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Providing for Consideration of H.R. 4761, Deep Ocean Energy Resources Act of 2006

Location: Washington, DC

PROVIDING FOR CONSIDERATION OF H.R. 4761, DEEP OCEAN ENERGY RESOURCES ACT OF 2006 -- (House of Representatives - June 29, 2006)


Mr. MORAN of Kansas. Mr. Speaker, I rise in support of increased exploration, drilling and production of natural gas off our intercontinental shelf. This is an important issue for all of the country, but especially true among my farmers and ranchers in Kansas.

I am one who supports renewable fuels, and ethanol and soy diesel provide a great opportunity for economic opportunity in Kansas, for Kansas farmers and for American agriculture and for our country. We must become much more independent from the energy sources abroad.

But for our farmers and ranchers to remain in business, to survive into the future, they have got to have access to natural gas and at prices that are affordable. Natural gas is the primary feed stock, the ingredient for the production of many agricultural components, but especially for nitrogen fertilizer that is so important; and if we are going to produce ethanol in this country, if we are going to produce soy diesel, we are going to have to have the fertilizer at an affordable price that will allow our farmers to raise the corn and grain sorghum to produce the ethanol to raise the soy beans to produce the soy diesel.

Our farmers are struggling across the country. Input costs are dramatically on the rise. Nearly 40 percent of the nitrogen capacity, fertilizer capacity has been shut down in this country since 1999. Six years ago, approximately 15 percent of our fertilizer needs were met in the United States from abroad. Today 50 percent is imported.

Prices have increased dramatically: $250 a ton for nitrogen fertilizer in 2002; today, $416.

One of my farmers who farms in southwest Kansas, 30 years ago when he started farming, natural gas was 19 cents. Today it is $9. We are seeing double, triple and even fourfold prices that DONNY YOUNG talks about in trying to stay in business with these increasing input costs, while the price of corn has stayed the same.

We in the United States need to become independent if we are going to produce the ethanol. And it is important that we remember that natural gas is necessary to make that nitrogen fertilizer.

I encourage the adoption of this proposal.

A vote for H.R. 4761 is a vote for agriculture.

Agriculture's ability to produce an affordable food supply will continue to face huge obstacles if our nation does not come to grips with its desire to have limitless resources, like natural gas, for production and not realize that these resources have to come from somewhere. Our natural gas crisis has two solutions--increase supply and reduce demand. H.R. 4761 addresses one aspect of this crisis as it will increase the supply of natural gas from the Outer Continental Shelf. This additional supply will do two things. It will send a strong signal to natural gas markets and could increase the elasticity in North American natural gas markets. It indicates to these futures markets that the United States is committed to lifting the moratoria in the Outer Continental Shelf to provide consumers with an additional supply of natural gas. This message should ease the volatility in natural gas prices that all of us have seen since 1999 and the additional supply should help ease the natural gas prices over time.

Why does agriculture care so much about this natural gas crisis? Simply put, agriculture is a very large consumer of natural gas. Farmers use significant amounts of natural gas for food processing, irrigation, crop drying, heating farm buildings and homes and for the production of crop protection chemicals and nitrogen fertilizers.

Natural gas is the primary feedstock in the production of virtually all commercial nitrogen fertilizers manufactured in the Untied States. Natural gas is not just an energy source it is the raw material for producing the fertilizer. Today, in the case of the nitrogen fertilizer anhydrous ammonia, natural gas accounts for over 90 percent of the total cash cost of production.

Just like Kansas wheat and Wisconsin milk, fertilizer is a commodity bought and sold worldwide and subject to basic global supply and demand economic principles. As the U.S. domestic nitrogen fertilizer manufacturing sector declines due to high natural gas prices, Kansas farmers and other U.S. food producers will be subject to global supply/demand forces on the fertilizer products they buy, even more so than today.

The climb in natural gas prices since 2000 has forced U.S. fertilizer production costs to unprecedented levels. Over this period of high prices and intense volatility, the U.S. fertilizer industry began to shut down production. Nearly 40 percent of the industry's nitrogen capacity permanently shut down between 1999 and today. This has and will, continue to make U.S. farmers dependent on offshore production from the major suppliers such as Saudi Arabia, Venezuela and Russia.

This rise in natural gas prices and the permanent closure of so much U.S. fertilizer production has dramatically impacted fertilizer prices throughout the marketing chain and, in particular, at the farm level. According to USDA, U.S. prices to farmers for ammonia climbed from $250 per ton in 2002 to $416 per ton in 2005. That is almost a doubling of the price of ammonia to farmers.

This continued loss of production from the U.S. nitrogen fertilizer industry would force farmers to rely on a highly uncertain and highly volatile world market with no assurance that they will be able to obtain enough product to meet their full demand. This is particularly important when considering the importance of nitrogen to farmers. Thirty to 50 percent of corn yields are directly attributed to nitrogen fertilizer.

Passing H.R. 4761 represents a direct, positive action to increase our nation's domestic natural gas supply to help relieve the high prices pressuring American farmers, fertilizer producers and homeowners. Allowing exploration and development of the Outer Continental Shelf is an essential commitment that our nation must make. These natural resources belong to all Americans and should be developed for the benefit of the entire nation.

A vote for H.R. 4761 is a vote for agriculture. Please support passage of H.R. 4761.


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