[Congressional Record (Bound Edition), Volume 148 (2002), Part 4]
[Senate]
[Pages 4874-4875]
[From the U.S. Government Publishing Office, www.gpo.gov]




       NATURAL GAS TRANSMISSION LINES AND ENHANCED COST RECOVERY

 Mr. BREAUX. Mr. President, the demand for natural gas is 
expected to increase tremendously in this country over the next 15 
years. By some accounts demand for natural gas will go from 
approximately 23 trillion cubic feet in 2000 to over 31 trillion cubic 
feet by 2015, a 34 percent increase. The existing natural gas 
transmission infrastructure simply cannot accommodate this increased 
demand.
  Natural gas offers an environmentally friendly and secure source of 
energy, and we must ensure that we have the infrastructure in place to 
meet this increased demand. Otherwise, we could suffer adverse 
environmental consequences and undermine the potential for economic 
growth, which depends upon safe and secure sources of energy. Natural 
gas also has the added advantage of reducing our dependence on foreign 
energy sources, which in today's environment, is a major advantage.

[[Page 4875]]

  The Senate Finance committee took several steps to address this 
issue. Improving the depreciation period for natural gas distribution 
lines and clarifying that natural gas gathering lines are seven-year 
property is a step in the right direction. However, I am concerned that 
the bill we are now considering, as well as the House-passed energy 
legislation, does not address cost recovery for natural gas 
transmission lines. Reliable estimates indicate that we will have to 
build over 38,000 miles of additional transmission lines, a fifteen 
percent increase over current capacity, to deliver the increased amount 
of natural gas that will be required to meet the increased demand over 
the next fifteen years. My concern is that if the Congress determines 
that enhanced cost recovery is necessary to generate the additional 
investment required to meet this enormous demand, that it is necessary 
to address the entire natural gas delivery system, including both 
distribution and transmission lines.
  There is no doubt that the demands for capital investment in this 
area are very large indeed. Industry studies show that the natural gas 
industry will require almost $50 billion in new investment for pipeline 
transmission lines over the next fifteen years, over $3.2 billion per 
year, to meet this demand. These expenditures also include the United 
States portion of an Alaskan Gas Pipeline, which offers tremendous 
potential for this country in meeting its energy needs.
  These are daunting sums. I am very concerned whether this capital can 
be raised in both the current economic climate and under our current 
cost recovery system. Over the past year, the companies we depend upon 
to raise the capital required to build these transmission lines lost 
over $60 billion in market capitalization. This situation will impede 
their ability to raise the necessary capital in the market. Accelerated 
depreciation will help alleviate this problem by increasing cash flow, 
thus reducing a company's need to borrow money to build additional 
pipelines and lower the cost of capital that must be borrowed to 
complete the projects. Our committee recognized as much, as did the 
House, when it chose to lower the depreciation period for natural gas 
transmission lines from 20 to 15 years. I supported this decision, but 
we may not be able to utilize fully this increased distribution 
capacity if we do not take similar steps regarding transmission. After 
all, natural gas will not arrive at the distribution point unless the 
transmission infrastructure is sufficient to handle the increased 
amount of natural gas required.
  There is no question that the capital investment required to ensure 
that we have adequate transmission pipelines to deliver natural gas is 
very significant. There is also no question that Congress needs to 
examine the entire delivery system to ensure that the benefits of any 
improved cost recovery are utilized efficiently and do not produce 
unwanted bottlenecks.
  I think it would be appropriate for us to review carefully the need 
for shorter depreciation periods not just for distribution lines but 
for natural gas transmission lines as well when this matter goes to 
conference. Any decisions regarding natural gas depreciation must be 
made with an eye towards their effect on the system as a whole, 
including transmission lines.

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