

“We need to have policies that allow the industry to consistently invest in development of new supplies…IDC expensing has been part of the U.S. tax code since, I think, 1913. (Eliminating it) will have the effect of reducing U.S. producers’ cash flow by somewhere from 20% to 30% in the first year. Most U.S. producers operate under a simple rule: Cash flow equals capital spending.

“If you eliminate the expensing of IDCs—and I believe that is a wrong-headed policy—you will have the unintended consequence of reducing investment in natural gas supply.”

He urges producers to at least “do just one thing when policy-makers talk about sweeping changes in the way we use energy in this country and that is to do the math. Do the math.”

He concludes that the best policy is to let various energy sources compete. “The reality is there is no perfect form of energy. Only markets can weigh the pros and cons of various types of energy, and let the markets do the job.”

--Nissa Darbonne

(The 60-minute webinar is now available for review. Click to register for the webinar, which includes a copy of Hart Energy Publishing editors’ Vision: Global Energy Outlook, 2009 special report.)