<a href=www.stltoday.com>Saint Louis Post-Dispatch By Repps Hudson Post-Dispatch updated: 04/28/2003 11:16 PM

Farmers planting corn this spring are getting a refresher course in the law of supply and demand.

The price of natural gas, the main ingredient in production of nitrogen fertilizers, is nearly double what it was a year ago.

That's because winter was cold - again - and the amount of gas in storage is down drastically.

As for the effect on food prices for consumers, Jim Milleville doesn't see any. He's general manager of St. Clair Service Co., a farm cooperative in Belleville with about 1,000 members. "The cost of processing food is so much more than the commodity that it shouldn't make any difference."

Farmers will have to absorb the fertilizer cost increase.

Mike Schulte, a Belleville-area farmer who's planting 300 acres of corn this spring, is one of the lucky ones. He bought nitrogen fertilizer at $295 a ton last fall, before natural-gas prices hit about $9.50 a million cubic feet in late February. "Now (the fertilizer's) up to about $400 to $430 a ton," he said.

Another lucky - or far-sighted - farmer is Fred Yoder of Plain City, Ohio, president of the National Corn Growers Association. He paid $110 a ton last fall for anhydrous ammonia for his 450 acres of corn. Today that same nitrogen fertilizer would cost 55 percent more.

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"They may be contemplating cutting back on their acreage," he said, "or planting and then waiting until the corn's 6 to 12 inches high, then side-dressing it."

That would mean an application of anhydrous ammonia while the plants are young. It would be an additional expense in tractor fuel and time, but a drop in fertilizer prices could compensate for that cost, Yoder said.

Two years ago, after the worst natural-gas price spike anyone can remember, farmers also paid extraordinarily high prices for nitrogen fertilizers.

Natural gas provides the energy and the hydrogen to produce nitrogen fertilizers from ammonia. Natural gas accounts for 70 percent to 80 percent of the cost of such fertilizers, said Peter Scharf, associate professor of agronomy at the University of Missouri at Columbia.

He has written a paper urging farmers to use caution before deciding to switch to soybeans from corn because of the high cost of the fertilizer corn needs. For example, beans don't require nitrogen fertilizers.

Corn and soybeans are the two major crops most farmers in this area raise. They usually rotate the crops to protect soil conditions.

Scharf noted that when farmers plant beans on the same field a second year, the yield typically will be 5 percent to 8 percent lower than if they follow corn-bean rotation.

If farmers go with beans again instead, they could run into another law of supply and demand.

Fertilizing with nitrogen this spring may cost farmers $8 to $20 more an acre, but they still would be betting that their corn yield will make enough to turn a small profit, Scharf said.

Milleville estimated that farmers are paying up to $13.50 an acre more than they did last spring for fertilizer for corn.

Assuming corn sells for $2.50 a bushel this fall, Milleville said, farmers would have to raise an additional five bushels an acre to make up the cost.

However, if they switch to beans, Milleville noted, beans might glut the market, which could drive down the price.

At the same time, a smaller amount of corn planted this spring would mean a smaller harvest - and possibly higher prices. That would benefit corn growers.

Yoder said he expects corn production to drop 10 percent to 15 percent nationwide this year as more farmers switch to soybeans or grain sorghum, also known as milo, to save money.

Milo, which grows in drier conditions, is primarily a cattle feed.

Farmers in the South, who use natural gas to run irrigation pumps, may be thinking about switching to milo this year, because natural gas is too expensive to make irrigation cost-effective, Yoder said.

The higher price of natural gas will boost the cost of producing corn by about $2 billion nationwide, he said.

Much also depends upon things farmers cannot control: weather, overseas production and markets and other factors, such as military conflicts or political instability.

Scharf recommends that farmers scale back application of nitrogen fertilizers this spring by 10 to 20 pounds an acre, "thus saving about $3 to $6 an acre."

The science of agronomy hasn't developed to the point that it can determine exactly how much nitrogen is needed on a particular field, he said. "We find there's a tremendous amount of variability in soil productivity, field to field - even within a field."

The variables include soil types, humus, moisture content and other factors that can differ within just a few feet.

Applying fertilizer is a little like carpet bombing. Agronomy hasn't evolved to the point that fertilizer can be applied like "smart bombs" to boost productivity where it's needed while leaving the rest of the field alone.

Scharf and other observers see more uncertainty down the road, much of it related to fluctuations in natural-gas prices and the movement offshore of fertilizer production.

China is the largest producer of nitrogen fertilizers, followed by areas such as Eastern Europe, Trinidad and Tobago, Saudi Arabia and Venezuela, where the market price of natural gas is consistently lower than in the United States, Scharf said.

Two years ago, the market price of natural gas was much higher than what fertilizer producers had contracted for. As a result, those producers sold their gas to the market and didn't make fertilizer, Scharf said. That cut down on fertilizer supplies and helped push up the price.

The same trend seems to be happening again, Scharf said.

Furthermore, natural gas in underground storage in early April was 623 billion cubic feet, 883 billion cubic feet less than a year ago, according to the Energy Information Administration. This supply is 598 billion cubic feet - 49 percent - below the five-year national average of 1,221 billion cubic feet. That was a record low level for the last nine years, the Energy Information Administration said.

Reporter Repps Hudson: E-mail: rhudson@post-dispatch.com Phone: 314-340-8208

By TOM MORTON Casper Star-Tribune staff writer

The coalbed natural gas industry has waited 34 months for the U.S. Bureau of Land Management to issue its Environmental Impact Statement (EIS) on drilling on federal land in the Powder River Basin, an industry official said Monday.

It will probably wait some more, Bruce Hinchey, president of the Petroleum Association of Wyoming, told the Casper Rotary Club. "We're at 34 months and counting," he said.

"We were expecting it on the 17th (of April), but it was delayed a week," Hinchey said. "We expect a lawsuit by environmental groups."

That would mark the latest delay in new drilling in the Powder River Basin that has slowed to a standstill now that the federal government has issued the maximum number of drilling permits, he said.

Developing a natural gas field in Wyoming takes between four and five years, Hinchey said.

He laid the blame for the delay in the basin on the federal government's environmental policies, such as allowing drilling at certain times of the year but not at other times.

Some federal policies are extreme, he said.

For example, if digging for a pipeline will expose rocks that are a different color than the ground, the excavated rocks must be painted the same color as the ground, Hinchey said.

In response to a question from Rotarian David Bishop, Hinchey said that there's no way to calculate how much Wyoming has lost in revenues because of the federal policies and the delays in new drilling.

Hinchey, former Wyoming House Speaker, became director of the PAW during his last term in the Senate in 2002.

During his talk, he gave a brief overview of the oil and gas industry's history in Wyoming, starting with the first well 118 years ago drilled southeast of Lander.

Now, 20 of Wyoming's 23 counties -- with the exceptions of Platte, Goshen and Teton counties -- have oil or gas production, Hinchey said.

"We don't have any yet in Yellowstone, but we're working on that," he joked to a lot of laughter.

More than 15,000 miles of pipeline operated by 42 companies, Hinchey later added, are in all Wyoming counties.

In other statistical matters, he said the deepest well drilled in Wyoming was more than 25,000-feet deep, and yielded a dry hole. The deepest producing well is 24,877 feet, he said.

The oil and gas industry employs about 22,000 people who earn an annual payroll of $850 million, he said.

While the industry has begun to decline in Campbell County -- in the Powder River Basin -- it is up in Carbon, Sweetwater and Sublette counties, Hinchey said.

Hinchey showed the audiences charts of production and sales that marked the downward trend of oil production and the upward trend of gas production.

Limited pipeline capacity, however, hinders the rate of gas production, he said.

Yet that production pays more than $900 million a year for much of Wyoming's state and local government operations, Hinchey said. "That equals a direct payment of $1,900 for every person in Wyoming. ... You can see without the oil and gas industry what kind of taxes you would pay."

He also listed the countries that export oil to the United States, with the most coming from Canada, followed by Saudi Arabia, Mexico, Venezuela, Nigeria, the United Kingdom, Iraq, Norway, Angola and Algeria.

"Fifty-seven-point-eight (percent) of the total is from foreign countries," Hinchey said. "That's why it's so important for Congress to have the national energy policy bill."

By TOM MORTON Casper Star-Tribune staff writer

The coalbed natural gas industry has waited 34 months for the U.S. Bureau of Land Management to issue its Environmental Impact Statement (EIS) on drilling on federal land in the Powder River Basin, an industry official said Monday.

It will probably wait some more, Bruce Hinchey, president of the Petroleum Association of Wyoming, told the Casper Rotary Club. "We're at 34 months and counting," he said.

"We were expecting it on the 17th (of April), but it was delayed a week," Hinchey said. "We expect a lawsuit by environmental groups."

That would mark the latest delay in new drilling in the Powder River Basin that has slowed to a standstill now that the federal government has issued the maximum number of drilling permits, he said.

Developing a natural gas field in Wyoming takes between four and five years, Hinchey said.

He laid the blame for the delay in the basin on the federal government's environmental policies, such as allowing drilling at certain times of the year but not at other times.

Some federal policies are extreme, he said.

For example, if digging for a pipeline will expose rocks that are a different color than the ground, the excavated rocks must be painted the same color as the ground, Hinchey said.

In response to a question from Rotarian David Bishop, Hinchey said that there's no way to calculate how much Wyoming has lost in revenues because of the federal policies and the delays in new drilling.

Hinchey, former Wyoming House Speaker, became director of the PAW during his last term in the Senate in 2002.

During his talk, he gave a brief overview of the oil and gas industry's history in Wyoming, starting with the first well 118 years ago drilled southeast of Lander.

Now, 20 of Wyoming's 23 counties -- with the exceptions of Platte, Goshen and Teton counties -- have oil or gas production, Hinchey said.

"We don't have any yet in Yellowstone, but we're working on that," he joked to a lot of laughter.

More than 15,000 miles of pipeline operated by 42 companies, Hinchey later added, are in all Wyoming counties.

In other statistical matters, he said the deepest well drilled in Wyoming was more than 25,000-feet deep, and yielded a dry hole. The deepest producing well is 24,877 feet, he said.

The oil and gas industry employs about 22,000 people who earn an annual payroll of $850 million, he said.

While the industry has begun to decline in Campbell County -- in the Powder River Basin -- it is up in Carbon, Sweetwater and Sublette counties, Hinchey said.

Hinchey showed the audiences charts of production and sales that marked the downward trend of oil production and the upward trend of gas production.

Limited pipeline capacity, however, hinders the rate of gas production, he said.

Yet that production pays more than $900 million a year for much of Wyoming's state and local government operations, Hinchey said. "That equals a direct payment of $1,900 for every person in Wyoming. ... You can see without the oil and gas industry what kind of taxes you would pay."

He also listed the countries that export oil to the United States, with the most coming from Canada, followed by Saudi Arabia, Mexico, Venezuela, Nigeria, the United Kingdom, Iraq, Norway, Angola and Algeria.

"Fifty-seven-point-eight (percent) of the total is from foreign countries," Hinchey said. "That's why it's so important for Congress to have the national energy policy bill."

Copyright © 2003 by the Casper Star-Tribune published by Lee Publications, Inc., a subsidiary of Lee Enterprises, Incorporated

Posted on Mon, Apr. 14, 2003 BY JUAN FORERO Miami Herald.com- New York Times News Service

LA PAZ, Bolivia - Ed Miller had high hopes in the late 1990s when, as manager for British Gas in this landlocked country, he and a fellow geologist came up with a surefire plan to develop and market Bolivia's immense reserves of natural gas.

With an eye on California and its insatiable appetite for energy, three multinationals, including British Gas, soon formed a consortium to build a 400-mile pipeline to the Pacific Coast.

The idea was to liquefy the gas and ship it to California. The projected sales were $21 billion over 20 years.

Now, with $350 million already invested, the project -- once heralded as Latin America's largest infrastructure development -- is close to collapse, a casualty of roiling nationalism and political turbulence.

WINDOW CLOSING

''The project is coming to the end of its opportunity window,'' said Miller, 47, an American who left the consortium and now runs a pipeline that transports gas to Brazil.

Indeed, President Gonzalo Sanchez de Lozada's government, buffeted by protests that killed 30 people in February, has delayed plans to announce a decision on the project's next phase: whether to build a fuel pipeline through Peru or through Bolivia's old enemy, Chile.

The government now talks about consulting with Bolivians, to let them make the decision.

But Repsol-YPF of Spain, British Gas and the BP subsidiary Pan American Energy, the three companies of the Pacific LNG project, as the consortium is called, insist that Chile is the only viable option.

That's because building through Peru, they say, would cost $600 million more. An American consulting firm working for the Bolivian government recently reached the same conclusion.

Aides to Sanchez de Lozada say the government is still carefully studying both options, but people close to the project say the president is paralyzed -- because deciding on Chile would more than likely lead to huge, destabilizing protests.

''The government does not have the political oxygen to decide,'' said Gonzalo Chavez, an economic analyst and former vice minister of energy.

Opposition to the project, fueled by left-leaning indigenous leaders who strongly reject the Chilean option, is intense and spreading.

Most Bolivians have yet to forgive Chile for snatching Bolivia's coastal province in a 19th-century war. Included was the region around the present-day port of Patillos, where a liquefaction plant would be built.

Among the opposition are senior military officers who have pronounced themselves against the project for reasons of what they call ``national dignity.''

Even the president's partner in the government coalition, former President Jaime Paz Zamora, has questioned natural-gas sales.

''Bolivia,'' he has said, ``must come first.''

In one of Latin America's most nationalistic countries, some critics also oppose the very idea of selling gas to the United States, which many consider an imperialist aggressor.

''The gas stays here. We can consume it here,'' said Choque Huanca, a new member of congress who represents a left-leaning indigenous political party.

Such talk, though, ignores the fact that Bolivia, with a gross domestic product of just $8 billion, could make use of only a tiny fraction of its gas reserves, estimated at 52 trillion cubic feet, second in Latin America behind Venezuela's. Even supplying California for 20 years would consume only 13 percent of the gas.

Analysts also point out that this desperately poor country could vastly improve its economic outlook by positioning itself as an important gas supplier to California before other countries do. Taxes and royalties on exported gas could bring in up to $7.7 billion in a generation.

But to become a great gas power, Bolivia needs foreign capital to finance the Pacific LNG project, whose total cost is estimated at $5 billion or more.

And changing minds there will not be easy. Companies of all kinds have faced stiffening opposition to their investment plans, as Bolivians have turned against the market-reform model once championed by their president.

''There is a repudiation,'' said Jose Guillermo Justiniano, minister of the presidency, the executive's administrative arm. ``That is why there is a conviction against the model. They see the model as the devil. Market economies are the devil.''

The government of Sanchez de Lozada has been so battered by opponents that it lacks the political capital to undertake austerity measures or to make unpopular economic decisions.

GRIM VISION

Bolivia's future will remain grim unless it opens up to foreign investment, political analysts say.

''The fact of the matter is that you cannot go back on globalization and that no country can afford to isolate itself from the international currents,'' said Eduardo Gamarra, a Bolivian-born professor of polical science and director of the Latin American and Caribbean Center at Florida International University.

Miller, a Californian who first came to Bolivia in 1978, ran an Argentine company that in the late 1990s was among the first to find major gas deposits.

After mapping out the pipeline plan on a barroom napkin, he assumed Bolivians would welcome a project that promised to inject billions into the economy.

Now, the dream is all but dead -- prompting Miller to abandon Pacific LNG.

''I essentially became frustrated and burned out,'' he said.

<a href=www.planetark.org<Planetark-Reuters ARGENTINA: April 9, 2003

BUENOS AIRES, Argentina - Natural gas-powered cars have long been preferred by cabbies who spend hours on city streets here, and these days, they can also be spotted among Argentina's smart set after an economic collapse made them a cheap, yet chic, choice.

Businessmen in suits and sedans are lining up at filling stations around Buenos Aires for CNG - or compressed natural gas - and lines for the fuel were 50 cars deep along the highways leading to beaches this summer.

Argentina, with the third-biggest natural gas reserves in Latin America after Bolivia and Venezuela, is spearheading the use of CNG in vehicles and leads the world in the number of natural-gas cars with about 800,000.

The economic crisis here has had the unexpected effect of helping the environment. The fuel is cheap, clean burning and produces fewer harmful emissions than gasoline or diesel. CNG cars today make up 15 percent of Argentina's personal vehicles.

The drive to use an abundant national resource as fuel in Argentina echoes similar attempts in Brazil, the world's No. 1 sugar producer, to encourage the use of cane-based ethanol to cut pollution and reduce dependence on oil, even though both countries are oil producers.

"It's got some potential. It's one piece of a very large puzzle. It has a lot of application in areas where there's a lot of natural gas," said Jed Bailey, a director of research for Latin America at Cambridge Energy Research. "And Argentina has the infrastructure for it."

Argentina also has a new economic reality after the January 2002 peso devaluation pumped up dollar-based gasoline and diesel prices more than 30 percent.

"It's less expensive. I'd say I save 20 to 30 pesos a day," said Luis, who drives as part of his work for an energy company.

His investment two months ago to outfit his silver Peugeot to run on CNG has already saved him about 1,500 pesos ($515), about 200 pesos more than it cost to convert the motor.

Argentina's government has also jumped on the bandwagon, promoting natural gas use to cut costs in public transportation.

Some here argue compressed gas is the fuel of the future.

Argentina's Chamber of Compressed Natural Gas, which joins providers and equipment makers, is at work on a Latin American project to unify standards to create a continent-wide network that can later be taken to other parts of the world.

"There's a revolution going on in the energy sector that developed countries aren't taking notice of. Developed countries are betting on the fuel cell idea, but that's for some 20 years from now," Chamber member Gregorio Kopyto said.

NATURAL GAS AROUND THE WORLD

Compressed gas is being promoted for use in vehicles in India, South Korea and Thailand, where it is seen as a good way to reduce oil imports in a region where crude oil reserves are small, but gas reserves are high in several countries.

Engineers in Italy have been working on a scooter that runs on natural gas. The fuel has also seen increased use in the United States in vehicle fleets such as school and city buses, police cars and airport ground service vehicles, according to U.S. government and private sector reports.

Argentina exports natural gas vehicle technology to Asia, Europe and Latin America and the Chamber plans to help host a Natural Gas Vehicles conference in Buenos Aires in 2004.

For natural gas to be a workable alternative fuel it must be widely available and the proper infrastructure must be in place. Creating a network of natural gas stations and converting vehicles may not be cost-effective in some places.

"You have to make it convenient enough for people to want to do it and it can't be so prohibitively expensive that they won't," said Linda Doman, an expert for international issues at the U.S. Department of Energy's Energy Information Administration.

"You have to have a certain amount of gas stations, otherwise people couldn't drive very far," Doman said.

Argentina opened its first compressed gas station in 1984 and now has 1,100 outlets in 17 provinces, making it available to a majority of its 5.4 million car owners. About 110,000 cars were converted last year alone.

The local Fiat (FIA.MI), Volkswagen (VOWG.DE) and Peugeot (PEUP.PA) units make CNG cars that also run on gasoline.

A natural-gas car costs about 10 percent more than the standard version, a Volkswagen spokesman said. The fuel is stored in a metal cylinder that can take up much of the trunk.

GAS AND GOVERNMENT

A bill that would require that all public transportation run on the fuel and provide incentives for the gas sector is wending its way through Congress.

"To keep bus tickets at the current level, the state is subsidizing diesel prices, which is costing around 20 million pesos a month ($6.9 million)," Energy Secretary Enrique Devoto said in an interview after the bill was presented.

"The cost difference would allow us to, for a short time, use the subsidy to fit the bus motors to run on compressed gas. That would lower costs by half and make it possible to maintain accessible ticket prices," he said.

The savings are key for the cash-strapped government, where a deep recession led to the biggest ever sovereign debt default last year. Using the fuel could also limit inflation as the peso has lost about 70 percent in value since devaluation.

CNG costs 60 percent less than the cheapest gasoline at the station where Luis filled his tank, run by Repsol YPF (REP.MC).

Natural gas is just one of many alternative fuels, along with liquefied petroleum gas, methanol, solar energy, biodiesel, hydrogen and electricity.

Whether it is the wave of the future or not, the fuel is likely to remain a focus of efforts to reduce dependence on costly oil in Argentina, and one welcomed by those watching their wallets.

"I travel a lot of kilometers (miles) and I spend a lot less, at least 30 or 35 percent less," said cab driver Miguel Angel Granja, who converted his car as soon as the option became available. "I have to fill the tank three times a day, but it's still cheaper than diesel."

Story by Athena Jones