NCGA Comments on Need for Domestic Natural Gas Development (4-13-06)

The National Corn Growers Association (NCGA) has a direct and strong interest in the development of the next offshore leasing program because corn growers rely on affordable natural gas for production. In comments submitted by NCGA to the Minerals Management Service (MMS) on the “Draft Proposed Program” for a new five-year outer continental shelf (OCS) oil and gas leasing program for 2007-2012, NCGA said increasing natural gas prices and unstable supplies have had a negative impact on corn growers.

NCGA urged the MMS to make expansion of domestic oil and natural gas production a high priority. “We need to open areas beyond the central and western Gulf of Mexico to responsible energy development,” said NCGA President Gerald Tumbleson. “NCGA urges the MMS to take bold action to make as many offshore areas available for exploration and production in the next five-year plan.”

NCGA, highlighting the importance of developing new supplies of oil and natural gas to the nation’s economic growth and national energy security, urged the MMS to:

• Open the remaining Lease Sale 181 area, including the northern segment commonly known as the “Stovepipe;”
• Make available for leasing other areas in the eastern Gulf of Mexico, which is expected to hold significant resources;
• Expand the acreage offered for lease in the Beaufort and Chukchi Sea and Bristol Bay in Alaska;
• Include other areas where the MMS should initiate dialogue with states in the South Atlantic region – such as Georgia, North Carolina and South Carolina – in a manner similar to Virginia for possible leasing off their coasts.

Corn growers are an energy consumer and an energy producer. They rely on affordable natural gas as a feedstock for fertilizer, but also energy for irrigation, powering farm equipment, drying grain and producing ethanol. Grower profitability, Tumbleson said, is directly linked to natural gas usage and increased prices in farmers’ production costs. That is translating into a huge cost increase per acre for a typical farmer.

“As proposed, the [MMS] plan is not sufficiently bold enough to support future economic growth and to help reduce our dependence on imports,” Tumbleson said.

NCGA said natural gas accounts for 70 to 90 percent of the cost of producing anhydrous ammonia, a key component of nitrogen fertilizer. Rising natural gas prices in the United States have also caused domestic nitrogen fertilizer producers to severely curtail production. The sharp rise in natural gas prices and the resulting curtailment of U.S. fertilizer production have also had a dramatic impact on fertilizer prices throughout the marketing chain and, in particular, at the farm level.

According to U.S. Department of Agriculture data, the U.S. average spring price to farmers for ammonia climbed from $250 per ton in 2002 to $416 per ton in 2005.

NCGA supports the development of more domestic oil and natural gas resources off our coasts by greatly enlarging the areas offered for sale in the leasing program for 2007–2012. “If recent events have taught us anything, it is that our nation must develop energy supplies right here in America,” said Tumbleson. “This cannot be done by denying access to much of the country’s offshore oil and gas resources. Eighty-nine percent of the OCS acreage off the lower 48 states has been placed off limits.”

Click on this link to read the comments in their entirety.