INSIGHT: US Congress on natgas: beginning or end?

14 December 2006 15:46  [Source: ICIS news]

By Joe Kamalick

 

WASHINGTON (ICIS news)--For the first time in 25 years the US Congress has lifted its ban on offshore drilling for a small patch in the eastern US Gulf, and for some in the gas-starved US chemicals industry that action is a new beginning - or maybe a dead end.

 

For five years the US chemicals industry has been making the rounds on Capitol Hill, knocking on congressional doors, pleading for access to vast stores of natural gas that lie beneath federally-owned outer continental shelf regions along the US coasts.

 

The US chemicals industry’s fate is tied to natgas because it is the segment’s principal feedstock.

 

This year, the industry’s lobbying effort paid off.  Early on Saturday morning, 9 December, Congress passed a bill to open 8.3m acres of the eastern Gulf to energy development.  The bill also provides that about one-third of federal fees and royalties paid by energy firms to exploit that new territory will be given to Gulf Coast states.

 

The chemicals industry had wanted a much broader offshore bill passed earlier this year in the House; that bill would have opened huge areas off the East and West Coasts to energy development, but the Senate made clear it would not accept that measure. The far more modest Senate bill lifting the ban for the 8m acres in the eastern Gulf was the best that could be done.

 

Although the acreage is small, “this is a huge historic success for our industry and the future course of the energy debate,” said American Chemistry Council president Jack Gerard. 

 

“In that vote, Congress set three important precedents,” Gerard said.  “It recognised that the US needs to re-examine its energy policy, it lifted part of the 25-year drilling moratoria, and it established that coastal states should share in the offshore development revenue.”

 

“Just 16 months ago,” he noted, “Congress was unwilling to even consider a new survey of offshore energy reserves.  In little over a year we have moved light years, and this vote sets us up for further offshore energy discussion in 2007 - even with the change in the political dynamic in Congress.”

 

That change in the political dynamic is the upset victory Democrats scored over Republicans in the 7 November congressional elections, in which they won majority control in both the House and the Senate and are positioned to reset the energy agenda.

 

Bob Slaughter, president of the National Petrochemical and Refiners Association, agrees that passage of the limited offshore access authorisation was a victory.  “It looks like a great victory,” he said, “because anything positive on this issue out of Congress looks quite significant.”

 

However, while hailing the modest offshore development bill as a first step, Slaughter is not hopeful that further steps by Congress will be forthcoming.

 

“It is very important that we keep trying, and we will be pushing for additional offshore access,” Slaughter said, “but with the new makeup in Congress, it is going to be tough sledding.”

 

Slaughter is concerned that the modest gain represented by the eastern Gulf offshore opening may trigger strident anti-drilling reaction by Democrats now in control in Congress.

 

Representative Nick Rahall (Democrat-West Virginia) in January will take over chairmanship of the House Resources Committee, the panel that has jurisdiction over offshore energy resources.  Rahall, Slaughter notes, “has said that he is going to push for continuing the moratoria on offshore development, and he is going to be a key player in this issue.”

 

Slaughter is concerned that Democrats will see last week’s vote to open a bit more of the offshore area to drilling as a portent of things to come - unless they act to forestall it. 

 

The existing moratoria on offshore drilling are renewed each year by Congress; the new Democrat-controlled legislature might move to have the offshore drilling ban made permanent as a federal statute.

 

At the American Chemistry Council, Gerard is more hopeful.

 

“I think there’s going to be a more thoughtful discussion on offshore energy now,” Gerard said.  “State governors are going to see now that there is a potential revenue stream for their states in this.  They and their representatives in Congress will be taking a closer look at offshore energy now.”

 

Gerard also argues that offshore access will be seen as crucial to energy issues dear to Democrat hearts such as energy efficiency and alternative fuels.

 

“The US chemicals industry is vital to energy conservation and efficiency in production of home siding, window coatings, insulation and more,” he notes.  “And the cost of natural gas makes up 90% of the fertiliser cost for growing corn; without natural gas, the country cannot achieve its ethanol goals.”

 

Though their estimates of the chances for success may differ, Slaughter and Gerard agree that the lobbying effort has to continue.  “We have to get up on Capitol Hill and start connecting the dots” to educate members of Congress on the gas issue, Gerard said.

 

“We have to keep on telling our story,” Slaughter said.  With a new Congress, he said, “There is an opportunity for us to go out and talk to new people and tell them why our industry is important.  They might not always agree with us, but at least we can get them to take a minute and look at things our way.”

By: Joe Kamalick
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