- The Washington Times - Monday, October 31, 2005

Among the many lessons of Hurricane Katrina is the serious vulnerability of our nation’s natural-gas supply — and the urgent need for Congress and industry to work together to find a way out of what is now nothing short of a national emergency.

It is a crisis for the 6-in-10 American families who heat their homes with natural gas and face an average price increase of close to 50 percent or $500 per family this winter. It is a crisis for the chemistry industry, which uses natural gas as a raw material for compounds used in thousands of consumer products — from agriculture, telecommunications and automobiles to pharmaceuticals, health and beauty products and food packaging.

It is rippling through the economy in the form of product shortages. Simmons Bedding Company has reported that it cannot obtain enough polyurethane foam needed to make bedding. Goodyear is cutting U.S. tire production by 30 percent due to rubber shortages. Newell Rubbermaid has seen resin costs jump 21 percent in a year, and is looking at switching to alternative materials. And a bottled-water company that wanted to supply water to FEMA found that its suppliers could not provide the plastic needed. Production of carpet and fertilizer are also down.

The natural-gas crisis is threatening U.S. manufacturing, economic growth, employment and international competitiveness. More than 96 percent of all manufactured goods are directly touched by chemistry. The industries that rely on chemistry together represent more than a quarter of the nation’s entire workforce. Unaffordable natural gas is driving away investment, crippling our manufacturing base and reducing job opportunities. It is transferring to foreign countries the advanced research and technology desperately needed in order to compete on the world stage. In effect, our nation’s energy policy has become its de facto manufacturing and national-security policies as well.

In the chemistry industry alone, more than 100 plants have closed and more than 100,000 jobs have been lost. These jobs have been literally exported to other countries — in Europe, the Middle East, Latin America and China — where natural gas is plentiful and up to 20 times cheaper. Business Week recently noted that of the 120 large-scale chemical plants under construction around the globe, only one is being built in the United States. Plants under construction are located where natural gas is abundant, reliable and affordable.

Over the past two decades, we have been using more natural gas — and producing less — creating shortages and price increases. Electric utilities, which burn about a third of all available natural gas as a fuel, have been encouraged to use natural gas over other energy sources. Advanced technologies such as coal gasification have been developed, but their potential has not been fully explored.

We are now at a tipping point. Congress and the administration can ignore the problem, and Americans will suffer the consequences. Or they can bite the bullet and take the urgent actions that are necessary now. The emphasis is on the word “urgent,” because we cannot wait for another two, three or five years of debate.

What are the solutions? Natural gas is a regional commodity whose supply and price are driven largely by public policy. What was missing from the Energy Policy Act of 2005, passed before Katrina hit, was an urgent sense of the extent to which our nation’s natural-gas supply is falling short of our nation’s needs. The fact is this country is facing a very serious natural-gas crisis that requires its own emergency response from government and industry. In order to secure the nation’s access to natural gas and bring prices down to their historically affordable levels, we need to address supply:

• Congress must send a powerful message to the markets by eliminating barriers to offshore energy production in the oil-and gas-rich Outer Continental Shelf (OCS).

• The Department of the Interior must expedite leasing to tap the vast natural-gas reserves in the eastern Gulf of Mexico, 100 miles from the Florida coast.

There is some momentum for OCS exploration in recently introduced legislation and comments by Rep. Richard Pombo, Sen. Pete Domenici and others, and we are hopeful. Increasing imports of liquefied natural gas (LNG), which was encouraged in the energy legislation, can be part of the solution. But it is insufficient on its own. Increasing domestic supply is critical. And we should take care that LNG does not become another path to energy dependence for the United States.

As Mr. Domenici put it at a recent energy hearing, “We’ve got to get moving.” There is no time to waste.

Jack Gerard is president and CEO of the American Chemistry Council.

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