By Frank Esposito Plastics News Staff
Midland, Michigan-A group of 11 major plastics and chemicals executives has asked President Bush and key lawmakers to alter the pending federal energy bill because they do not believe it addresses the long-term need for a plentiful supply of affordable natural gas in the US.
"If you look at the plastics and chemicals industries in our country, they were built over the last 50 years, but in the last couple of years, they've been decimated," said William Stavropoulos, chairman and chief executive officer of Dow Chemical Co.
Other signees of a 20 Jan letter to the president include DuPont Co. CEO Charles Holliday, Eastman Chemical Co. chairman and CEO Brian Ferguson, Bayer Corp. president and CEO Attila Molnar, Dow Corning Co. president and CEO Stephanie Burns, Lyondell Chemical Co. president and CEP Dan Smith, Nova Chemicals president and CEO Jeffrey Lipton, and Solutia Chairman, president and CEO John Hunter.
Natural gas is a key fuel and raw material used in many aspects of plastic production. It is used to make monomers like ethylene and propylene, which then are converted into major commodity plastics such as polyethylene and polypropylene. Dow is one of the world's largest PE makers and generates about half of its annual sales and profit from plastics.
In the letter, the executives say that 2004 is on track to be the fourth year out of the past five in which natural gas prices will trend far above historical levels. Prices per million Btu stayed in the range of $1.75-$2.50 for much of the 1990s, but have been around $5-$6 in recent years, spiking as high as $10 at times. US natural gas prices stood 19 Jan at $5.50.
"If we had $4 natural gas, we'd be competitive with the rest of the world," Stavropoulos said in a 21Jan telephone interview.
The executives contend that the high prices have been the equivalent of a $111 billion tax on the economy during the past 18 months. The US chemical industry - which employs a million Americans and converts $20 billion worth of raw materials into $200 billion in finished products each year - once was America's largest net exporter, but now has a large trade deficit, according to the letter.
The executives also argue that the issue "is not a free-market problem."
"The high price of natural gas was created by government policies that increased demand for natural gas … while impeding the development of greater supply by discouraging more exploration and production," the letter reads.
Additionally, the executives want Congress to examine the causes of volatility in the natural gas market and to enact "reasonable measures to reduce the kinds of market distortions … seen in the last month."
The natural gas situation already has prompted Midland-based Dow to begin developing a liquefied natural gas terminal on Quintana Island, near Freeport, Texas. The project, done in partnership with Freeport LNG Development LP, will allow Dow to meet most of its Gulf Coast natural gas needs by regasifying LNG brought in from outside the USt. The site is expected to be operating by 2007.
Stavropoulos said Dow's LNG work will not be affected by government action on the natural gas issue.
"This is a complex issue with many different viewpoints," Stavropoulos said of the decision he and his peers made when writing the letter. "We wanted to put a face on a trade association and show that this was affecting real live people."