South Jersey Gas Issues Statement – The Natural Gas Status Quo Isn’t Working: Congress Must Act

The following is an opinion editorial provided by Edward J. Graham:

As millions of households enjoy summer activities such as barbecues and beach trips, we at South Jersey Gas are working to stabilize the price that our customers will pay for natural gas next winter. We do this by purchasing natural gas and storing it underground for use on winter’s coldest days, encouraging families to spread their natural gas payments over 12 months by signing up for a balanced-billing plan and informing consumers how to use energy more efficiently.

For the fourth summer in a row, we and hundreds of other energy utilities are dismayed that tight market conditions continue to drive up the wholesale price of natural gas-and that Congress still has not completed work on legislation setting forth a new path to guide how natural gas is produced, transported and used in the United States.

The status quo clearly isn’t working. During the 1990s, when ample supplies of natural gas were available for purchase, the wholesale price of natural gas was about $2 per thousand cubic feet. Now, the price is more than $6. Why? Simply put, because demand for natural gas has risen but government policies have impeded production.

The growing popularity of natural gas is easy to understand. Natural gas is the cleanest fossil fuel. It produces half as much greenhouse gases as coal, and almost a third less than oil for the same amount of energy. As a result, most new electric power plants are fueled with natural gas.

In New Jersey natural gas is by far the most popular home-heating fuel because it is clean, efficient and reliable. In fact, when deciding which fuel to use new home builders overwhelmingly choose natural gas. Even though natural gas remains the least costly way to heat a home, on average, customers have been hammered in recent years by price increases that have resulted from an extremely tight balance between available natural gas supplies and growing demand.

Natural gas is found in abundance throughout North America. In fact nearly all of the natural gas consumed in our country is produced in the U.S. and Canada. In contrast, 63 percent of the petroleum consumed in the U.S. each year is imported from foreign countries.

Production companies are working at a furious pace to keep up with rising demand, but are yielding only modest production gains. Many of the large natural gas resources that produced so reliably for decades are becoming depleted, and production is migrating toward deeper waters of the Gulf of Mexico and to Western states, where large reservoirs are located.

But federal laws and regulations that were based on exploration and production technologies of the 1970s often stifle producers’ efforts to access fresh supplies of natural gas. Just as the X-rays and invasive surgery of 30 years ago have given way to MRIs and arthroscopic techniques, techniques used to locate natural gas and get it to consumers have advanced dramatically. For example, with horizontal drilling technology a well dug in one place can reach underground natural gas supplies 5-6 miles away. Rigs are smaller and less intrusive.

We all have a stake in persuading Congress to iron out contradictions in federal policies that promote the use of environmentally friendly natural gas and, at the same time, cite present impediments to producers’ seeking to meet that growing demand. Caught in the squeeze are the 66 million homes, schools, businesses, manufacturers and electric power plants that rely on natural gas.

South Jersey Gas and other energy utilities throughout the United States are doing all we can to help our customers. We continue to aggressively pursue and implement strategies to shield our customers from price fluctuations in a volatile energy market. Thanks in part to our successful natural gas hedging practices, SJG customers pay the same Basic Gas Supply Service rate they paid in May 2004 despite a 12 percent increase in the wholesale price of natural gas during the past year. This strategy, along with the effective management of our storage and pipeline assets has enabled SJG to provide our residential customers two bill credits in the past 16 months.

In conjunction with the New Jersey Board of Public Utilities’ Office of Clean Energy Programs, South Jersey Gas continues to promote the use of innovative energy efficient technology to our commercial and industrial customers. Even though our efforts and those of other natural gas utilities to minimize customer costs and promote efficiency have been successful in the short-term, a long-term comprehensive solution is clearly needed. It is past time for Congress to do its part.

Both the Senate and House have passed their own versions of an energy bill. The next step is for members of the Senate to meet with the House to negotiate the final version of an energy bill, which President Bush would then sign into law. We at South Jersey Gas urge each member of Congress and especially the members of our New Jersey Congressional delegation to work quickly and aggressively to negotiate an energy bill that is good for our customers and all Americans. We as a nation should not be forced to choose between environmental protection and economic growth. We can have both-especially if our lawmakers put into place visionary policies that lay out a rational plan for future supply, delivery and use of natural gas.

Sincerely,

Edward J. Graham

President & CEO

South Jersey Gas