Friday, July 23, 2010

Coalition of Consumers Urges Senate Not to Legislate Natural Gas Demand in Energy/Climate Bill

/PRNewswire/ -- A coalition of major manufacturers, agricultural organizations and other industrial energy consumers today cautioned the Senate to avoid legislating new natural gas demand in any energy or climate change bill, saying such an approach would be "misguided" given existing strong demand growth and looming regulatory and political uncertainty surrounding access to major supply sources.

In a letter to Senate Majority Leader Harry Reid, 67 industrial and agriculture energy consumers -- representing farm and food concerns and makers of chemicals, fertilizer, glass, paper and steel -- expressed concern about artificially creating power and transportation sector demand for natural gas through legislative incentives. Doing so, they said, would cause the type of fuel switching that has ripple effects through the economy.

Paul Cicio, president of the Industrial Energy Consumers of America (IECA), said legislating new demand would prompt increased price volatility and higher prices. Higher natural gas prices also mean higher electricity costs.

"The impact will be felt by all consumers, not just industrial users," Cicio said. "Farmers will pay more for fertilizer, natural gas to dry their crops and electricity to run their irrigation systems; homeowners will pay more to heat and cool their homes; and manufacturers would be confronted with greater competitiveness challenges which threaten jobs at home."

The coalition said gas demand has been steadily rising in the past decade without the incentives being contemplated in the Senate and in the absence of carbon caps, which will increasingly shift more power generators from coal to natural gas. The power sector's natural gas demand has grown by nearly 30% since 2001.

"The economic recovery and our energy security will be better served if U.S. energy policy ensures American manufacturing can continue to compete globally and keep its jobs here," said Peter Molinaro, Dow Chemical's vice president of federal and state government affairs. "Our economy needs a diverse base of price-sensitive natural gas consumers -- and a diverse energy supply -- in order to reduce price volatility in all energy sectors."

The letter urges the Senate to allow the market to set supply and demand for natural gas instead of picking 'winners' and 'losers' through legislation.

The coalition acknowledged there is great hope that the large shale gas reserves will materialize as recoverable supplies. "However, history has shown that unforeseen circumstances, including the potential for both federal and state regulations to be placed on shale drilling, can either slow its production, increase its costs or otherwise dramatically alter these types of future projections."

The industrial and agriculture consumers called for a coherent energy policy that balances gas demand with the economy's need for affordable supplies.

Signatories to the letter include: American Forest &Paper Association, Dow Chemical Company, Kimberly-Clark Corporation, Land O' Lakes, Steel Manufacturers Association and The Fertilizer Institute.

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