With summer's hot weather finally upon us, Americans by the millions are cranking up their air conditioners to help them cope with this seasonable discomfort. But in a few weeks they'll be getting the bill from the local power company - and they won't like what they see.
Americans are about to pay dearly for an acute shortage of natural gas that has sent prices for this widely-used fuel through the roof. The price of natural gas in the U.S. has nearly doubled in the past year, to $6.31 per million British thermal units (Btu).1 According to Energy Secretary Spencer Abraham, storage levels of gas are at their lowest point in almost three decades.2 Simply put, domestic production of natural gas has not kept pace with growing demand. How did this happen?
For decades, natural gas was used by utilities to help meet demand during winter's coldest months. To deal with seasonal fluctuations in price, power companies typically purchased gas in the summer when demand and prices were low and stored it for winter use when demand and prices were higher.3 This arrangement began to unravel with the enactment of the Clean Air Act Amendments of 1990, which encouraged the use of natural gas by putting strict limits on emissions of a host of pollutants, including those from coal-fired generators.
During the 1990s, the Clinton Administration actively promoted the use of clean-burning natural gas, touting it as an environmentally friendly alternative to coal. Natural gas became a key component in the Clinton Administration's policy to combat the alleged "threat" of global warming brought on by manmade emissions of greenhouse gases. Meanwhile, energy deregulation spawned a boom in construction of new power plants. More than 90 percent of the power plants built since the late 1990s run on natural gas,4 and the Energy Information Administration (EIA) estimates that the US appetite for natural gas will grow from 22 trillion cubic feet in 2001 to 35 trillion cubic feet by 2020.5
However, the same federal government that was promoting the use of natural gas was also systematically limiting its supply. Though the United States has vast reserves of natural gas both on land and off shore, much of it is off limits to drilling. Through the expansion of wilderness areas and national monuments in gas-rich regions of the West, the Clinton Administration shut off millions of acres to oil and gas exploration. According to Energy Secretary Abraham, approximately 40 percent of known U.S. natural gas reserves are inaccessible as a result of stringent environmental regulations on federal lands under which they are located.6
The Bush Administration is attempting
to open federal lands for oil and gas exploration to deal with
the nation's soaring energy needs. But environmental groups insist
on tying the Administration and industry in knots with lawsuits
which delay getting the gas to the consumer. Additional problems
arise through the lack of an adequate infrastructure to transport
the gas. Alaska has 35 trillion cubic feet of known natural gas
reserves, but only now is Congress getting around to funding
a pipeline to transport it to the lower 48 states. Construction
of the pipeline could take ten to 12 years.7
A new analysis by the EIA shows the McCain-Lieberman
bill will increase natural gas prices another 16 percent over
the next seven years.8 That's an awfully
short-sighted way to treat an environmentally friendly fuel.
Bonner Cohen is a senior fellow with The National Center for Public Policy Research. Comments may be sent to [email protected].
1 Kenneth Bredemeier, "Natural
Gas Prices to Stay High With Stocks Low," Washington, Post,
June 11, 2003, p. E3.