Although there are many factors that can affect natural gas prices in a particular market for a certain period, such as the nuclear accident in Japan, the growing differential highlights how the U.S. natural gas market has been insulated from external events and the impact of the expanding U.S. natural gas resource base. Additionally, companies are seeking further markets for natural gas and have applied for permits to export natural gas as LNG. As the price for dry gas has dropped because of the increase in supply and other reasons such as the warm winter of 2011, the natural gas industry has turned its attention to producing more wet gas in order to bolster the value they receive. Flaring: A Value Issue

As natural gas production began to increase in 2005, so did the amount of natural gas that was vented (released into the atmosphere) and flared (burned at the production site). Water is a key component of energy production, particularly for shale gas development that requires significant quantities for hydraulic fracturing. Electric power generation makes up the biggest component of U.S. natural gas consumption followed by industrial use. Some of the industrial sector is poised to return to the United States from overseas because of projected low natural gas prices, although in many cases companies are waiting to determine if low U.S. natural gas prices are sustainable. If large parts of the U.S. economy are to shift to natural gas, sufficiently low long-term prices that maintain the advantage of gas over other fuels are likely to be required. The amount of investment that would be required to undertake this change would be enormous, probably in the trillions of dollars, and new technologies and infrastructure would be needed to make the changes economical and practical, particularly in the transportation sector for natural gas vehicles. Less than 1% of U.S. natural gas was consumed in the transportation sector in 2011. Although some of this has occurred, overall natural gas production continues to trend upwards, in part because of cost-reducing efficiency gains, and in part because of contract provisions. Much of the increase in natural gas-fired generation has been from facilities that have been operating below capacity. Coal will, however, retain an important share of the electric power market. Many of these investment plans, if they ultimately come to fruition, will result in new production capacity becoming available over the next five years. Any exports would be an additional source of demand and would likely put upward pressure on prices. Some companies on both the supply and demand side of natural gas have made, or have announced plans for large investments to confirm their positions. Other companies are waiting to see how various dimensions of the debate unfold. The domestic situation may also have an effect on the rest of the world as major U.S. companies with large international portfolios, in particular, continue to buy into shale gas assets. Although oil and gas exploration and production is regulated primarily at the state level, several regulatory developments are occurring at the federal level as well. Price Levels and Volatility: Not a Certainty

The ability of U.S. industry to be positively affected by the evolving position of the United States with respect to natural gas supply depends not only on the low current price, but the expectation that prices will remain low into the future. The market must price natural gas in such a way that consumers are drawn to use more natural gas and that producers are encouraged to produce more natural gas. Industries that use natural gas as an input have seen prices fall. Still other legislation has been introduced that would promote natural gas infrastructure in some areas and other legislation has been introduced to limit the environmental effects of natural gas production.
Due to the growth in natural gas production, primarily from shale gas, the United States is benefitting from some of the lowest prices for natural gas in the world and faces the question of how to best use this resource.
Different segments of the U.S. economy have different perspectives on the role natural gas can play. Suppliers, which have become the victims of their own production success, are facing low prices that are forecast to remain low. Some companies that have traditionally produced only natural gas have even turned their attention to oil in order to improve their financial situation. Smaller companies are having a difficult time continuing operations and larger companies, including international companies, have bought into many shale gas assets. Prices have remained low even as consumption has increased, in part, because producers have raised production to meet the demand and because companies have improved efficiency and extraction techniques. Some companies, many with large production operations, have applied for permits to export natural gas. This has raised concerns from consumers of natural gas that domestic prices will rise. The debate regarding exports is ongoing.
Industries that consume natural gas have seen input costs drop, and some have heralded low natural gas prices as the impetus for a manufacturing revolution in the United States. Some companies have begun to make major investments to take advantage of the low natural gas prices, particularly in petrochemicals. Other companies are waiting to see if prices will remain low long enough to warrant major investments in new facilities. Meanwhile, the electric power sector has already seen a transition from coal-fired generation to natural gas. Low natural gas prices are also putting pressure on renewable sources of power generation. However, increases in demand will put upward pressure on natural gas prices.
The transportation sector, the one part of the economy vulnerable to foreign energy supplies, is beginning to explore ways to use more natural gas. Transportation makes up less than 1% of U.S. natural gas consumption and would require billions of dollars in investment to increase that share significantly.
All of the change that has taken place so far has occurred despite environmental concerns and regulatory developments at the state and federal level that might curtail production. Natural gas is a fossil fuel that produces various pollutants, some more than other fossil fuels and some less. Methane, the major component of natural gas, is also a potent greenhouse gas when released without burning. Other environmental concerns focus on water use and disposal in hydraulic fracturing to extract natural gas from shale formations.
Over the next five years, many of the issues being debated now may be decided. The industry and market are adapting to the newly found supplies and the concerns associated with them, as well as integrating more natural gas into the economy. There are many evolving issues some of which Congress can influence directly because of statutes and some indirectly. On the demand side, legislation has been introduced regarding exports of liquefied natural gas and alternative fuels for vehicles. There has been other legislation related to environmental regulations of natural gas.