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Aluminum Industry, Manufacturing Sector Await Congress' Consideration of Comprehensive Energy Strategy
While last month’s power blackout in the Northeast and Midwest was a wake-up call to policy makers of the nation’s energy shortfalls and the underlying weakness of the electric grid, Congress returns to consider in conference what many say are two energy bills—Senate and House—that have little in common and much to debate.
For the aluminum industry, the blackout paused production for only hours at a few aluminum plants on both sides of the New York-Canada border, but the reminder of the California electricity crisis of 2001—and the resulting primary aluminum plant closures in the Pacific Northwest—underscores the need for our industry’s access to affordable, reliable energy. The industry hopes legislation will be signed this year to help assure affordable access to electricity and natural gas.
Energy represents about a third of the production cost of primary aluminum. Electricity is essential to primary aluminum production. These factors together make energy efficiency and energy management prime objectives for the industry. While the industry is a large consumer of both natural gas and electricity, its annual expenditure for electricity is more than $2 billion.
Manufacturing industries need resolution on President Bush’s energy proposals so that the economy will benefit from adequate supplies at reasonable prices over the long term. Since the 1970s, our energy consumption has grown at twice the rate of domestic energy production. That mismatch will continue to adversely affect manufacturing if the U.S. does not enact a comprehensive energy strategy to enhance supply, improve infrastructure, and increase efficiency, without compromising environmental safeguards or imposing efficiency mandates.
To ensure domestic aluminum manufacturing, the Association’s view is that the U.S. must increase domestic energy supplies in an environmentally sensitive manner; improve energy efficiency, conservation and development of new technologies; expand and secure our energy delivery infrastructure; ensure affordable energy supplies for low-income households; and thoughtfully streamline energy development regulatory processes.
With some held-over artificial-market disadvantages for industrial customers of electricity, it may be impossible to operate or restore primary smelting capacity in the Northwest U.S., and other regional aluminum plants may become subject to similar concerns. The recommended approach is to provide short-term policies to help the industry transition to a rational market situation, and long-term policies to restore supply-demand balance in electricity markets.
Further, the high cost of natural gas in the U.S. is having a devastating impact on manufacturing competitiveness and jobs. U.S. natural gas production has been stagnant since 1995 even though we have an abundant resource base with prices double their historical base. There were no increases in domestic production even though prices from January 2000 to January 2003 were more than double the average price from 1991-1998. In fact, U.S. production in 1970 was higher at 21 trillion cubic feet per year.
Manufacturing has lost 2 million jobs since 1998 and energy costs are a major contributing factor. Congress must act quickly to stem the national energy crisis by enacting legislation providing a robust, diverse and affordable supply of energy. It is critical that Congress and the states act to increase supply of natural gas and address regulations to enable power generators to meet air quality standards without switching from coal to natural gas. Congress must also expedite commercialization of clean coal technology, the ultimate solution for power generation using coal in an environmentally acceptable manner.
Certainty of an affordable energy supply is essential to capital investment in the manufacturing sectors that provide high-paying jobs. Putting the U.S. on the path to a reliable and affordable supply of domestic energy is essential to this country's short-term economic rebound and future long-term growth. All supply options should be considered to contribute to a diverse, robust energy supply.