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Congressman Says Bush Policies on LNG, Gas Cartel at Odds

The Bush administration's support for increased imports of liquefied natural gas (LNG) is at odds with its position against producing countries forming a worldwide gas cartel, said Rep. John Peterson (R-PA) Wednesday.

"On one hand, they're scared stiff of an OPEC-like organization coming together to regulate outputs and prices for our natural gas. But on the other [hand], they're trying to help bring that cartel along by laying the vital infrastructure for it to work -- the importation of large quantities of LNG," he said.

The congressman's comments followed a speech by Energy Secretary Samuel Bodman at a conference sponsored by Cambridge Energy Research Associates in Houston (see related stories). Bodman, in prepared remarks, said the nation "must take steps to create and maintain an adequate liquefied natural gas infrastructure." While he didn't use the words "gas cartel" specifically, Bodman said that "initiatives, new or old which seek to control the flow of energy supplies to the market and circumvent the role of the market to set prices, are contrary to the long-term interests of both producers and consumers."

Bodman didn't single out any overseas gas-producing countries, but The Wall Street Journal reported that his remarks coincided with Russian President Vladimir Putin's visit to the Middle East, where he is talking up an international natural gas cartel.

"Worldwide markets are dominated by the folks who control the commodity. And in the case of natural gas, that's not us. It's our friends in Russia and Iran," Peterson said. The two countries are believed to control almost half of the world's known natural gas reserves.

The Energy Information Administration predicts that LNG's share of the U.S. gas market will be 15% by 2020. "That's fine. We need more natural gas. But the more and more natural gas we bring in [from foreign countries], the stronger and stronger we're making the world market for it," said Peterson spokesman Chris Tucker.

A world market will set the stage for a gas cartel, he noted. "The only way a cartel can be formed is if we have a world market. We don't have one right now. We have a local market," Tucker said.

"Everyone agrees we need more natural gas. The Bush administration's answer is to get it from abroad through LNG. Our answer is why don't we put LNG on the shelf for a little bit, and let's explore ways to produce more domestically. Let's not give up on the domestic production," he noted.

Peterson is a huge proponent of increased drilling for U.S. natural gas, particularly in the offshore. He helped to author a bill last year that sought to make more of the Outer Continental Shelf accessible to oil and gas producers. The measure passed the House, but ran into significant opposition in the Senate. In the end, a bill favoring more limited offshore drilling was passed by Congress and signed into law by President Bush.

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