Natural Gas, Unnatural Policy

From IBD:
Posted 3/29/2006

Energy Development: As vast reserves of natural gas remain unexploited in the U.S. and offshore, we may soon be buying gas from Canada bought from Russia. Is America's energy policy stuck on stupid or what?

While some prattle on about the need for energy independence and others are busily gathering wood chips and switch grass, Canada is planning to do what oil companies are routinely accused of doing — making a tidy profit off U.S. dependence on foreign energy and lack of domestic supply.

Canada's government recently approved a $1.5 billion joint venture between Petro-Canada and Gazprom, the Russian energy giant. The deal calls for Gazprom to build a plant near St. Petersburg in Russia to liquefy Russian natural gas and then ship it to Canada. Canada, in turn, will reconvert the gas and ship it to U.S. consumers through existing pipeline networks.

The announcement comes at a time when we are sitting on abundant natural gas supplies beneath federally protected areas in Alaska, the Mountain West and the waters of the Outer Continental Shelf (OCS). The American Petroleum Institute (API) estimates that these areas hold 635 trillion feet of the stuff — enough to meet total U.S. demand for 28 years or heat 75 million American homes for the next century.

So why are we not exploiting this vast domestic resource? Good question.

Jack Gerard, president and chief executive of the American Chemistry Council, has repeatedly attacked the schizophrenia of a policy that encourages American industry and utilities to use more natural gas on environmental grounds while prohibiting domestic exploration on the same grounds.

This policy, according to Gerard, has a devastating impact on the economy. When gas prices rise, he says, "large companies and small businesses alike must close plants, lay off workers, relocate overseas or raise prices for the goods consumers use every day." Consumers, workers and competitiveness all suffer.

In many industries, natural gas is not only a source of energy, but also a raw material. The policy's "ripple effects," says Gerard, include the loss of 2.9 million jobs in manufacturing over the last five years, including 182,000 in forest products and 100,000 in chemicals.

In 2004 alone, 70 chemical plants were shuttered, according to API. And BusinessWeek found that of the 120 chemical plants being built worldwide last year with price tags of $1 billion or more, only one was under construction in the U.S. while 50 were going up in energy-hungry China.

Andrew Liveris, president and CEO of Dow Chemical Co., (DOW) told members of two House subcommittees last November that Dow is building a $4 billion plant in Oman that will employ 1,000 in high-paying R&D, engineering and operations jobs.

Until about three years ago, Liveris added, the new plant and those 1,000 jobs were going to be located in Freeport, Texas. But the high domestic cost of natural gas caused the project to be moved.

For his part, Gerard of the Chemical Council told a Senate subcommittee in February that it was "frustrating to see proposals in Congress that would extend the off-limits signs in the OCS out to 150 to 250 miles off Florida's coast even as Cuba is hiring Chinese energy interests to explore for energy in waters that are barely 50 miles off Florida."

Let's face it: Our dependence on foreign sources of energy is largely self-inflicted. Isn't it time for Congress to step on the gas?