ACC's Jack Gerard urges Congress to wait to revisit chemical security rules

As Democrats plan to revisit the chemical facility security rules established last year by the Republican-led Congress, key Republicans and the Bush Administration are criticizing the move. This, as the chemical industry asks Congress to allow the Department of Homeland Security to implement the established rules and to wait a few years before revisiting the language. During today's OnPoint, Jack Gerard, president of the American Chemistry Council, explains his industry's standpoint on chemical facility security rules. He also discusses why he believes increased domestic natural gas exploration will play an important role in the future of alternative energy. Gerard says the environmental concerns associated with offshore drilling are unfounded and urges Congress to pursue increased exploration.


Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jack Gerard, president of the American Chemistry Council. Jack, thanks for coming back on the show.

Jack Gerard: Thank you, it's great to be here.

Monica Trauzzi: Chemical security discussions are heating up on the Hill. The Bush administration and Senate Republicans are opposed to the rewrite of last year's bill that Democrats are proposing. What is your take on recent actions in Congress to alter the chemical facility security rules? Should the language be touched at all?

Jack Gerard: No, it shouldn't, not at this point and let me tell you why. This dialogue started post 9/11, about five years ago. The chemical industry, voluntarily, without any requirement on the part of Federal or State law, voluntarily stepped forward instead, you know, we have an obligation to protect our people, to protect the communities in which we serve. And we have spent $3.5 billion since 9/11 to secure our plants and to secure our facilities. It took Congress five years to get to this point, last year, enacting, for the first time after a long extended debate, requirements for the chemical facilities around this country. They gave the Department of Homeland Security six months to finish regulations to implement that act. We're now two weeks away from the final regulations, and now they want to reopen the issue. We think it's premature to do that. We believe the Department of Homeland Security should have the ability to put these regs in place. Let's let the dust settle, and then a few years down the road let's take a look at it. Let's see if it's effective. Let's see if it's working right, but to open it in the middle of the process, to require us, if you will, to change horses midstream is not only inappropriate, but it's very disruptive to security. We think we need to stay focused on security, and the best way to do that is to move these rules forward, put them in place, and let's make sure the chemical plants around this country are secure.

Monica Trauzzi: But, in a way, the Democrats would like to increase security in certain aspects. New Jersey, for example, would like to go beyond what the Department of Homeland Security would require. Why shouldn't they be able to do that?

Jack Gerard: Well, they do now. New Jersey has already implemented a security code for their state and just recently the governor, I believe as late as yesterday, announced he's going to take that even further. Keep in mind the language passed by the Congress was silent on the question of federal preemption. In other words, the language that was passed at the DHS has now been asked to put regulations together, didn't say if this preempted federal law. The common law or the case law reminds us that what happens under those circumstances is the states and localities can adopt whatever provisions they would like. But if there's conflict between the federal law and the state or the local law than the federal law prevails. That's good governance. That's good judgment. Otherwise we're going to get in a situation where you're going to have state law and federal law that's going to conflict; and those of us trying to do the right thing and secure our plants aren't going to know where to go to get permission. At the end of the day we end up with a stalemate. We think it's irresponsible to leave that undecided. So the best way to decide it, the way that the Department of Homeland Security approached it is in the rules they come forward and they say if the state law conflicts with what the feds have been asked to do than the federal law prevails. Otherwise the states can do what they want. In the case of New Jersey the current implementation of their security plan, we believe, does not conflict with what the feds have required. So they can go ahead with what they're doing, and until they do something that's in direct conflict or contradiction to what the federal law requires they're allowed to continue and do whatever they think they need for security purposes.

Monica Trauzzi: So, onto natural gas issues. ACC is really pushing for Congress to address increased domestic natural gas exploration. How feasible do you think movement is on this during this Congress with the Democrats in power?

Jack Gerard: Well, as you know, in the last Congress, for the first time in 25 years, we opened about 8 million acres in the Gulf of Mexico on the outer continental shelf or off the coast line of the United States for further natural gas development. It took us 25 years to lift a moratorium on one of the key energy supply issues of our time. The United States is blessed with a vast resource of natural gas. In the business that we're involved in, in the business of chemistry, we take natural gas and we convert it into all the products we make, the products that we enjoy every day, from the cosmetics to the fibers in our clothes to the tires on our cars to the coatings and the paints and everything else. And so when we have an inadequate natural gas supply in the United States it directly impacts our industry. It has cost us billions of dollars and an estimated over 100,000 jobs because the natural gas supply in the United States is inadequate to meet the demand. Now it doesn't have to be that way. So in the current political environment we think it's going to be a little more difficult to add additional gas supply. But when you look at important issues of our time, such as the climate change debate, it's going to be critically important to have an adequate natural gas supply to allow us to meet and achieve our objectives under any climate policy. So the issue hasn't gone away. We still have ...

Monica Trauzzi: Well, it was an uphill battle last time though.

Jack Gerard: It was a big battle.

Monica Trauzzi: So are you expecting an even bigger battle this time?

Jack Gerard: Well, keep in mind, in the Senate it was a broad, strong bipartisan vote. Over 70 members of the Senate, Democrats, Republicans alike, voted for additional natural gas supply. There's some key Democrats in the Senate who would like to lead another effort. We think, as we begin to shift our energy discussion to climate for example, that we must keep in mind that we need a comprehensive energy policy in this country if we're going to be successful at the other initiatives that have been announced, as they relate to renewables, as they relate to climate change and other things.

Monica Trauzzi: Senator Bingaman has said he'd like to focus alternatives. How important do you think alternative energy, you were just talking about that, how important is that to the future of U.S. energy policy?

Jack Gerard: Well, I think alternatives, conservation, supply, all of those issues must be dealt with, as I mentioned earlier, in a more comprehensive way. When you look at alternatives, and this goes back to our natural gas supply discussion, in order to produce alternatives, in order to produce renewables in this country we need a lot of natural gas. Thirty percent of our corn crop in the United States is dependent upon adequate fertilizer resources. Ninety percent of the fertilizer we use to grow that corn is natural gas. So without an adequate, reliable affordable supply of natural gas we really can't get to these other forms of energy. So we believe the natural gas is the thread that holds this entire discussion together. And that if you consider each of these in a vacuum, failing to address the natural gas supply issue, we failed the country. We haven't put in place a comprehensive, responsible energy plan.

Monica Trauzzi: Do you think the current push for ethanol however is negatively impacting the push for natural gas? Are people just sort of seeing ethanol as the silver bullet and only focusing on that?

Jack Gerard: Well, there's a heavy focus on ethanol now as you know, with the president's announcements and with the movement in the Congress and the potential for a farm bill this year. But anybody who has sat down and thought about it much will clearly recognize, and we view that as our responsibility as industry, to remind the Congress without adequate natural gas you don't get to where you want to go with ethanol. You can't tie the two policies together unless must both pieces are equally strong. And so we think has got to be a combined effort here, with a thoughtful, comprehensive approach.

Monica Trauzzi: Let's talk about consumers for a moment.

Jack Gerard: Let's do.

Monica Trauzzi: From a consumer standpoint the current situation looks bleak. Energy prices are skyrocketing.

Jack Gerard: Absolutely.

Monica Trauzzi: And people are looking for them to go down. So how can you be sure that prices will go down? I mean will they if we increase natural gas supply?

Jack Gerard: Yeah, one of the things a lot of people don't understand is while oil is traded in a global environment, so the price of oil by and large is the same around the world, natural gas is not that way. Natural gas price is determined on a regional basis. So the United States Congress has within its power and control, if you will, to determine the price of natural gas, not by a federal mandate, but merely through the laws of economics, supply and demand. Eighty-five percent of our natural gas reserves in this country that's on the Outer Continental Shelf is off-limits. We're not allowed to even explore. We're not allowed to find out what's there or what isn't there. If the Congress will, in a responsible way, open up some of those resources, the marketplace will understand as we bring additional supply online to deal with some of these concerns, to protect the consumers. Because the cost of natural gas, which has gone up over 400 percent in the last six or seven years, gets passed directly onto the consumers. The people in Florida who are concerned about drilling off their coastlines, the price of their energy to cool those homes is going up dramatically because of an inability to get an adequate natural gas supply. So we've got to stay focused on the central gas question. It's at the heart and soul of anything we do in energy in this country. And as I mentioned earlier, it's the thread that holds all these pieces together if we're serious about energy independence and energy security for the United States.

Monica Trauzzi: What about those people who are concerned about the environment and the negative impact and the negative impact that that might have on the environment?

Jack Gerard: Well I think we've demonstrated, through our actions over the last 25 years, that their concerns are unfounded or they're overstated. What I mean by that, when those unfortunate events of Katrina and Rita happened in the Gulf, I think people don't realize there were about 300 to 400 platforms out there, oil and gas platforms, that were destroyed, that were blown off their moorings. And how many stories did we hear about these huge natural gas or huge oil leaks that occurred? None. Why? Because the technology today is advanced. It's safe. We're capable and have the ability to drill for or use these resources in a way that protects the environment. The other thing that's a bit ironic is when you think about natural gas it's lighter than water. If you had a natural gas spill in the ocean what happens? It bubbles to the surface and it dissipates. It happens naturally all the time. It hurts nothing. It destroys nothing. It causes no environmental harm. So for people to keep suggesting somehow we're going to pollute beaches and shores, it's just unfounded. It's a lot of hysteria that's unnecessary and we can deal with this crisis if we all sit down, responsibly work across party lines, and in a bipartisan way develop a comprehensive energy policy.

Monica Trauzzi: We're just about out of time. I want to get this last question in. What's your take on climate change legislation that would cap emissions? Is there a specific piece of legislation that's out there that ACC would support?

Jack Gerard: Well, the American Chemistry Council and our members, those who are in the business of chemistry, are very proud of our accomplishments to date and what we've been doing about climate change. Since 1990 we have reduced our greenhouse gas emission by 10 percent in real terms. We emit 10 percent less today than we did in 1990. In terms of intensity, which is another measurement a lot of people use, we have reduced our emissions by 30.6 percent. So we're the folks that are leading the effort. We know what it takes to control the emissions of greenhouse gas. The second quick point I would make, we produce the materials that will allow others to control greenhouse gas emissions. We create the insulation. For every unit of energy or Btu unit we use to create insulation we save 40 other units of energy. So we not only are walking the walk today in reducing our greenhouse gas emissions footprint, but we are the providers of the technologies, of the tools and the equipment if you will, it will allow others to reduce their footprint. So we've got to be a critical part of this discussion. We're anxious to do so. Our board met last week. We've modified our policy so we can aggressively pursue a responsible, comprehensive climate policy. And we're happy to do so.

Monica Trauzzi: OK. We'll end it on that note. Thanks for coming on the show.

Jack Gerard: Thank you.

Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.

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