 |
| NCGA
Corn Board member Theresa Schmalshof testifies today before
the House Subcommittee on Energy and Mineral Resources on the
impact high natural gas prices has on farmers. |
NCGA’s
Schmalshof Testifies on Natural Gas Pricing Impacts on Corn Growers
(5-19-05)
Explaining the
impact high natural gas prices have on farmers, National Corn Growers
Association (NCGA) Corn Board member Theresa Schmalshof testified
today before the House Subcommittee on Energy and Mineral Resources.
At the oversight hearing
on the impacts of high energy costs to the American consumer, Schmalshof,
a corn grower from Adair, Ill., provided insight to Chairman James
Gibbons (R-N.V.) and other subcommittee members on how high natural
gas prices affect the cost of producing fertilizers that are relied
upon by farmers for crop production. In addition to being a feedstock
for fertilizer, she said growers rely on affordable natural gas
for energy for crop irrigation, to power farm equipment, for drying
grain and for producing ethanol.
“Whether used directly
as a feedstock or for heat and power generation, reasonably priced
natural gas is essential to grower profitability,” said Schmalshof.
“Increased natural gas prices are having adverse affects on
farmers.”
According to a recent
University of Illinois study, the total cost per acre to produce
corn across Illinois in 2004 increased 6 to 9 percent due to rising
prices for fertilizer, seed and fuel. And there is no relief in
sight, she said.
“For my family
farm, the price increase in one year translates to a $40 to $50
per acre cost increase,” she said. Schmalshof emphasized to
the committee that the producers cannot pass all costs onto buyers.
According to the U.S.
Department of Agriculture, farm gate prices for fertilizer have
jumped to near record-high levels. Fertilizers account for more
than 40 percent of the total energy input per acre of corn harvested.
The largest cost component of making all basic fertilizer products
is natural gas, accounting for more than 90 percent of the cash
cost of production.
Schmalshof also said
that the higher natural gas prices will negatively impact the growing
ethanol industry. “The second biggest cost in ethanol production
– second to feedstock – is the cost of energy, generally
natural gas,” said Schmalshof. “Energy costs typically
make up about 15 percent of a dry-mill plant’s total costs.
The corn industry becomes more energy efficient every year, but
we still must have adequate, reliable and affordable natural gas
to fuel the industry.”
In her testimony, she
said NCGA believes there are two solutions to the natural gas crisis:
increase supply and reduce demand. Additional supply is available
from onshore and offshore production, and liquefied natural gas.
Congress can adopt measures to ensure that potential federal lands
and Outer Continental Shelf areas are open for leasing, that leases
and permits are issued promptly, that the appropriate tax and royalty
policies are in place, and that the necessary pipeline infrastructure
is available to bring supplies to market, while leaving behind as
small an environmental footprint as possible.
Touching on other solutions,
Schmalshof discussed Alaska’s North Slope as an area with
significant potential reserves that can be unlocked to bring natural
gas to domestic markets.
Schmalshof also said Congress must adopt measures to ensure that
new coal and nuclear facilities are constructed stating that it
is vitally important that these forms of power generation be developed
and deployed. Schmalshof said that without new coal and nuclear
development, demand for gas-fired power plants will continue to
grow and place an ever-increasing burden on the nation’s supply
base.
“Converting agricultural
and industrial plants to environmentally friendly coal gasification
technology can significantly reduce demand for natural gas,”
said Schmalshof. “This is of particular interest for coal-rich
states like Illinois.”
Schmalshof said conversion
of an East Dubuque, Ill., fertilizer plant, where they are substituting
coal gasification technology for natural gas, will displace 11.6
billion cubic feet of natural gas for residential use each year,
enough to supply over 157,000 homes.
“By utilizing
coal gasification technology, fertilizer costs will be reduced,
and -- at the same time -- more natural gas will be available to
the electric generation industry,” she said.
Schmalshof concluded,
“We urge Congress to act expeditiously to promote the development
of domestic energy resources to help secure future economic growth
for our nation. Congress needs to enact a comprehensive energy policy
now that provides an enhanced role for domestic renewable energy
sources, further development of all energy resources for a more
diverse portfolio, and environmentally sensitive production of adequate
domestic supplies of natural gas.”
To view the
written testimony in its entirety, please click on the following
link.