Spurred by high domestic natural gas prices compared with their global counterparts, 15 associations, including the American Chemistry Council and the Society of the Plastics Industry Inc., have formed a broad-based coalition to lobby for fewer restrictions on drilling.
In particular, the Consumer Alliance for Energy Security, formed in April, wants Congress to provide greater access to the Outer Continental Shelf, almost 90 percent of which is off-limits to drilling. The Minerals Management Service estimates there are 4.2 trillion cubic feet of natural gas and 86 billion barrels of recoverable oil in the OCS.
``In order to compete and succeed in the global marketplace, our country needs a plentiful, diverse and affordable energy supply,'' said John Engler, president and chief executive officer of the National Association of Manufacturers. ``It's time to reduce costs and expand supplies.''
Manufacturing uses one-third of all natural gas in the U.S., with the chemicals and plastics industry using roughly 10 percent of that - both to run their plants and as a feedstock for raw materials.
More than 80 percent of the resin in this country is produced from natural gas,'' said William Carteaux, president of SPI.
Although natural gas stockpiles are the highest since 1991, according to the Energy Information Administration, prices remain almost three times higher than in 1999, as they typically are based on how the market views future supply and demand.
``North American gas supply/demand balance is still tight and is expected to stay that way,'' said Energy and Environmental Analysis Inc. of Arlington, Va. ``There is much uncertainty about future gas development.''
In March, the average wellhead price of natural gas was $6.35 per million Btu, the EIA estimated. That's down from the average price of $10.68 in October, but it still leaves prices three to four times higher than in many other countries - a contrast to the late 1990s when U.S. prices were on a par with other countries. The price of natural gas is less than $2 in seven countries, according to CAES, and between $5 and $6 in China, Japan and South Korea.
The accelerating disparity ``has been devastating,'' said a report released earlier this month by the Manufacturers Alliance/MAPI, a public policy and economic research group in Arlington.
The report agreed there is a need to expand production but also said liquefied natural gas remains ``the best hope for adding measurably to U.S. gas supplies in the short-to-medium term.''
``Here and now, if you want to look at what holds the best promise of adding to energy supplies, LNG is it,'' said MAPI economist Donald Norman. ``Near-term, it is the answer, given the difficulties in gaining approval to develop new natural gas production'' and the likelihood that it will be at least five years before a pipeline from Alaska's North Slope is approved and constructed.
The four LNG terminals operating in the U.S. provide less than 3 percent of natural gas supplies. But three are under construction, and permits have been issued for nine others. ``The price of natural gas can be lowered by 21 percent by 2010 if all these are brought on stream,'' Norman said. LNG could provide as much as 20 percent of U.S. natural gas consumption by 2010, he added. ``It's critical that we jump in this.''
The plight of manufacturers isn't getting much sympathy, one source said, from an administration that is focused on foreign policy and the war in Iraq and is reluctant to be seen, in an election year, as anti-environment or as a supporter of big oil.
``There is a failure on the part of elected officials to understand the relationship between supply and the viability of the manufacturing sector,'' said Jack Gerard, ACC president and chief executive officer. ``We've got to work harder, we've got to be more aggressive and we've got to be more outspoken.''
CAES said that because of high energy prices, more than 100,000 chemical industry jobs have been lost since 2000.
``Any belief that we are going to see significant drops in pricing from the current $6-$8 levels are unfounded,'' Carteaux said. But if legislation is passed that permits access to the outer shelf, it can bring price stability to the market by sending a message that supply is on the way, he said.
``I am guardedly optimistic that we can get something through in this session,'' Carteaux said.
But that's no guarantee. A bill to open up a section of the OCS - known as Section 181- in the central and eastern Gulf of Mexico for drilling and oil exploration was passed by the Senate Energy & Natural Resources Committee by a 15-6 vote last month. But sources said SB 2253 isn't likely to move to the floor for a vote until after the elections, and only if it has the 60 votes needed to overcome a filibuster.
The bill also must overcome the opposition of U.S. legislators in coastal states who see drilling as a detraction to tourism, and from environmental groups concerned that if permission is granted to drill in one area, it could create a domino effect.
