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Natural Gas (5-26-06)

Cleaner than other fossil fuels and abundant in the United States, natural gas has gained an increasing foothold across the nation. It powers over 60 million American homes and 90 percent of new power plants. In all, natural gas accounts for nearly a quarter of energy consumption in the US. The federal government has tracked the status of natural gas as it has gained popularity and has periodically requested reports on the subject. In 1992 it solicited the first update from the National Petroleum Council (NPC), entitled "Potential of Natural Gas in the United States." Since that time NPC has issued two more reports, one in 1999 ("Meeting the Challenges of the Nation's Growing Natural Gas Demand"), and, most recently, in 2003 ("Balancing Natural Gas Policy--Fueling the Demands of a Growing Economy"). Secretary of Energy Spencer Abraham requested the latter in light of homeland security, price volatility, fuel avaibility and other concerns.

On May 18th, the House rejected an attempt to allow more offshore natural gas drilling through an amendment to the 2007 Interior, Environment, and Related Agencies Appropriations Act (H.R. 5386). Florida and California representatives cited a threat to tourism when opposing the measure, saying that wells could be placed within three miles of the coast. "It's a grievous assault on Florida and other [coastal] states," said Representative Adam Putnam (R-FL). This argument overshadowed the call for more energy supplies to reduce high energy prices. Putnam sponsored an amendment (H.AMDT.856) on the House floor to reinstate the ban, which passed 217-203. (5-26-06)

The House Appropriations Committee voted on May 10, 2006 to remove a long-standing ban on offshore natural gas drilling. The committee voted 37-24 to include the amendment, which was introduced by Representative John Peterson (R-PA), in the 2007 Interior, Environment, and Related Agencies Appropriations Act. Originally enacted in 1982, the ban on coastal drilling covers the east and west coasts of the U.S. as well as the eastern part of the Gulf of Mexico. It has been renewed by Congress every year during the appropriations process.

Peterson's amendment would lift restrictions on offshore natural gas drilling but maintain limitations on offshore oil drilling. The language in the legislation is similar to language Peterson introduced last year to a bill in the House Resources Committee. That bill was approved by the committee, but the offshore drilling provisions were removed in a 157-262 vote when the bill came before the full House.

The amendment will likely face a tough battle on the House floor this year as well. Critics from both parties, particularly those in coastal states, have voiced strong opposition. According to E&E Daily, Representatives Jim Davis (D-FL) and Mark Foley (R-FL) plan to introduce a new amendment sometime next week that will renew the ban. Representative Lois Capps (D-CA) called the amendment "failed Republican energy policy that won't solve our nation's energy needs and has repeatedly and resoundingly been rejected by the House and the American public" (E&E) and said she too would be fighting to reinstate the ban. (5/11/06)

Federal Energy Regulatory Commission (FERC) Chairman Pat Wood announced February 16, 2005 at a conference in Houston that eight new Liquefied Natural Gas (LNG) terminals could be built by 2010 to help meet the country's needs. The amount of authority that should be granted to FERC over the siting of new LNG terminals is a central debate in national energy policy legislation.

For more information, see the Energy Information Administration report on LNG, including tables of planned expansions and proposed terminal sites in the lower 48 states. The California Energy Commission also offers a good overview. A map of US terminals is available by clicking here. (2/25/05)

Even though the highly contested Energy Bill failed to pass in the Senate, the natural gas industry still made significant gains in the second session of the 108th congress. The authorizing language for the Alaska natural gas pipeline was attached to the FY05 Military Construction Appropriations bill, which was passed just prior to Congress' adjournment for the election on October 11th, 2004. According to Environment and Energy Daily, the language includes "a ban on a northern route for the line that would bypass Alaska markets, provisions that allow Alaska to control in-state use of the gas to promote its use for heating or enhancement of a gas industry in Alaska, and a streamlined permitting and expedited court review process to speed construction and limit judicial or regulatory delays...The bill also includes $20 million for a worker job training program in Alaska, including $3 million for construction of a Fairbanks training facility." This language, which effectively provides all the necessary prerequisites for the $20 billion project to get underway. The FERC will hold an "open season" in early 2005 for companies wishing to bid on pipeline capacity. The stage is set for another battle in 2005 over the proposed drilling in the Arctic National Wildlife Refuge on Alaska's North Slope. With President Bush's reelection and a larger Republican majority in the House and Senate, Democrats may have a difficult time blocking ANWR development in the 109th congress.

High gas prices and market volitility prompted two hearings on capitol hill in October of 2004. The Senate Competition, Foreign Commerce, and Infrastructure Subcommittee held a hearing on the domestic supply and cost of natural gas followed by a Senate Joint Economic Committee hearing on the long-run economics of natural gas. Since 2000, American companies have increasingly turned to natural gas to satisfy their energy needs, thereby moving the nation from a natural gas surplus to a deficit. Because of this, the prices of propane, natural gas, and heating oil gone up 22%, 15.3%, and 28.4% respectively.

The House Subcommittee on Energy Policy, Natural Resources, and Regulatory Affairs met June 23rd to discuss the federal and state roles in siting liquefied natural gas (LNG) terminals at both onshore and deepwater ports. Chairman Doug Ose (CA) stressed the importance of LNG, explaining that increasing energy demands require the U.S. to import more LNG and consequently build more ports with the ability to accept these imports. The responsibility of licensing and securing these ports, however, has not been clear and the Committee called for federal standards that would specifically outline the LNG terminal permitting and siting process. As decided by the Maritime Transportation Security Act of 2002, the Federal Energy Regulatory Commission (FERC) has jurisdiction over the siting and construction of onshore terminals while the Department of Transportation (DOT), including the Coast Guard, is in charge of offshore terminal licensing and security.

Currently, five new terminals have been approved by federal regulators, but all with different criteria, raising questions of how secure they are from terrorist attacks and what danger they pose to nearby residents. Eight deepwater port applications are currently being processed, but none are in operation anywhere in the world, making deepwater ports uncharted territory.

Sources: CQ Today, Environment & Energy Daily, Greenwire, hearing testimony, The Kansas City Star, The Los Angeles Times, The National Petroleum Council website, The New York Times, Thomas website, and The Washington Post.

Contributed by: David Millar, 2004 AGI/AAPG Semester Intern; Jenny Fisher, 2006 AGI/AAPG Spring Intern and Timothy Donahue AGI/AIPG Summer Intern.

Background Information taken from the AGI's Natural Gas Policy site and AGI's Energy Hearing Website for the 108th Congress.

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

Last updated on May 26, 2006.

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