Five representatives of business and social service organizations have expressed support for opening more of the US Outer Continental Shelf to natural gas leasing.
They testified Nov. 17 during a US House subcommittee hearing on The Outer Continental Shelf Natural Gas Relief Act of 2005. The bill to terminate existing OCS moratoriums and withdrawals was introduced by Reps. John E. Peterson (R-Pa.) and Neil Abercrombie (D-Ha.) 2 days earlier.
Rep. Jim Gibbons (D-Nev.), chairman of the Energy and Mineral Resources Subcommittee of the House Resources Committee, noted the recent increase in the price of natural gas and the gas potential of areas of the Outer Continental Shelf now off limits to exploration and development.
“Until we restructure the regulatory framework to enable this development, and until this federal government ceases to ration American energy resources such as natural gas, our constituents will continue to pay high energy bills and our manufacturing and agricultural industries will continue to suffer,” Gibbons said.
Industries hurt
Jack N. Gerard, president of the American Chemistry Council, pointed out in written testimony that US chemical companies use 2.5 tcf/year of gas, more than 10% of the nation’s consumption.
“This year, for the first time in history, the nation’s natural gas bill will top $200 billion. My industry’s gas bill will exceed $20 billion,” Gerard said. In 1999, when gas last sold at $2-3/MMbtu, the nation spent just over $50 billion and the chemical industry, $5 billion. “Americans have $150 billion less to spend this year on other things,” Gerard noted, suggesting that policies that encouraged electric utilities to switch from coal to gas as a generation fuel “turned out to be the straw that broke the camel’s back.”
Michael L. Bennett, president of Terra Industries Inc., Sioux City, Iowa, said his company and other nitrogen fertilizer producers won’t survive “unless we find a way to lower natural gas prices through increased supply.”
He said that in the past 2 months three of the nation’s biggest remaining nitrogen fertilizer producers, including Terra, have idled significant portions of their facilities or reduced production due to rapidly climbing gas prices.
“A $1/MMbtu change in the price of natural gas moves Terra’s annual operating income by about $100 million,” said Bennett, testifying on behalf of the Fertilizer Institute, whose members represent about 2% of US gas consumption.
Keith Oellig, president of the Dauphin County (Pa.) Farm Bureau, said higher gas and fertilizer prices come while other commodity prices are extremely low.
“The dealer where I purchase my fertilizer stated that prices for 2006 would be $205/ton,” he said. “That is an increase of $100/ton over 2002. Unfortunately, prices for corn have not gone up accordingly.”
Geoffrey P. Hunt, a senior vice-president at Osram Sylvania, said the lighting products manufacturer relies on gas to melt and form glass bulbs and tubing and to process raw materials.
“As compared to natural gas costs in 2000, our bills in 2005 will be $24 million higher,” he said. “In fact, for 2004 to 2005 alone, gas costs for us have escalated by $7 million. This is the largest single rate of increase in any of our costs of production.”
He said his company’s competitors in Europe pay less than $5/Mcf for gas, while those in Asia pay less than $4/Mcf.
“By 2007, the competitive disadvantage will be over $20 million, on top of the wage gap vs. China, which is already overwhelming,” said Hunt.
Low income families
Greater domestic supply and required commercial and utility gas storage would help stabilize prices, suggested David Bradley, executive director of the National Community Action Foundation.
“Allowing a high market price could call forth investment in exploration, alternative fuels, and accelerated upgrades of inefficient equipment and buildings, but this should not occur until after protection and exploitation of all small consumers are in place,” he said.
“Those small consumers who are too poor to respond to the market-i.e., those who lack capital or credit to invest in efficiency improvements-must be guaranteed access at least to the quantity of energy necessary to maintain healthy conditions in their homes and ensure the ability to travel to their work,” Bradley said.
He noted that the lack of affordable energy is “devastating” to poor workers trying to escape poverty and to the health and security of the elderly poor trying to remain independent.✦
