C&EN: TODAY'S HEADLINES - EXPANDING THE GAS SUPPLY

JEFF JOHNSON AND MARC REISCH

PIPELINE Chemical industry advocates policies to increase natural gas supplies to bring costs down.
PHOTODISC

The chemical industry, which once thrived on plentiful and cheap natural gas, is cheering recommendations contained in two reports that it says would go a long way toward ameliorating recent record-high gas prices.

The reports—one from the National Petroleum Council (NPC) and the other from a congressional natural gas task force made up of House Republicans—recommend aggressive short-term measures. Among them are new government policies that would increase drilling on public lands and on near-shore continental shelf areas that are currently off-limits because of public opposition.

The reports seek extremely aggressive energy efficiency and conservation programs coupled with suspension of certain air pollution regulations, resulting in greater use of coal and oil as fuels. And longer term, they urge federal aid in construction of the Alaska gas pipeline and policy changes to speed construction of more liquefied natural gas terminals.

Industry groups urged that the reports’ recommendations be included in energy legislation now under consideration (see page 19). Bob Slaughter, president of the National Petrochemical & Refiners Association, says, “Any lack of resolve in addressing the critical natural gas supply issue will result in the continued export of America’s petrochemical and other industries.”

Lebedev
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Greg Lebedev, American Chemistry Council CEO, says the industry needs the immediate relief the recommendations could provide. “Access to gas reserves in the outer continental shelf and the Rockies is key to reducing natural gas costs and is vital to restoring the competitiveness of American manufacturing.” Long-term solutions, such as the Alaska pipeline and importing liquefied natural gas, are fine, Lebedev says, but not enough to preserve industry competitiveness and jobs.

Huntsman Corp., with an annual gas bill exceeding $200 million, agrees that more has to be done to bring costs down quickly. Senior Vice President Don H. Olsen says that “conservation is a factor, but we can’t conserve our way out of this problem. We must have increased exploration and production.”

Dow Chemical Vice President Peter Molinaro says Dow will also “be aggressive in energy conservation and efficiency.” Echoing Olsen, Molinaro adds, “We need more gas supplies.” Without them, he says, the U.S. Gulf Coast could begin to look like the old Midwest Rust Belt—“an area with a large footprint but fewer working assets.” High gas prices mean companies like Dow will have to invest outside the U.S. where costs are much lower. “Not enough members of Congress get this,” he says.

Environmental groups oppose the recommendations contained in the reports. The Wilderness Society, for instance, contends that the NPC task force included no constituencies other than those that stand to benefit financially from the implementation of the report’s recommendations. It also says conservation measures and greater reliance on renewable energy would be a more environmentally benign method of reducing natural gas prices.

Energy consultant Jim Osten of Global Insight says companies can buy gas for 50 cents to $1.00 per million Btu in places like Trinidad, Qatar, and Saudi Arabia. As a result, U.S.-based chemical producers—who paid as much as $19 on the spot market last winter and are now paying about $4.45—are at a major disadvantage. So he expects most new ethylene, ammonia, propylene, and other major petrochemical projects—with or without the proposed measures—will be built overseas.