While current lower prices and potentially boundless natural gas resources are helping to make the United States once again an attractive manufacturing site, companies like Dow Chemical are withholding new commitments until they see government policies leading to a stable market for the long term.

“If we could see a predictable scenario, showing that natural gas would likely be predictably priced for long period of time, then that could be a really good opportunity for re-investment and re-industrialization in the United States, not just by the chemical industry, but by other manufacturers, said Peter Molinaro, vice president of government affairs for Dow Chemical Co.

“It was both high prices and volatility during the last decade that caused us to shut down some operations in the U.S. and invest elsewhere,” Molinaro said.

In the past there were supply constraints and lack of adequate storage driving volatility. That is no longer the case. But, after you verify the huge volume of shale gas reserves, then the question remaining is how government policy is going to impact the market. “We need to be convinced there won’t be public policies that resist access to the natural gas supply.” Molinaro mentioned both land access and restrictive rules on the use of water in shale drilling.

Also, policies affecting the demand side are critical. Dow doesn’t believe the government should incentivize programs for new and increased use of natural gas in power generation, for instance, by attempting to switch all coal plants to natural gas. Nor should it push consumers to natural gas vehicles. These are relatively inelastic uses of the fuel and these large new markets could increase volatility and pressure prices upward. “This militates against American manufacturing taking advantage of it,” Molinaro said.

Dow wants to see “policies that don’t exacerbate volatility and harm industry segments, but allow the market to work. We need to avoid policies that direct natural gas into inelastic uses.” Molinaro pointed out that industrial demand is elastic. “We can dial back on a cold day in February,” helping to equalize supply and demand and put the brakes on price spikes.

“This is a golden opportunity to re-industrialize America, We tried being a post-industrial society and rely on financial services; that didn’t work out so well. We’d like to put people to work in chemical plants, and we’re willing to invest billions of dollars where we can be ensured stability and predictability,” Molinaro said.

Dow is not just going to wait on the sidelines, however. “We’re going to be outspoken on policy questions and educate policy makers to work with the industry.”

Dow is one of the sponsors of a recently announced task force convened to explore ways to ensure a stable natural gas market. The Task Force on Ensuring Stable Natural Gas Markets is a cooperative effort of the Clean Skies Foundation and the National Commission on Energy Policy. Other task force sponsors are the American Gas Association, ConocoPhillips, the Natural Resource Defense Council, Pacific Gas & Electric, Public Service Commission of West Virginia, Southern Company, and Spectra Energy Corp. (see NGI, May 24).

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