- The Washington Times - Monday, June 9, 2003

In a hearing room today on Capitol Hill, discussion will focus on concerns that growing demand for natural gas in the United States is outpacing available supply. Make no mistake, the concerns are justified and this issue is ripe for congressional attention.

Natural gas literally helps to fuel our economy, meeting roughly one-fourth of our nation’s energy needs. Among other uses, this sought-after commodity is relied upon to generate electricity, fertilize crops, and heat tens of millions of homes and businesses.

Wholesale prices for natural gas have doubled from a year ago, and two months into the storage season, when gas utilities and industrial customers tend to stow away supplies for the peak winter months, gas storage levels are critically low. Now, Congress is digging in to debate immediate and long-term solutions: improving access to supply, providing incentives for production and encouraging efficient energy use.

Congress should take action, and quickly, but not without addressing the other half of the equation — the pipeline infrastructure needed to move gas from the wellhead to customers.

Much like trucks and railcars are needed to haul produce grown on a farm in California to a grocery store in South Carolina, pipelines are needed to transport natural gas pulled from a wellhead off the Louisiana coast to residential and industrial customers in Pennsylvania.

An expanded network of natural gas pipelines is essential to getting gas supplies to market. The Interstate Natural Gas Association of America has estimated that between $60 billion and $70 billion in new interstate pipeline investment will be required over the next 12 to 15 years to meet the demands of the market.

And yet, onerous regulations and bureaucratic permitting processes have discouraged investment in new pipeline projects.

Federal Reserve Chairman Alan Greenspan (who is expected to testify at today’s hearing) recently labeled existing federal policies as “contradictory,” having encouraged natural gas as a fuel source, while constraining access to supply. Mr. Greenspan is right on target and the inconsistencies are clearly demonstrated by existing barriers to developing pipeline infrastructure.

Building pipelines is an extremely capital intensive business. But outdated federal statutes, such as the Public Utility Holding Company Act (PUHCA), are choking off needed investment in the pipeline sector. The House of Representatives recently passed a bill that would repeal the antiquated PUHCA. The Senate should follow suit.

Congress should also examine the jurisdictional minefield that exists not only among competing federal statutes and regulations but also with state and local rules. Local opponents aren’t shy about tossing federally approved, interstate pipeline projects on an endless regulatory merry-go-round, using layers of red tape to slow or even stifle needed infrastructure.

On average, it currently takes more than a year just to site and permit a pipeline project. That’s simply too long. If Congress is serious about addressing access to supply, it must streamline the approval process for interstate pipelines, clarifying jurisdictional confusion along the way. The “not-in-my-backyard” argument tossed out by local opponents does not supersede need, and it should not be allowed to disrupt interstate projects blessed by a rigorous federal approval process.

It’s worth noting that federal regulators appear to be getting the message. The Federal Energy Regulatory Commission (FERC), which has primary responsibility for approving interstate pipeline projects, recently signed a memorandum of understanding with nine other federal agencies, to make the permitting process less onerous for pipelines. These agencies have agreed to review pipeline construction permits concurrently, rather than serially. This is a step in the right direction, but real progress has yet to take shape.

Even with these roadblocks to developing new capacity, pipeline operators are working within the system to find ways to bring natural gas supplies to needy markets. For instance, Duke Energy has federally approved pipeline projects under way that, once completed, will bring much-needed supply to Long Island and New England, and provide many areas of southwestern Virginia access to natural gas for the first time. To keep up with growing demand for natural gas in this country, dozens of projects like these will need to be built.

As Congress prepares to discuss the structural imbalances between natural gas supply and demand in the U.S., policymakers should focus on the critical aspect of delivery. Whether shipping milk from a dairy farm to a Dairy Queen, or carting beans harvested from a coffee bush to a Starbucks Coffee house, transportation is the backbone of our economy.

Pipelines transport natural gas and policymakers should provide the necessary incentives that will make it possible for pipeline capacity to keep up with demand. Congress should address the policy disconnect between consumption and production either as part of a comprehensive energy bill or as stand alone legislation. Whatever the vehicle, Congress must act and act soon.

Fred J. Fowler is president and chief operating officer of Duke Energy and currently serves as chairman of the Interstate Natural Gas Association of America.

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