Remarks to the CQ-Roll Call Forum on Natural Gas in the New Energy Economy
*** As Prepared for Delivery ***
Good morning and thank you for inviting me to be with you today.
I have a lot of confidence in America's natural gas industry, your organization's leadership - and generally the leadership of the entire natural gas industry. We have worked closely over the past year with AGA and other natural gas interests on responsible energy policy. The reality, though, is that energy legislation is largely stalled in the Senate and it's uncertain what this administration's policy is going forward.
I'm not going to stand here and try to tell you with certainty what's coming, either, but we can look at a snapshot of the politics and technological developments that are likely to affect natural gas in the near future.
The obvious game-changer - one that's come to light much more clearly only in the past year - is the sheer size of our nation's shale gas resources. More on the implications of that in a moment, but I'm guessing you're most interested in how things are playing out in the Senate right now.
Considering the crowded legislative calendar and the upcoming midterm elections, it remains highly unlikely that we'll find consensus on a climate bill this year. That's not necessarily bad news for natural gas. Given what we've seen in terms of the climate legislation that passed the House and what was introduced in the Senate, I believe we're better off starting from scratch.
Any energy or climate bill that fails to promote natural gas in the context of lowering emissions is simply unacceptable. But that's certainly what the House cap-and-trade bill would do. The Senate version that emerged from EPW isn't much better. Both proposals failed at the most fundamental levels - they neither reduced emissions nor kept costs down for consumers. The absence of natural gas as a cornerstone of those bills was, in my view, a direct cause of their failure.
I do think eventually that some sort of legislation to curb greenhouse gas emissions is still likely if not inevitable. I also believe it's the responsible thing to do. To begin with, though, whatever type of proposal we agree on must have broad bipartisan support. The proposals we've seen so far certainly weren't written in that spirit. And I think their chances of success reflect the shortsightedness of that strategy. To succeed, we're going to have to scrap the cap-and-trade bills we've seen so far as they are not going to advance in the Senate.
My staff and I continue to consider alternatives to reducing emissions that protect both our economy and the environment. Senator Bingaman and I have been holding a series of hearings on alternatives to cap-and-trade, including discussion of a revenue-neutral carbon tax and greater investment in breakthrough technologies.
Others in the Senate are also engaged. Senator Cantwell has what's being called a "cap-and-dividend" model, which would guarantee 75 percent of the revenue raised from pricing carbon would be returned to taxpayers, who will ultimately shoulder the burden of compliance. And there are the ongoing bipartisan discussions between Senators Graham, Kerry and Lieberman. Senator Lugar has also called for improving energy efficiency and advancing technological solutions to our climate challenges.
One thing we could do today that would make a difference is enact the bipartisan energy bill that Senator Bingaman and I moved through the Senate Energy Committee last summer. That bill, while not perfect, provides substantial support for developing the new technologies we're going to need to meet our carbon-reduction goals in the future. Providing a price signal for carbon might be part of future policy decisions, but we must also provide incentives for technological innovation. The energy bill does that without threatening our economic recovery. It would also increase our domestic supply of oil and gas - energy we need today and will continue to need far into the future - by opening up new areas of the Gulf of Mexico and providing vital loan guarantees for an Alaska gas pipeline project. And finally, it's a bill that's written, has been reported from the committee of jurisdiction, and is supported by a bipartisan group of senators.
Despite some shortcomings, the energy bill, in its current form, is good legislation. It certainly could stand some improvement - especially revenue sharing for coastal states with energy production - and I will try to improve the production provisions on the floor. Similarly, I will also oppose any effort that weakens the bill. It remains unclear, though, when the full Senate might take it up. The White House and Congress are sending out mixed signals right now on whether an energy only bill - one that does not contain a price on carbon - would be acceptable.
Now of course, natural gas is a big winner in the great push to expand renewables. Alternatives like wind and solar need a baseload energy supply, which natural gas can provide. I don't want to preach to the choir, but this is a story we all need to be telling Americans because the message hasn't reached everyone it needs to yet. I can't tell you how many young people come into my office thinking we can shut off access to all fossil fuels today and simply switch the country to using pure solar and wind. It's not just convincing Americans that natural gas is a good, clean, efficient source of energy, we must also explain that natural gas is absolutely necessary as a baseload energy source to make other forms of alternative energy reliable.
What's needed is a more straightforward policy that provides incentives to improve energy efficiency, and really encourage an expanded role for natural gas in power generation. The biggest opposition to greater natural gas usage comes from the coal industry and industrial users of gas. I understand their concerns and I'm not going to advocate that the government pick winners or losers here. Bottom line is that energy demand is rising, both domestically and across the world. We're going to need as much energy as we can lay our hands on to meet that demand. Our shared focus should be on ensuring that we can access as much affordable energy as possible, and that we use it in the most efficient and environmentally-friendly way.
Greater efficiency should be one of the cornerstones of our efforts. Residential natural gas consumers have managed to progressively reduce consumption while at the same time expand the number of households using gas. That's an encouraging sign of what's possible.
I want to go back and talk about industrial gas consumers for a moment. The chemical and fertilizer industries are critical parts of our economy. My home state is still smarting over the loss of the Agrium plant in 2008. The short of it is that I believe the prolific supplies of natural gas - shale of course but also gas from Alaska's North Slope and our offshore resources - are going to combine with expanded pipeline infrastructure to provide a much more stable supply picture in the future. This should allow for longer-term contracts between producers and industrial consumers, and I'm encouraged by the willingness of some on both sides to engage in these discussions.
There was a major recession-induced demand shock for natural gas last year, coupled with the glut associated with shale plays, which again has been a game changer for the industry.
Cheap gas is good for consumers and good for industry, but there needs to be balance in regard to pricing so that producers can continue to invest.
Many of you are aware of the issues we took up last June in Committee, in S.1462, regarding natural gas pipelines. I obviously feel that continuing what's been a successful expansion of pipeline capacity across the country is critical to energy security and I'm generally reluctant to remove certainty from an investment standpoint by authorizing retroactive federal controls over these already heavily-regulated entities. The Section 5 rate change authority was the key example here. The amount of FERC-initiated litigation right now concerns me because we haven't seen it before and I do hope it doesn't result in any distraction and slowdown in pipeline construction.
The Alaska gas line talks over the years have certainly impressed on me two things. First, that the market sets the price for delivered natural gas. And second, that whoever builds, owns and operates the pipeline has to expect a level of certainty about their return or the pipeline won't get built.
The price of gas is rising a bit, as we know, and that has inspired new development in places we wouldn't have thought likely a few years ago, such as New York and Pennsylvania. It's an exciting time for natural gas, but we've got to stay focused on every concern I've outlined here this morning.
Here's how valuable I think natural gas is going to be, not in my own words but in those of author Robert Bryce, who testified before the Energy Committee last spring. He wrote, "Wood dominated the global energy scene through the 18th century. The 19th century was coal and the 20th century was oil. Natural gas should be the dominant fuel source for the 21st century, and that dominance should be welcomed."
Thank you all for welcoming me here this morning. I'm glad to take a few of your questions.
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