will arbitrage the u. s. natural gas price down, possibly significantly, through increased imports. in addition to increased supplies from abroad, north america still has numerous unexploited sources of gas production. significant quantities of recoverable gas reserves are located in alaska and the northern territories of canada. negotiations over the construction of pipelines connecting these northern supplies to existing delivery infrastructure are currently under way. * * * to be sure, the dramatic changes in technology in recent years have made existing oil and natural gas reserves stretch further while keeping energy costs lower than they otherwise would have been. seismic imaging and advanced drilling techniques are facilitating the discovery of promising new reservoirs and are enabling the continued development of mature fields. but because of inexorably rising demand, these improved technologies have been unable to prevent the underlying long - term prices of oil and natural gas in the united states from rising. conversion of the vast athabasca oil sands reserves in alberta to productive capacity has been slow. but at current market prices they have become competitive. moreover, new technologies are facilitating u. s. production of so - called unconventional gas reserves, such as tight sands gas, shale gas, and coalbed methane. production from unconventional sources has more than doubled since 1990 and currently accounts for roughly one - third of u. s. dry gas production. according to projections from the energy information administration, the majority of the growth in the domestic supply of natural gas over the next twenty years will come from unconventional sources. in many respects, the unconventional is increasingly becoming the conventional. in the more distant future, perhaps a generation or more, lies the potential to develop productive capacity from natural gas hydrates. located in marine sediments and the arctic, these ice - like structures store immense quantities of methane. although the size of these potential resources is not well measured, mean estimates from the u. s. geological survey indicate that the united states alone may possess 200 quadrillion cubic feet of natural gas in the form of hydrates. to put this figure in perspective, the world's proved reserves of natural gas are on the order of 6 quadrillion cubic feet. * * * in the decades ahead, natural gas and oil will compete in the united states with coal, nuclear power, and renewable sources of energy. as the manner in which energy is produced and consumed evolves, it is not unreasonable to expect that, in the long run, the prices per unit of energy from various sources would tend to converge

##quent. newly issued covered bonds backed by high quality mortgage loans and issued by strong financial institutions may find a growing investor base in the united states. the federal reserve has long accepted a broad range of high - quality collateral from depository institutions at its discount window. highly rated, high - quality covered bonds would generally fall within that broad range as eligible collateral. private lenders also are likely to find such bonds attractive as collateral for credit extensions. financial innovation, properly understood, can increase the diversity of funding sources, improve the distribution of risks, and provide incentives to monitor such risks - - all helping to promote economic growth. the federal reserve seeks to encourage new and innovative sources of funding, and will continue to work with other policymakers and market participants to accomplish this important objective.