As natural gas prices continue to maintain their lofty levels, industries that use the commodity as a feedstock are finding it increasingly more difficult to conduct business as usual. As one of the largest energy users in Ohio, steel producers in the state said Thursday that they have grave concerns over natural gas prices, which have increased 400% in five years. In the most recent price run-up, the steel companies say that natural gas costs per ton of steel produced have tripled.
Collectively, the nine steel companies that make up the Ohio Steel Council spend nearly $1.5 billion annually for energy to operate their Ohio-based plants. Of this cost, $1 billion is spent on natural gas, or about 5 Mcf per ton.
The Ohio Council is urging state legislators to consider a more flexible yet environmentally sound policy to open Ohio public lands and the Great Lakes to oil and natural gas drilling and extraction. In addition, the council is calling for streamlining the approval process for new pipelines to bring additional supplies to the state. As part of its lobbying, the council said it supports a proposal by Ohio Rep. John P. Hagan (R-Alliance) to bring oil and gas wells to Ohio's public lands and Lake Erie. Hagan is expected to introduce legislation in the next three weeks.
However, there are dissenting opinions on the legislation. The United Steelworkers of America (USWA), which is a voting member of the council, does not support the proposed legislation. Instead, the union backs the Apollo Initiative, which calls for large scale federal commitment to the development of renewable energy resources, including wind, solar and biomass, as well as conservation incentives.
The council said that while steel producing companies also support the development of alternative and renewable energy resources, they maintain that government policy must address the immediate supply and availability of conventional energy resources, noting that Ohio steel producers have already made great strides in reducing consumption of both natural gas and electricity per ton of steel produced.
"Hurricanes Katrina and Rita exposed the vulnerability of concentrating so much of our nation's energy infrastructure in a small geographic region of the country," said William Brake, co-chairman of the Ohio Steel Council. "In Ohio, we must do all we can to develop our ample, native energy resources, so we can ensure adequate supplies.
"This will not only protect jobs, but also will protect both residential and industrial consumers from the extremes of price volatility. While exercising good environmental stewardship, we should investigate all possible options, including drilling and extraction on public lands and in Lake Erie," Brake said.
In order to increase the supply and lower the cost of energy resources nationwide and in Ohio, steel producers favor the following measures:
The council noted that the price and availability of natural gas also affects electricity prices. It noted that the Ohio steel industry purchases more than 8 billion kWh, or more than $300 million, of electricity each year and will bear a huge share of the increased costs.
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