Senate Energy Bill Update #17 (Can You Hear Me Now?)

June 25, 2003
12:00 AM
With sky high natural gas prices due to tight supplies/strong demand, and with even higher prices looming later this year, and on the eve of DOE’s Natural Gas Summit, worried Senate Dems are again urging the Bush Administration to drop its opposition to the Alaska natural gas pipeline provisions in the Senate Energy Bill. The natural gas crunch could wallop America’s economy for years, yet until recently has received little attention from the media (which may have been preoccupied with the aftermath of the war, a weak economy, Middle East roadmaps, Sammy Sosa’s bat, Hillary’s book and the travails of Martha Stewart). That changed when Federal Reserve Chairman Alan Greenspan elevated the crisis in testimony before Congress two weeks ago. So, six Democrats on the Senate Energy Committee have written to the President – again -- seeking his support in reducing the prospects of a future natural gas price spikes by encouraging construction of the Alaska Natural Gas Pipeline. Here’s the letter: June 25, 2003 The President The White House Washington, D.C. 20500 Dear Mr. President: We write today to reiterate our strong support for the construction of the Alaska Natural Gas Pipeline, along the Alaska Highway route, as a means of mitigating the long-term impact of natural gas prices on the United States economy. Our country is facing its most severe natural gas shortage in a quarter century, and industry analysts are predicting elevated natural gas prices for years to come. Just last week, Fed Chairman Alan Greenspan testified before the House Committee on Energy and Commerce that Afutures prices suggest that we are not apt to return to earlier periods of relative abundance and low [natural gas] prices anytime soon.@ He suggested that the U.S. economy could be damaged if additional sources of natural gas are not developed, observing that Ato the extent that natural gas consumption must adjust to limited supplies, most of the reduction must come from the industrial sector and, to a lesser extent, utilities.@ Similarly, Robert Allison, chief executive of Anadarko Petroleum, is quoted as saying, AWe=re already facing the prospect of higher utility bills for consumers and higher energy costs for many businesses . . . [and] the shortage is going to become a matter of exporting jobs to countries with cheaper natural gas.@ Rising natural gas prices are a classic example of the basic law of supply and demand at work. And, according to Cambridge Energy Research Associates (CERA), the natural gas supply deficit may be as much as 4.5 billion cubic feet of gas per day by 2010. Last week, the New York Times reported that AEnergy Secretary Spencer Abraham and the National Petroleum Council are convening a top-level meeting later this month to discuss the shortage and propose solutions.@ Presumably, suggestions to relax environmental restrictions on the production and/or transportation of natural gas, expand drilling in the Outer Continental Shelf off the U.S. coast, and increase imports of liquefied natural gas will all be on the table. Each of these options is certain to generate spirited debate. There is, however, one option about which there is little controversy B building a pipeline to bring natural gas from Alaska to the lower 48 states. There are 35 trillion cubic feet of known natural gas reserves on the North Slope of Alaska that could meet projected domestic demand. That gas is currently being pumped back into the ground, because there is no way of getting it to consumers in the lower 48 states who need it. Unfortunately, the pipeline to transport this gas from Alaska is unlikely to be built any time soon without the involvement of the federal government. Last year, we strongly supported provisions in the Senate-passed energy bill that would ensure this pipeline would be built through Alaska. However, that bill died in conference due to unrelated issues. As the Senate prepared to address this issue again last month, the White House Office of Management and Budget issued a Statement of Administration Policy (SAP) that put the Administration on record in support of the construction of Aa commercially viable Alaska natural gas pipeline,@ but undercut that support by declaring that Amarket forces should select the route and timing of the project,@ and noting that Athe Administration opposes the price-floor tax subsidy provision in the Senate Finance Committee bill.@ It is widely acknowledged that our country faces a tight natural gas supply picture in the foreseeable future which will likely translate into higher prices and a drag on the economy. At the same time, Alaska=s North Slope oil fields hold proven natural gas reserves that can address this problem, if only gas from the reserves can be delivered to market. The country needs an Alaska natural gas pipeline. There is broad bi-partisan support within Congress for both the route along the Alaska Highway, and a reasonable Acommodity risk”provision that addresses legitimate concerns about price volatility over the life of the project and protects American taxpayers. It is our hope, therefore, that you will instruct Secretary Abraham to devote serious attention to what it will take to get North Slope natural gas to market, and direct OMB to reconsider its opposition to the Alaska gas pipeline provisions being debated as part of S. 14, the Senate Energy bill. With your support, we can reduce the prospects of a future natural gas price crisis by encouraging the construction of the Alaska Natural Gas Pipeline. Sincerely, [signed by Sens. Bingaman, Cantwell, Dorgan, Feinstein, Johnson and Wyden]