US chemical, other industries caution against natgas fuel mandates

24 July 2012 22:39  [Source: ICIS news]

WASHINGTON (ICIS)--US chemical producers and other major industries on Tuesday warned that federal efforts to stimulate use of natural gas as a transportation fuel could undermine the nation’s manufacturing sector.

The Senate Committee on Energy and Natural Resources heard testimony from manufacturing and energy sector officials on the potential for expanded use of natural gas to fuel trucks and automobiles, reducing US dependence on imported oil and gasolines.

Paul Cicio, president of the Industrial Energy Consumers of America (IECA), told the Senate panel that legislative or regulatory incentives for use of natural gas as a transportation fuel could unfairly disadvantage industries and power generators that depend on natural gas as a feedstock and fuel.

Cicio said that IECA, whose 39 corporate members include 12 chemicals manufacturers, “is becoming increasingly alarmed at the ever increasing potential demand and over-reliance on natural gas”.  Other IECA members include manufacturers of automobiles, food products, paper and building supplies.

“While we have an abundant supply,” he said, citing in particular new natural gas resources made possible by hydraulic fracturing (fracking), “it appears that we also have explosive potential demand”.

In his testimony, he cited increasing regulation of energy use by the Environmental Protection Agency (EPA), forcing shutdown of coal-fired power generation in favour of gas-fired generators, other EPA restrictions on industrial boilers and increased incentives for export of liquefied natural gas (LNG).

At the same time, said Cicio, other government actions could impede production of natural gas.

“While it appears that we have an abundant supply of natural gas, manufacturing is concerned about the growing threats to continued robust and economic production of natural gas,” Cicio told the panel.

“There are at least three potential major barriers,” he added, citing growing public concerns about oil and gas drilling and the controversy around hydraulic fracturing or “fracking”, along with increasing federal regulation and litigation and other actions by environmental groups.

“We note that the Bureau of Land Management (BLM) has proposed to regulate hydraulic fracturing on federal lands, and that the EPA has regulated drilling emissions,” he said, adding: “The EPA gives every indication that it intends to regulate drilling and hydraulic fracturing on public lands where most of the natural gas supply is being currently produced.”

As a consequence, Cicio said, government-driven incentives for greater natural gas consumption as a transportation fuel could combine with increasing federal restrictions on gas production to create shortages and price hikes that could choke manufacturing.

Energy and Natural Resources Committee chairman Jeff Bingaman (Democrat-New Mexico) said that Tuesday’s hearing was not aimed at support for any specific legislation but to consider what energy options might be available.

Last year a bipartisan group of House members introduced the NAT GAS Act, which would provide tax incentives for the purchase of natural gas-fuelled vehicles (NGVs), construction of natural gas retail fuelling stations and use of natural gas as a vehicle fuel.

That measure was widely opposed by the chemicals industry and other manufacturers. It failed to win sufficient backing for House passage.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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