Natural Gas Access/Supply
Natural Gas is Necessary for Fertilizer and Food Production
Food security—having enough food to feed a growing population—remains one of the great challenges facing humanity. According to the United Nations, the global population will increase by more than two billion people in the next 40 years, and many reports have indicated that food production needs to double by 2050. Because 40 to 60 percent of the world’s food production is made possible through the effective use of fertilizer, this natural resource and the industry that provides it are at the center of the global solution.
Natural gas plays a critical role in the production of fertilizers that serve as the soil ‘food’ that plants—from corn and wheat to pumpkins and apples—need to produce a healthy and bountiful crop. Specifically, natural gas is used to produce ammonia, which also serves as the primary ingredient in most nitrogen fertilizers and is an essential ingredient in many finished phosphate fertilizers.
The United States is the fourth largest producer of ammonia in the world, currently producing over 10 million tons annually. However, most of the world’s ammonia is now produced outside the United States. In fact, ammonia plant capacity in the United States decreased by nearly 40 percent during the last 12 years, partly because rising natural gas prices made the plants uneconomical to operate.
Policies that Promote Fuel Switching have Serious Implications for the Fertilizer Industry
Currently, discoveries of new natural gas supplies throughout the United States could potentially stabilize prices within the natural gas market. However, environmental concerns associated with the technology and processes necessary to extract natural gas from the newly discovered reserves and U.S. government efforts to incentivize consumers and other industries to switch to natural gas could limit the positive benefits associated with those supplies.
The New Alternative Transportation to Give American Solutions Act of 2011 (NAT GAS Act or H.R. 1380), introduced by Reps. John Sullivan (R-Okla.), Kevin Brady (R-Texas), Dan Boren (D-Okla.) and John Larson (D-Conn.), currently has more than 180 co-sponsors (100 Democrats and 80 Republicans). This act would provide financial incentives, estimated at $5 billion over 5 years, to promote the manufacture, purchase and use of natural-gas-powered vehicles in the United States. While the bill shares bipartisan support, its cost remains a major concern with the current budget deficit. Furthermore, the bill would create additional demand for the use of natural gas which would eventually lead to higher prices. It is unclear if there are enough votes in the House to pass a bill that subsidizes the use of natural gas. TFI is working with a coalition of natural gas consumers, as well as groups concerned with rising federal deficits, to defeat this legislation. We believe that the market, not the federal government, should set the price of natural gas.
If the power industry is driven to switch from coal to natural gas, natural gas prices would increase dramatically. Because the power industry is generally regulated and therefore fuel costs are passed through to the end user in the form of fuel adjustments, industrial consumers of natural gas, such as nitrogen fertilizer producers, would be forced to compete with power generation companies that will pay whatever is necessary to ensure an adequate supply of natural gas. The end result would be very damaging to industrial consumers of natural gas that will have to compete for natural gas with the power industry while also subsidizing the utilities' advantage by paying for higher fuel adjustments in monthly electricity bills.
TFI is working with a coalition of natural gas consumers, as well as groups concerned with rising federal deficits, to defeat this legislation.