Traders aren’t factoring into futures prices any expectation of Washington legislating greater natural gas use. “If you were looking at only the natural gas market, no, you wouldn’t find it,” says Keith Barnett, director of strategic analysis for Merrill Lynch Global Commodities.

If looking at futures for off-peak power in regions that have a lot of coal as part of it, traders are factoring in some belief that the Waxman-Markey bill will create some price fluctuation, he says.

Frankly, though, Barnett says of gas and other energy traders, “We’ve seen a lot of bills wax and wane—no pun intended—a number of times over the years.” Waxman-Markey may go the way of the rest.

As it stands now, Waxman-Markey should go the way of the rest—defeated—says Rod Lowman, president and chief executive of America’s Natural Gas Alliance, which consists of 28 U.S. gas producers that generate more than 40% of daily supply. “We could not support Waxman-Markey as it stands now.” Within the 1,428-page document, little mention is made of natural gas.

Keith Rattie, chairman, president and chief executive of Questar Corp., says, “America can only hope the Senate provides some desperately needed adult supervision (of the House)…These 1,428 pages virtually ignore the CO2 reduction that can be achieved…by natural gas...Waxman-Markey is a wake-up call (that)…natural gas has virtually zero mind-share with those we elect in Washington these days.”

Instead of accepting minor concessions in the existing bill, resulting in energy policy that is further fraught with inequity, the natural gas industry should work to prevent any bill from coming out of Waxman-Markey, he says. “We are being asked to insert 10 pages and we are being asked to hold our noses on the other 1,428.”

He adds that the industry must avoid a public-relations war with coal. “Al Gore would like nothing more than natural gas and coal forming a firing squad around each other.”

Lowman says Congress is coming to understand that the U.S. has plentiful natural gas supply, both already surfaced and readily producible. “Shale and shale-gas plays have changed everything…This is going to be a global phenomenon: We are going to have a lot of natural gas.”

What to do with all that gas? Two Gulf Coast liquefied natural gas (LNG) receiving terminals, at Sabine Pass and Freeport, Texas, are permitted by the Department of Energy to ship out what gas they have taken in. Two LNG terminals in British Columbia may commence exporting Canadian-produced natural gas as well, Barnett says.

Otherwise, North American gas supply is stranded, in a way.

Barnett says, “I have long thought that the ability to export LNG should not be inhibited...Exporting (U.S. gas) allows the market to balance itself and sends appropriate price signals, and we would be exporting to two of our strongest allies—the U.K. and Japan.”

The Merrill Lynch analysis team believes the Nymex price will struggle to exceed $4 for the balance of 2009, due to rapidly diminishing odds of many or any powerful Gulf of Mexico hurricanes this season, storage nearly full in the U.S. and Canada, and new LNG supply expected in the fourth quarter. “We’re obviously going to be in an oversupply situation in the back half of 2009,” Barnett says.

For 2010, the outlook is mixed. “The bulls are afraid of (a continued sluggish) economy and of more LNG imports and the bears are afraid of production declines.” Most economists expect slow U.S. growth in 2010, and a second wave of LNG imports is expected in the summer and fall, he adds.

Most forecasts among gas analysts across many firms expect prices to range from $2.50 to $8—generally between the cash cost and marginal plays’ life-cycle investment costs—during the next two to four years. Some forecasts are for $8 or nearly $8 in the latter half of 2010. “I’m less sanguine,” Barnett says. New LNG supply will keep Henry Hub gas prices well below $8.

Justin Carlson, senior energy analyst for research firm Bentek Energy LLC, says, “The U.S. is more than 2 Bcf per day long on gas….We don’t have anywhere to put it—nor do we have a demand market to absorb that gas....”