Mr. Chairman and members of the committee, my name is Bob Drake. I farm and raise Angus cattle in Davis, Oklahoma. Like many Oklahomans, I have been active in the oil and gas industry as well as farming and ranching for most of my life. I am currently vice-president of the Oklahoma Farm Bureau and I serve as chairman of the National Grazing Lands Conservation Initiative. I have also served as President of the National Cattlemen’s Beef Association. This issue concerns me both as an agricultural consumer and as a producer in the oil and gas industry. On behalf of the American Farm Bureau Federation and the Oklahoma Farm Bureau, thank you for the opportunity to express how energy supply, and energy prices, are adversely impacting American agriculture.
First, let me say that today’s agriculture is more energy efficient than ever before, producing more economic benefit with less energy. For example, on corn fields across this nation, farmers are producing 30 percent more crop using 30 percent less energy-related inputs, including fertilizer, than we did only a generation ago. Even though energy efficiencies have been realized in agriculture, no one should expect a growing U.S. economy and population to need less energy security in the future.
Natural gas is one of the most important energy feedstocks to production agriculture and associated manufacturing industries. In the last year, the United States has experienced prolonged natural gas price volatility, along with an overall elevation in price.
One of the industries highly dependent on natural gas that is critical to American agriculture is the fertilizer industry. Natural gas is the primary feedstock in the production of virtually all commercial nitrogen fertilizers in the United States, accounting for 90 percent of the farmer’s total cost of anhydrous fertilizer. According to The Fertilizer Institute, the 2000 planting season saw ammonia fertilizer at a cost of around $100 per ton. During the 2003 growing season, farmers faced ammonia prices of $350 or more per ton. The U.S. Department of Agriculture estimates that it cost U.S. farmers and ranchers an extra $2.6 billion to produce the same amount of food and fiber in 2003 when compared to the 2002 growing season. Our domestic fertilizer production capacity already has experienced a permanent loss of 25 percent over the past four years and an additional 20 percent is currently shut down due to high natural gas prices. The current price volatility threatens the existence of what remains of our domestic fertilizer industry and will exacerbate America’s dependence on foreign sources of energy and fertilizer.
Last week, I sat down with a group of producers in the Oklahoma panhandle to discuss this issue. They reported that the cost of running their natural gas powered irrigation pumps increased more than 70 percent in 2003. One producer, in Beaver County, Oklahoma, stated that these costs alone resulted in a $26,000 drop in his net income.
The current natural gas crisis is a prime example of the need for a clear and consistent energy policy. On one hand, the federal government has encouraged expanding the use of natural gas as an environmentally friendly alternative for electrical generation, home heating and manufacturing. At the same time, the federal government has increased the regulatory burden on domestic natural gas exploration, drilling and production and placed moratoriums on many energy-rich areas such as the Outer Continental Shelf (OCS), the Gulf of Mexico and federal lands. Similar restrictions have been and continue to be experienced on other traditional energy resources such as oil, coal and nuclear, due primarily to environmental concerns, but adding to the demand pressure on natural gas as a clean alternative. In Oklahoma, oil and gas exploration on private lands has been severely hampered by the U.S. Fish and Wildlife Service’s habitat rules for the burying beetle. The service has delayed drilling, gathering and other activities of oil and gas producers. If left unaddressed, U.S. energy policy as a whole will certainly result in the loss of even more of our energy independence tomorrow.
In addition to higher operating costs due to natural gas, farmers and ranchers have experienced diesel fuel price increases 40 percent above historical averages. With thin margins already being experienced in agriculture and the prospect of high energy prices in the foreseeable future, this added expense, which cannot be passed on in the price of agricultural commodities, will erode the financial positions of many farm and ranch families.
The energy price instabilities being experienced today should not be allowed to grow into a more serious energy crisis in the future. Nor does America need to become as dependent on foreign sources of natural gas as we now are with crude oil. Energy rich repositories now off limits must be reconsidered for environmentally safe oil and gas exploration and production immediately. Advancements in oil and gas-drilling technology have resulted in the most environmentally sound and responsible capturing of energy stocks ever conducted, and will continue to improve. Earlier this year, American Farm Bureau Federation President Bob Stallman was on hand in support of Secretary of Interior Gale Norton’s announcement of royalty relief for deep natural gas drilling in the shallow waters of the western Gulf of Mexico. These innovative approaches show promise toward future energy supplies, but much more can be done.
AFBF and the Oklahoma Farm Bureau strongly believe that the current comprehensive energy legislation will lead to a diversified energy portfolio with increased emphasis on renewable sources, while at the same time increase our domestic energy supply from traditional sources such as natural gas, oil and coal in a safe and affordable manner. We urge that Congress complete this important legislation this session. Thank you for the opportunity to appear before you and for your consideration of our views.