Energy demand is on the rise – be it oil, natural gas, nuclear, coal, or renewable resources. Domestically, predictions show only coal sector production to increase but even that might cause some to pause given the uncertainty surrounding environmental regulations. Bottom line is that the U.S. will be importing more energy than ever before. What happened to the talk about energy and national security? It’s time to seriously look at our policies.
It is the policies of the past that got us here today. For example, let’s take natural gas. In the 80s and 90’s there was a surplus of supply and weak demand. This kept prices low. The market was influenced by certain legislative and regulatory measures. Two measures that impacted gas development included the Powerplant and Industrial Fuel Use Act of 1978 (PIFUA) and the Natural Gas Policy Act of 1978 (NGPA). While the PIFUA placed restrictions on industrial and power generation uses of natural gas, the NGPA set in motion a process that encouraged gas supply growth. Amendments in 1987 to the PIFUA removed restrictions on the use of gas in power generation, and the Natural Gas Wellhead Decontrol act of 1990 removed wellhead price controls.
Capability of natural gas continues to increase. Growing demand and limited supply has resulted in tighter markets, higher prices and greater volatility. This will continue until we can bring additional supplies to the market. In addition, with the current world oil supply situation and the flurry of environmental regulations facing refiners, we can expect to see gasoline prices remain high as well.
We must focus on the policies of today so we can have a plan for the future. We have to coordinate energy and environmental policies. For example, the electric industry has made a lot of changes. We no longer have just the vertically integrated utilities. In fact, close to 40 percent of generation comes from marketers – most of these new merchant generators are powered by natural gas.
Our government policies particularly, environmental polices, encourage the use of natural gas but do not address the corresponding need for additional natural gas supplies. Companies are switching from coal to natural gas. Why is this? Coal is our most abundant fuel source and should be used for electric generation and we can do this an environmentally responsible way. Natural gas is more flexible and can be used for different things such as heating homes and businesses. If we are to restore some kind of fuel diversity to our electricity sector, we need to provide a regulatory environment that will enable investors to consider coal plants. Right now, with the uncertainty about new source review, mercury, visibility and a host of other issues, building a new coal plant is just "too hard" even in a state like mine.
Mr. Chairman, it is my hope that we can pass the energy bill so we don’t continue, willy-nilly, down a path with no plan and pass a law here, a regulation there with no clear thoughts of coordination or where these policies lead us into the future.