In his first State of the Union speech, which lasted more than an hour, President Obama uttered just one sentence about opening up new offshore areas to oil and gas drilling. A few days later he rolled out a budget that would kill most tax incentives for fossil fuels. That sums up the amount of space this industry has on the Oval Office's radar screen.

Meanwhile, during a press conference in London in February, Gazprom executive Alexander Medvedev showed he has been paying attention. He spoke against the shale-gas resource base rapidly building here, saying it pollutes U.S. drinking water and is probably uneconomic. He also said developing European shales is "unimaginable."

If Russia is truly threatened by all this, it will delay projects (it already has delayed production by three years at the giant Shtokman gas field in the Barents Sea) or turn east, shipping its gas and liquefied natural gas to China.

At press time, meanwhile, U.S. gas producers were touting their enhanced gas reserves. Conference calls were still rolling out, but to date, E&P companies have been reporting stunning details: increased production, higher proved reserves and, thanks to new regulations from the Securities and Exchange Commission, huge 2P and 3P numbers.

Petrohawk Energy Corp.'s shale wells enabled it to hike production almost 450% last year. It drilled or participated in 564 wells in three shale plays. It averaged 11 rigs running through 2009 and planned to boost that to 17 rigs this year, so more gas is coming, from more Hawk-operated wells.

Comstock Resources Inc.'s Haynesville production rose from less than 2 million cubic feet a day at year-end 2008, to 84 million a day by year-end 2009. Management now thinks the Haynes­ville could add at least 400 billion cubic feet equivalent to its proved-reserve column in 2010.

Both producers will speak at our 5th annual Developing Unconventional Gas Conference & Exhibition (DUG), in Fort Worth later this month, along with nearly a dozen other producers. Their remarks should be illuminating.

Are investors starting to question shales as a viable source of gas supply? No. Are they starting to question shale players' business models? Yes, some are. What is the impetus to lease more acreage and drill more shale wells in the face of natural gas prices that averaged $3.94 in 2009? Optimistic producers are counting on higher long-term gas prices and more demand to push them over the goal line.

But some people fear we are in for an extended period of $3 to $5 per thousand cubic feet, which makes the economics of some shale wells dicey. Certified financial planner, advisor to institutional investors and blogger Alan Brochstein talks of E&Ps facing an era of “profitless prosperity” as they increase U.S. gas production.

He says just because the nation needs their gas and they can produce plenty of it, doesn't mean they can make money doing so. He has a point. An urgently needed commodity is not necessarily a profitable one. All of us can recall when beleaguered farmers dumped raw milk into ditches or slaughtered cattle rather than send them to depressed markets.

Low prices may argue for less drilling now, but still, it is useful to study the cost of not drilling enough.

In mid-February, Science Applications International Corp. (SAIC) released a study doing just that. It was commissioned in 2007 by the National Association of Regulated Utility Commissioners' gas committee and board of directors. They wanted to know the impact of drilling moratoria on federal lands onshore and offshore.

The study used a federal modeling program relied on by Congress and the administration to analyze the energy outlook under existing laws. It used new resource estimates, and projected the social, economic and environmental effects if drilling moratoria last through 2030.

The report estimated that the gas-resource base on federal lands should be increased over previous estimates by 132 trillion cubic feet (Tcf) onshore and 154 Tcf offshore, for a total increase from 1,748 Tcf to 2,034 Tcf. (To give that number context, in 2009 the U.S. consumed 22.8 Tcf, including imports.)

SAIC's "Combined Comparative Case," which combines these resource increases with maintaining moratoria from 2009 to 2030, indicates cumulative U.S. oil and gas production would fall by 15% and 9%, respectively.

Average natural gas prices would therefore jump 17% and average electricity prices would go up 5%. Because of that, cumulative national real disposable income would fall by $1.16 trillion—some $4,500 per capita. GDP would thus decrease cumulatively by $2.36 trillion, for an average annual decrease of 0.52%.

This country cannot afford to look at shale-gas potential and blink. Water-sourcing and disposal problems can and will be handled properly with new technologies. Companies are committed to solving any and all challenges associated with developing more clean-burning, abundant natural gas. For many reasons, they cannot afford not to.