Page 12 ■ Thursday, January 19, 2012


NATION & WORLD Natural gas price plunges


By JONATHAN FAHEY Ap Energy Writer


ral gas is plummeting at a pace that has caught even the experts off guard. A 35 percent collapse in the futures


NEW YORK — The price of natu-


price over the past year has been a boon to homeowners who use natural gas for heat and appliances and to manufactur- ers who power their factories and make chemicals and materials with it. The country is fl ush with natural gas


tial gas and electric customers are saving roughly $200 a year, according to a study by Navigant Consulting. ■ For companies that make plastics,


as a result of new drilling techniques that have enabled energy companies to tap vast supplies that were out of reach not so long ago. The country’s natural gas surplus has been growing even as the country burns record amounts. This winter’s warm weather slowed


the growth in demand, however, and created a glut. In the Northeast, Decem- ber was the fourth warmest in the last 117 years. Winter supplies are 17 percent above their fi ve-year average. The natural gas futures price fell 13


percent last week, to $2.67 per 1,000 cu- bic feet. That’s the lowest winter-time level in a decade. “The market has been overwhelmed


with gas,” said Anthony Yuen, a com- modities analyst at Citibank. He and other analysts expect the price


fertilizer and other chemicals derived from natural gas, the falling prices are nothing short of a windfall. The same goes for makers of products from steel to bricks to beer. All use a lot of natural gas to heat their furnaces. U.S. manufac- turers are becoming more competitive globally as a result of the country’s cheap natural gas, industry offi cials say. Some industries aren’t cheering,


though. With electricity prices falling, the


profi ts of all electric power producers — whether they rely on coal, nuclear or wind — are shrinking. Companies that drill solely for natural


customer’s bill. The rest is transmission and delivery charges, which don’t change along with fuel prices. Homeowners are paying $10.18 per 1,000 cubic feet of gas on average, including transmission and delivery charges, according to the En- ergy Information Administration. Over a year, a customer will burn an aver- age of 75,000 cubic feet, or about $760 worth. The multi-year drop in natural gas prices caught most industry experts by surprise. In the middle of the last decade, natu-


ral gas looked to be in short supply. Pro- duction in the U.S. was slowing, imports from Canada were rising and plans for importing liquefi ed natural gas from the Middle East and elsewhere were drawn up.


to average near $3 for all of 2012. If the weather stays mild, the price could even dip below $2, a level not seen since 2002. Cheap natural gas is mainly a good thing for the economy: ■ More than half of U.S. households


drillers could give the gas away and still be hugely profi table just from selling the oil.


use natural gas for heat, and a quarter of the nation’s electricity is made from it. Falling heating and electric costs are off- setting the impact of high gasoline prices and enabling families and small busi- nesses to spend on other things. Residen-


es to homeowners is not as big as a ma- jor drop in oil and gasoline prices would provide. The average household’s annual gasoline bill is about $4,000, roughly double the average annual gas and elec- tric bill. Also, the fuel cost is only half of a


The benefi t of falling natural gas pric-


gas production as much as they would have during previous periods of low prices. They’ve found ways to produce the fuel at much lower cost so they can be profi table at much lower prices. And, in many cases, natural gas is a byproduct of oil drilling, which is so profi table that companies are going after every barrel they can fi nd. Analysts say in some oil and gas fi elds,


gas are earning less these days, too. That’s prompting some to hunt instead for oil, whose price is near $100 a barrel. Still, drillers aren’t reducing natural


2005. Chemical and metals manufactur- ers were shutting U.S. factories and mov- ing overseas, where gas was abundant and cheaper. Farmers in need of fertil- izer were turning to inexpensive imports from Canada, Trinidad and Asia. But over the next few years, drillers


Natural gas futures hit nearly $15 in “The market has been


overwhelmed with gas.” – Commodities analyst Anthony Yuen


perfected methods fi rst tried in 1981 that now allow them to profi tably extract gas trapped in shale formations — layers of fi ne-grained rock that in some cases have trapped ancient organic matter that has cooked into oil and natural gas. Engineers combined the ability to drill


horizontally into shale with a technique called hydraulic fracturing. Millions of gallons of water, sand and chemicals are pumped into wells to break rock and cre- ate escape routes for the gas. In doing so they unlocked natural gas deposits deep underground across the East, South and Midwest that are large enough to sup- ply the U.S. for decades. This eventually turned the shortage into a glut, and re- versed the fortunes of some industries.


benefi ting,” said Steve Wilson, the CEO of CF Industries, which makes ammo- nia and other fertilizer ingredients. CF Industries, which is based in Deerfi eld, Ill., has seen its daily natural gas costs fall from $6 million to $2 million over the past few years. The company is planning to spend more than $1 billion expanding its U.S. plants. While industrial customers are bet- ting on low prices for years to come, things could change if demand increases sharply because of extreme weather or faster-than-expected economic growth, or if the U.S. begins exporting gas. It’s also possible that natural gas drilling could be curtailed by environmental regulations designed to protect drinking water from hydraulic fracturing. Legislators in New York and New


Jersey have banned hydraulic fractur- ing temporarily, and the Environmental Protection Agency is studying it and may propose national regulations. The most likely near-term scenario


dustries in Donaldsville, La., that was shuttered by its former owner in 2004 is running again. Steel maker Nucor Corp. is building a factory in Louisiana; Shell Oil Co. is planning a petrochemical plant in Appalachia; and Dow Chemi- cal is building a type of chemical feed- stock plant it hasn’t built in the U.S. since 1995. “A whole slice of American industry is


An ammonia plant owned by CF In-


is that prices keep falling, according to Rusty Braziel, an analyst at Bentek En- ergy. “This ain’t the bottom,” he said.


Hoeven uses address to promote Keystone XL pipeline


By DIRK LAMMERS Associated Press


pipeline to carry oil from Canada to Texas Gulf Coast refi neries is the “larg- est shovel-ready project in the country” with the potential to create thousands of jobs and reduce American dependence on oil from the Middle East, North Da- kota Sen. John Hoeven said Jan. 14. President Barack Obama faces a Feb. 21 deadline to decide whether the $7 billion Keystone XL pipeline expansion proposed by Calgary-based TransCana- da Corp. is in the national interest.


SIOUX FALLS, S.D. — A proposed


Republicans have been pounding him on the issue, saying it’s a question of whether the president wants to cre- ate jobs and import energy from a close friend and ally, or lose jobs and see Ca- nadian oil go to Asia. Hoeven used his party’s weekly radio and Internet ad- dress to continue pushing the pipeline. “It’s hard to imagine a project that


is more in the national interest and the interest of the American people,” Ho- even said in the address. He said the pipeline would keep the


cost of fuel in the U.S. down and create thousands of jobs for American workers when the nation greatly needs them.


The U.S. State Department delayed a decision on granting a permit in November, largely because of worries about the pipeline’s environmental im- pact, especially in the Nebraska Sand- hills, a region of porous hills that in- cludes a high concentration of wetlands and a key aquifer. The proposed 1,700-mile expansion


kota and forks in Steele City, Neb., with branches going east and south to refi n- eries in Illinois and Oklahoma. Hoeven said Keystone XL is the kind


would go through Montana, South Da- kota, Nebraska, Kansas and Oklahoma. So-called feeder pipelines would con- nect the Keystone XL to rich oil fi elds in North Dakota and Montana. A section of the pipeline that’s al- ready built enters the U.S. in North Da-


of project that will grow the U.S. econ- omy, and he called on Obama to join Republicans in creating a legal, tax and regulatory environment that empowers private investment. “That’s the approach that will grow


our economy and get people back to work,” Hoeven said. “That’s the ap- proach that will reduce our defi cit and debt, and strengthen our nation.”


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