Natural gas markets also costly, lawmakers hear
FRANKFORT – As gasoline prices rise and fall at local gas stations, a natural gas industry official told the legislative Special Subcommittee on Energy today that the price of that fuel could rise significantly this winter.
The potential rise in cost—which could increase 90 percent this winter to around $13-$14 per unit over last winter’s average $7.15 unit cost, according to American Gas Association official Chris McGill—is “an extraordinary increase in unit cost,” said McGill, “remembering that the commodity price for natural gas is about 70 to 80 percent of the consumer bill.”
The cost of all energy commodities are higher today, said McGill, including liquefied natural gas which was imported to the U.S. at record levels in 2007 and has been in strong demand in Asia and elsewhere. But competition for supply is only part of the price equation. Other factors include the storage of natural gas at historically high prices, supply disruptions and more domestic demand including the increased use of natural gas for electricity generation, he explained.
Ten years ago, only 3.5 trillion cubic feet (TFC) of natural gas was used for power generation in the U.S., he said. In 2007, the amount used to generate power nearly doubled to 6.5 TCF, McGill said.
“And that’s part of what is reflected in the price of gas today,” he told lawmakers, adding that residential, industrial and small business gas usage comprised most demand in the U.S. a decade ago. “Today, the market is about 1/3 electricity generation, about 1/3 industrial consumption and about 1/3 residential and small commercial consumption. And that has changed the market in terms of market pricing.”
The lack of a national energy strategy is also affecting the energy markets, said McGill, who was quick to point out Kentucky’s successful passage of energy legislation in recent years.
House Majority Floor Leader Rocky Adkins, D-Sandy Hook, said the need for a national policy is “the issue” for the American people because “it is busting their pocketbooks across this nation every day.”
“We’ve got to look at all the alternatives we have if we are serious about reducing our dependence on foreign oil which is growing now to almost 70 percent,” Adkins said. “We’ve got to keep that money in this country … and we can do that in this nation. We have the technology to do it and we’ve got to move forward.”
Sen. Charlie Borders, R-Russell, also encouraged more national attention to the country’s energy needs.
“Just conversation may be the driving force here…because people polled across this nation in the 70 to 75 percent range are saying we need to do something,” Borders said. “The fact is we’ve got to keep preaching in spite of those doomsayers who would see it get worse and worse and worse. We’ve got to everyday do everything we can and bring common sense into the equation.”
A report from Department of Financial Incentives Commissioner Donna Duncan on progress made under the state’s 2007 Energy Act was also presented to the committee. Duncan said the department has received around 40 requests from potential applicants for approval of coal-related, biomass, or renewable projects since the law’s passage, with three coal and one biomass project possibly receiving preliminary approval in coming months.
The 2007 Energy Act, also known as House Bill 1 sponsored by Adkins, provides financial incentives to companies that use coal, biomass, or renewables like solar and wind to create alternative forms of energy in the state, among other provisions.
|
