Natural Gas

American Forest & Paper Association CEO W. Henson Moore talks price, supply

What's the outlook for natural gas prices and supplies? Will incentives to find more oil and gas in the House energy bill help achieve energy independence? And what's the outlook for getting an energy bill passed this year? W. Henson Moore -- a former deputy Energy secretary, Louisiana congressman, senior White House aide and now president and chief executive officer of the American Forest & Paper Association -- joins OnPoint to talk about natural gas price and supply, the energy bill and the president's energy agenda.


Brian Stempeck: Hello, and welcome to OnPoint. I'm Brian Stempeck. Joining us today is Henson Moore, president and CEO of American Forest and Paper Association. Also joining us is Ben Geman, reporter with Greenwire and E&E Daily. Mr. Henson, thanks a lot for joining us today.

Henson Moore: Glad to be here Brian and Ben.

Brian Stempeck: Early this week, the White House came out with some new energy policy recommendations and says the administration is kind of putting its muscle behind the energy bill, coming out with some new ideas. Is that going to be enough to get the energy bill through?

Henson Moore: We don't know. The basic debate is still going to be the same over provisions of the bill. What the president came up with are some new ideas. They're good ideas. I see where Chairman Domenici has embraced them and think they're very helpful, and so that's good. I think it was more directed towards trying to relieve the energy crisis we're seeing now with oil and gasoline prices than it was maybe in helping pass a bill. The bill's going to have problems. Hopefully, it will pass. Certainly, those of us in industry are very much in support of it. Anything you can do to cause us to use energy more wisely and to get more energy is very important to us.

Brian Stempeck: Do you think we're seeing a shift yet, though? I mean we have -- we saw President Bush going all around the country promoting his Social Security plan. Do you think with gas prices being extremely high, getting a lot of the public's attention, is he going to start doing the same thing for the energy bill, or is this more of a one-hit type deal?

Henson Moore: You'll have to check with the White House. I don't think he's giving up on Social Security, and that seems to be his No. 1 goal these days. But he is supporting the energy bill. He's working hard for it. He understands it, having been governor of Texas, you have to. Big energy producing state. The problem with energy, I've been in this town now 30 years. We've had three energy bills over 30 years, about every 10 years apart. I was on the Energy Committee in the House when President Carter tried to pass one and got something through. I was in the Department of Energy under President Bush 12 years ago when he got one through. And now here we are again working on a third one.

Brian Stempeck: Sure.

Henson Moore: The problem is we never really finished the job and do what you have to do. And we never really have a crisis that lasts long enough to get the Congress and the American people to do what you have to do.

Brian Stempeck: Like you said, you were there the last time we passed a bill in 1992. What is the difference between then and today, and what are some of the things that you think were left undone in the early '90s?

Henson Moore: I think a lot of the things that they're trying to do in this bill were left undone in the 1990s. The 1990s, we approached it as trying to build a bipartisan bill, and we did. Bennett Johnson then was the chairman of the Energy Committee in the Senate, and John Dingell was in the House. And we simply went to them and worked with them and got the Republicans and Democrats together to come up with a consensus bill we could agree on. And that bill did some important things, but it didn't solve all the problems, because there are some things you can't get consensus on. A lot of those same things, what you're seeing now in this bill, where you're trying to get consensus, or you're trying to get a majority vote to get it done, there were things leftover that we couldn't do in 1992 or President Carter couldn't do in 1976.

Ben Geman: I wanted to bring this back around to your industry in particular. What is the nexus between energy policy and the forest products industry?

Henson Moore: They're two, and a good question. I appreciate you asking, Ben. The first one is we are a large co-generator of power. Matter of fact, we're responsible for about 7 percent of electricity of the country. My industry is. Almost every pulp mill in the country, of which we have a number, generate electricity. It's a biomass-based electricity, a green form of electricity, if you will. Secondly, we're a major consumer of energy. It's very important to us in our industrial process, and if energy prices go too high, as they have recently, we can't compete worldwide. We studied this matter six years ago, and we had the best energy prices in the world, of the countries we compete with. Today, they're the worst. We're dead last. Everybody has cheaper energy prices we compete with than us. So it's twofold. We use it, and we produce it.

Ben Geman: A couple of years ago, you told members of Congress that the high energy prices were going to really start to create some significant job losses in your industry. Two years later, has that come to pass?

Henson Moore: Yes, it certainly has. We've lost something like 32 percent of our workforce. These are high-paying jobs. These are people that make -- a paper mill makes on the average of $80,000 to $90,000 a year income. We've lost 32 percent of those workers across the country. Not just because of energy. No one thing causes your problems in being competitive. But this is certainly one of the big ones. It's our third biggest cost item, and making anything out of a tree, it costs about -- our third biggest item, behind the cost of the raw material and the cost of labor, is the cost of energy.

Ben Geman: Your organization is part of a group that's been pushing for a series of policy measures, and one of the big ones is greater access to offshore areas that are currently restricted. Now, the White House has said several times that it supports the existing offshore moratoria. Does the president just have his head in the sand on this, or --

Henson Moore: No, no, I think what he's simply saying is don't get me involved in a dogfight unless you got the votes to win it. I think the president would sign a bill that did that, but he's not going to stick his neck out and try to urge the Congress to do something right now it's not showing any interest in doing. Senator Lamar Alexander, that I believe you've had on this show, we're very strongly behind his bill, because he's got the courage to really try to solve the natural gas problem, from both of conservation -- using less of it -- from both of R&D -- finding new ways to create gas, as well as being to go back and relook at drilling offshore in the United States, where we know there's an awful lot of gas deposits. Quite frankly, it's going to take all of those things to make it happen, and the real serious energy problem we have today is not oil. It's gas. We're seeing people buying the Prius automobiles, the automobiles now they're going to be using hybrid forms of fuel. We're seeing people taper off buying SUVs in response to high gasoline prices. But, on the other hand, with natural gas, we're seeing increased consumption. The EPA's people, pushing people and industry to use natural gas, because it's a cleaner form of fuel. So the consumption's not going down. It's going up. Just the opposite of what's going on maybe with oil.

Ben Geman: And to what extent will the energy bill that the House just passed address this? Or what's not actually in that bill that would really be needed to address what you're talking about?

Henson Moore: It addresses everything but the drilling offshore. It tries to speed up getting permits to drill for natural gas in the Rocky Mountains. We believe there are significant gas reserves. It also does a number of other things to try to be of help to natural gas. It tries to speed up the permitting for an LNG terminal in the United States. That could be tied up forever in paperwork. It tries to cut through some of that, so we can bring in liquefied natural gas from other parts of the world and then convert it to a gas again and put it in a pipeline. What it doesn't do is address that offshore drilling part. That's the piece that Senator Alexander's got a new idea about -- new way of going about it, which basically says if a governor wants to drill offshore, let him go to the Department of Interior and get the moratorium taken off just for his state and let him drill.

Ben Geman: I mean that's such a political hot potato, as you well know. Is there any chance that there's going to be enough support for that?

Henson Moore: I hope so, because at some point, people got to realize, "Wait a minute, we're not sucking natural gas out of the air." This is something that came from someplace, and you want to use it to heat homes. That's its first and greatest use, because it's a cheap, clean form of home heating. Natural gas prices now have tripled in the last three or four years. They're now the most expensive in the world. We have chemical plants closing and leaving the country, because that was their feedstock, and they can't stay open. It's hurting my paper mills around the country. At some point, the American people have to realize that the only way to get more gas is to be willing to drill for it where we know we have it, as well as try to use less and try to create alternative forms of energy. But, secondly, if you look at the records of the states that have drilled offshore, Texas and Louisiana, there's not a problem. And so, basically, if a governor wants to do it, why should we stand in the way? Why should the people in Tennessee tell the governor of Alabama he can't do it if the governor of Alabama wants to?

Brian Stempeck: Stepping back and looking big picture, there's still some major problems for the energy bill. You have the MTBE issue is going to come up again, and you also have this issue in the Senate over judicial nominations, where it could just shut down the Senate entirely. Are you optimistic that this is going to happen? I mean you're shaking your head. I'm not sure if -- do you think it's going to get through this year? I mean are natural gas prices high enough? Are gas prices high enough to get Congress to do something?

Henson Moore: Yes, I think -- I am optimistic. This'll be the second time the bill has passed the House of Representatives. It'll be the second time the Senate has addressed this issue. I don't think there's a senator over there, I don't care if he's Republican or Democrat, who doesn't know there is an energy issue, and we have to work on it. And we have to work together to try to find a bipartisan compromise, which is the way you have to deal with energy issues, I think. So I think it will happen. Whether or not there's a nuclear option, and whether or not there's a fallout in stopping this thing, we'll have see how that plays out. But, basically, I don't think the American people are going to stand by and let the Senate just do nothing, and I think energy is something that everybody thinks you need to do something about. Most people equate energy problems with what they're paying for gasoline. That's just the tip of the iceberg. We're paying for gasoline. There are these other issues. We're going to have serious electricity issues in the country if we don't do something about it, and there are some good features in this bill, electricity. We've talked about natural gas. Something's got to be done about that. Alternative fuels. The bill does, and Lamar Alexander in particular, encourage the creation of biomass gas, or gasification, which our industry is very interested in pursuing. So a number of things in there that make a lot of sense when the public, if you can get their attention to think beyond gasoline prices.

Ben Geman: But the political dynamic here has become really interesting, because I'm wondering if we're seeing a bit of a split within the Republican Party insofar as we have the sort of social conservative wing that's very interested in this judicial nominee issue. But from within the business community that cares about energy policy, are you very concerned that if the social conservatives win out on judicial nominees, that that'll throw a wrench into efforts to get the energy bill passed?

Henson Moore: Well, it could. You know that when you watch the Senate in operation, anything can throw a wrench into it. You could have one senator who could stand up and stop things and put a money wrench in, and then, of course, you have the filibuster rule, which, you know, requires you to have a super majority to be able to do anything. I think the Senate is capable of doing nothing. By the same token, I think the Senate is capable of rising above itself and doing what it has to do. And I think energy is one of those cases where it will.

Ben Geman: But you're not specifically concerned that the removal of filibusters for judicial nominees would halt progress on the energy bill?

Henson Moore: It could. I really -- I saw the poll in The Washington Post. I thought the poll question was improperly asked on that, that said a majority of the American people say that they're not in favor of changing the rule. The question was asked in a very skewed way. If the question had been asked, "Are you in favor of majority vote or two-thirds vote to approve judges?" I think you'd find more people say, probably a majority saying 50 percent, but that's up to the senators to work that out. We do need judges. They need to get on with that, and I don't think that that can stand in the way of doing important business of the country, which the energy bill is one of.

Brian Stempeck: I want to switch topics for a second. Another big issue for your industry is climate change. This is the kind of issue that could cut either way for a lot of forest and timber companies. On the one hand you have these companies could really benefit if you had a plan to basically pay them to store carbon dioxide in the form of trees and biomass. But on the other hand, obviously you're affected by energy prices. Where does the forest industry come down on climate change?

Henson Moore: We've been very much in support of the president's voluntary program where you signed up for it to reduce our emissions. Unfortunately, we've done all the things that the paper industry around the world has yet to do to really reduce our emissions. Like we've cut our use of fossil fuels in half over the last 20 years. We're now a major co-generators of electricity that we use ourselves, that's biomass-based. Most of the rest of the industry hasn't done those things we've already done. But we'll still find a way to reduce our emissions even further. We are, our industry and our forests, are major sequestration areas. As long as you leave the trees standing or keep the areas in forestation, that helps. The products we make are carbon sinks: books, lumber, that sort of thing. They're carbon sinks. But what's in it for us, quite frankly, is that we believe there's opportunity to further use gasification of our liquid byproducts. Something we're working on now, something the Alexander bill really gets into, we believe that's a real future for us in terms of becoming 100 percent independent of buying any electricity, any power from anybody, and becoming a net seller of power that fits under global climate changes being --

Brian Stempeck: A lot of these things that you're talking about, I mean why not support the McCain-Lieberman or cap-and-trade type approach? The forest industry would definitely benefit. You'd have these, you know, for these landholdings, you'd get paid for growing these trees, and also kind push towards some of these alternative energies that you're talking about. Why not support a cap-and-trade plan like that?

Henson Moore: I don't think we're opposed to a cap-and-trade plan. I think what we're opposed to is being told you have to do it, being mandatory. I think that basically --

Brian Stempeck: Yeah, but if you have it voluntary, nothing happens. I mean a lot of the people are saying they're going to reduce emissions haven't done so.

Henson Moore: We're saying in forestation and replanting our forests, not because we want somebody to pay us to plant trees or for carbon. We're doing it because that's the raw material we use. So we don't even need that. That's not a factor in our thinking. If somebody came along and a lot of that's going on in other parts of the world like South America, where people are putting up money to plant trees, that's fine if they want to do that. That helps. That's just not -- we're just not in that business. We're in the business, quite frankly, of making forest products people use everyday, and we do it in a responsible manner. We're willing to reduce our CO2 byproduct, and we're working hard to do that, and we think that this gasification technology will go even further.

Brian Stempeck: There are some companies, though, that I mean, if you look at the utility industry, there's starting to be a split there where some power companies are looking down the road, and they see these carbon dioxide regulations coming, and they want to get out ahead of it and lobby for it. Is that starting to happen yet in the timber industry? I know there are some companies out there who are selling some of their lands and selling the credits that they have through the Chicago Climate Exchange or other plans like that to try and get paid now for the trees they're growing. It's kind of another source of income for your whole industry.

Henson Moore: Basically, we're not looking at it that way, as a new source of -- you know, if some businessman in our industry thinks he can make some money out of that, that's fine. But it's not looked at something we're trying to do. We're not really opposing it or supporting it. We're just doing everything we can do to voluntarily reduce our CO2 emissions. And if somebody comes up with a scheme that's mandatory or by law, we'll take a look at it and see whether or not it's something we can support or something we oppose. But, basically, that's not a future business venture we're looking at.

Ben Geman: One last questions for you. You were a deputy energy secretary in the late '80s and early 1990s. What do you see has changed at the Department of Energy since then? What has changed the most, and what advice would you have for new Energy Secretary Bodman?

Henson Moore: Matter of fact, I think he's well qualified for the job. He's got a real technical background. I think he understands it. What a lot of people don't realize is a majority, 80 percent that the Department of Energy works on is what we call the bomb factory, the nuclear weapons program. Not much money or effort devoted to energy. The Department of Energy has done a good job, however, in looking at new forms of energy, new ways to get energy. A lot of the drilling techniques today that used to find oil and gas were develop by the Department of Energy as part of the underground testing program for nuclear weapons. The gas technology I'm talking about was a program of the Department of Energy's that we worked with them on. And now we're out now taking it to that applications stage from basic research. I would say what the Department of Energy ought to do is to keep putting money and science into new forms of energy, alternative forms of energy, that it's so speculative that you're not going to find businessmen putting money up yet. When it gets to a point where it looks like you may have something here, then business will come in and take it to the applied stage. So I think the most important thing the Department of Energy could do would be to continue work on science and research for alternative forms of energy.

Brian Stempeck: All right, we're going to have to stop there. We're out of time. I want to thank our guests today. That was Henson Moore, president of the American Forest and Paper Association. Also with us was Ben Geman, reporter with Greenwire and E&E Daily. I'm Brian Stempeck. This is OnPoint. Thanks for watching.

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