US fertiliser group sees benefits from energy legislation

22 April 2005 19:38  [Source: ICIS news]

WASHINGTON (CNI)--Energy legislation passed by the US House of Representatives Thursday includes measures that would aid the fertiliser industry, including easier siting of liquefied natural gas (LNG) terminals, an industry official said Friday.

 

“We have been an outspoken advocate for the need for a comprehensive energy bill,” said Kraig Naasz, president of the Fertilizer Institute (TFI). “With the House passage of its energy bill, we are one step closer to our goal.”

 

The House overwhelmingly passed the House Energy Policy Act of 2005 Thursday by a vote of 249-183 after two days of debate. The Senate plans to begin work on energy legislation next month.

 

TFI worked with other natural gas end user industries to defeat an amendment that would have deleted provisions in the bill stipulating that the Federal Energy Regulatory Commission (FERC) serve as the lead agency for review of new LNG terminals. States would have only a consultative role.

 

“Our domestic nitrogen fertiliser manufacturers, this nation’s chemical industry, agricultural, residential and commercial sectors have all suffered from the strained domestic supplies and persistent high prices of natural gas,” said Naasz.

He said: “LNG is the best option for bringing new supplies of natural gas to the US quickly, and we believe FERC is the appropriate lead agency for the thorough, complex and expeditious review of siting LNG facilities.”

 

In addition, the $8.1bn (Euro6bn) House bill includes provisions aimed at increasing the domestic supply and transportation of natural gas, including expanded tax incentives for domestic and alternative fuel production, oil and gas royalty relief, and streamlining permitting for energy facilities and transportation infrastructure.

 

TFI said tax incentives for deep water drilling in the Gulf of Mexico will also benefit North American nitrogen fertiliser manufacturers if they lead to more natural gas output.

 

The bill also amends and maintains mandatory purchase and sale obligations under the Public Utilities Regulatory Policy Act (PURPA). Naasz said this provision is "vitally important" to phosphate fertiliser producers that use process steam to cogenerate and market electricity.

 

This is the fourth time since 2001 that the House has passed comprehensive energy legislation. Previous efforts have stalled in the Senate.

 

Last year, however, several provisions favoured by the fertiliser industry were rolled into a corporate tax bill, which President George W Bush signed into law. Those measures included extending ethanol and creating biodiesel subsidies, and creating tax incentives and loan guarantees for a proposed Alaska natural gas pipeline.

 

Natural gas is the feedstock for nitrogen fertiliser and accounts for 70% to 90% of the cost of its production. As a result of record high natural gas prices in the US, 20 nitrogen fertiliser production facilities have closed since 1998. Fifteen of those plants have closed permanently, representing a 20% drop in total production capacity, while five plants remain idle.

 

The closures combined with the drop in operating rates have resulted in a 35% decline in US ammonia production from 16.2m tonne of material in 1998 to 10.6m tonne last year. During the same period, US nitrogen imports have increased from 5.54m tonne to 0.940m tonnes.

 

The Senate Energy and Natural Resources Committee is expected to report its version of an energy bill by mid-May. If Congress passes a comprehensive energy bill, it would be the first comprehensive energy measure enacted since 1992.

By: Glenn Hess
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