Like coal and oil, natural gas is a fossil fuel. Fossil fuels (which we burn to power transportation, heating & cooling, and electricity) are non-renewable sources of energy formed in the earth over millions of years. Natural gas typically forms in regions near deltas from marine microorganisms and plants in the ocean. Sealed off from oxygen and put under ever-increasing amounts of heat and pressure, this organic matter undergoes a thermal breakdown process that ultimately converts it to hydrocarbons. In the U.S., most natural gas is produced in the Appalachia region.
The lightest of these hydrocarbons occur in a gaseous state known collectively as “natural gas,” which in its pure form is a colorless, odorless gas composed primarily of methane.
The U.S. is the largest producer and consumer of natural gas in the world. In 2025, the U.S. was also the largest exporter in the world of liquified natural gas (LNG). While the majority of natural gas is delivered in its gaseous form via pipeline in the U.S., the growth in the international market for natural gas has given rise to the use of natural gas in its liquefied form (LNG).
Data from the U.S. Energy Information Administration (EIA) confirms that natural gas supplies approximately 36% of total US primary energy consumption, primarily heating (47%) and the generation of electricity (roughly 41% of the total utility-scale power mix). Behind this are renewables (approx. 28%), coal (15%), and nuclear (8%). In the primary energy consumption landscape, natural gas's 36% share puts it nearly on par with petroleum.
The U.S. natural gas industry is structurally distinct and driven primarily by private enterprise rather than state-owned entities. The process begins with upstream producers—ranging from independent operators to massive corporations like Expand Energy Corporation—extracting raw gas from the ground. Once processed, the gas is transported over long distances across a vast network of large, high-pressure interstate and intrastate transmission pipelines. This gas eventually connects to city gates, where Local Distribution Companies (LDCs) take over to lower the pressure and deliver it directly to commercial and residential consumers. This competitive market structure was finalized by the Federal Energy Regulatory Commission’s (FERC) Order No. 636 in 1992. Order No. 636 fundamentally transformed the industry by requiring interstate pipeline companies to "unbundle" (separate) their gas ownership and sales services from their transportation and storage services. This effectively turned pipeline companies into open-access transporters, allowing consumers and utilities to buy gas directly from producers in a highly competitive wholesale market.
Yes, natural gas is a rapidly growing energy source. Backed by strong domestic consumption and rising liquefied natural gas (LNG) exports, U.S. natural gas production is on track to hit an all-time record high in 2026, averaging roughly 121 to 122 billion cubic feet per day. A major catalyst for this growing domestic demand is the booming data center industry, alongside utilities transitioning away from coal.
Much of this record-breaking supply is driven by high crude oil prices, which incentivize heavy drilling in the Permian Basin. Because natural gas in this region is often trapped alongside crude oil (associated gas), oil-focused drilling inherently surges gas production. Furthermore, as these mature reservoirs naturally lose pressure over time, the gas-to-oil ratio (GOR) steadily increases. This happens because lighter natural gas molecules escape underground pores much more easily than heavier oil at lower pressures, resulting in a national rise in natural gas output per barrel of oil extracted.
Natural gas plays a highly contested, strategic role in the clean energy transition. On one hand, it serves as an economically attractive "bridge fuel" that reduces local air pollution and cuts carbon emissions, emitting roughly 50% less CO2 than coal and 30% less than oil during combustion. Furthermore, its ability to provide quick-ramping, dispatchable power makes it a vital reliability backstop to balance the intermittent nature of wind and solar energy.
However, its long-term viability is increasingly questioned due to severe lifecycle climate impacts. Methane emissions from supply chain leaks pose a catastrophic risk; research indicates that a leakage rate of just 2.5% to 3% completely negates the climate advantages of gas over coal, due to methane's immense heat-trapping potency. Additionally, upstream extraction—particularly hydraulic fracturing (fracking)—causes habitat destruction, requires massive amounts of water, and risks contaminating local water supplies with toxic chemical runoff.
Consequently, energy economists and climate scientists warn against a heavy reliance on gas. While it has a lighter immediate carbon footprint than other fossil fuels, over-investing in gas infrastructure risks carbon lock-in, absorbing capital that could otherwise fund a more rapid deployment of purely renewable energy and battery storage systems.
CREDIT: EIA
