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Gas woes acknowledged

Article-Gas woes acknowledged

When Pete Domenici , chairman of the senate''s Energy and Natural Resources Committee, actually uttered the word plastics in his litany of industries affected by high natural gas prices, Bill Carteaux and Gene Steadman allowed some satisfaction that their efforts to educate legislators had finally resonated.

Carteaux, president of the Society of the Plastics Industry (SPI; Washington, DC) and Steadman, employed by Celanese Corp. (Dallas, TX) and chair of SPI''s energy task force, spent several days on the Hill visiting with energy committee members and laying out the punitive effects of $7/million btu natural gas. For Steadman, this has been a 4-year effort, going back to the last time the U.S. had passed a comprehensive energy bill. Natural gas prices have tripled in the interim, but it''s record-high gasoline prices that are forcing legislators to take a conciliatory tone and work together towards a compromise as their constituents clamor for action. That atmosphere will likely propel a bill to the president this summer.

The primary interest was in measures calling for greater efficiency in commercial and residential use of energy coupled with production increases, specifically requesting surveying and development of the outer continental shelf (OCS).  

The proposal to review the moratoria on the 1.6-billion-acre OCS includes seismic surveys to determine reserve levels, and a "local option" for states to lease the land for exploration and pocket royalties. Today, all that money goes to the federal government. The bill also provides that 35% of any revenue go towards coastal refurbishment and wetlands preservation. Proponents say newer technologies mitigate environmental impact since five wells can connect to one, smaller platform, instead of large platforms for each well. In addition, the platforms could be 20 miles offshore, out of the line of sight, and they would tap into existing gas pipeline infrastructure.

In its last boom from 1993 to 1997, offshore gas production increased 400 billion cu ft to 5.14 trillion cu ft with Gulf of Mexico gas accounting for 27% of the dry natural gas produced in the lower 48 states, according to the Energy Information Administration. The area''s predicted reserves were estimated at 96 trillion cu ft in 1995 on top of known, existing reserves of 37 trillion cu ft.

The measure also proposed granting sole jurisdiction of liquefied natural gas (LNG) ports to the Federal Energy Regulatory Commission (FERC) instead of individual states. Protests at the state level about the placement of LNG ports have held up construction in Maine and California. LNG has only recently come into the picture, with limited affect from four active ports. It could play a larger role with 36 more sites proposed, but Steadman says the U.S. can''t "LNG its way out of the problem."

Finally, due to calls from the SPI and other trade groups like the Industrial Energy Consumers of America, the bill will attempt to create greater transparency in gas futures trading, which some feel was lost due to the Commodities Futures Modernization Act of 2000.

In June, Peter Huntsman, president and CEO of Huntsman Corp. (Woodlands, TX) decried gas traders after the government release of data showing record gas reserves saw the day''s trading session actually end up $.44. Huntsman says hedge funds and paper traders manipulate the market, punishing downstream consumers, and he called for real-time gas-trading oversight and re-imposition of pre-2000 limits on how much the price can move in a single session.

A time for action

SPI estimates the country faces an 8.25-trillion-cu-ft natural-gas shortfall by 2020, if nothing is done, and even if the entire bill was adopted, the added production and conservation would make up 80% or 6.8 trillion cu ft of that gap.

If adopted, the Department of the Interior would have 27 months to begin leasing newly opened land, with it likely taking 12 months for an energy company to gain a license. From there, it would take 18 to 24 months to begin production, resulting in additional domestic gas supplies within 30 to 36 months.

Steadman''s own company recently began shipping in methanol from Trinidad and Tobago at $1.60 instead of using domestic gas, resulting in a loss of 120 jobs at its Clearlake, TX facility. Steadman says the move was necessitated by the fact that for every dollar price increase in natural gas, the cost to the chemical industry is $3.4 billion, which is passed on to resin consumers.

Tony Deligio [email protected]

Contact information

Society of the Plastics Industry
TAGS: Business
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