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Natural Gas Production Urged

Posted on: Wednesday, 29 March 2006, 12:01 CST

By Adam Wilmoth, The Daily Oklahoman

Mar. 29--American consumers will continue to see high natural gas prices as long as energy companies are restricted from drilling on millions of acres of federal lands, Devon Energy Corp.'s Larry Nichols said Tuesday.

The Oklahoma City energy company chairman and chief executive officer joined executives from four other companies that either produce or consume natural gas in calling for Congress and the Bush administration to lift restrictions on federal lands.

The federal government has locked up 90 percent of its offshore resources and much of its land in the Rocky Mountains and in Alaska.

"That's far more than any other country, including those known for being environmentally friendly like Norway and the United Kingdom," Nichols said.

"As long as we continue these policies, we are going to have high natural gas prices, which are going to have an adverse impact on American jobs and consumers. Congress has the power to make that change."

The U.S. Minerals Management Service estimates the off-limits areas of the East and West coasts and offshore Alaska contain about 420 trillion cubic feet of natural gas, enough to heat 52 million homes for 120 years.

The executives called for support of legislation that would allow drilling in an area called Lease Sale 181, about 100 miles off Florida's western coast. Proponents say the action would allow production companies access to more than 7 trillion cubic feet of natural gas.

While increased drilling also could affect crude oil and gasoline prices, the executives said they focused on natural gas because it is less dependent on world markets. About 96 percent of the country's natural gas usage is produced in North America.

Besides lifting restrictions on many offshore drilling areas, the executives also called for staffing to help the U.S. Bureau of Land Management more quickly get through its backlog of drilling requests, which includes more than 5,000 applications.

"The Post Office hires more employees where it has more mail, and the Bureau of Land Management needs to do the same," Nichols said. "Americans would not tolerate a six-month delay for mail, much less delays of 12 months or 18 months. That's what our industry deals with regularly."

Besides a direct effect on residential natural gas consumers, soaring prices have caused many of the country's fertilizer plants to move overseas, said Steve Wilson, chairman and chief executive officer of C.F. Industries Holdings of Illinois. Losing the fertilizer companies has cost American jobs and raised prices for American farmers, he said.

Natural gas is the raw material used to make ammonia, which is the building block of most fertilizers. Natural gas is to ammonia what flour is to bread, Wilson said.

Each $1 increase in the cost of 1,000 cubic feet of natural gas causes the cost of ammonia to jump by $33 a ton, Wilson said. At that rate, ammonia costs have risen from $80 three years ago to about $500 in September.

Wilson blamed soaring natural gas prices on contradictory U.S. government policies.

"Our nation's policies of encouraging natural gas usage but saying, 'Don't dare drill for it' has led to increased demand and painfully high prices," he said. "While our company is committed to conservation and practices it every day, we cannot just conserve our way out of this situation. We have to add new domestic supply, and we must start now."

Soaring natural gas prices also have affected the country's steel industry, said Dan DiMicco, president and chief executive officer of Nucor Corp. Each $1 increase in the cost of natural gas costs the country's steel industry $360 million annually, he said.

"The steel industry has been strong enough in the past three years to pass those costs through to our customers," DiMicco said. "That is not sustainable for a cyclical industry historically vulnerable to competition."

Along with lowering natural gas prices, the executives said increased domestic drilling also could have environmental benefits.

"We're losing the ability to produce steel, fertilizer and other products here, and they're going to countries where there are no environmental controls anywhere close to what we have here in the U.S.," DiMicco said. "They are producing those products in ways that contribute major amounts of carbon dioxide, nitrous oxide and sulfur into the atmosphere, and they float all over the world."

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Source: The Daily Oklahoman

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