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Natural Gas: A Strategic Resource for the Future

With abundant worldwide reserves, countries will use gas to reduce dependence on oil and to reduce environmental problems associated with other fossil fuels. Several factors will encourage the use of natural gas for electric power production worldwide, including raised expectations regarding supplies, environmental concerns with coal and nuclear power plants, relaxed restrictions on gas use for electricity production and growing use of gas-fired combinedcycle units to meet future demand and price competitiveness.

U.S. natural gas resources are large when compared to current domestic gas consumption. At the end of 1989, the U.S. had approximately 168 trillion cubic feet (tcf) of proven reserves, compared with consumption in 1989 of 18.95 tcf.

While the natural gas surplus will diminish as the electric utility industry increases its use, long-term supplies of foreign sources of natural gas are available. There appears to be growing interest among natural gas producers, including Canada, Algeria, Mexico and Norway to increase gas imports into the United States, further enhancing the availability of natural gas.

Secure supplies of natural gas can replace oil in many applications, thereby freeing up oil supplies for uses in which other fuels cannot substitute. For example, fuel-switchable industrial users can switch from oil to gas almost immediately, electric utility boilers can swtich from oil to gas, new powerplants can use gas-fueled combined-cycle technology, and natural gas can serve as an industrial feedstock in lieu of certain petroleum products. Compressed natural gas vehicles could allow gas to substitute for oil in transportation.

The removal of price controls in the Natural Gas Wellhead Decontrol Act of 1989 was an important development for the domestic gas industry. However, additional action is needed to address some of the remaining regulatory impediments to an efficient natural gas industry including restricted access to pipelines and end-use restrictions. In my judgement, overregulation of natural gas has stifled its efficient production, transport and use. A freer gas market would benefit consumers, the energy industry and the Nation.

A combination of regulatory reforms and comprehensive legislation could increase the competitiveness of natural gas, lower prices paid by consumers and reduce U.S. imports. We should move now to take full advantage of natural gas as a strategic resource for our future by funding R&D related to natural gas production and gas-use technologies, allow exploration of onshore and offshore federal lands in an environmentally-sensitive manner, offer limited tax incentives to encourage domestic production, and implement and enforce Clean Air legislation that will promote the use of natural gas while providing environmental and public health benefits.

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Coal has Substantial Potential to Limit Dependence on Imported Oil in an environmentally sound manner

Coal is our most abundant fossil fuel resource, and the U.S. has the industrialized world's largest coal reserves. Since the energy shocks of 1973, coal has increased its share of total U.S. energy consumption from 18% to over 23% in 1989.

The challenge to coal is to burn it cleanly. Significant progress has been made in reducing harmful emissions over the last decade, but further progress is required to satisfy the public's demands for cleaner air. The Clean Air Act, as submitted by President Bush and endorsed by many in Congress, will encourage the continued use of coal in an environmentally sensitive manner.

At the same time, we must continue efforts to fully understand the impact of CO2 burning on the greenhouse effect. There are still considerable scientific uncertainties about the relationship of the greenhouse effect and global warming, but there is sufficient concern to warrant intensified scientific inquiry. The International Panel on Climate Change is playing a useful international role in determining the scientific basis of global warming and at the same time considering potential policy responses, consistent with economic priorities.

In today's environment of oil shortage, we have few short term alternatives to substitute for coal in electrical generation. Coal meets almost 60% of our electricity needs and to forego even a small percentage would be difficult and probably result in greater oil use. At the same time we must be respectful of environmental priorities. Our best option at the moment is to continue funding for DOE's Clean Coal Technology Program -- an innovative program which invites a useful government-industry partnership. Once these technologies are developed, we should examine regulatory means to deploy them more rapidly.

Finally, the Administration should support a strong coal export program. Over the last decade the U.S. coal and transportation industries have improved their competitive position and are well situated to expand coal exports to the Pacific and the Europe. At the moment, however, some European nations presently subsidize their highly unprofitable coal industries. Such subsidies go against the spirit of free trade and should be eliminated, thereby paving the way for greater imports of competitively priced U.S. coal.

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Nuclear Power Plays an Important Role Worldwide, but Problems Remain

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Nuclear power deserves another look in light of energy security and environmental concerns

The over one hundred nuclear power plants in the United States today supply some over 15% of U.S. electrical needs. As we look toward the future nuclear power can help improve energy security and enhance environmental quality. At the same time, nuclear power's future is likely to depend upon whether three conditions can be satisfied:

Nuclear power should be able to compete with other sources of electricity supply in the marketplace on its economic merits, as it did in the United States in the early 1970's and as it does in many other countries now.

The safety of existing and future nuclear power plants must continue to be satisfactorily demonstrated, so that general public acceptance is restored.

Progress must be evident in the siting and building of high-level waste-management systems in a safe and publicly acceptable manner. Recent court rulings allowing a feasiblity study of Yucca Mountain, Nevada, as a potential site represents some real progress in this area.

In the United States, utilities will be unlikely to order new plants until several interrelated issues are satisfactorily resolved. These include:

Establishment of an appropriate balance between prospective risks and prospective rewards for utilities that invest in new capital-intensive generation.

Continued forward progress in the deployment of satisfactory waste-management systems.

True "one stop" licensing that removes the likelihood that a license will be denied after a sizeable investment has been made in plant construction.

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