Natural Gas Executives Lobby US Senate On CO2, Taxes, Regulations

Natural gas executives are lobbying the U.S. Senate en masse this week in a bid to gain more favorable terms for their industry on a raft of issues from climate change laws to new tax proposals.

The chief executives of several of the country's largest natural gas producers are warning legislators that several proposals under consideration by policymakers could stifle production. But, they argue, if properly encouraged the industry could meet Democrats' twin goals of cutting greenhouse gas emissions while reducing reliance on imported energy.

The executives, including Jim Hackett, CEO of Anadarko Petroleum Company (APC), and Larry Nichols, head of Devon Energy Corp. (DVN), say they're meeting with a number of key Senators who sit on five of the crucial committees drafting legislation that will impact their business.

"We're starting to see several senators who've said they will carry the ball" on legislation that would favor the natural gas industry, said Hackett at an industry briefing. "We think we have people in all five (committees) that are actually receptive to natural gas," he said.

The CEOs are seeking to block proposals that would raise taxes on the oil and natural gas industry and move some environmental regulation of production from the state to the federal level.

In budget proposals, Democrats are seeking to eliminate tens of billions of dollars in tax credits for the petroleum industry.

"You don't have to be a rocket scientist to know that if you take away that kind of cash from us, natural gas drilling goes down, oil drilling goes down and our foreign imports go up," said Nichols.

Separately, some lawmakers want regulation of a production technique called "hydraulic fracturing" under the Environmental Protection Agency. The process - which forces water and chemicals into reservoirs - is currently overseen at the state level. Industry officials are concerned EPA might restrict the activity.

Hackett said he is optimistic about how the Obama administration may move on hydraulic fracturing. One proposal mentioned by officials is for the federal government to establish a standard, which would then be administered state-by-state. "We don't think that's even necessary, but we're willing to talk about that notion if there was a big concern about (fracturing)," he said.

Climate Concerns and Proposals

The companies also want the climate bill now being drafted to include the natural gas industry in the "offset credits" system and to give the sector more emission allowances.

Under the proposed cap-and-trade system, the government would give away hundreds of billions of dollars in emission allowances - each conveying the right to emit a ton of greenhouse gases - to different industries as a way to neutralize higher costs under the bill, particularly for energy. The CEOs said they believe their industry received a disproportionally small number compared to the coal industry and the ratio of actual emissions per unit of energy. Natural gas, when burned, produces approximately half the greenhouse gas emissions of coal.

The climate bill also creates an offset market that allows emission-reduction projects to get cash credits for the greenhouse gases saved from being emitted into the atmosphere.

The executives are proposing a "bridge fuel credit" that would be used like an allowance or offset for each metric ton reduction of greenhouse gas emissions attributable to substituting natural gas for a more emissions-intense fuel.

Demand Constraints

The industry also has another problem it wants Congress to fix - demand.

With new production techniques and big new fields discovered in the U.S., the industry has too supply. Crimped by recession, demand has plummetted and so have prices.

But the climate bill Congress is considering could undercut demand even more. Analyses of the bill - which includes renewable energy and efficiency mandates - predict natural gas consumption is likely to stay flat or fall because of new alternative energy and efficiency requirements.

But one bill, championed by Senate Majority Leader Harry Reid, D-Nev., could spark new demand in the transportation industry by encouraging natural gas vehicles and infrastructure.

Other executives petitioning Congress include John Pinkerton, chief executive of Range Resources Corp. (RRC); Brent Smolik, President of El Paso Co.'s (EP) exploration and production unit; and David Trice, Chairman of Newfield Exploration Co. (NFX).

-By Ian Talley, Dow Jones Newswires; [phone]; [e-mail];