“Clearly, the energy business is in the middle of a revolution. Now revolutions are messy. They change stock-market valuations. They change technology. Many players don’t adjust quickly. We are in the messy part now,” said Larry Nichols, chairman and chief executive of Devon Energy Corp., in a keynote speech at the 38th annual Howard Weil Energy Conference in New Orleans.

“Our industry needs more discipline in developing these very large fields,” he told attendees in remarks on the gas industry and pending legislation. “But the majors know it (recognize the huge potential) and they are coming back to the U.S. gas business.”

For now, the industry has likely dodged the bullet on a 2010 energy climate-change bill. The enthusiasm for huge legislative packages has been sucked out of Congress after the marathon effort required to pass healthcare reform, he said. And in the first year of the Obama administration, nothing bad has yet been inflicted on the industry—a victory of sorts, he added.

“Legislation on hydraulic fracturing has gone nowhere and now the issue has been referred to the EPA for a study—the classic way in Washington to bury an issue,” Nichols said.

“It is amazing this issue has the legs that it does. In the worst-case scenario, if EPA does not come up with new regulations on fracing until later, they will be presenting their ideas to a very different kind of Congress after this November.”

Nichols said the industry has made significant progress in getting its message before Congress. The cap-and-trade bill passed by the House last year “is dead…and the dynamics have changed dramatically.”

Nichols, who is also chairman of the American Petroleum Institute—the first independent producer executive to be named to the post—said the advent of horizontal shale-gas drilling is revolutionizing the industry. He reminded the audience that it was Devon that drilled the first commercially successful multifrac well in the Barnett shale in 2002. Since then, industry research groups have pegged the increase in U.S. gas resources at 40%.

“Now that’s a game-changer. There are still some technical challenges, but that resource is much more abundant than we thought it would be, and it’s happened just when the world is looking for a cleaner, more abundant fuel.”

This change is beginning to be understood elsewhere. Last September, Nichols said, he attended the annual meeting of the Electric Power Research Institute, and no one there could remember a time when a representative from the natural gas industry had attended. Nuclear and coal officials were always there. Now natural gas is at the table.

Public utility commissioners were still under the impression that the U.S. does not have enough natural gas to fuel electric-power plants. Now, they are getting the message, and right at the time they fear they may not be able to build any more coal-fired plants, Nichols said.

“So let’s start having a serious dialogue with the PUCs (public utility commissions) and the utilities. The PUCs are not used to this.”

Finally, Nichols cautioned there is much work left to do. “I hear people tell me, ‘If you just go to Washington and educate them, you’ll be alright.’ No, you won’t. Environmentalists fear cheap and abundant natural gas as it would undermine their goal to get subsidies on wind and solar.”

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