Senate Energy Committee Addresses Increases in Natural Gas Prices (3/01)

The following column by GAP Senior Advisor John Dragonetti is reprinted from the March 2001 issue of The Professional Geologist, a publication of the American Institute of Professional Geologists . It is reprinted with permission.

In his continuing effort to assess the issue of high natural gas prices, Senate Energy and Natural Resource Committee Chairman Frank Murkowski (R-Alaska) conducted an unusual lame-duck hearing in mid-December. In his opening comments the Chairman noted natural gas spot prices were escalating to nearly four times higher than the previous year and that demand for the energy source had been grossly underestimated.  However, it appears the hearing had the much broader purpose of setting the stage for the development of a new GOP energy package to be introduced in the next session. Evidence of this was apparent in Murkowski’s listing of a number of provisions he intends to include during the 107th Congress. The most significant items mentioned were increased access to natural gas deposits on federal lands, accelerated permitting for pipeline projects, and extension of the Alaskan Gas Pipeline project to the North Slope.

Earlier Legislation
The suggested provisions noted above reflect similar stipulations contained in S. 2557, the National Energy Security Act of 2000, introduced during the 106th Congress. This earlier effort included the creation of a heating oil reserve for the northeastern United States; research on improving the efficiency of coal burning power plants; accelerating the re-licensing process for hydroelectric and nuclear power facilities; tax incentives to encourage marginal well preservation; and affording tax credits to producers of power from renewable energy sources.  But the most contentious item was the plan to open the Alaska National Wildlife Refuge (ANWR) to oil exploration and development. This issue has long been a priority of the petroleum industry and the Alaskan congressional delegation, and an element of George W. Bush’s campaign strategy, but strongly opposed by environmentalists who fear exploration in ANWR’s ecologically sensitive coastal plain. Supporters of development contend modern drilling techniques would minimize environmental damage, and flow in the Trans-Alaska Pipeline System requires additional oil as the Prudhoe Bay deposits are depleted.

The Hearing
Held exactly one year after the release of the National Petroleum Council report on natural gas demand, the December 12th hearing provided senators a chance to discuss short- and long-term actions that federal and state governments can take.  The witness list consisted of a representative from the Energy Information Administration (EIA) – a neutral body within the Department of Energy designed to perform statistical analysis – and representatives from professional organizations: the American Gas Association, the National Association of State Energy Officials, and the Natural Gas Supply Association.  The EIA representative explained that the current tight natural gas market, especially in the Northeast, is the result of a range of factors: relatively flat domestic gas production for the past several years, expectation of a colder winter that would result in greater demand, below normal gas storage levels, and tight supply conditions in alternative fuel markets.  The natural gas market is not expected to recover quickly from these problems in part because the future growth in natural gas demand is expected to rise sharply as new natural gas generators are added to the national electricity grid.  Combined, these factors mean that the long-term natural gas market is going to remain in the headlines. Murkowski and others noted that the domestic natural gas resources could meet this demand but current federal regulations limit the accessibility and marketability of these resources.  Members agreed that one long-term action within congressional oversight was access to federal lands for resource development – as well as the actions suggested in the National Energy Security Act of 2000.  The representative from the National Association of State Energy Officials suggested a short-term solution to the price spike was to increase funding for the Low Income Home Energy Assistance Program.

The experience last year in the northeast where heating oil shortages caused prices to soar is likely to be revisited this year. High energy prices could also affect the economy, which Federal Reserve Chairman Alan Greenspan believes could bring on an economic slump. There is obviously increased congressional interest in natural gas supply and demand. These as well as other factors indicate that energy policy considerations are on the rise.  It, therefore, appears energy will be high on the congressional agenda for the 107th session, and a subject for the incoming Administration to address.

This column is a bimonthly feature written by John Dragonetti, CPG-02779, who is Senior Advisor to the American Geological Institute’s Government Affairs Program.

This article is reprinted with permission from The Professional Geologist, published by the American Institute of Professional Geologists. AGI gratefully acknowledges that permission.

Please send any comments or requests for information to the AGI Government Affairs Program.

Contributed by John Dragonetti, AGI Government Affairs.

Posted May 13, 2002

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