Sector Plays

[excel]

Natural gas prices to climb
The U.S. produces 84 percent of its gas and imports 14 percent from Canada.
By MARTA HUMMEL
Medill News Service
Wednesday, August 6, 2003


WASHINGTON — With natural gas stockpiles near 20-year lows and energy policy meant to ease prices in limbo, Pennsylvania consumers are expected to see higher heating bills this winter.
The Senate scrapped legislation Friday to open federal land to oil and gas drilling, among other sweeping changes, in favor of a Democratic bill that emphasizes conservation over consumption.

But the chairman of the Senate Committee on Energy and Natural Resources, Pete V. Domenici, said he would fight to include many of the Republican provisions when the House and Senate reconcile their two bills after Congress reconvenes in the fall.

“I promise you we will write many of this year’s energy provisions into the bill at conference,” he said. “We will do more for production. We will do more for energy diversity. We will do more for research. Tonight’s bill is just a vehicle to get us to conference.”

Rep. Todd Platts, R-York County, chose not to vote on the bill in April, and Pennsylvania’s Republican senators, Arlen Specter and Rick Santorum, voted for the Senate version on Friday.

Hurricanes and hot weather this summer combined with a cold fall or winter could also squeeze the supply and push prices higher.

“Hurricane Claudette, which developed in the Gulf of Mexico in July 2003, caused a loss of 18.1 percent of natural gas production from the Gulf and 20.8 percent of oil production (as of July 16),” according to report by the Interior Department.

“These and other factors could lead to a tighter market.”

The Energy Department warned in June that high prices could continue through this year into 2004.

Pennsylvania produces 21 percent of its electricity from natural gas, compared with 22 percent nationally, according to Philadelphia-based Penn Environment, an environmental group.

The U.S. produces 84 percent of its gas and imports 14 percent from Canada. Pennsylvania ranks 15th of 22 gas-producing states in the United States, with all of its production coming from the western half of the state.

Experts say the United States has the potential to supply growing demand — which could double by 2025 according to industry estimates — but energy companies need the ability to drill in public lands.

“You could drill in downtown Pittsburgh more easily than in public lands,” said Lou D’Amico, executive director of the Independent Oil and Gas Association of Pennsylvania, which represents 135 independent firms. He said companies “are certainly hoping” any energy legislation opens federally protected land.

“New technology makes it possible to drill without hurting the environment,” he added.

But environmental groups think Congress should focus on reducing consumption and moving toward alternative fuels.

“Congress should be looking to long-term solutions, not quick fixes,” said David Masur, executive director of Penn Environment.

“Infrastructure costs like building roads and transporting fuel are huge. When you add in these costs, allowing more drilling doesn’t necessarily mean lower prices.”

But what is clear is that the United States must increase production or look to other sources if it hopes to meet growing demand.

“If demand doesn’t stabilize, more gas will have to come from imports,” said Sara Banaszak, director of gas and power for PFC Energy, a Washington-based energy consulting firm.