America’s energy future is natural gas: That’s a paraphrased quote this week from John Rowe, CEO of Exelon Corp (NYSE: EXC), the country’s largest producer of nuclear power.

The logic is undeniable. First, coal power is under attack as never before, not only on the basis of carbon dioxide (CO₂) emissions but for increasingly environmentally destructive mining techniques such as mountaintop removal. Environmental Protection Agency (EPA) rules announced this week should allow owners of coal plants in the US enough time to take action to avoid financial damage. But plant closings are inevitable with 25 percent of coal-fired capacity more than 50 years old and no longer economically viable.

Moreover, rising coal prices–due to robust demand in Asia–and falling wholesale electricity prices have left so-called dark spreads at less than profitable levels. Dark spreads are the difference between power prices and the cost of coal needed to produce the juice.

This squeeze, as I pointed out last week, has driven Dynegy (NYSE: DYN) to the brink. And it’s further discouragement to any company looking to brave the public’s knee-jerk reaction to all things coal and build a plant that burns the dark mineral.

Second, conservation and renewable energy–whether hydro, wind, solar, geothermal, wood-waste over everything put together–is simply incapable of meeting even the very conservative projection from the Energy Information Administration for future power demand. Any idea they can replace the percentage of coal-fired plants set to be retired in coming years is laughable.

Third, enter the crisis in Japan, which has elevated the hysteria about nuclear power in Europe and the US to levels not seen since Chernobyl in the early 1980s, and before that the 1979 accident at Three Mile Island, which imitated popular movie “The China Syndrome,” that preceded it by 12 days.

Watching news coverage of the event is extremely frustrating. On its face, understanding the situation is difficult enough, given the immensely technical nature of nuclear issues and cultural differences between Japan and the US. On top of that, however, some so-called news organizations appear to have focused their coverage on criticizing the US president, alleging the events indicate a “lack of leadership.”

That not only means the reports are less than thoroughly researched. But they’re also emotionally charged and therefore wholly useless. You’ll be better informed by not watching at all, though perhaps not as entertained.

So what do we know? The most important fact is it’s now been a week since the cooling rods were automatically inserted into the reactor cores at the plant. Every hour those rods are in place–and they were put in place automatically when the earthquake hit–the less the chance of an actual meltdown at these plants.

As long as that’s the case there’s no chance Japan’s crisis will ever become as severe an event as Chernobyl, or even Three Mile Island. At Chernobyl the cooling rods didn’t shut down the reactor when the accident occurred. The Japanese plants did shut down, despite an earthquake measuring 9.0 on the Richter scale and a tsunami every bit as destructive as what struck Aceh and the coasts of other Indian Ocean countries several years ago.

The current count of dead from Japan’s natural disasters is now well over 15,000. Thus far, however, none of them are the result of what’s transpired at the affected nuclear reactors. That’s also worth noting as nuclear power hysteria seems to heat up over the US airwaves.

Irrational or not, that hysteria is likely to have a severe impact on nuclear power’s prospects for growth or even sustainability in the US. And again, that means only one thing: advantage natural gas, particularly when it comes to generating electricity.

Despite the overheated rhetoric we’re hearing now, a mass shutdown of US nuclear power plants isn’t going to happen. For one thing, the Obama administration remains steadfast in its support not only for existing nuclear production–22 percent of the US power supply–but for its push to see new plants built.

Only a handful of US electricity producers have taken advantage of Uncle Sam’s low-cost loan guarantees thus far, mainly because of uncertainty that state regulators would allow the plants into rate base. Utility managers know full well that a nuclear plant is a long-term commitment, and only if there’s a relative certainty of a return on investment will they commit shareholders’ money.

That’s why the only companies to build thus far are SCANA Corp (NYSE: SCG) and Southern Company (NYSE: SO), which operate in South Carolina and Georgia, respectively. These states have seen the logic in a power mix based on different resources and have historically cooperated with utilities to achieve system cost and reliability goals. Unfortunately, however, many states are simply incapable of supporting conditions that are necessary for such long-term planning.

The situation in Japan is providing ammunition to opponents of nuclear power in many states, which will make it even more difficult to build new reactors. The Obama administration remains a bulwark against knee-jerk actions against operating plants in this country, such as what’s going on in Germany. That country now seems unlikely to keep its nukes running past a 2022 shutdown date now enshrined in law, ensuring it will become increasingly dependent on Russian energy in coming years.

Earlier this week I wrote that I expect some states to take action against their nuclear power plants. California remains at the top of the list, with PG&E Corp (NYSE: PCG) most vulnerable financially through its Diablo Canyon plant. Diablo is a key part of the Golden State’s power supply, but has been a target for many years by anti-nuclear forces because of its location near a fault line.

The plant is not of the same design as the 40-year-old plants in Japan. Nor is it at risk to a tsunami, which was the disaster that pushed the Japanese reactors over the edge, as it shut down electricity needed to keep water pumps pumping. The plants did shut as they should when the earthquake struck.

Such considerations matter little to longstanding opponents of Diablo, who are likely to believe their time has come and act accordingly. We’ve yet to see how the administration of Governor Jerry Brown and the regulators he’s appointing will react. But until they make a clear statement–and unless that’s in support of the plant–PG&E is at severe financial risk.

As for the other plant in the state, San Onofre, it still provides a hefty percentage of power used in Southern California, by some estimates as much as 20 percent. Located right on the ocean, the plant has been cited in recent days as vulnerable to tsunami/earthquake scenario. It has a 30-foot seawall, which would have blocked the worst of what happened in Japan. More significant for investors in joint owners Edison International (NYSE: EIX) and Sempra Energy (NYSE: SRE), however, is the fact that neither company is significantly exposed financially even to a worst-case on the political front.

The same is true of Entergy Corp (NYSE: ETR), the owner of the Indian Point nuclear plant upriver from New York City. The plant is a major source of energy for the nation’s financial capital but also the source of angst for the sizeable anti-nuclear population in the Empire State.

Even plant opponents admit there’s little chance of anything going wrong at the plant, which is also not the same design as the Japanese reactors. But an alleged fault line near the plant and its proximity to New York City squarely land it on the list of plants in the crosshairs of anti-nuclear activists.

The good news for Entergy shareholders is the company’s dividend is more than covered by its Mid-South electricity operations alone. The strength of these was further underscored this month by S&P’s credit rating boost for the New Orleans unit. In fact, the resilience of the Big Easy territory–decimated during Hurricane Katrina–is also strong evidence this company can handle the aftermath of an improbable disaster, which should be noted by Indian Point worriers.

Even in a worst-case for Indian Point–meaning complete closure–Entergy would remain financially healthy. The most likely scenario, however, is that the company will have to spend more on the plant to meet higher safety standards. And the same is true for owners of other nuclear plants across the country.

We probably won’t know for certain how all this shakes out for some months. The sooner Japan is able to resolve the remaining challenges at the afflicted nuclear power plants–which now appears to be dealing with pools of spent fuel rods–the less the pressure will be on the Obama administration to do something merely political, rather than something that really makes sense.

Most likely, however, how nuclear power companies fare will depend on the quality of their regulatory relations. Those who have good relations–as in fact Entergy does in the Mid-South–will at least be able to recover the cost of any upgrades in safety. Those who can’t will have to eat the cost. And companies that operate in unregulated markets will have to try and pass along with costs as best they can, or rather as the market permits.

One thing is certain. After the selloff of the past week or so, nuclear utilities across the board are already reflecting the worst-case scenario. That means expectations are low and will be relatively easy to beat as future events unfold.

In fact, the same is true of non-nuclear companies, which have also suffered in the selloff. That, in my view, is at least partly due to the fact that utility exchange-traded funds (ETF) and exchange-traded notes (ETN)–which hold measures of both nuclear and non-nuclear companies–are being sold in the wake of the crisis. One example is AES Corp (NYSE: AES), a utility index member and therefore an ETF holding, which slid this week despite owning no nuclear plants. In fact, the company is a major player in renewable energy, presumably a winner from nuclear’s setback.

Such is the inherent irrationality of selloffs and hysteria, to which the US nuclear energy industry has once again proven vulnerable. But potential rewards from owning US utilities now strongly outweighs risks, even for companies like Entergy that own controversial nukes.

The larger point, though, is that keeping existing nuclear plants open won’t close the gap between America’s demand for power and its supply. Only building new plants will do that, and after Japan that looks unlikely. That leaves natural gas as the only real alternative.

Natural gas plants can be constructed relatively quickly–18 months if they’re located near pipelines. They can be built to capacity as large as baseload nuclear and coal plants. And the price of natural gas at this point is very low, less than $4 per million British thermal units in North America thanks to rapid development of shale gas.

Of course, as we’ve seen again and again reliance on a single fuel can be disastrous in the long run. No doubt a move to gas as a panacea will ultimately backfire on those who overextend.

Meanwhile, more demand for gas means more revenue for companies that build pipelines, processing and storage assets to bring US shale gas to market. And that means big profits for the companies I highlight in the March Utility Forecaster Feature Article, The Real Gas Bull Market.