The hearing will come to order. Good morning and thank you all for coming.
As my colleagues on this Committee know, I have long been concerned with our nation’s competitiveness. If our children and grandchildren are to enjoy the same opportunities that we have had, we must develop a new infrastructure of competitiveness.
The President has recognized this need by announcing the American Competitiveness Initiative and embracing most of the math and science education recommendations in the National Academy of Sciences study: “Rising Above the Gathering Storm.” He also made a commitment to move America toward energy independence. I refer to this as the ‘Second Declaration of Independence’ to make us less reliant on foreign sources of energy – especially from countries that do not share our values and could hold us hostage.
Today’s hearing is about a key component of energy independence – harmonization of our energy, environmental, and economic policies. Nowhere is our failure more apparent than natural gas prices.
The United States has the highest natural gas prices in the world – which is having a devastating impact:
· Families in the over 60 million homes that use natural gas for heat are struggling to pay their utility bills;
· High prices have permanently shutdown seventeen nitrogen fertilizer plants, representing 20 percent of our production capacity – in fact, farmers in Ohio are planting less corn and more wheat and soybeans because they do not need nitrogen fertilizer;
· Chemical manufacturers went from being the most successful export industry in the history of our nation in the late 1990s to a net importer; and
· An official from Bayer warned me three years ago that jobs would be sent overseas unless something was done about high prices, and since they remain high, he told me last week that their U.S. employment has been reduced from 22,000 jobs in 2002 to 14,000.
Our environmental policies have played a role in exacerbating the demand for natural gas and limiting the supply. This hearing will examine a relationship that many cite as one of the causes for high natural gas prices – that our clean air regulations have increased natural gas demand because electricity can be generated cleaner from it than from coal.
It is important that the American public understand the context of this discussion. [CHART 1] We have made great progress in reducing our emissions considering the growth of the economy. This hearing is about learning how best to continue to improve our air quality.
I am going to focus mainly on what has occurred since enactment of the Clean Air Act Amendments of 1990, which required cuts in power plant emissions. [CHART 2] This chart shows that over the past 20 years the percent of electricity generated from coal has significantly decreased. From an energy, economic, and national security perspective, this is bad news as coal is our most abundant and lowest cost domestic energy source. We are the Saudi Arabia of coal with over 250 years of supply.
[CHART 3] Over this same period, the percent of electricity generated from natural gas has increased greatly. Thus, as the percentage of coal decreased in the 1990s, natural gas generation increased to meet electricity demand.
As stated earlier, natural gas is used by many different consumers. [CHART 4] From 1990 to 2005, while production remained basically flat, the percentage of natural gas used to generate electricity increased from 19 to 27 percent. This rise without a reciprocal increase in supply has led to an escalation of natural gas prices and a reduction in industrial use. The electric sector is projected to increase use by three more percentage points by 2020, but this analysis is based on the current regulatory situation – it does not anticipate proposals by some of my colleagues.
Although this hearing is not about supply, which Chairman Inhofe covered in a 2004 hearing, it is a big part of this story. [CHART 5] Out to 2030, consumption is expected to continue to outpace domestic production by a great deal. Some of this difference is projected to be made up by liquefied natural gas (LNG) imports from other countries – unfortunately, just like oil.
This is unacceptable since we have resources at home that we are not accessing. Simply put, if we increase demand through our policies, then we must also increase supply. That is why I am a cosponsor of a bill introduced this week by Senators Domenici and Bingaman to open the Gulf of Mexico’s Lease 181 Area to drilling 100 miles off the Florida coast. This could provide heat for 15 years for nearly 5 million homes – enough for all of Ohio’s households.
We also took action in the recently enacted energy bill to:
· Encourage more production on public lands and in Alaska’s National Petroleum Reserve;
· Promote the construction of LNG terminals and a pipeline from Alaska; and
· Increase the use of clean coal technologies, nuclear power, and renewables – which will diminish the use of natural gas for electricity generation.
However, there is no immediate solution to reduce high natural gas prices today. [CHART 6] Since 1990, natural gas prices have increased substantially – more than tripling for Ohio families, with an average price of $16.76 per thousand cubic feet in November 2005. Ohioans are struggling to pay their utility bills, especially the poor and elderly on fixed incomes.
To relieve this burden, we have increased LIHEAP funding by about 73 percent since I came to the Senate in 1999 and are working to provide more funding right now. In considering our environmental policies, we must bear in mind the impact on the impoverished and understand that we have already greatly improved our air quality because LIHEAP is not a solution.
I look forward to hearing from the witnesses about what we can learn from the past 15 years as we continue to improve the environment and protect public health. With natural gas prices already through the roof, families and people’s jobs are depending upon to us to take into account the impact of clean air regulations on our nation’s energy and economic needs.