CNDI 2008 NATURAL GAS DISAD

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NATURAL GAS DISAD – CNDI 1/2
NATURAL GAS DISAD – CNDI 1/2.............................................................................................................1 NATURAL GAS DISAD – 1NC.....................................................................................................................3 NATURAL GAS DISAD – 1NC.....................................................................................................................4 NATURAL GAS DISAD – 1NC.....................................................................................................................5 NATURAL GAS DISAD – 1NC.....................................................................................................................6 NATURAL GAS DISAD – 1NC.....................................................................................................................7 ________________..........................................................................................................................................8 ***UNIQUENESS...........................................................................................................................................8 U – SHORT TERM / AT OIL PRICES ...........................................................................................................9 U – LONG TERM .........................................................................................................................................10 U – LONG TERM .........................................................................................................................................11 U – NEW SUPPLY .......................................................................................................................................12 U – NEW SUPPLY .......................................................................................................................................13 U – NEW SUPPLY .......................................................................................................................................14 U – AT VOLATILITY / PRICES HIGH ......................................................................................................16 U – AT VOLATILITY / PRICES HIGH ......................................................................................................17 _________......................................................................................................................................................18 ***LINKS.......................................................................................................................................................18 Links – CO2 Cap............................................................................................................................................19 Links – Permits...............................................................................................................................................20 Links – Permits...............................................................................................................................................21 Links – High Oil Prices..................................................................................................................................22 Links – AT Turns (Efficiency / Renewables).................................................................................................23 Links – AT Turns (Efficiency / Renewables).................................................................................................24 Links – AT Turns (Efficiency / Renewables).................................................................................................25 ______________________________________________............................................................................26 ***HIGH PRICES IMPACTS THAT TURN THE CASE............................................................................26 Low Prices Key Oil Peak................................................................................................................................27 _______________________..........................................................................................................................28 ***ECONOMY IMPACTS............................................................................................................................28 1NC/2NC – Economy Impact.........................................................................................................................29 1NC/2NC – Economy Impact.........................................................................................................................30 Internal Link – Hits All Businesses................................................................................................................31 Internal Link – Recession...............................................................................................................................32 Terminal Econ Impacts...................................................................................................................................33 Terminal Econ Impacts...................................................................................................................................34 _____________________________________________..............................................................................35 ***CHEMICAL INDUSTRY IMPACTS – EXTERNAL.............................................................................35 1NC/2NC – Chemical Industry Impact .........................................................................................................36 1NC/2NC – Chemical Industry Impact .........................................................................................................37 High Prices Kill Chemical Industry................................................................................................................38 High Prices Kill Chemical Industry................................................................................................................39 ________________________________________________........................................................................40 ***MANUFACTURING SHIFT IMPACTS – EXTERNAL........................................................................40 1NC/2NC – Manufacturing Shift Impact.......................................................................................................41 1NC/2NC – Manufacturing Shift Impact.......................................................................................................42 High Prices Cause Manufacturing Shift.........................................................................................................43 High Prices Cause Manufacturing Shift.........................................................................................................44 Manufacturing Shift Key to Economy / Heg..................................................................................................45 Manufacturing Shift Key to Hegemony.........................................................................................................46 _______________________________________________..........................................................................47 ***MANUFACTURING SHIFT IMPACTS – TURNS THE CASE............................................................47

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Manufacturing Shift Impact – Turns Oil........................................................................................................48 ________________________________________........................................................................................49 ***NATURAL GAS DISAD AFF ANSWERS.............................................................................................49 _____________________..............................................................................................................................50 ***NONUNIQUENESS.................................................................................................................................50 2AC NU – High Prices Now..........................................................................................................................51 1AR NU – AT New Supply ...........................................................................................................................52 1AR NU – AT New Tech / Supply ................................................................................................................53 1AR NU – AT LNG Solves............................................................................................................................54 ____________________________................................................................................................................55 ***LINK DEFENSE AND TURNS..............................................................................................................55 2AC – NO IL – PREDICTION UNCERTAINTY ........................................................................................56 2AC – MUST READ......................................................................................................................................57 2AC – Permits Key Efficiency / Renewables.................................................................................................58 2AC – Permits Key Efficiency / Renewables.................................................................................................59 1AR – Efficiency / Renewables......................................................................................................................60 1AR – Efficiency / Renewables......................................................................................................................61 2AC – Auctioning Solves Link.......................................................................................................................62 2AC – Permits Key Natural Gas Industry......................................................................................................63 _____________________..............................................................................................................................64 ***IMPACT ANSWERS...............................................................................................................................64 2AC – Warming Outweighs...........................................................................................................................65 2AC – Oil Peak Outweighs.............................................................................................................................66 2AC – Chemicals Impact................................................................................................................................67 2AC – Chemicals Impact................................................................................................................................68 2AC – Chemicals Impact................................................................................................................................69 1AR – High Prices Kill Chemicals Now........................................................................................................70 1AR – High Prices Don’t Impact Chemicals..................................................................................................71 1AR – High Prices Increase Chemical Revenues...........................................................................................72

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A – UNIQUENESS MULTIPLE MARKET PRESSURES WILL DRIVE DOWN NATURAL GAS PRICES IN THE MEDIUM AND LONG TERM FOSTER NATURAL GAS REPORT 5-16-2008 U.S. natural gas prices could fall "substantially" over the next three to four years, according to Strategic Energy & Economic Research Inc. (SEER). Henry Hub prices could decline by as much as $2/MMBtu by 2012, said SEER's CEO Ron Denhardt in a presentation today. Quoting the famous New York Yankees Yogi Berra - "the future isn't what it use to be" - Denhardt warned that several economic conditions would drive down U.S. natural gas prices, including a weak dollar, a strong demand response, and higherthan-expected growth in natural gas production, among other things.

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B – LINK Carbon cap and trade dramatically spikes natural gas prices and causes severe electricity shortages National Association of Manufacturers 2005, http://www.nam.org/s_nam/doc1.asp? CID=141&DID=226226 Those who advocate a “cap and trade” scheme for reducing carbon dioxide emissions argue that the flexibility and “market-based” mechanisms will lower overall costs of the program. They compare their legislation to the successful sulfur dioxide (SO2) emissions reduction program authorized by the 1990 Clean Air Act Amendments. However, that program was successful (and credits remained available at low prices) because there were affordable options to reach compliance—fuel switching to lower sulfur coal or installation of SO2 scrubbers. No such alternatives exist for carbon—utilities would have to compete for limited supplies of natural gas with homeowners, agriculture and industry; and there are no “scrubbers” that can be put on plants to remove CO2. Nevertheless, with a “cap and trade” program that rations coal use, utilities will have to make large scale changes in the energy they use. Historically, the only viable option to meet carbon dioxide reduction targets on a large scale would be to switch to natural gas. But that option is disappearing with the recognition that natural gas supplies are already failing to keep up with ever-increasing demand, as was very evident by the high spot prices (reaching $19.00/mcf) this past winter. Unless nuclear power plants can be built quickly and often to replace coal to generate electricity, a “cap and trade” program could lead to severe electricity shortages—irrespective of price—and reduce fuel diversity and economic security, leading to ever greater manufacturing job losses to overseas nations that do not have carbon caps. Unlike the SO2 program, there is no inexpensive substitute fuel or technology to reduce carbon dioxide emissions. A “cap and trade” scheme for CO2 would raise energy prices and create shortages of natural gas and electricity. Capping” carbon dioxide means creating a limit on how much carbon intensive fuel—most notably coal—can be used in the U.S. economy. Legislating less energy available to generate electricity necessarily leads to higher electricity prices, if not actual shortages, because there is no other energy source that is sufficiently abundant and cost-effective to replace coal. A CO2 cap and trade program would act as a tax on the economy. The Congressional Budget Office (CBO), in their 2001 report, “An Evaluation of Cap and Trade Programs for Reducing U.S. Carbon Emissions,” the CBO stated “the economic impacts of cap-and-trade programs would be similar to those of a carbon tax: both would raise the cost of using carbon-based fuels, lead to higher energy prices and impose costs on users and some suppliers of energy.” By raising the prices of electricity and natural gas, a cap and trade program will be highly regressive, hurting the poor, the elderly, minorities and anyone on a fixed income, disproportionately. It will also reduce general prosperity and productivity. The CBO stated in the same report, “The higher prices for energy and energy-intensive products that would result from a cap-and-trade program would reduce the real income that people received from working and investing, thus tending to discourage them from productive activity. That would compound the fact that existing taxes on capital and labor already discourage economic activity.” As the NAM observed in our January 7, 2003, letter to members of the Senate Commerce Committee, “While some companies would profit from a government program that would allow them to sell emissions reductions to others, the overwhelming majority of U.S. companies will experience this as a tax on growth that will hurt their international competitiveness and thus, their workers and stockholders.”

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C – IMPACTS 1 – Natural gas is key to the chemical industry and the production of a laundry list of valuable inputs into the economy and energy Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH The current price of natural gas is the chemical industry's number one economic issue. Natural gas is the lifeblood of the chemistry business in the U.S. Not only do we use natural gas as a fuel in our manufacturing processes, much like other industries, but we also use it as an ingredient, or feedstock, for many of the products we make. Natural gas and natural gas liquids contain hydrocarbon molecules that are split apart during processing and then recombined into useful chemical products. These products include life-saving medicines, health improvement products, technology-enhanced agricultural products, more protective packaging materials, synthetic fibers and permanent press-clothing, longer-lasting paints, stronger adhesives, faster microprocessors, more durable and safer tires, lightweight automobile parts, and stronger composite materials for aircraft and spacecraft. The business of chemistry also makes many of the products that help save energy throughout the entire economy, including insulation, house wraps, lubricants, and highstrength light-weight materials, enabling American industries and consumers to be more energy efficient. The business of chemistry is the only part of the economy that adds value to these hydrocarbon molecules rather than combusting them for energy. 2 – Chemical industry key to the economy Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH The $460 billion business of chemistry is a key element of the nation's economy, providing the building block materials that the rest of the U.S. economy relies upon. It is the country's largest exporter, accounting for ten cents out of every dollar in U.S. exports. Chemistry companies invest more in research and development than any other business sector. Safety and security have always been primary concerns of ACC members, and they have intensified their efforts, working closely with government agencies to improve security and to defend against any threat to the nation's critical infrastructure. SUMMARY OF TESTIMONY A hearing on enhancing the nation's energy security could not come at a better time. The nation is facing an energy crisis caused by runaway prices for natural gas. Unless Congress acts to increase domestic natural gas supplies our economy will continue to struggle and we will fall short of our goals for a cleaner environment. A crisis of this magnitude poses a grave threat to America's economic and national security. Current energy prices are making it impossible for the US chemical industry, and other critical industries, to compete in global markets. Because the business of chemistry produces the building block materials that the rest of our modern economy relies upon, we are somewhat of a "canary in the coalmine." As we go, so goes the rest of the nation.

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3 – The impact is extinction and turns the case Chemical and Engineering News 1999 Vol. 77, No. 49. pp. Pp.46-47. http://pubs.acs.org/scibin/bottomframe.sci?hotartcl/cenear/991206/7749spintro2 The pace of change in today's world is truly incomprehensible. Science is advancing on all fronts, particularly chemistry and biology working together as they never have before to understand life in general and human beings in particular at a breathtaking pace. Technology ranging from computers and the Internet to medical devices to genetic engineering to nanotechnology is transforming our world and our existence in it. It is, in fact, a fool's mission to predict where science and technology will take us in the coming decade, let alone the coming century. We can say with finality only this: We don't know. We do know, however, that we face enormous challenges, we 6 billion humans who now inhabit Earth. In its 1998 revision of world
population estimates and projections, the United Nations anticipates a world population in 2050 of 7.3 billion to 10.7 billion, with a "medium-fertility projection," considered the most likely, indicating a world population of 8.9 billion people in 2050. According to the UN, fertility now stands at 2.7 births per woman, down from 5 births per woman in the early 1950s. And fertility rates are declining in all regions of the world. That's good news. But people are living a lot longer. That is certainly good news for the individuals who are living longer, but it also poses challenges for health care and social services the world over. The 1998 UN report estimates for the first time the number of octogenarians, nonagenarians, and centenarians living today and projected for 2050. The numbers are startling. In 1998, 66 million people were aged 80 or older, about one of every 100 persons. That number is expected to increase sixfold by 2050 to reach 370 million people, or one in every 24 persons. By 2050, more than 2.2 million people will be 100 years old or older! Here is the fundamental challenge we face: The world's growing and aging population must be fed and clothed and housed and transported in ways that do not perpetuate the environmental devastation wrought by the first waves of industrialization of the 19th

and 20th centuries. As we increase our output of goods and services, as we increase our consumption of energy, as we meet the imperative of raising the standard of living for the poorest among us, we must learn to carry out our economic activities sustainably. There are optimists out there, C&EN readers among them, who
believe that the history of civilization is a long string of technological triumphs of humans over the limits of nature. In this view, the idea of a "carrying capacity" for Earth—a limit to the number of humans Earth's resources can support—is a fiction because technological advances will continuously obviate previously perceived limits. This view has historical merit. Dire predictions made in the 1960s about the exhaustion of resources ranging from petroleum to chromium to fresh water by the end of the 1980s or 1990s have proven utterly wrong. While I do not count myself as one of the technological pessimists who see technology as a mixed blessing at best and an unmitigated evil at worst, I do not count myself among the technological optimists either. There are environmental challenges of transcendent complexity that I fear may overcome us and our Earth before technological progress can come to our rescue. Global climate change, the accelerating destruction of terrestrial and oceanic habitats, the catastrophic loss of species across the plant and animal kingdoms—these are problems that are not obviously amenable to straightforward technological solutions. But I know this, too: Science and technology have brought us to where we are, and only science and technology, coupled with innovative social and economic thinking, can take us to where we need to be in the coming millennium.

Chemists, chemistry, and the chemical industry—what we at C&EN call the chemical enterprise—will play central roles in addressing these challenges. The first section
of this Special Report is a series called "Millennial Musings" in which a wide variety of representatives from the chemical enterprise share their thoughts about the future of our science and industry. The five essays that follow explore the contributions the chemical enterprise is making right now to ensure that we will successfully meet the challenges of the 21st century. The essays do not attempt to predict the future. Taken as a whole, they do not pretend to be a comprehensive examination of the efforts of our science and our industry to tackle the challenges I've outlined above. Rather, they paint, in broad brush strokes, a portrait of scientists, engineers, and business managers struggling to make a vital contribution to humanity's future. The first essay, by Senior Editor Marc S. Reisch, is a case study of the chemical industry's ongoing transformation to sustainable production. Although it is not well known to the general public, the chemical industry is at the forefront of corporate efforts to reduce waste from production streams to zero. Industry giants DuPont and Dow Chemical are taking major strides worldwide to manufacture chemicals while minimizing the environmental "footprint" of their facilities. This is an ethic that starts at the top of corporate structure. Indeed, Reisch quotes Dow President and Chief Executive Officer William S. Stavropolous: "We must integrate elements that historically have been seen as at odds with one another: the triple bottom line of sustainability—economic and social and environmental needs." DuPont Chairman and CEO Charles (Chad) O. Holliday envisions a future in which "biological processes use renewable resources as feedstocks, use solar energy to drive growth, absorb carbon dioxide from the atmosphere, use low-temperature and low-pressure processes, and produce waste that is less toxic." But sustainability is more than just a philosophy at these two chemical companies. Reisch describes ongoing Dow and DuPont initiatives that are making sustainability a reality at Dow facilities in Michigan and Germany and at DuPont's massive plant site near Richmond, Va. Another manifestation of the chemical industry's evolution is its embrace of life sciences. Genetic engineering is a revolutionary technology. In the 1970s, research advances fundamentally shifted our perception of DNA. While it had always been clear that deoxyribonucleic acid was a chemical, it was not a chemical that could be manipulated like other chemicals—clipped precisely, altered, stitched back together again into a functioning molecule. Recombinant DNA techniques began the transformation of DNA into just such a chemical, and the reverberations of that change are likely to be felt well into the next century.

Genetic engineering has entered the fabric of modern science and technology. It is one of the basic tools chemists and biologists use to understand life at the molecular level. It provides new avenues to pharmaceuticals and new approaches to treat disease. It

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expands enormously agronomists' ability to introduce traits into crops, a capability seized on by numerous chemical companies. There is no doubt that this powerful new tool will play a major role in feeding the world's population in the coming century, but its adoption has hit some bumps in the road. In the second essay, Editor-atLarge Michael Heylin examines how the promise of agricultural biotechnology has gotten tangled up in real public fear of genetic manipulation and corporate control over food. The third essay, by Senior Editor Mairin B. Brennan, looks at chemists embarking on what is perhaps the greatest intellectual quest in the history of science—humans' attempt to understand the detailed chemistry of the human brain, and with it, human consciousness. While this quest is, at one level, basic research at its most pure, it also has enormous practical significance. Brennan focuses on one such practical aspect: the effort to understand neurodegenerative diseases like Alzheimer's disease and Parkinson's disease that predominantly plague older humans and are likely to become increasingly difficult public health problems among an aging population. Science and technology are always two-edged swords. They bestow the power to create and the power to destroy. In addition to its enormous potential for health and agriculture, genetic engineering conceivably could be used to create horrific biological warfare agents. In the fourth essay of this Millennium Special Report, Senior Correspondent Lois R. Ember examines the challenge of developing methods to counter the threat of such biological weapons. "Science and technology will eventually produce sensors able to detect the presence or release of biological agents, or devices that aid in forecasting, remediating, and ameliorating bioattacks," Ember writes. Finally, Contributing Editor Wil Lepkowski discusses the most mundane, the most marvelous, and the most essential molecule on Earth, H2O. Providing clean water to Earth's population is already difficult—and tragically, not always accomplished. Lepkowski looks in depth at the situation in Bangladesh— where a well-meaning UN program to deliver clean water from wells has poisoned millions with arsenic. Chemists are working to develop better ways to detect arsenic in drinking water at meaningful concentrations and ways to remove it that will work in a poor, developing country. And he explores the evolving water management philosophy, and the science that underpins it, that will be needed to provide adequate water for all its vital uses. In the past two centuries, our science has transformed the world. Chemistry is a wondrous tool that has allowed us to understand the structure of matter and gives us the ability to manipulate that structure to suit our own purposes. It allows us to dissect the molecules of life to see what makes them, and us, tick. It is providing a glimpse into workings of what may be the most complex structure in the universe, the human brain, and with

it hints about what constitutes consciousness. In the coming decades, we will use chemistry to delve ever deeper into these mysteries and provide for humanity's basic and not-so-basic needs.

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________________ ***UNIQUENESS

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U – SHORT TERM / AT OIL PRICES
U – AT OIL PRICES – NATURAL GAS MARKET FUNDAMENTALS REMAIN STRONG DESPITE SPORADIC INCREASES DUE TO OIL LINKAGE GULF NEWS 4-29-2008 Unlike oil, however, the market fundamentals seem to be somewhat solid for natural gas. Analysts are predicting that gas is going to stay in the $11 to $12 per British thermal unit (BTU) range, as demand grows and reserves, especially in the United States, decline. The US's Energy Department said that natural gas inventories have only risen 24 billion cubic feet, to just over 1.2 trillion cubic feet, as of April 18, which Dow Jones called a much smaller increase than expected.

AT OIL PRICES – TURN – OIL INDUCED PRICE STRENGTH LEADS TO INCREASED PRODUCTION AND INVESTMENT IN NATURAL GAS GULF NEWS 4-29-2008 The good news? Higher natural gas prices mean more money to invest in new operations. The Petroleum Services Association of Canada boosted its activity forecast 14 per cent from 14,500 wells to 16,500 wells, and attributed what they call a "drilling revival" to increased interest in natural gas thanks to recent price hikes and a healthy long-term price outlook. Meanwhile, talks are in place to build natural gas pipelines everywhere from Turkmenistan to the Subcontinent and from Turkey into Europe, just to name a few. "This is the year of natural gas," said Jim Cramer of CNBC's Mad Money TV show in the United States. His reasoning is pretty sound - as the price of oil increases, more people look to cheaper natural gas for everything from heating and cooling to powering cars. That increased demand is translating into more natural gas drilling, more interest in the pipelines used for transport and more overall investment as energy companies look to fill the vacuum created by record oil. AT OIL – OIL’S EFFECT IS OVERSTATED – NATURAL GAS IS NOT INTERCHANGEABLE THE OKLAHOMAN 4-25-2008 Tony Say, a natural gas marketer who is president of Clearwater Enterprises Inc., said numerous factors, including the high price of oil, factor into its value. If natural gas were valued using its British thermal unit equivalency to oil, its price would be higher today, he agreed. "But it is not an interchangeable product," he said. "You can't take your house in the Southwest and heat it using fuel oil. But is the high price of oil helping that commodity? Absolutely. The gas traders look at what oil prices are doing. There is no doubt about it."

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U – LONG TERM
NATURAL GAS MARKETS STABLE IN THE LONG TERM – NEW SUPPLY WILL ALLOW THE INDUSTRY TO WEATHER CURRENT PRICE PRESSURES CANADA NEWSWIRE 5-21-2008 Despite recent upward pressure on natural gas prices, additional supplies, particularly from unconventional sources, expanding LNG import capabilities and increasing investment in natural gas storage will keep the market in balance over the longer term, concludes a new paper released today by the Canadian Gas Association. North America continues to have an ample supply of natural gas with expected declines in some conventional sources of supply being offset by stronger than expected performance by other unconventional supplies, says the CGA paper entitled Natural Gas Markets - Price and Supply Update. "Current prices are also drawing investment into exploration and development and increasing the supply of natural gas in North America," says Canadian Gas Association President, Michael Cleland. "Unconventional supplies such as shale gas, coal bed methane and gas from waste are becoming increasingly economic in the present environment." "Today's natural gas prices are being influenced by increasingly tight global markets for all energy commodities" said Cleland. "No energy source, whether renewable or non-renewable will escape this reality." However, with multiple energy options and a strong responsive natural gas marketplace, North America is well positioned to weather these storms. Natural gas will continue to play a key role in meeting the energy needs of consumers. The Canadian Gas Association (CGA) is the voice of Canada's natural gas delivery industry. CGA members are gas distribution companies, transmission companies, related equipment manufacturers, and other service providers involved in the delivery of natural gas in Canada. U – LONG TERM PRICES ARE BELOW HIGH END PREDICTIONS FOSTER NATURAL GAS REPORT 5-16-2008 If natural gas production continues at its current higher level, on the other hand, working gas storage would end about 185 Bcf higher than projections. Also, Henry Hub gas prices are "well below their historic relationship" with residential fuel oil prices, Denhardt said, which suggests a near-term "upside potential for natural gas prices." If prices do fall below $7/MMBtu to $8/MMBtu, "substantial volumes of production could be lost," as 20% to 40% of wells at that price level are marginal, based on production costs. In 2010, SEER sees Henry Hub prices likely hovering near $9/MMBtu. Other industry predictions range from $7.00/MMBtu to almost $11/MMBtu. High oil prices and carbon pricing in Europe could support the high end of gas prices in 2010, "but there are downside risks as well," Denhardt said.

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U – LONG TERM
All their evidence is systemically biased – most qualified studies and market fundamentals prove prices will lower and stabilize Inside FERC 2-21-2005 Seeking to debunk widely held views on the gas supply/demand picture, a new report asserts that futures prices are not sustainable at current levels and "will moderate significantly" within the next year. "The contemporary domestic political scene has rendered continued high prices for natural gas a convenient problem for both political parties," wrote James Choukas-Bradley, an attorney with the Washington law firm Miller, Balis & O'Neil, and Michael Donnelly, a consultant with Global Energy Advisors. "Therefore, there is wide political satisfaction, though largely unstated and politically unspeakable, for continued high gas prices," said the pair, who co-authored the report on gas market dynamics for 2005 and beyond. "There is no consensus among industry experts that domestic supplies are dwindling," said the report, issued last week. "Projections indicate annual rates for total domestic production that range from minus 2% to plus 2%, [while] the federal government continues to project 1% to 2% annual growth to 2020." Moreover, bullish news for gas markets tends to get wider media coverage than bearish news, according to the authors. "The trade press reports and responds to the pronouncements and projections of stock analysts who cover the industry," and such analysts "implicitly consider the interest of their industry to reside in higher prices." At the same time, the mainstream media cover stories about higher prices since they tend to mean "bad news for consumers, and therefore sometimes worth reporting," the authors said. "Neither the producer-oriented media nor the consumer-oriented media are served institutionally by bearish natural gas price news." For their part, market players themselves no longer appear to concentrate on fundamentals, the report said. "We have been and remain in the midst of a climate of crisis concerning natural gas prices, with market prices subject to wild swings resulting from trading decisions by both commercial and speculative traders that respond to 'psychology' and 'spin,' either in spite of or in the absence of reliable, real-time fundamental information," the authors said. While domestic producers have incentives to hedge their physical gas price exposure, "producers generally do not hedge a large portion of their production on a long-term basis, seeking rather to capture the upside of higher future prices." Meanwhile, "speculative traders dealing with financial gas price exposure have the incentive to support price volatility and volume liquidity," according to the study. But fundamentally, the full-cycle replacement cost of gas in the U.S. and Canada "remains significantly below market prices," running at about $2.75 to $3.00/MMBtu for most offshore Gulf of Mexico supplies and at $3.25 to $3.50/MMBtu for deep-water Gulf supplies. "The full-cycle replacement cost for other domestic sources is lower, in some cases considerably lower," the authors said. Increasing imports of liquefied natural gas also will put heavy downward pressure on gas prices, the authors predicted. "If two new LNG import terminals are built every three years, and North American gas demand reaches 30 Tcf by 2025, LNG should compete with indigenous gas, potentially displacing as much as 40% of Gulf Coast production by 2010, with an expected reduction in gas prices," according to the study. "Even in the absence of other factors, such gas-on-gas competition by itself should result in Henry Hub prices at $4.25/MMBtu or lower, in 2004 dollars, before 2010."

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U – NEW SUPPLY
INCREASED LNG INTEGRATION WILL MAINTAIN PRICE STABILITY IN NATURAL GAS MARKETS CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ Current outlooks expect increasing supplies from liquefi ed natural gas (LNG). Forecasts call for LNG to rise from 3% to supply 15% of North American gas demand by 2020. Th is translates into just over 3 tcf of natural gas being supplied by LNG by the year 2020. LNG provides North America with access to natural gas supplies from outside the continent. However, while high prices in other markets are competing heavily for available world supplies, North America is uniquely positioned to employ LNG as a balancing supply in its market. Countries in Asia and Western Europe, that rely on LNG for much of their natural gas supply are willing to enter into longer term contracts, and pay premium prices to ensure LNG supply for their high demand winter heating season. In return these contracts often allow for diversion of LNG cargoes to other markets during periods of lower prices and demand, typically during the summer months. Given a ready supply of pipeline gas, North American based LNG buyers would not be expected to match the premium winter LNG prices. But North America’s unique natural gas storage capability will attract LNG cargoes during the typically lower price summer months. Th e associated gas supply will then be stored for use during their higher demand winter season.

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U – NEW SUPPLY
U – SUPPLIES FOR NATURAL GAS KEEPING UP WITH DEMAND – MARKET IS STABLE IN THE NEXT DECADE CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ A survey of recent North American gas supply outlooks show steady to slightly upward expectations for natural gas supply over the next 15 years. Strong natural gas prices have drawn investment into the exploration and development of natural gas supplies. North America produced 26.6 trillion cubic feet (tcf) of natural gas in 2006. Also North America has increased its proven gas reserves to a total 282 tcf. Th is addition of new supply has been refl ected in an increase in the reserves to production ratio (R/P), the measure of available short term supply of natural gas. Th e R/P ratio has remained stable or slightly growing around the 10 year level for the last decade. Th is reflects the fact that new gas discoveries, in the various North American supply basins are being converted into reserve additions at a rate roughly equal to the growth in continental gas demand.

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U – NEW SUPPLY
U – UNCONVENTIONAL SUPPLIES – FORECASTS DON’T TAKE INTO ACCOUNT NEW SOURCES OF NATURAL GAS SUPPLIES CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ Other Supply Developments In the meantime, other important technological developments, which do not appear in current forecasts, will add to the natural gas supply picture for Ontario and North America. MORE EV – UNCONVENTIONAL GAS CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ Unconventional Gas: North American developers are having increasing success fi nding and extracting natural gas from unconventional formations, particularly shale. In addition to simply fi nding more unconventional natural gas plays; new technologies such as horizontal drilling and better fracturing techniques, have made these plays far more productive than had been the case even fi ve years ago. In Canada alone, there have been signifi cant new discoveries such as the Upper and Lower Montney Shales and Muskwa Shale in B.C. and the Utica Shale in Quebec which could add over 100 tcf to reserves over the next decade. In the U.S., the Barnett Shale in Texas alone has added an estimated 30 tcf to continental gas reserves. MORE EV – RENEWABLE GAS CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ Renewable Natural Gas: Development of renewable natural gas (RNG) is increasing. RNG is gas that is produced from the decomposition of waste from landfi lls, municipal solid waste, forestry, and agricultural waste. RNG provides energy and in doing so helps curtail the associated waste-based GHG emissions. Th e Alberta Research Council estimates the technical potential supply of RNG in Ontario alone at just over 110 bcf annually or about 12% of the province’s current annual demand. Key issues to be addressed in the eff ort to develop RNG projects centre on the basic economics of the proposed projects that require sizeable capital investments to build the necessary gas collection, purifi cation and distribution infrastructure. MORE EV – HYDRATES CGA 2008 – CANADIAN GAS ASSOCIATION NATURAL GAS MARKETS PRICE AND SUPPLY UPDATE, 5-21, http://www.cga.ca/ Gas from Hydrates: Recent tests have successfully extracted gas from hydrates at rates equal to that for coal bed methane. Commercial development of hydrates-based natural gas

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supply is still 10 to 20 years off and would require the completion of the Mackenzie Delta pipeline to enable the associated gas supplies to be brought to market. Successful development of hydrates would increase the world’s natural gas resource base by 7 to 19 times its current level.

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U – AT VOLATILITY / PRICES HIGH
TURN – Gas price spikes don’t kill the industry but sustained market imbalances will devastate productivity and job growth Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH High natural gas prices also negatively impact productivity and employment in our industry. In any industry, a company faced with declining profitability must evaluate whether or not to continue operations. During the 2000-2001 "spike" in natural gas prices, many companies idled their operations. About fifty percent of the industry's methanol capacity and fifteen percent of the industry's ethylene capacity were simply shut down during this time. Many workers were sent home. As natural gas prices came down plants reopened. These relatively short-term increases in natural gas prices led to relatively short-term shutdowns. However, there are serious questions regarding how these companies will respond over the long-term if faced with a business environment with sustained conditions of tightened natural gas supply and high natural gas prices. For our employees, demand destruction sooner or later becomes job destruction.

TURN - The plan creates a permanent crunch in the natural gas market – sustained high prices will eliminate the ability to cope with price volatility Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH A disturbing reality of the U.S. natural gas market is that nearly 70% of it is price insensitive. This means that 70% of gas consumers have no option to either stop using energy or to use a different form of energy and must pay whatever the price is for the gas they need. The remaining 30% of demand, predominantly industrial manufacturers, can adjust to gas price swings by switching to more reasonably priced fuels or by ceasing to operate their manufacturing facilities. It is in this 30% that demand destruction occurs. In the past, this demand destruction generally has been temporary. Higher prices led to increased production and lesser demand, thereby increasing supply and moderating prices. Once prices returned to more economic levels, industrial consumers switched back to natural gas or restarted idled facilities. In light of recent trends -- record numbers of working drill rigs in 2001 did not increase supply; more stringent air quality regulations that limit or eliminate the ability to fuel switch; ever increasing demand for natural gas from price insensitive users -- there is a significant risk that this historical pattern will not repeat itself. Rather, ACC is concerned that temporary demand destruction may become permanent demand destruction for many of its members.

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U – AT VOLATILITY / PRICES HIGH
Natural gas market has stabilized, only government regulations on demand can create market inbalances Gas Daily 10-9-2003 Despite persistent warnings of a U.S. gas shortage, supply and demand in fact have reached an appropriate balance now that the ''gas bubble'' of the 1980s and 1990s has burst, an executive of an inde-pendent producer said this week. ''As a country, we've been somewhat spoiled over the last 20 years because we've had an overabundance of natural gas deliverability, brought about by policy changes in the late '70s,'' said Bruce Vincent, executive vice president of Houston-based Swift Energy. ''Our view is that the fundamentals of natural gas supply and demand, and the uses for natural gas, are pretty much in balance.'' As a result, average prices will stay in the $ 4 to $ 5/MMBtu range for the foreseeable future, Vincent said this week during the Independent Petroleum Association of America's 2003 Oil & Gas Investment Symposium in San Francisco. In an interview with Gas Daily, Vincent cited the Natural Gas Policy Act and the Powerplant and Industrial Fuel Use Act, which in the 1970s pushed electric utilities and some industrial customers to use fuel oil instead of natural gas. That, he said, led to the oversupply that came to be known as the gas bubble. ''For many years, we were always used to that surplus. Of course, that discouraged significant new exploration, but eventually that worked itself off -- a lot of it through increasing demand, some of it through decreasing supplies. So we find ourselves to where they really are in balance,'' he said. Given that fundamental shift, the market has created both a floor and a ceiling for the value of gas. ''As the price gets too high, we're going to drive some of the demand away from the market. And if the price gets too low, the demand will come back and it will discourage the drilling activity and the supply will come down,'' Vincent said. ''The key determinants of that overbalance/underbalance will be weather and the economy. Those are the two big fundamentals that drive demand,'' he added. ''Both of those, particularly weather, are unpredictable.'' Recent price spikes don’t point to a crisis in natural gas because higher prices have been offset by lower capital costs Energy Information Administration 2004 – Annual Energy Outlook http://www.eia.doe.gov/oiaf/aeo/electricity.html In AEO2005, the projected average price for natural gas delivered to electricity generators is 45 cents per million Btu higher in 2025 than was projected in AEO2004; however, the impact of the higher prices is offset by the assumption that capital costs for new natural-gas-fired power plants will be lower than assumed in AEO2004, as well as the inclusion of more recently completed and announced plans for gasfired power plants. As a result, in AEO2005, projected cumulative capacity additions and generation from natural-gas-fired power plants are higher than in AEO2004, and capacity additions and generation from coal-fired power plants are lower. The AEO2005 projectione of 1,406 billion kilowatthours of electricity generation from natural gas in 2025 is 8 percent higher than in AEO2004 (1,304 billion kilowatthours) and more than twice the 2003 level of about 630 billion kilowatthours (Figure 5). Less new gas-fired capacity is added in the later years of the forecast because of the projected rise in natural gas prices.

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_________ ***LINKS

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Links – CO2 Cap
CO2 emissions caps cause sustained high prices due to increasing demand for natural gas Liuzzi 2003 – President, CF Industries The Fertilizer Institute, Testimony Before House Committee on Energy and Commerce, 6-10 More specifically, the fertilizer industry stresses that the most effective measure to deal with high natural gas prices over the short- term are incentives and other regulatory measures that will reverse decades of artificially induced demand for natural gas over other fuel technology for electric power generation. Congress itself is among those who share in the responsibility for this problem, as the requirements of the Clean Air Act have made it increasingly difficult to permit, construct and enlarge the nation's coal-fired plants. Where the nation once relied on coal for the lion's share of its electric power, over 90% of all new power plant construction intends to rely on natural gas. Recent proposals to impose further rules on mercury and CO2 emissions will only add to the burden of coal-fired generators and hasten the move to natural gas. This, of course, will cause a tremendous new demand to be placed on the existing gas supply base, ensure high prices into the foreseeable future, and threaten the viability of the domestic nitrogen fertilizer industry - an industry, unlike the electric power industry, that does not have an alternative to natural gas. Accordingly, any legislation passed by this Committee should ensure that all coal, nuclear and hydroelectric plants are able to operate safely at their full capacity, and that incentives are provided and obstacles removed to ensure that new coal and nuclear facilities are constructed. Any regulation of CO2 causes a crisis for natural gas National Petroleum & Refiners Association 5-25-2004 http://www.npra.org/issues/petrochemical/NGsummary.pdf The Economic Consequences of High Natural Gas Prices From 2000 until early 2004, manufacturing sector employment declined for 32 consecutive months. This equaled a loss of two million U.S. manufacturing jobs. More than 10,000 of those jobs were lost in the chemical industry. High energy costs have played a significant role in those losses. Higher natural gas prices can also put a large portion of the domestic petrochemical industry at a competitive disadvantage to European and Asian producers. Additional loss of facilities and jobs could occur if the current and prospective gas price and supply situation is not addressed promptly through more supply-based policy changes. Three years of extraordinarily high natural gas prices (2001-2003) have resulted in a depressed chemical export market and contributed to a negative trade balance for the U.S. economy. This negative trade balance allows foreign businesses to capture U.S. market share, in part because European and Asian producers are not experiencing increased feedstock prices to the same extent as the U.S. The natural gas supply situation has prompted Federal Reserve Board Chairman Alan Greenspan to warn that sustained high natural gas prices are a “very serious problem” with the potential to offset the economic recovery under way. Continues… Policy Recommendations Immediate Actions: Efficiency Plus Conservation We can delay discretionary environmental regulations that require the use of natural gas to achieve air quality standards. A primary example of this is EPA’s ill-considered requirement that refiners use natural gas as part of New Source Review settlements. Resist new public policy initiatives such as   global  climate change legislation which have the potential to impact natural gas supplies. Any “Clear Skies” legislation or regulations mandating reductions in certain emissions should meet the following criteria: 1) not encourage fuel switching; 2) should not apply to combined heat and power; 3) be limited to only three pollutants (NOx , SO2, and Hg); 4) not regulate CO2 in any way. 

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Links – Permits
EIA analysis proves the plan causes sustained high prices to do its constraint on the market Energy Information Administration 2003 – Analysis of S.139, the Climate Stewardship Act http://www.eia.doe.gov/oiaf/servicerpt/ml/pdf/summary.pdf Delivered prices of coal, natural gas, petroleum, and electricity all increase in the S.139 case relative to the reference case (Figure S.3) as a consequence of the emissions allowance program. Figure S.4 shows the percentage change in delivered prices from the reference case to the S.139 case. In percentage terms, coal prices are most affected by S.139: the price in the S.139 case is 474 percent above the reference case price in 2025. Natural gas prices in the S.139 case are 46 percent above the reference case prices in 2025, average petroleum product prices are 29 percent higher, and prices for petroleum-based transportation fuels are 31 percent higher. These price changes reflect supply and demand shifts as well as allowance costs. For example, the reduced U.S. demand for oil in the S.139 case is expected to reduce the world oil price by 7 percent and help mitigate the price impact on final consumers. The increased U.S. demand for natural gas works in the opposite direction, increasing the market-clearing price of gas at the wellhead. Electricity prices, reflecting the higher cost of using fossil fuels for generation and the incremental cost of plant investments to reduce greenhouse gas emissions (e.g., by replacing coal-fired plants that do not sequester carbon dioxide), are 46 percent above the reference case level in 2025. Permits cause a shift to natural gas due to fears of carbon tax Cicio 2003 – Executive Director, Industrial Energy Consumers of America The Natural Gas Crisis, http://www.ieca-us.com/downloads/homepg/gas_summit_recommendations.doc Climate Change The Administration must not implement “GHG transferable credits” embodied in the GHG Registry 1605 (b). Doing so will signal that a carbon cap is nearing and all corporate energy related decision making will plan to use the least carbon intensive fuel, natural gas. This will only further aggravate a very serious natural gas shortage. 1990 cap mandates forever increasing natural gas prices and fundamentally alters the market Montgomery 1997 – President, Charles River Associates FDCH, 10-9 In percentage terms, an emission trading program or a carbon tax sufficient to return emissions to 1990 levels in 2010 would produce a 23% increase in the cost of electricity, a 45% increase in the cost of heating oil, a 40% increase in the cost of gasoline, and a 46% increase in the cost of natural gas in 2010 to households. As the U.S. economy grows and it becomes more difficult to hold emissions at this fixed level, increasingly expensive efforts will be required to hold to the cap. Therefore, the carbon tax or permit price would rise to about $400 per tonne by 2030. The taxes on individual fuels would also increase in proportion to the growing carbon tax. Cap and trade increases natural gas demand Breslow 2004 – Mass Climate Action Network http://www.massclimateaction.org/PrimerCarbonCap&Trade2.doc The point of cap-and-trade is to obtain the goal of reducing GHG emissions at the lowest possible cost to generators of power, by giving owners the choice of either reducing emissions from their plants or buying permits and continuing to emit CO2. The assumption is that existing and new generators who can reduce emissions at low cost will do so (by producing from natural gas plants or renewable sources) and then can sell their permits to generators that have higher costs to cut emissions.

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Links – Permits
Tradeable permits increase natural gas costs by 147% National Center for Policy Analysis 1999 http://www.ncpa.org/hotlines/global/pd113099d.html To comply with the Kyoto Accord, the Clinton administration has proposed a tradable CO2 emission permit plan. Supporters argue that an emissions trading scheme would be a less expensive way of reducing emissions than the other primary option, a carbon tax on all fuels, because it allows emissions reductions to be concentrated at sources where it is least expensive. However, economist Margo Thorning points out that "Carbon taxes could be imposed instead of tradable permits: there should be, in principle, no difference in energy prices under the two alternative systems." Under either system, energy prices will rise. For instance: The Department of Energy estimates that carbon permit prices would be equal to a carbon tax of $348.00 per ton in 2010. WEFA, Inc., an econometrics forecasting firm, estimates that the cost of carbon permits would top $265.00 per ton. The DOE estimates that these permit prices would increase the cost electricity by up to 86.4 percent, gasoline by 52.8 percent, home heating oil by 76 percent and natural gas by 147 percent. Best studies prove permits increase natural gas prices by 13% Business Week 1-8-2001 What's in this scenario? Key elements include a ''voluntary'' 45%-50% increase in Corporate Average Fuel Economy standards, replacing our premiums for a minimum level of vehicle liability insurance with a gasoline tax of 34 cents a gallon, and instituting a $ 50-per-metric-ton ''tradable carbon emission permit programs.'' The tradable carbon permit scheme alone would collect $ 73 billion in ''energy taxes'' from individuals and businesses in 2010. The five-lab study itself acknowledges that these policies would raise gasoline prices 29%, natural gas prices 13%, and coal prices 120%.

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Links – High Oil Prices
High oil prices solve the impact of natural gas prices on the chemical industry Chemical News & Intelligence 1-3-2005 Rogers said substantial increases in oil prices as well as natural gas prices helped limit cash flow generation in 2004. US producers using natural gas feed stocks were not disadvantaged by higher natural gas prices as their competitors coped with elevated oil prices. However, should a recession limit oil demand in 20072010 and lower oil prices, Rogers said US companies that rely on natural gas could be at a competitive disadvantage. Other long-term factors of concern include product liability lawsuits and pension funding requirements.

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Links – AT Turns (Efficiency / Renewables)
All their turns assume multiple pollutant standards and carbon sequestration Pew Center for Global Climate Change 2003 http://www.pewclimate.org/policy_center/analyses/mit_analysis.cfm The Massachusetts Institute of Technology (MIT), through its Joint Program on the Science and Policy of Global Change, has assembled a world-class collaboration of economists and scientists to model and analyze global climate change policies. Using their EPPA1 model, one of the world’s premier energyeconomic models, MIT has undertaken the only analysis of the Lieberman-McCain Climate Stewardship Act (S.139) as it will be offered on the Senate Floor in October 2003 – i.e., Phase I only – achieving 2000 emissions in 2010. MIT uses the same economic, energy use and emissions baselines as the U.S. Energy Information Agency (EIA), but has a much less pessimistic view of the future supply curve for natural gas, based on potentially available natural gas sources (federal lands, unconventional gas, Alaska, deep sea and LNG). The strength of the MIT-EPPA model is its treatment of non-CO2 greenhouse gases2 (GHGs) and biomass sequestration – both these sources offer opportunities for low-cost reductions. MIT finds considerable efficiency opportunities, including accelerated penetration of combined heat and power plants and distributed generation. The use of efficiency, non-CO2 GHGs and sequestration means that much less switching in energy supply is required. - This allows coal use to remain consistent at around 24 Quads per year. - This also means that, although there is some fuel switching to natural gas, overall gas demand growth is less because overall, less energy is being consumed. Companies won’t respond to regulation with innovation, lack of certainty and experience proves Stavins 2000 – Prof Government @ Harvard Economic Analysis of Global Climate Change Policy: A Primer, http://papers.ssrn.com/sol3/papers.cfm? abstract_id=240389 Since the compliance costs associated with most climate policies are initially incurred by private firms, it is important to analyze correctly the behavioral response of such firms to various policy regimes. Most economic analyses treat firms as atomistic profit-maximizing or cost-minimizing units. This is satisfactory for many purposes, but it can lead to distorted estimates of the costs brought about by some policies. For example, one potentially important cause of the mixed performance of implemented market-based instruments is that many firms are simply not well equipped internally to make the decisions necessary to fully utilize these instruments. Since market-based instruments have been used on a limited basis only, and firms are not certain that these instruments will be a lasting component on the regulatory landscape, most companies have not reorganized their internal structure to fully exploit the cost savings these instruments offer. Rather, most firms continue to have organizations that are experienced in minimizing the costs of complying with command-and-control regulations, not in making the strategic decisions allowed by market-based instruments (Hockenstein, Stavins, and Whitehead 1997). The focus of environmental, health, and safety departments in private firms has been primarily on problem avoidance and risk management, rather than on the creation of opportunities made possible by marketbased instruments. This focus has developed because of the strict rules companies have faced under command-and-control regulation, in response to which companies have built skills and developed processes that comply with regulations, but do not help them benefit competitively from environmental decisions (Reinhardt 2000). Absent significant changes in structure and personnel, the full potential of market-based instruments will not be realized. Economic models may thereby underestimate the relative costs of employing such instruments to achieve global climate targets.

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Links – AT Turns (Efficiency / Renewables)
Comprehensive studies prove fossil fuel regulation on balance increase energy costs Long 1995 – Director For Environment, OECD Business Economics, April, Vol. 30, No. 2, Pg. 25 Assertions of competitiveness impacts are clearly influential. Each of the five Western European countries that have unilaterally introduced climate-related energy taxes have included exemptions for those domestic industries that would be most affected. Peter Sorensen, of the Copenhagen Business School, in a paper prepared for a 1993 OECD seminar on "Environmental Policies and Industrial Competitiveness," observed that: "Not surprisingly, many opponents of the (carbon) tax argue that it would be irrational for Denmark to introduce such a tax unilaterally, thereby incurring a loss of competitiveness, since Denmark's contribution to global warming is very small. The main arguments advanced in favor of the tax were that it would increase the pressure for the introduction of a carbon tax at the EC level, and that Denmark might in fact gain a strategic competitive advantage in the long-term by adjusting to such a tax at an early stage." If, however, the climate change threat prompts governments to press for substantial reductions in energyrelated greenhouse gas emissions, then much stiffer carbon and/or energy taxes, or the introduction of tradeable emission rights schemes, could have important effects on prices and competition by driving up the price of energy and energy-intensive products. The OECD has carried out some quite detailed analyses of the likely economic consequences for various countries, and regional groupings of countries, of efforts to reduce levels of carbon dioxide emissions using different economic instruments. Drawing on a GeneRal Equilibrium Environmental model ("GREEN"), the studies reveal that, indeed, there would be quite differentiated, and substantial, economic costs, and also a "carbon leakage" situation as energy-intensive manufacturing moves toward countries with lower energy taxes. Increased costs tradeoff with renewable investment South China Morning Post 5-25-2004 Kyoto has been signed and ratified by 124 nations, although only developed countries involved have to adhere to the requirement of cutting greenhouse gas emissions by 5 per cent less than 1990 levels between 2008 and 2012. Developing nations that have ratified the pact - China among them - are not required to meet the target, although they are encouraged to participate through a tax credit trading system. The problem for Kyoto supporters is that the world's biggest polluter, the US, is not participating. Although central to the formulation of the treaty and a key participant at the 1997 signing ceremony, US President George W. Bush pulled his country from the mechanism in 2001, claiming it was ineffective and damaging to economic growth. Australia and Canada have cited the same reasons and, like the US, embarked on their own pollutioncontrol programmes. Russia was using the same argument until Mr Putin's announcement. Dr Michaels described the reasoning as "logical" as the Kyoto Protocol "will do nothing measurable about global warming". "But it does cost a lot of money and could impede the development of technologies that would emit much less carbon dioxide per unit of economic output," he argued. "The creation of new technologies requires capital investment, largely in the US, on the part of individuals. It is therefore counterproductive to artificially raise the price of energy or enact taxes to fight global warming because that takes the capital away that would normally be used for investment."

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Links – AT Turns (Efficiency / Renewables)
Regulation can only impair innovation because it imposes costs upon a market that will innovate on its own Altman 2001 – Prof Economics @ U Saskatchewan Ecological Economics, Vol. 36, Issue 1, January Following the Axiom of Modest Greed, rational profit seeking economic agents would not allow any significant or economically meaningful economic opportunities to go unexploited. As McCloskey (1990, p. 112), articulates the axiom: ‘The Axiom of Modest Greed involves no close calculation of advantage or large willingness to take risks. The average person sees a quarter and slides over it. He sees a $500 bill and jumps for it. The Axiom is not controversial. All economists subscribe to it, whether or not they believe in the market… and so should you.’ It follows from this Axiom that $500 cannot be expected to be lying around. To wit, economic inefficiencies, of any substantive order of magnitude, should not be assumed to be lingering in the economy waiting to be exploited through the action of regulators and prescient economic agents. Therefore, forcing firms to become greener, although generating social benefits, necessarily elicits private economic costs. Moreover, any evidence that greener economies appear to be economically vibrant and, therefore, viable and competitive, should not be taken as evidence that environmental regulations have induced appropriate cost countervails as such a deduction runs contrary to the analytical predictions of the conventional economic wisdom ( Stewart; Jaffe and Palmer). It is, indeed, a long standing scientific tradition, as pointed out by Thomas Kuhn ( Coase, 1994, p. 27) that: ‘Anomalous observations… cannot tempt [a scientist] to abandon his theory until another one is suggested to replace it… In scientific practice the real confirmation questions always involve the comparison of two theories with each other and with the world, not the comparison of a single theory with the world.’1

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______________________________________________ ***HIGH PRICES IMPACTS THAT TURN THE CASE

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Low Prices Key Oil Peak
Natural gas supplies solves the impact to oil peak by constraining the price of oil at a competitive level Discover 1999 June, Curtis Rist, http://www.findarticles.com/p/articles/mi_m1511/is_6_20/ai_55926786/print The most promising copper bullet is new technology for turning natural gas into fuels like gasoline and diesel. For years, natural gas has been used mostly for generating electricity and fueling kitchen stoves and some home furnaces. In the Alaskan oil fields the gas is pumped back into the ground to maintain pressure in the oil wells. In Nigeria and the Middle East, it's simply flared. But such waste is soon to become a thing of the past. Chemical engineers long ago figured out how to convert natural gas into liquid fuel (see "Gas to Gasoline," page 86), but the process was never cost-effective. "The Nazis did it in the final days of World War II because they had to," says Anderson. The South Africans followed suit during the international boycott through the apartheid years. "No one would sell them any oil," he notes. "They had to figure out how to make it themselves." Still, it was expensive. Twenty years ago, a natural gas plant that produced 100,000 barrels of liquid fuel a day would have cost about $100 billion to build, says Anderson. But now that companies are doing it on a large scale and with better technology, the cost of building a natural gas plant has come way, way down. Today a natural gas plant can be constructed for as little as $10 billion, bringing the total expense of producing a barrel of fuel from natural gas down to under $20. "That will effectively put a ceiling on the price that anyone can charge for a barrel of oil--which is something that has never existed in history," says Anderson. "The moment anyone tries to charge above that amount, people will switch to fuels derived from natural gas." By most estimates, there's enough natural gas to produce about 1.6 trillion barrels of oil. Most of that gas probably will not be converted to oil. Still, the figure offers a hint at the extent of the world's natural gas reserves: more than all the petroleum ever consumed--roughly 830 billion barrels--and enough to fuel the world for some 60 years at current rates of consumption. And there may be far more. John Edwards, a former Shell geologist and now an adjunct geology professor at the University of Colorado in Boulder, believes that underwater deposits of another form of natural gas could raise the total to 5 trillion barrels. In many parts of the world, the seafloor contains natural gas trapped inside ice crystals called hydrates. The hydrates can be extracted by lowering a pipe into the ground and drawing up a core of mud and crystals. The problem is that unless the core is properly contained, the change in pressure and temperature at the surface can cause it to explode, says Edwards. But that isn't stopping the Japanese, who plan to drill and see if it's feasible to extract such fuel. The payoff could be huge. "There's at least again as much natural gas trapped in hydrates as has already been discovered, and probably more," Edwards says. When and if supplies of natural gas begin to run out, the oil companies will focus on squeezing usable fuels out of even more difficult prospects, Already, the Canadians are starting to mine the tar sands of Alberta, where an estimated 300 billion barrels of oil are trapped. And Venezuelans are beginning to excavate the solid tarry deposits of the Oronoco sludge belt, which contains as much as 1 trillion barrels of oil. If those supplies run out, there's always coal--the most abundant and environmentally damaging of all fuels. Ninety percent of the world's fossil fuels are contained in coal deposits. Tapping it and converting it to liquid fuels (a process nobody has fully mastered yet) could yield a Supply lasting a millennium.

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_______________________ ***ECONOMY IMPACTS

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1NC/2NC – Economy Impact
High gas prices ripple through the entire economy Sun.com 2004 – March, http://www.sun.com/br/0304_ezine/man_gas.html Natural gas use is widespread. This raw material accounts for 38 percent of industrial energy use, 15 percent of commercial building use, and 16 percent of electric generation use. Increases in gas prices ripple throughout the economy. For example, as average gas prices rose by 303 percent at the end of 2000, fertilizer prices increased by 144 percent. Without offsetting cost savings from other farming expenses, farmers would have curtailed production to boost corn prices to recoup expenses. Higher corn prices lead to higher prices for corn syrup and grain feed, ultimately forcing up prices for hundreds of consumer products such as soft drinks, breakfast cereals, burgers, and ethanol used in gasoline. High natural gas prices will cause recession more likely now than oil Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH For the U.S. chemical industry, economic survival depends on having access to an abundant and affordable supply of natural gas. Every recession since World War II has been proceeded by a steep increase in energy prices. In the past it's been the cost of oil. This time, it may by natural gas, the "other" fuel and the hidden energy crisis. Recessions due to high gas prices continue even after gas prices stabilize Livingston 2004 – Editor, Labor Standard http://www.laborstandard.org/Environment/Greenspan.htm, 6-23 Price spikes in oil prices pushed the U.S. and the world into recessions in 1974 (the Arab oil embargo), 1979 (the Iranian Revolution), and 1991 (the Persian Gulf War). These price spikes have a so-called asymmetrical effect—the recessions continue after the prices return to their previous lower levels. Greenspan knows that a price spike in natural gas would push the U.S. into a serious recession. Combined with price increases in oil, such a spike in natural gas prices would be deadly.

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1NC/2NC – Economy Impact
Global war Mead 2004 (Foreign Policy, March/April) Similarly, in the last 60 years, as foreigners have acquired a greater value in the United States-government and private bonds, direct and portfolio private investments-more and more of them have acquired an interest in maintaining the strength of the U.S.-led system. A collapse of the U.S. economy and the ruin of the dollar would do more than dent the prosperity of the United States. Without their best customer, countries including China and Japan would fall into depressions. The financial strength of every country would be severely shaken should the United States collapse. Under those circumstances, debt becomes a strength, not a weakness, and other countries fear to break with the United States because they need its market and own its securities. Of course, pressed too far, a large national debt can turn from a source of strength to a crippling liability, and the United States must continue to justify other countries' faith by maintaining its long-term record of meeting its financial obligations. But, like Samson in the temple of the Philistines, a collapsing U.S. economy would inflict enormous, unacceptable damage on the rest of the world. That is sticky power with a vengeance.THE SUM OF all POWERS?The United States' global economic might is therefore not simply, to use Nye's formulations, hard power that compels others or soft power that attracts the rest of the world. Certainly, the U.S. economic system provides the United States with the prosperity needed to underwrite its security strategy, but it also encourages other countries to accept U.S. leadership. U.S. economic might is sticky power. How will sticky power help the United States address today's challenges? One pressing need is to ensure that Iraq's econome reconstruction integrates the nation more firmly in the global economy. Countries with open economies develop powerful trade-oriented businesses; the leaders of these businesses can promote economic policies that respect property rights, democracy, and the rule of law. Such leaders also lobby governments to avoid the isolation that characterized Iraq and Libya under economic sanctions. And looking beyond Iraq, the allure of access to Western capital and global markets is one of the few forces protecting the rule of law from even further erosion in Russia.China's rise to global prominence will offer a key test case for sticky power. As China develops economically, it should gain wealth that could support a military rivaling that of the United States; China is also gaining political influence in the world. Some analysts in both China and the United States believe that the laws of history mean that Chinese power will someday clash with the reigning U.S. power.Sticky power offers a way out. China benefits from participating in the U.S. economic system and integrating itself into the global economy. Between 1970 and 2003, China's gross domestic product grew from an estimated $106 billion to more than $1.3 trillion. By 2003, an estimated $450 billion of foreign money had flowed into the Chinese economy. Moreover, China is becoming increasingly dependent on both imports and exports to keep its economy (and its military machine) going. Hostilities between the United States and China would cripple China's industry, and cut off supplies of oil and other key commodities Sticky power works both ways, though. If China cannot afford war with the United States, the United States will have an increasingly hard time breaking off commercial relations with China. In an era of weapons of mass destruction, this mutual dependence is probably good for both sides. Sticky power did not prevent World War I, but economic interdependence runs deeper now; as a result, the "inevitable" U.S.Chinese conflict is less likely to occur.Sticky power, then, is important to U.S. hegemony for two reasons: It helps prevent war, and, if war comes, it helps the United States win.

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Internal Link – Hits All Businesses
Rising prices hit every business in the US Sun.com 2004 – March, http://www.sun.com/br/0304_ezine/man_gas.html Rising gas prices also increase electricity costs, hurting profit margins of every U.S. business. Because of environmental restrictions, natural gas—a clean-burning fuel—powers 90 percent of all recently built electric generation plants. In New England, where gas fuels 40 percent of electricity plants, average power prices hit 30 cents per kilowatt hour in mid-January 2004—a 600-percent increase over normal prices. Why the price shock? An eighth of the region's power generators shut down because they lacked gas or they sold their gas to residential heating markets instead of producing electricity.

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Internal Link – Recession
Natural gas crisis will cause recession IECA 2003 – Industrial Energy Consumers of America http://www.ieca-us.com/downloads/natgas/15_Naturalgas-tter1-16-03.doc, 1-16 Every major energy crisis since 1973 was followed by an economic recession. The recent energy crisis of 2000-2001 was no different. The link between affordable supplies of energy and our economic well-being is no coincidence. Industrial energy-consuming companies were devastated by high energy costs that resulted in plant closures, plant idling, worker layoffs, and the transfer of production to offshore facilities. This same story is being repeated again, only from a lower number of manufacturing plants and jobs that may never return. Since 1998 the manufacturing sector in the U.S. has lost about 2 million jobs. High energy costs and government initiatives that would cause electric utilities to switch to natural gas will only exacerbate the loss of jobs. For the first time, U.S. natural gas prices are now being sustained at high levels relative to our major global competitors. The U.S. North East Transco Zone 6 city gate price is currently $7.435 per million Btu, and the recent European Zebruugge hub price is $3.20 per million Btu, and the Shanghai City Gate price is $4.70 per million Btu in energy deficient China.

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Terminal Econ Impacts
Global war Mead 2004 (Foreign Policy, March/April) Similarly, in the last 60 years, as foreigners have acquired a greater value in the United States-government and private bonds, direct and portfolio private investments-more and more of them have acquired an interest in maintaining the strength of the U.S.-led system. A collapse of the U.S. economy and the ruin of the dollar would do more than dent the prosperity of the United States. Without their best customer, countries including China and Japan would fall into depressions. The financial strength of every country would be severely shaken should the United States collapse. Under those circumstances, debt becomes a strength, not a weakness, and other countries fear to break with the United States because they need its market and own its securities. Of course, pressed too far, a large national debt can turn from a source of strength to a crippling liability, and the United States must continue to justify other countries' faith by maintaining its long-term record of meeting its financial obligations. But, like Samson in the temple of the Philistines, a collapsing U.S. economy would inflict enormous, unacceptable damage on the rest of the world. That is sticky power with a vengeance.THE SUM OF all POWERS?The United States' global economic might is therefore not simply, to use Nye's formulations, hard power that compels others or soft power that attracts the rest of the world. Certainly, the U.S. economic system provides the United States with the prosperity needed to underwrite its security strategy, but it also encourages other countries to accept U.S. leadership. U.S. economic might is sticky power. How will sticky power help the United States address today's challenges? One pressing need is to ensure that Iraq's econome reconstruction integrates the nation more firmly in the global economy. Countries with open economies develop powerful trade-oriented businesses; the leaders of these businesses can promote economic policies that respect property rights, democracy, and the rule of law. Such leaders also lobby governments to avoid the isolation that characterized Iraq and Libya under economic sanctions. And looking beyond Iraq, the allure of access to Western capital and global markets is one of the few forces protecting the rule of law from even further erosion in Russia.China's rise to global prominence will offer a key test case for sticky power. As China develops economically, it should gain wealth that could support a military rivaling that of the United States; China is also gaining political influence in the world. Some analysts in both China and the United States believe that the laws of history mean that Chinese power will someday clash with the reigning U.S. power.Sticky power offers a way out. China benefits from participating in the U.S. economic system and integrating itself into the global economy. Between 1970 and 2003, China's gross domestic product grew from an estimated $106 billion to more than $1.3 trillion. By 2003, an estimated $450 billion of foreign money had flowed into the Chinese economy. Moreover, China is becoming increasingly dependent on both imports and exports to keep its economy (and its military machine) going. Hostilities between the United States and China would cripple China's industry, and cut off supplies of oil and other key commodities Sticky power works both ways, though. If China cannot afford war with the United States, the United States will have an increasingly hard time breaking off commercial relations with China. In an era of weapons of mass destruction, this mutual dependence is probably good for both sides. Sticky power did not prevent World War I, but economic interdependence runs deeper now; as a result, the "inevitable" U.S.Chinese conflict is less likely to occur.Sticky power, then, is important to U.S. hegemony for two reasons: It helps prevent war, and, if war comes, it helps the United States win.

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Terminal Econ Impacts
Nuclear war Chris H. Lewis in his book "The Coming Age of Scarcity" p. 56 1998 Most critics would argue, probably correctly, that instead of allowing underdeveloped countries to withdraw from the global economy and undermine the economies of the developed world, the United States, Europe, and Japan and others will fight neocolonial wars to force these countries to remain within this collapsing global economy. These neocolonial wars will result in mass death, suffering, and even regional nuclear wars. If first world countries choose military confrontation and political repression to maintain the global economy, then we may see mass death and genocide on a global scale that will make the deaths of World War II pale in comparison. However, these neocolonial wars, fought to maintain the developed nations' economic and political hegemony, will cause the final collapse of our global industrial civilization. These wars will so damage the complex economic and trading networks and squander material, biological and energy resources that they will undermine the global economy and its ability to support the earth's 6 to 8 billion people. This would be the worst case scenario for the collapse of global civilization The impact turns the case and causes global instability Silk, Professor at Pace University, 1996 (Leonard, Making Capitalism Work, p. 27-28) Theoretically there was no reason why this had to be so. In a rational world, the improved prospects for peace should have led to greater spending on consumer goods and productivity raising investment. But that happens only when workers can be shifted to new jobs--and financial resources reallocated to create those jobs. In the absence of sufficient shifts of human and capital resources to expanding civilian industries, there were strong economic pressures on arms-producing nations to maintain high levels of military production and to sell weapons--conventional as well as dual-use nuclear technology--wherever buyers could be found. Without a revival of national economies and of the global economy, the production and proliferation of weapons would continue, creating more Iraqs, Cambodias, Yugoslavias, and Somalias-or worse. Like the Great Depression, the economic slump of the early 1990s fanned the fires of nationalist, ethnic, and religious hatred around the world. Economic hardship was not the only cause of these social and political pathologies, but it aggravated all of them, and in turn they fed back upon economic development. They also undermined efforts to deal with such global programs as environmental pollution, the production and trafficking of drugs, crime, sickness, famine, AIDS, and other plauges. Economic growth would not solve all those problems. But growth--and growth alone--creates the additional resources that make it possible to achieve such fundamental goals as higher living standards, national and collective security, a healthier environment, and more open economies and societies.

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_____________________________________________ ***CHEMICAL INDUSTRY IMPACTS – EXTERNAL

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1NC/2NC – Chemical Industry Impact
1 – Natural gas is key to the chemical industry and the production of a laundry list of valuable inputs into the economy and energy Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH The current price of natural gas is the chemical industry's number one economic issue. Natural gas is the lifeblood of the chemistry business in the U.S. Not only do we use natural gas as a fuel in our manufacturing processes, much like other industries, but we also use it as an ingredient, or feedstock, for many of the products we make. Natural gas and natural gas liquids contain hydrocarbon molecules that are split apart during processing and then recombined into useful chemical products. These products include life-saving medicines, health improvement products, technology-enhanced agricultural products, more protective packaging materials, synthetic fibers and permanent press-clothing, longer-lasting paints, stronger adhesives, faster microprocessors, more durable and safer tires, lightweight automobile parts, and stronger composite materials for aircraft and spacecraft. The business of chemistry also makes many of the products that help save energy throughout the entire economy, including insulation, house wraps, lubricants, and highstrength light-weight materials, enabling American industries and consumers to be more energy efficient. The business of chemistry is the only part of the economy that adds value to these hydrocarbon molecules rather than combusting them for energy. 2 – Chemical industry key to the economy Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH The $460 billion business of chemistry is a key element of the nation's economy, providing the building block materials that the rest of the U.S. economy relies upon. It is the country's largest exporter, accounting for ten cents out of every dollar in U.S. exports. Chemistry companies invest more in research and development than any other business sector. Safety and security have always been primary concerns of ACC
members, and they have intensified their efforts, working closely with government agencies to improve security and to defend against any threat to the nation's critical infrastructure. SUMMARY OF TESTIMONY A hearing on enhancing the nation's energy security could not come at a better time. The nation is facing an energy crisis caused by runaway prices for natural gas. Unless Congress acts to increase domestic natural gas supplies our economy will continue to struggle and we will fall short of our goals for a cleaner environment. A crisis of this magnitude poses a grave threat to America's economic and national security. Current energy prices are making it impossible for the US chemical industry, and other critical industries, to compete in global markets. Because the

business of chemistry produces the building block materials that the rest of our modern economy relies upon, we are somewhat of a "canary in the coalmine." As we go, so goes the rest of the nation.

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1NC/2NC – Chemical Industry Impact
3 – The impact is extinction and turns the case Chemical and Engineering News 1999 Vol. 77, No. 49. pp. Pp.46-47. http://pubs.acs.org/scibin/bottomframe.sci?hotartcl/cenear/991206/7749spintro2
The pace of change in today's world is truly incomprehensible. Science is advancing on all fronts, particularly chemistry and biology working together as they never have before to understand life in general and human beings in particular at a breathtaking pace. Technology ranging from computers and the Internet to medical devices to genetic engineering to nanotechnology is transforming our world and our existence in it. It is, in fact, a fool's mission to predict where science and technology will take us in the coming decade, let alone the coming century. We can say with finality only this: We don't know. We do know, however, that

we face enormous challenges, we 6 billion

humans who now inhabit Earth.

In its 1998 revision of world population estimates and projections, the United Nations anticipates a world population in 2050 of 7.3 billion to 10.7 billion, with a "medium-fertility projection," considered the most likely, indicating a world population of 8.9 billion people in 2050. According to the UN, fertility now stands at 2.7 births per woman, down from 5 births per woman in the early 1950s. And fertility rates are declining in all regions of the world. That's good news. But people are living a lot longer. That is certainly good news for the individuals who are living longer, but it also poses challenges for health care and social services the world over. The 1998 UN report estimates for the first time the number of octogenarians, nonagenarians, and centenarians living today and projected for 2050. The numbers are startling. In 1998, 66 million people were aged 80 or older, about one of every 100 persons. That number is expected to increase sixfold by 2050 to reach 370 million people, or one in every 24 persons. By 2050, more than 2.2 million people will be 100 years old or older! Here is the fundamental challenge we face: The world's growing and aging population must be fed and clothed and housed and transported in ways that do not perpetuate the environmental devastation wrought by the first waves of industrialization of the 19th and 20th

. As we increase our output of goods and services, as we increase our consumption of energy, as we meet the imperative of raising the standard of living for the poorest among us, we must learn to carry out our economic activities sustainably. There are optimists out there, C&EN readers among them, who believe that the history of civilization is a long string
centuries of technological triumphs of humans over the limits of nature. In this view, the idea of a "carrying capacity" for Earth—a limit to the number of humans Earth's resources can support—is a fiction because technological advances will continuously obviate previously perceived limits. This view has historical merit. Dire predictions made in the 1960s about the exhaustion of resources ranging from petroleum to chromium to fresh water by the end of the 1980s or 1990s have proven utterly wrong. While I do not count myself as one of the technological pessimists who see technology as a mixed blessing at best and an unmitigated evil at worst, I do not count myself among the technological optimists either. There are environmental challenges of transcendent complexity that I fear may overcome us and our Earth before technological progress can come to our rescue. Global climate change, the accelerating destruction of terrestrial and oceanic habitats, the catastrophic loss of species across the plant and animal kingdoms— these are problems that are not obviously amenable to straightforward technological solutions. But I know this, too: Science and technology have brought us to where we are, and only science and technology, coupled with innovative social and economic thinking, can take us to where we need to be in the coming millennium. Chemists, chemistry, and the

chemical industry—what we at C&EN call the chemical enterprise—will play central roles in addressing these challenges. The first section of this Special Report is a series called "Millennial Musings" in which a wide variety of representatives from the chemical enterprise
share their thoughts about the future of our science and industry. The five essays that follow explore the contributions the chemical enterprise is making right now to ensure that we will successfully meet the challenges of the 21st century. The essays do not attempt to predict the future. Taken as a whole, they do not pretend to be a comprehensive examination of the efforts of our science and our industry to tackle the challenges I've outlined above. Rather, they paint, in broad brush strokes, a portrait of scientists, engineers, and business managers struggling to make a vital contribution to humanity's future. The first essay, by Senior Editor Marc S. Reisch, is a case study of the chemical industry's ongoing transformation to sustainable production. Although it is not well known to the general public, the chemical industry is at the forefront of corporate efforts to reduce waste from production streams to zero. Industry giants DuPont and Dow Chemical are taking major strides worldwide to manufacture chemicals while minimizing the environmental "footprint" of their facilities. This is an ethic that starts at the top of corporate structure. Indeed, Reisch quotes Dow President and Chief Executive Officer William S. Stavropolous: "We must integrate elements that historically have been seen as at odds with one another: the triple bottom line of sustainability—economic and social and environmental needs." DuPont Chairman and CEO Charles (Chad) O. Holliday envisions a future in which "biological processes use renewable resources as feedstocks, use solar energy to drive growth, absorb carbon dioxide from the atmosphere, use low-temperature and low-pressure processes, and produce waste that is less toxic." But sustainability is more than just a philosophy at these two chemical companies. Reisch describes ongoing Dow and DuPont initiatives that are making sustainability a reality at Dow facilities in Michigan and Germany and at DuPont's massive plant site near Richmond, Va. Another manifestation of the chemical industry's evolution is its embrace of life sciences. Genetic engineering is a revolutionary technology. In the 1970s, research advances fundamentally shifted our perception of DNA. While it had always been clear that deoxyribonucleic acid was a chemical, it was not a chemical that could be manipulated like other chemicals—clipped precisely, altered, stitched back together again into a functioning molecule. Recombinant DNA techniques began the transformation of DNA into just such a chemical, and the reverberations of that change are likely to be felt well into the next century.

Genetic engineering has entered the fabric of modern science and technology. It is one of the basic tools chemists and biologists use to understand life at the molecular level. It provides new avenues to pharmaceuticals and new approaches to treat disease. It expands enormously agronomists' ability to introduce traits into crops, a capability seized on by numerous chemical companies. There is no doubt that this powerful new tool will play a major role in feeding the world's population in the coming century, but its
adoption has hit some bumps in the road. In the second essay, Editor-at-Large Michael Heylin examines how the promise of agricultural biotechnology has gotten tangled up in real public fear of genetic manipulation and corporate control over food. The third essay, by Senior Editor Mairin B. Brennan, looks at chemists embarking on what is perhaps the greatest intellectual quest in the history of science—humans' attempt to understand the detailed chemistry of the human brain, and with it, human consciousness. While this quest is, at one level, basic research at its most pure, it also has enormous practical significance. Brennan focuses on one such practical aspect: the effort to understand neurodegenerative diseases like Alzheimer's disease and Parkinson's disease that predominantly plague older humans and are likely to become increasingly difficult public health problems among an aging population. Science and technology are always two-edged swords. They bestow the power to create and the power to destroy. In addition to its enormous potential for health and agriculture, genetic engineering conceivably could be used to create horrific biological warfare agents. In the fourth essay of this Millennium Special Report, Senior Correspondent Lois R. Ember examines the challenge of developing methods to counter the threat of such biological weapons. "Science and technology will eventually produce sensors able to detect the presence or release of biological agents, or devices that aid in forecasting, remediating, and ameliorating bioattacks," Ember writes. Finally, Contributing Editor Wil Lepkowski discusses the most mundane, the most marvelous, and the most essential molecule on Earth, H2O. Providing clean water to Earth's population is already difficult—and tragically, not always accomplished. Lepkowski looks in depth at the situation in Bangladesh—where a well-meaning UN program to deliver clean water from wells has poisoned millions with arsenic. Chemists are working to develop better ways to detect arsenic in drinking water at meaningful concentrations and ways to remove it that will work in a poor, developing country. And he explores the evolving water management philosophy, and the science that underpins it, that will be needed to provide adequate water for all its vital uses. In the past two centuries, our science has transformed the world. Chemistry is a wondrous tool that has allowed us to understand the structure of matter and gives us the ability to manipulate that structure to suit our own purposes. It allows us to dissect the molecules of life to see what makes them, and us, tick. It is providing a glimpse

we will use chemistry to delve ever deeper into these mysteries and provide for humanity's basic and not-sobasic needs.
into workings of what may be the most complex structure in the universe, the human brain, and with it hints about what constitutes consciousness. In the coming decades,

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High Prices Kill Chemical Industry
Chemical industry can’t switch away from natural gas profitably Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH Natural gas accounts for nearly thirty-nine percent of all energy consumption by the business of chemistry. Natural gas liquids that are derived from natural gas or refinery operations account for another twenty-three percent. In total, more than half of the U.S. business of chemistry's energy needs come from natural gas. The U.S. business of chemistry has invested billions of dollars in facilities that make chemical products from natural gas and natural gas components. These facilities do not have the ability to switch to other inputs and produce these products. This infrastructure was built based on the competitive advantage the U.S. offered through its natural gas supply. Chemistry’s reliance on natural gas for power and products means that inflated prices have a uniquely devastating impact Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH Because of our industry's duel use of natural gas, as well as our significant presence in the U.S., the business of chemistry today accounts for eleven percent of domestic natural gas consumption, second only to electric utilities. As a result, changes in the natural gas market, such as constricted supply and inflated prices, have a particularly severe impact. In order for the domestic business of chemistry to remain competitive in the global marketplace and to be able to continue to provide employment and other benefits here at home, it is essential that measures be taken to increase natural gas supplies and to make these supplies available at reasonable prices.

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High Prices Kill Chemical Industry
High prices kill profitability Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH High natural gas prices significantly cut into our industry's profitability. For every one-dollar increase in the price of natural gas, over the course of a year, our industry incurs approximately $4.2 billion in additional costs. Yet, because we compete in a global market, U.S. companies are unable to pass these added costs for natural gas along to their customers if our products are to remain competitively priced with those produced by our foreign competitors. In 1999, when the price of natural gas averaged $2.27, the operating margin for basic chemical companies was 6.8%. In 2001, when the price of natural gas rose to an average of $4.27, the operating margin dropped to 0.6%. High prices kill chemical industry competitiveness Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH Restricted supplies and high prices for natural gas severely limit the ability of U.S. chemical manufacturers to remain competitive with foreign competitors. The business of chemistry in the U.S. is concentrated in the Gulf Coast region largely because of the region's proximity to a traditionally abundant, low cost supply of natural gas resources. While about seventy percent of U.S. petrochemicals production uses natural gas as a feedstock, the same percentage of producers in Western Europe and Asia use naphtha, a crude oil derivative. Unlike crude oil, the price of which is set by the global market, natural gas is not as broadly traded, with the result that price increases for natural gas in North America are felt only in North America. For many years, the U.S. business of chemistry enjoyed the benefit of relatively low cost feedstocks relative to our foreign competitors, enabling the industry to become the global leader in chemical products. A tightened natural gas market and soaring natural gas prices, however, put this position in jeopardy. For the business of chemistry, experience shows that, although this number fluctuates depending on the price of crude oil, the price for natural gas at which we become unable to compete in global markets is between $3.25 and $4.00. Current prices are hovering around $6.00.

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________________________________________________ ***MANUFACTURING SHIFT IMPACTS – EXTERNAL

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1NC/2NC – Manufacturing Shift Impact
1 – High natural gas prices cause manufacturing to shift overseas, devastating the US economy IECA 2003 – Industrial Energy Consumers of America 12-3, http://www.ieca-us.com/downloads/natgas/$111bilion.doc The impact of high energy costs on manufacturing is significant and it contributed greatly to reduce manufacturing after-tax profits during the 41 month natural gas crisis. According to Bureau of Census data, manufacturing profits fell 47.7 % during the time period of the natural gas crisis versus the previous 41 months. Manufacturing plays an important role in the economic health of our country and we must recognize that affordable energy, including natural gas, is essential. In the past, the affordability of U.S. energy was a key factor in manufacturing building their factories here. Now, the non-globally competitive price of natural gas and natural gas feedstock is forcing manufacturing companies to produce their products elsewhere. According to the National Association of Manufacturers, manufacturing accounts for 22 % of GDP growth, contributes one-third of the economy’s productivity growth, creates more business activity and jobs in other sectors than any other industry, performs 62 % of U.S. private sector R&D, pays the highest wages –18 % higher than the national average and makes two-thirds of all U.S. exports. 2 – Overseas manufacturing shift devastates the US economy and global leadership Choate 2002, Pat Choate, director of the Manufacturing Policy Project and Edward Miller, president of DSI, former economic treaty negotiator, 2002 , http://www.uscc.gov/researchpapers/2000_2003/reports/analysis.htm For two centuries, industrial and military self-sufficiency was America’s policy. It succeeded brilliantly. It protected against European adventurism in the 19th century. It enabled the nation to become the richest, most industrialized country in the world. And it allowed America to be the arsenal of democracy in the 20th century. Even when America disarmed following World War I and again after World War II, it still had the industrial capacity -- the potential -- to re-arm quickly if a threat emerged. And when one did, America’s factories
quickly converted to war production, allowing the Allied forces to out produce and ultimately overwhelm the Axis powers in the 1940s and hold off the enemy during the Korean War. Following the Korean War, the U.S. defense industrial base was repeatedly modernized, again enabling the USA to cope

And self-sufficiency was taken a step further during the Cold War as the United States actively led Europe, Japan and others in denying the Soviet Union the technologies, machinery, skills, and research they needed to keep apace — economically and militarily. That policy of strength and containment succeeded, too. The Soviet Union could not match the West, its people grew weary, and
with any foreign threat. that empire broke into pieces. But with the collapse of the Soviet Union, America seems to have quickly forgotten the older lessons and policies that long served it well. In a very real way, the mood of America in these first days of the 21st century is akin to that of America in the 1920s. Then, the "war to

With the collapse of the Soviet Union, America remains the sole super power. Americans are generally
end wars" had ended. The threat was gone. America could return to the business of America, which was perceived to be business. prosperous. And while as recently as the 1980s, the global competitiveness of domestic industries was a top concern of national leaders, their successors now focus on assuring stockholders higher share prices and American consumers a steady flow of inexpensively produced goods, regardless of where they are made. Once again, the business of America seems to be business. Today, a smaller, simpler, more trusting, view dominates. Terrorists are seen as the principal threat to national security. The emergence of China -- a one-party, repressive, Communist state — as an economic and military power is mainly seen not as a danger, but as a business opportunity. And global economics is treated as something analogous to celestial mechanics -- a selfdriven, self-correcting system in which markets balance supply and demand, assuring ever more growth and development. But there is also something different about what America is doing now from what it did after World War I and World War II. Then, the United States shifted military production back to civilian uses and even though military expenditures were cut, the U.S. industrial base remained in America. The long-held policy of self-

, now that the Cold War is over, the U.S. industrial base is being taken apart, piece-by-piece, and relocated to other nations. In the process, much of American’s industrial and military production base is being sold to foreign interests, and more important a significant portion of it is being physically relocated into other nations, including our most likely strategic rival — China.
sufficiency was not disturbed. Unlike in the past, however

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1NC/2NC – Manufacturing Shift Impact
3 – Nuclear war Zalmay Khalilzad, RAND, The Washington Quarterly, Spring 1995 Under the third option, the United States would seek to retain global leadership and to preclude the rise of a global rival or a return to multipolarity for the indefinite future. On balance, this is the best long-term guiding principle and vision. Such a vision is desirable not as an end in itself, but because a world in which the United States exercises leadership would have tremendous advantages. First, the global environment would be more open and more receptive to American values -- democracy, free markets, and the rule of law. Second, such a world would have a better chance of dealing cooperatively with the world's major problems, such as nuclear proliferation, threats of regional hegemony by renegade states, and low-level conflicts. Finally, U.S. leadership would help preclude the rise of another hostile global rival, enabling the United States and the world to avoid another global cold or hot war and all the attendant dangers, including a global nuclear exchange. U.S. leadership would therefore be more conducive to global stability than a bipolar or a multipolar balance of power system.

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High Prices Cause Manufacturing Shift
High natural gas prices cause manufacturing to shift overseas, devastating the US economy IECA 2003 – Industrial Energy Consumers of America 12-3, http://www.ieca-us.com/downloads/natgas/$111bilion.doc The impact of high energy costs on manufacturing is significant and it contributed greatly to reduce manufacturing after-tax profits during the 41 month natural gas crisis. According to Bureau of Census data, manufacturing profits fell 47.7 % during the time period of the natural gas crisis versus the previous 41 months. Manufacturing plays an important role in the economic health of our country and we must recognize that affordable energy, including natural gas, is essential. In the past, the affordability of U.S. energy was a key factor in manufacturing building their factories here. Now, the non-globally competitive price of natural gas and natural gas feedstock is forcing manufacturing companies to produce their products elsewhere. According to the National Association of Manufacturers, manufacturing accounts for 22 % of GDP growth, contributes one-third of the economy’s productivity growth, creates more business activity and jobs in other sectors than any other industry, performs 62 % of U.S. private sector R&D, pays the highest wages –18 % higher than the national average and makes two-thirds of all U.S. exports. High prices devastate manufacturing competitiveness IECA 2003 – Industrial Energy Consumers of America http://www.ieca-us.com/downloads/natgas/15_Naturalgas-tter1-16-03.doc, 1-16 As of January 16, 2003, the Henry Hub wholesale price of natural gas was over $5.00 per million Btu and is more than twice the average price of $1.97 per million Btu from 1991 to 1998. U.S. natural gas production has fallen for three straight quarters. Prices in Europe, Brazil and China are less than in the United States. Industrial energy consumers, already weakened by a fragile economy, are threatened with further loss of global competitiveness placing good jobs at risk. Leadership is needed by the U.S. Congress and the states to put our country on the road to an affordable and reliable energy supply.

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High Prices Cause Manufacturing Shift
High natural gas prices cause wholesale shift of US manufacturing base overseas Sun.com 2004 – March, http://www.sun.com/br/0304_ezine/man_gas.html U.S. firms cannot survive when costs triple. Companies using gas for feedstock, such as nitrogen fertilizer producers, have been among the first to feel financial pain. High gas prices, which account for up to 90 percent of fertilizer costs, have forced nine nitrogen fertilizer plants to close or cease operations since January 2001. The remaining facilities have only operated at 50 percent capacity. Where are farmers getting their fertilizers? According to the U.S. Government Accounting Office, the 25 percent decline in U.S. fertilizer sales has been accompanied by a 43 percent increase in imports and a 7 percent decrease in agricultural consumption. Job losses follow plant closures. Russell Gold, staff reporter for The Wall Street Journal, recently wrote, "U.S. chemical makers have lost an estimated 78,000 jobs since natural gas prices began to rise in 2000." Theo H. Walthie, business group president, Hydrocarbons and Energy and EO-EG at The Dow Chemical Company, recently confirmed this pessimistic statistic when he spoke at the February 2004 CERAWEEK conference. According to Walthie, sustained high natural gas prices forced Dow to shutter U.S. plants, and focus investments overseas, accounting for some of the 3,500 jobs Dow lost globally in 2003. Walthie said more U.S. manufacturing jobs are at risk unless U.S. natural gas prices become globally competitive in the near-term. Where are the jobs and investments going? Companies like Dow Chemical are relying more on their joint-venture facilities in Malaysia and Kuwait, where natural gas prices are lower than in the United States. New plant additions by Asian-owned companies are also on the drawing board in Taiwan and China, positioning these companies to supply growing regional markets that turn basic chemicals into plastic parts. Higher Gas Costs Means Higher Beef Prices—and More Natural gas use is widespread. This raw material accounts for 38 percent of industrial energy use, 15 percent of commercial building use, and 16 percent of electric generation use. Increases in gas prices ripple throughout the economy. For example, as average gas prices rose by 303 percent at the end of 2000, fertilizer prices increased by 144 percent. Without offsetting cost savings from other farming expenses, farmers would have curtailed production to boost corn prices to recoup expenses. Higher corn prices lead to higher prices for corn syrup and grain feed, ultimately forcing up prices for hundreds of consumer products such as soft drinks, breakfast cereals, burgers, and ethanol used in gasoline. Rising gas prices also increase electricity costs, hurting profit margins of every U.S. business. Because of environmental restrictions, natural gas—a clean-burning fuel— powers 90 percent of all recently built electric generation plants. In New England, where gas fuels 40 percent of electricity plants, average power prices hit 30 cents per kilowatt hour in mid-January 2004—a 600-percent increase over normal prices. Why the price shock? An eighth of the region's power generators shut down because they lacked gas or they sold their gas to residential heating markets instead of producing electricity. The past decade's construction of gas-fired power plants is the major factor increasing gas demand. Most states regulate retail electricity prices—passing increased wholesale power costs through to retail customers. Manufacturers, however, face global competitors, and cannot pass energy cost increases through to consumers. The result is that power generators can outspend manufacturers for natural gas— forcing manufacturers to go offshore to find cheap gas supplies.

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Manufacturing Shift Key to Economy / Heg
Overseas manufacturing shift devastates the US economy and global leadership Choate 2002, Pat Choate, director of the Manufacturing Policy Project and Edward Miller, president of DSI, former economic treaty negotiator, 2002 , http://www.uscc.gov/researchpapers/2000_2003/reports/analysis.htm For two centuries, industrial and military self-sufficiency was America’s policy. It succeeded brilliantly. It protected against European adventurism in the 19th century. It enabled the nation to become the richest, most industrialized country in the world. And it allowed America to be the arsenal of democracy in the 20th century. Even when America disarmed following World War I and again after World War II, it still had the industrial capacity -- the potential -- to re-arm quickly if a threat emerged. And when one did, America’s factories quickly converted to war production, allowing the Allied forces to out produce and ultimately overwhelm the Axis powers in the 1940s and hold off the enemy during the Korean War. Following the Korean War, the U.S. defense industrial base was repeatedly modernized, again enabling the USA to cope with any foreign threat. And self-sufficiency was taken a step further during the Cold War as the United States actively led Europe, Japan and others in denying the Soviet Union the technologies, machinery, skills, and research they needed to keep apace — economically and militarily. That policy of strength and containment succeeded, too. The Soviet Union could not match the West, its people grew weary, and that empire broke into pieces. But with the collapse of the Soviet Union, America seems to have quickly forgotten the older lessons and policies that long served it well. In a very real way, the mood of America in these first days of the 21st century is akin to that of America in the 1920s. Then, the "war to end wars" had ended. The threat was gone. America could return to the business of America, which was perceived to be business. With the collapse of the Soviet Union, America remains the sole super power. Americans are generally prosperous. And while as recently as the 1980s, the global competitiveness of domestic industries was a top concern of national leaders, their successors now focus on assuring stockholders higher share prices and American consumers a steady flow of inexpensively produced goods, regardless of where they are made. Once again, the business of America seems to be business. Today, a smaller, simpler, more trusting, view dominates. Terrorists are seen as the principal threat to national security. The emergence of China -- a one-party, repressive, Communist state — as an economic and military power is mainly seen not as a danger, but as a business opportunity. And global economics is treated as something analogous to celestial mechanics -- a self-driven, self-correcting system in which markets balance supply and demand, assuring ever more growth and development. But there is also something different about what America is doing now from what it did after World War I and World War II. Then, the United States shifted military production back to civilian uses and even though military expenditures were cut, the U.S. industrial base remained in America. The long-held policy of self-sufficiency was not disturbed. Unlike in the past, however, now that the Cold War is over, the U.S. industrial base is being taken apart, piece-by-piece, and relocated to other nations. In the process, much of American’s industrial and military production base is being sold to foreign interests, and more important a significant portion of it is being physically relocated into other nations, including our most likely strategic rival — China.

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Manufacturing Shift Key to Hegemony
US technological dominance is key to hegemony Khalilzad, 1995 (Washington Quarterly, lexis) The United States is unlikely to preserve its military and technological dominance if the U.S. economy declines seriously. In such an environment, the domestic economic and political base for global leadership would diminish and the United States would probably incrementally withdraw from the world, become inward-looking, and abandon more and more of its external interests. As the United States weakened, others would try to fill the Vacuum. To sustain and improve its economic strength, the United States must maintain its technological lead in the economic realm. Its success will depend on the choices it makes. In the past, developments such as the agricultural and industrial revolutions produced fundamental changes positively affecting the relative position of those who were able to take advantage of them and negatively affecting those who did not. Some argue that the world may be at the beginning of another such transformation, which will shift the sources of wealth and the relative position of classes and nations. If the United States fails to recognize the change and adapt its institutions, its relative position will necessarily worsen.

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_______________________________________________ ***MANUFACTURING SHIFT IMPACTS – TURNS THE CASE

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Manufacturing Shift Impact – Turns Oil
Manufacturing shift turns their oil dependency impacts Gupta 2003 – Chairman and CEO, Rohm and Haas (Global Chemical Manufacturer) Testimony before House Committee on House Resources, 3-19, FDCH As more and more U.S. manufacturers shut down and production moves overseas, not only does our nation lose those jobs, but we also become increasingly reliant upon other nations for the materials upon which we have built our modern economy, our agricultural base and our national defense.

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________________________________________ ***NATURAL GAS DISAD AFF ANSWERS

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_____________________ ***NONUNIQUENESS

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2AC NU – High Prices Now
AFF – NU – NATURAL GAS PRICES AT ASTRONOMICAL LEVELS GULF NEWS 4-29-2008 Already consumers are starting to feel the pinch as natural gas follows oil skyward. Even before Sunday's strike, consumers in some parts of Canada are expecting prices to jump 55 per cent over the prices of May 2007. As one analyst said, he once would have pegged $12 per Btu natural gas as astronomical, but no one saw $120 per barrel crude oil either. As of Monday, prices are hovering in the $11 range, which is a two-year high for natural gas. AFF – NU – SHORT TERM SUMMER PRICES WILL REMAIN HIGH DUE TO TIGHT PRODUCTION SCHEDULES FOSTER NATURAL GAS REPORT 5-16-2008 Nonetheless, for this summer, the U.S. natural gas market "looks tight," with working gas storage levels expected to be 142 Bcf lower by October, when compared to last year. Although U.S. natural gas production is expected to be up 1.5 Bcf/d (2.8%), Canadian production and liquefied natural gas (LNG) imports will be down 0.5Bcf/d and 1.5 Bcf/d, respectively. Lower gas demand in the electric power sector due to improved hydroelectricity and nuclear generation could trigger a drop of 0.1 Bcf/d in gas deliveries to the sector this year. A greater decrease will come from the U.S. industrial sector - with a 0.4 Bcf/d decrease (or a 2.1% decrease). Demand for natural gas will outpace production for many reasons absent the plan North American Natural Gas Vision 2005, January, http://www.pi.energy.gov/pdf/library/NAEWGGasVision2005.pdf, North American Energy Working Group Experts Group on Natural Gas Trade and Interconnections Continued North American cooperation in natural gas production, storage, and delivery will be even more important over the next decade. For all three countries, the demand for natural gas is expected to increase, at a faster rate than production growth. The increased demand for natural gas will be driven by many factors, including population growth, industry consumption, and the environmental benefits of natural gas (compared to other fuels). This increased demand is expected to be between 15 and 25 percent for Canada and the U.S. and over 90 percent for Mexico during the ten year period (2002 to 2012).

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1AR NU – AT New Supply

New sources of supply will fail to stop rapidly rising prices in the status quo Domenici 2005 – Senator, New Mexico The Hill, 2-17 The United States faces a natural-gas crisis that will have a crippling effect on our economy by 2020 if we don't act now. Many thought we fixed the problem by approving construction of the Alaska natural-gas pipeline, but that pipeline will provide only enough gas to take the edge off our expanding energy appetite. But by 2025, the pipeline's estimated 2.2 trillion cubic feet (tcf) will equal only 7 percent of what the United States is expected to consume annually. Today, we consume 22 tcf of gas each year. By 2025, consumption will reach 31 tcf -- an increase of more than 40 percent. But by 2025, the United States will only be producing 21.8 tcf -- just 70 percent of expected demand. What's driving that demand? Nearly half of the new electricity generation expected to come on line in the next 20 years will require natural gas, according to a new study by the American Gas Foundation. That's because natural gas is clean and was, until recently, abundant and affordable. Even with today's tight supplies and rising prices, it's easier to site and build a gas-fired plant than a plant fired by coal or nuclear power, the two other abundant sources of electricity. We have thought we could make up the shortfall between production and consumption by importing liquid natural gas (LNG). But energy companies are having trouble getting the ports built that are needed for importing LNG. Companies have filed plans for some 40 LNG ship terminals on the East and West coasts, but local resistance to proposed terminals has stalled permitting and prevented construction. In recent months, LNG developers have run into local opposition in Eureka, Calif.; Harpswell, Minn.; La Joya, Baja California, Mexico; Mobile, Ala.; Vallejo, Calif., Searsport, Minn.; and Fall River, Mass. Given such resistance, it is unlikely that the United States will be able to build enough terminals in the next 20 years to facilitate the import of 30 percent of its gas even if we thought such reliance on foreign fuel was a good idea. Studies prove US natural gas production has peaked California Energy Commission 2005 Natural Gas Assessment Update, February, www.energy.ca.gov/2005publications/ CEC-600-2005-003/CEC-600-2005-003.PDF U.S. Natural Gas Production Has Flattened U.S. natural gas production has been relatively flat since 1990, staying below 20 trillion cubic feet per year even though the number of wells drilled has increased approximately 80 percent (Figure 16). Natural gas reserve depletion may be contributing to the apparent flattening of U.S. production. Depletion accompanies all nonrenewable resource development. As natural gas-producing areas are depleted, production falls below economic levels and new fields must be tapped to replace mature ones. These new fields, however, are usually smaller and more costly to develop. Thus, as time progresses, more effort is required to produce the same amount of gas. Advances in drilling technology have enabled producers to increase a well’s firstyear performance, but by extracting the gas more quickly, the well’s annual production declines more rapidly in subsequent years.

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1AR NU – AT New Tech / Supply
Prices will continue to increase despite new technology and sources Contra Costa Times 3-2-2005 Natural gas prices in California and throughout the United States have doubled since July 2001, the California Energy Commission said in a recent report. The expense of additional drilling required to find natural gas in mature fields will continue to boost prices, the report warned. While conservation, new extraction technology, drilling in undeveloped regions and imports of liquefied natural gas from overseas could provide some relief, pipelines to new production basins will take at least 10 years to build and ports to unload LNG tankers have yet to be built on the West Coast, the report noted.

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1AR NU – AT LNG Solves
AFF – NU – LNG DECLINES PUSH PRICES UP THE OKLAHOMAN 4-25-2008 What might happen? Analysts worry that an extremely warm summer will siphon natural gas normally headed to storage but instead will operate power plants, Say said. Also, while the nation historically has bought significant amounts of liquid natural gas at this time of year, that's not happening this year because producers are getting better prices for the product in Europe, he said. LNG won’t solve high prices Natural Gas Week 2-28-2005 The USpower industry should not fall victim to a false sense of security based on assumptions that LNG will be able to support the growing role of natural gas use for power generation, according to an industry expert. Natural gas has been the fuel of choice for new peaking and intermediate power plants, creating an almost 40% demand increase for natural gas between 1997, at about 4.06 Tcf, and 2003, at about 5.67 Tcf, according to the Department of Energy. Government data has projected that electricity consumption will grow 1.8% per year from 2003 to 2025. Larry Makovich, senior director of North American power at the Cambridge Energy Research Associates (Cera), spoke to the press in Houstonrecently at the 24th annual CERAWeek. Makovich said the timing and magnitude of LNG supply additions to the US, compounded by the power sector's increased reliance on natural gas creates an unprecedented set of risky alternatives for the sector. LNG supplies will likely not be available to meet the emerging natural gas supply shortfall seen amid production declines and increasing demand, Cera said, because of production/liquefaction constraints caused by apparent reluctance to make costly, long-term infrastructure commitments, as well as slippage in schedules and contracts. Cera forecasts that natural gas demand for electricity will expand between 14% and 36% by 2020. Makovich said social, political and technological developments could lead to higher costs, demand for new gas supplies and diversity on generation construction.

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____________________________ ***LINK DEFENSE AND TURNS

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2AC – NO IL – PREDICTION UNCERTAINTY
AFF – NO IL – GAS PRICE PREDICTIONS ARE TOO UNCERTAIN FOSTER NATURAL GAS REPORT 5-16-2008 Actually, Denhardt acknowledged, long-term forecasts "are typically not even close" to reality. "Planning requires more creative approaches than what is typically used today and is not as helpful as many are led to believe," he said. For example, a study from 1996 - by the world's largest consulting firm - was "totally off the mark" when it predicted that Henry Hub prices in 2010 would be $3.00 (nominal). Another study predicted that coal would be the major source of new generation, but as gas prices fell, environmental regulations tightened and the efficiency of natural gas-fired combined-cycle generating plants improved, and gas plants ended up "taking over" the generation market.

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2AC – MUST READ
Turn – all their links are based on incorrect assumptions about baseline emissions, the plan’s incentive for efficiency and renewables, and a tight natural gas market Pew Center for Global Climate Change, June 2004 http://www.pewclimate.org/policy_center/analyses/neweia.cfm The Pew Center on Global Climate Change has examined EIA’s analysis of SA.2028 and finds it to be consistent with its earlier approach. However, it is still primarily driven by the underlying key assumptions that result in unrealistically high cost projections. These key underlying assumptions are: 1. High growth of emissions in the baseline case: The high baseline case is the single most important element in explaining EIA’s high cost projections. EIA’s baseline case assumes high growth in: · petroleum use in transport: +46% by 2025; · coal-fired electricity generation: +35% by 2025; and · the non-CO2 greenhouse gases (GHG), including a 440% increase in emissions of industrial high-GWP gases (HFCs, PFCs, and SF6) by 2025 despite a production slow-down in recent years and considerable uncertainty over future industry-specific trends. Furthermore, EIA assumes no relevant policies will be enacted over the next twenty years: · there will be no further federal or state requirements for criteria air pollutants, and therefore less incentive to rely on cleaner fuels and technologies – even though, for example, President Bush has proposed tougher standards for powerplants through the Clear Skies Act; · natural gas prices will remain very high despite proposed policies to increase supply; · individual states will do nothing to address GHG emissions – even though the northeastern states are actively developing a program to impose CO2 caps on their powerplants, California is about to impose CO2 tailpipe standards, additional states are developing renewable portfolio standards, and other states are considering similar initiatives; and · the federal government will do nothing to address climate change – it will not even implement President Bush’s voluntary GHG intensity reduction target or technology programs. EIA’s assumptions result in an high baseline case which widens the apparent gap that must be closed to comply with SA 2028, and thereby increases EIA’s cost projection. 2. Limited opportunities to increase efficiency and reduce consumption: EIA still assumes that covered entities in the transportation, building and industrial sectors will do very little to increase their efficiency or reduce consumption under SA 2028. For example, EIA forecasts only a very modest increase in automobile efficiency, from 26.4 mpg to 27.2 mpg by 2025. These assumptions are made despite the fact that the GHG cap-and-trade program established by SA 2028 would create a sustained price signal, which should spur technology improvements, and the diffusion of these technologies into the marketplace.
3. Limited opportunities to reduce non-CO2 GHG emissions: EIA still assumes there are limited opportunities for covered entities to reduce their emissions of the non-CO2 GHGs (methane [CH4], nitrous oxide [N2O], and the industrial high GWP gases [HFCs, PFCs, SF6]). Under this assumption, EIA projects that overall emissions of non-CO2 GHGs from covered sectors would actually increase by around 70% under SA 2028 (note that EIA projects an increase of 230% in the baseline case). In contrast, the MIT analysis (see below) finds that overall non-CO2 GHG emissions would be reduced by around 45%. Particular examples that the MIT model finds for cost-effective reduction opportunities in the non-CO2 GHGs include the industrial high-GWP GHGs (HFCs, PFCs, and SF6) in the semiconductor, magnesium and aluminum sectors, and reducing methane emissions from coal and oil production facilities, landfills and natural gas pipelines. 4. Limited available offsets: EIA assumes that there is only a limited amount of cost-effective offsets available. For example, on domestic sequestration, EIA projects only 112 MTC at under $100/TC will be available; however, a forthcoming report from the Pew Center by Robert Stavins of Harvard University indicates an availability of 300 MTC at under $50/TC. EIA also takes a restrictive view of available international offsets, assuming that trading will only take place with the EU-15 through 2025. This ignores the fact that access to mitigation opportunities in other developed countries and, particularly, in developing countries would greatly increase the supply of inexpensive international credits.

5. Tight natural gas supply: EIA still assumes a very tight supply of natural gas. This assumption would limit one key option for a smooth transition away from highly carbon intensive energy use. However, as shown by EIA’s own evaluation of past reference cases, natural gas has been the fuel with the least accurate forecasts of production, consumption and prices.

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2AC – Permits Key Efficiency / Renewables
CO2 caps reduce natural gas demand – EPA and DOE studies prove carbon cap key to create incentives for efficiency and renewables Hawkins 2001 – Director, NRDC Climate Center FDCH, 11-15, Testimony Senate Environment and Public Works The other feature of the climate problem is that energy systems cannot turn on a dime. While some may use this fact to argue against S.556, the opposite is true. To establish the market signals needed to promote cleaner and smarter energy technologies we need to adopt policies now to limit CO2 emissions. As long CO2 can be dumped for free, the market will discourage the investments needed to modernize our energy technologies. Let me give an example of how the status quo distorts decisions away from climate friendly actions. In the US today, there is much talk about the need for energy security. While energy efficiency will give us the largest, most secure additional domestic supply, investments in efficiency continue to be undervalued, in large part because there is no value assigned to the pollution that efficiency prevents, particularly carbon emissions. As I discuss below, investments in energy efficiency make it possible to implement S.556 while saving consumers money. But it is unlikely the market will spur adequate efficiency programs as long as carbon emissions are ignored in calculating the value of efficiency improvements. Adopting the CO2 caps in S.556 would change the incentives and promote investments in efficiency, renewable energy and CO2 capture and avoidance measures. But the Administration says it would cost consumers too much, with Mr. Holmstead's testimony claiming that the bill would cause a 30-50 percent increase in electricity prices. This Committee heard similar claims in the 1980's when industry and the Reagan Administration claimed that enacting acid rain controls would raise electric rates by 30 percent or more. Of course, nothing like that happened, nor will it under S.556. Two assumptions affect forecasted costs of S.556 more than any others: what is the predicted growth in electricity and natural gas demand, and will Congress adopt revenue recycling provisions to prevent windfall profits to electric generating companies? One can calculate high costs for controlling carbon emissions only if one assumes little is done to improve energy efficiency and use of renewable energy and if one assumes that Congress will let electric generators retain $50-100 billion in windfall profits. Mr. Holmstead's testimony makes both these assumptions in predicting large price rises for electricity. However, according to the full EPA study of S.556, U.S. gross domestic product would actually be higher under S.556 than under business-as-usual as a result of the stimulus-producing programs for energy efficiency and renewable energy promoted by the bill. As for natural gas dependence, the S.556 program of efficiency and renewable energy would actually reduce natural gas use for electricity generation compared to the Administration's energy plan. With the S.556 emission controls and advanced energy efficiency and renewable energy programs implemented,

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2AC – Permits Key Efficiency / Renewables
expenditures on electricity generation would actually be $3 billion per year less in 2015 than under the Administration's energy plan. The Role of Energy Efficiency and Renewable Energy EPA's underlying report documents the power of the integrated strategy of emission caps, improved efficiency, and greater renewable energy sources that is called for in S.556. By improving efficiency and increasing the share of renewable energy sources, we can reduce the rate of growth in demand for electricity and for natural gas, thereby allowing the emission reductions required by S.556 to be achieved without diminishing economic growth. The tools to accomplish this smarter energy future have been documented in the November 2000 report by the Department of Energy's principle research labs. "Scenarios for a Clean Energy Future" shows that an integrated program of efficiency and renewable energy policies can save consumers money and help achieve reduced emissions, including CO2 emissions at much lower costs. The Energy Information Administration (EIA) has
criticized the Clean Energy Futures (CEF) policies as not being realistically achievable. But EIA has not supported its criticism with any real analysis rather EIA merely asserts that this rapid deployment of energy efficiency and renewable power technology is unlikely It is important to understand the relative competencies of these two different institutions within DOE. EIA's expertise is in retrospective analysis of energy market statistics, so it is not surprising that its projections forward are heavily colored by its familiarity with the past trends. In contrast, the National Energy Labs that prepared the CEF report are expert in the engineering and economics of conventional and advanced energy efficiency and renewable energy technologies. The CEF experts have prepared a rebuttal to EIA's criticism that adds further support to the CEF report's findings. I have attached this to my testimony and ask that

we have a large untapped potential to improve efficiency and save money. The measures called for in the CEF report
it be included in the record. An examination of the CEF report demonstrates the reasonableness of the National Energy Labs' view that are not dream technologies, waiting to be invented; they are common-sense initiatives designed to increase the use of technologies that already exist. The CEF measures include improved appliance efficiency, through labeling, standards, and financial incentive programs. They include similar measures for buildings, calling for less wasteful heating, cooling and lighting systems and weatherization and rebate programs to reduce gas and electric use in existing

in only six months, Californians were able to reduce their electricity consumption by 6% during the summer of 2001, with no deprivation. This experience should encourage us not to sell short our ability to be smarter about energy use, given
buildings. EIA claims the CEF's projected rate of deployment for these technologies is unreasonable. But the appropriate policy support. The Administration asserts the goal of its energy plan is to reduce demand and greenhouse gas emissions to levels well below EIA's business as usual (BAU) forecasts. These are laudable goals but the Administration's use of BAU forecasts to critique S.556 is inconsistent with those goals. The Administration needs to frame specific policies to achieve appropriately ambitious goals for energy efficiency and renewable

When policies to promote efficiency and renewables are combined with emission caps the cost of meeting S.556's pollution targets is dramatically reduced compared to BAU assumptions. Under BAU, EPA calculates S.556 would increase
energy. When it does so, it will conclude, as DOE's experts have, that S.556 will help, not hurt consumers. costs of electric generation by $17 billion per year in 2015; with very modest efficiency efforts the cost drops to under $13 billion; with the CEF moderate policies the costs drop to $500 million; and with the CEF advanced policies called for in S.556 there is a savings of $3 billion a year in electric generation costs. We can clean up power plants and save consumers money through smart policies to reduce waste and increase renewable energy supplies.

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1AR – Efficiency / Renewables
Permit market causes efficiency and tech improvements that prevent fuel switching – empirically proven and the EIA’s model is flawed Pew Center for Global Climate Change, June 2004 http://www.pewclimate.org/policy_center/analyses/neweia.cfm Pathway towards emissions reductions Because EIA assumes limited availability of cost-effective efficiency improvements and limited reduction opportunities for non-CO2 gases, the great majority (88%) of required emissions reductions would come from fuel switching in the electricity sector. As any sizeable transition to natural gas would be limited according to EIA’s predicted tight supply, the EIA model predicts the electricity sector would comply by using expensive renewable and nuclear technologies together with premature retirement of some existing coal plants. Such a large-scale and unplanned shift of capital assets would be expensive. This overall story is the same for the amended SA.2028 as for the original S.139 bill, with the only real change from the relaxed cap being a lower requirement for new nuclear units and some greater retention of existing coal plants (in 2010 coal use is up 7% from 2001 levels, falling to 79% of current levels by 2020). In addition, EIA's analysis is very conservative in its assumptions regarding the diffusion of those high efficiency technologies that already exist. Among other things, EIA assumes there will be less use of combined heat and power and distributed generation technologies under SA 2028 than in the baseline case. EIA is also pessimistic on the market penetration of new technologies – assuming, for example, that by 2025 no hydrogen and no coal-fired IGCC with sequestration plants would be operational despite these being principal objectives of federal energy R&D. The actual experience of companies on the Pew Center’s Business Environmental Leadership Council that have elected to take on a GHG reduction target is that low-cost, or cost-saving opportunities are often available – even for much more ambitious targets than proposed in the bill. For example, BP set a target of reducing GHG emissions by 10% from 1990 levels by 2010. By instituting an emissions trading program, BP met its target 8 years ahead of time and achieved $650 million of savings over three years for an estimated outlay of $20 million. DuPont has met its target to reduce GHG emissions by 65% between 1990 and 2010 and managed to use 9% less total energy in 2002 than it did in 1990, despite an almost 30% increase in production. Compared to a linear increase in energy with production, this achievement resulted in $2 billion in cumulative energy savings. EIA’s model shares the weakness of many computable general equilibrium (CGE) or “top-down” economic models – it tends not to recognize these opportunities and, as a result, overstates projected costs.

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1AR – Efficiency / Renewables
The warrant for fuel switching proves that the plan key to create incentives for natural gas efficiency Sander et al 1999 – CEO Environmental Financial Prospects, PhD Natural Gas, June 6, http://www.envifi.com/Bios/natgas.htm As the market for greenhouse gas emissions continues to evolve, switching to less carbon-intensive fuels will be an important means to reduce carbon emissions. Natural gas is the least carbon-intensive fossil fuel. Per unit of energy, combustion of natural gas results in 42 percent less carbon dioxide emissions than coal and 29 percent less than residual fuel oil. Significant reductions in carbon dioxide emissions could be made through fuel switching, for example, from residual fuel oil to natural gas. The value of carbon emission reductions resulting from a trading and regulatory regime will also favor cofiring of natural gas with coal and might lead to an early retirement of coal-fired boilers or a repowering to use natural gas. When the value of carbon reductions is added to the value of SO2 and NOx reductions that also result from a switch to natural gas, the financial premium associated with the environmental benefits of the switch will be even greater. The market in carbon reductions will motivate technological improvements to reduce emissions. For example, if price signals provide incentives for increased use of natural gas, the market would respond with new technologies. Price incentives will encourage technologies that produce, distribute, and combust natural gas more efficiently and effectively. Cap doesn’t increase natural gas usage due to efficiency and renewables Hawkins 2001 – Director, NRDC Climate Center FDCH, 11-15, Testimony Senate Environment and Public Works The Role of Natural Gas The Administration also claims that S.556 will endanger energy security by requiring too much natural gas for electric generation. But large increases in natural gas use do not occur if the integrated CEF efficiency and renewable policies called for in S.556 are implemented. Under either the moderate or advanced CEF policy programs, EPA's study confirms that natural gas use in electric generators will be less than under BAU growth with no emission controls.[5] There is no reason to oppose limits on carbon pollution in order to avoid excessive dependence on natural gas or any other single fuel for electricity generation. Smart policies that harness the largely untapped potential of efficiency and renewable energy do a better job of promoting fuel diversity and attack the problem of global warming at the same time.

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2AC – Auctioning Solves Link
Industry data and comprehensive study proves that revenue recycling from auctioned permits offset the effects on business from short-term run ups in energy prices Redefining Progress 2001, Accurate Price Issue Brief, November, “The Price Scare Will be a False Alarm,” www.rprogress.org/newpubs/2001/etrsummary.pdf Using data from the National Bureau of Economic Research’s Manufacturing Productivity database, Gale and Hassett empirically analyze the effect of an energy price increase on U.S. business investment in equipment and structures. They find that carefully designed revenue recycling policies are likely to more than offset a short-run decrease in investment following increases in energy prices. Because increased capital accumulation is associated with increased productivity and total output, they conclude that a tax shift could exert a positive influence on the macroeconomy and wages. Auctioning permits allows revenue recycling which solves the short term impacts of higher prices on energy intensive industries and causes incentives for clean energy which lowers prices in the long term Redefining Progress 1999, Backgrounder No. 1, September, “Fair and Low-Cost Climate Protection” www.rprogress.org/newpubs/1999/dga_backgrounder1.pdf Instead, it would be more direct and simple to chare polluters for their carbon emissions, then return the revenue to citizens and businesses through tax cuts or rebates. For example, one proposal for early action would stabilize greenhouse gas emissions in 2002 at 1990 levels, which could yield over $33 billion annually from pollution charges. The revenue would then cut existing payroll taxes, giving workers an extra $285 per year: increase funding for health care or education; reduce the deficit; or just give every citizen $120 rebate every year, thus offsetting most, if not all, of a household’s energy price increase. Extremely pessimistic economic studies, which many believe contain highly unrealistic assumptions, estimated that emissions permit prices would be very high, raising about $300 billion each year by 2010 (WEFA 1998). If returned as a lump-sum rebate, each citizen would receive slightly more than $1,000 per year. Fortunately, the higher the estimated cost to the economy, the more revenue would be raised to offset higher energy prices. In the long term, the economy will widely adopt clean-energy technologies, thus driving energy prices back down; revenues will decrease, as will the need for revenues to offset price increases. In addition to returning the revenue to the economy, some revenue should also be used to compensate displaced workers and firms in energy-intensive industries, such as coal mining, and protect low-income consumers who may be temporarily harmed by price increases resulting from greenhouse gas reductions. The revenue could easily take care of the most vulnerable industries, workers, and consumers, while leaving plenty to distribute more widely through rebates or tax reductions.

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2AC – Permits Key Natural Gas Industry
Turn – the plan increases income and asset values for the natural gas industry and permit market solves the impact to price volatility Sander et al 1999 – CEO Environmental Financial Prospects, PhD Natural Gas, June 6, http://www.envifi.com/Bios/natgas.htm Carbon trading is not only feasible, it is emerging even in the absence of government regulation. New investments are being made in technologies and research needed to monitor and standardize carbon measurement. Active trading of carbon could prove an inexpensive insurance policy against the unknown, but potentially catastrophic, problems that may emerge because of the rapid increase in global carbon emissions. An effective and efficient market-based solution will become even more important as governments around the world tighten restrictions on carbon emissions. The U.S. natural gas industry is well-positioned to help in reducing carbon dioxide emissions. While helping to clean up the air, the benefits to the industry could be substantial. Income and asset values should both increase. All the while, carbon trading could also make the natural gas industry more resilient to other forces that have persistently created business cycles in the energy sector.

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_____________________ ***IMPACT ANSWERS

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2AC – Warming Outweighs
Warming outweighs natural gas – delaying carbon caps ensures devastating warming and causes worse costs later on Hawkins 2001 – Director, NRDC Climate Center FDCH, 11-15, Testimony Senate Environment and Public Works Assistant Administrator Holmstead set forth the Administration's reasons for its opposition to any requirement to control CO2 from power plants. The Administration claims that CO2 controls will cost consumers too much and make generation too dependent on natural gas. The Administration also asserts that decisions to control CO2 should be made as part of broad climate change policy. Contrary to the Administration's claims, S.556 will save consumers money, will reduce growth in consumption of natural gas and will lay the groundwork for broader efforts to combat climate change. The Costs of Delay The Administration states that it takes the issue of climate change very seriously. But its opposition to controlling power plant CO2 is a serious mistake. This past weekend, the world's other industrialized countries agreed to take steps to significantly limit global warming pollution over the coming decade. In response, the President's spokesman is quoted as saying the President "agrees with the need to reduce greenhouse gas emissions. His Cabinet review is under way, to determine a way that can be done without forcing America into a deep recession." The fact is that the October 31 analysis of S.556 submitted by Mr. Holmstead for the Administration demonstrates that controlling CO2 from power plants will help the economy, not harm it. That analysis concludes that US gross domestic product would be higher under S.556, not lower. To take climate change seriously, one must look at the costs of delay in taking action. The assumption of many is that by delaying action to limit global warming pollution we will reduce costs. That assumption is wrong and ignores the nature of the global warming problem. Today's atmospheric concentrations of CO2 are 30 percent above pre-industrial levels, higher than they have been in over 400,000 years. They have reached that level in a geological blink of an eye due to our burning of fossil fuels. By burning these fuels we are returning to the atmosphere heat- trapping gases that were isolated over a period of about 75 million years. The speed at which we are reversing the earth's geologic history is astounding: each year we put back into the atmosphere an amount of CO2 that took 100,000 years to store in fossil fuels. CO2 stays in the atmosphere hundreds of years once it is released, so each year we allow CO2 emissions to grow, we are committing many generations to the consequences of the resulting change in climate. The only way to limit the extent of the climate change we inflict on future generations and ourselves is to limit, or stabilize, atmospheric CO2 concentrations and to do that we must act to reduce emissions. The longer we wait to start, the more expensive we make it to achieve any particular stabilization target. To stabilize CO2 levels in the atmosphere, we must limit the total cumulative tons of CO2 we release. For example, to limit the atmospheric buildup of CO2 to a level about 60 percent higher than pre-industrial levels (today it's 30 percent higher), cumulative global manmade carbon emissions up to the year 2100 must be kept below 950 billion metric tons. We have already released about one-third of this budget. But the real problem lies immediately ahead: at current emission rates we will consume half of the remaining budget in less than 30 years. Imagine you are on a supertanker so close to a reef that you will cover half the remaining distance in the next 20 minutes. There is time to avoid the reef only if the tanker alters course immediately. Our economy can grow without increasing carbon emissions but only if Congress acts now to signal the market that these emissions can no longer be dumped for free. Unless we act now to lower the business as usual growth in CO2 emissions, we will eliminate our ability to stabilize concentrations at more protective levels or force later action that is wrenching and expensive, requiring extremely rapid reductions in these gases.

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2AC – Oil Peak Outweighs
AFF – LINK – OIL PRICES ARE MORE LINKED TO NATURAL GAS THAN THE IMPACT OF ENVIRONMENTAL REGULATIONS FOSTER NATURAL GAS REPORT 5-16-2008 Longer term, U.S. dependency on imported LNG will increase, as Canadian imports decline sharply. Alaskan gas is expected to come online by 2021. Also, the price of long-term gas probably will more closely follow the price of oil. The relationship between oil and gas "is much more important [on the price of natural gas] than the impact of environmental regulations, with gas-to-liquids, feedstock, hydrogen, and fuel switching keeping fuel prices linked," Denhardt believes. He also pondered the future effect of coal-to-liquids entering the market, suggesting the possibility that supply competition of coal-to-liquids in the energy market would "put a ceiling on oil prices."

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2AC – Chemicals Impact
Non unique—current high natural gas prices will devastate the economy Gupta, Chairman and CEO, Rohm and Haas Co, 2003 (FDCH, 5/19, lexis) A hearing on enhancing the nation's energy security could not come at a better time. The nation is facing an energy crisis caused by runaway prices for natural gas. Unless Congress acts to increase domestic natural gas supplies our economy will continue to struggle and we will fall short of our goals for a cleaner environment. A crisis of this magnitude poses a grave threat to America's economic and national security. Current energy prices are making it impossible for the US chemical industry, and other critical industries, to compete in global markets. Because the business of chemistry produces the building block materials that the rest of our modern economy relies upon, we are somewhat of a "canary in the coalmine." As we go, so goes the rest of the nation. In particular, the US chemical industry's economic survival depends on having access to an abundant and affordable supply of natural gas. Natural gas is almost exclusively a domestic energy source, yet we all must operate in a global marketplace. We compete with producers from Asia, Europe, and the Middle East. Current natural gas prices have turned the US chemical industry into the world's high-cost producer. From our perspective, it is not an exaggeration to say that an economic disaster is unfolding in this nation because of dangerously volatile prices in natural gas markets. Critical infrastructures like the chemical industry are extremely sensitive to wild swings in energy prices. Without a secure supply of energy, the industries that contribute to the nation's economic and national security are deeply compromised. What we are facing is not a seasonal disturbance, but a fundamental structural imbalance in supply and demand for natural gas. America has developed a tremendous thirst for natural gas. It is clean. It is efficient. And until recently, it was abundant and cheap. Consumers love it for heating their homes. Environmentalists love it because it is clean burning. Industries, including the chemical industry, love it because it is an excellent raw material that makes its way into thousands of products that everyone one of use, every day. Because we love it, America is using more and more gas. Natural gas used to generate electricity has increased by 35 percent in the past five years and will nearly double in the next decade. Almost all new power generating capacity coming on line in the US is gas fired. Half of new homes are now heated by gas. America is becoming an economy that runs on natural gas. Unfortunately, the nation's current natural gas supply is running low. Production today is below where it was 30 years ago when Americans were consuming far less. The paradox is that America has adequate reserves to meet current and future needs. Unfortunately, we can't access those reserves. The most promising -- and desperately needed -- sources are currently off-limits to development. Some of the most promising supply sources are in areas like the eastern Gulf of Mexico, the northern Rocky Mountains, and off the coasts of North Carolina and California. In the final analysis, the natural gas crisis is a domestic political and public policy problem. Environmental policies are driving new demand for gas to generate electricity and heat homes. Other policies keep critically needed supplies out of reach. As a nation, we can't have it both ways. We can't crave more and make less. Appropriate federal policies are needed to ensure a better balance between the supply of and demand for natural gas, and to keep prices at a reasonable level.

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2AC – Chemicals Impact
Chemical industry has been through worse and empirically bounces back Chemical and Engineering News, 2001 (12/24, http://pubs.acs.org/cen/topstory/7952/7952bus1.html) To call 2001 merely a difficult year for the chemical industry downplays the severity of events that eventually influenced general economic, business, political, and social circumstances. The repercussions of terrorist attacks late in the year only made a tough situation worse. The industry was already in a downturn at its start. This spawned an increasing number of job reductions, production cutbacks, business divestitures, and company mergers in the days that followed. For the first time in several years, a handful of companies declared outright bankruptcy, failing to find a way to survive the hard times. High energy and raw material prices were significant factors early on, only to come full circle and end the year at dramatically lower levels. Weakening international economies, slackening demand, overcapacity, the strong dollar, and a squeeze on prices and margins contributed to some of the poorest financial results in years. Chemical sales and earnings continued to decline. Mergers and acquisitions created some entirely new companies and others with new focuses. In the end, the Top 50 global chemical producers got shuffled and mixed, with a few new behemoths emerging. The decisions of government regulators had considerable consequences in these transactions, as well as in environmental and trade policies. The chemical industry has faced added challenges since the terrorist attacks on Sept. 11. Concerns about energy prices shifted to ones about production and supply security. Pharmaceutical producers were drawn into discussions about ensuring the supply of antibiotics and vaccines. And site security--long a key consideration for employee, community, and environmental safety--has been heightened as chemical plants and refineries are feared to be potential targets. On a positive note, advances in sequencing the human genome brought excitement to
pharmaceutical discovery. Chemical companies advanced new production technologies and planned to slightly increase their investment in R&D. They also moved ahead with expansion plans around the world, while shutting down older, less efficient plants. The Internet continued to bring changes in how the industry conducts business, with many companies asserting themselves in the online world. Top CHEMICAL ECONOMY. Even in a lackluster year, the state of the economy is news, but given the precipitous declines of

2001, this year it is big news. Declining growth rates and contraction of gross domestic product in the U.S., exacerbated by many other negative factors, put enormous pressure on the U.S. chemical industry. Similar circumstances played out around the world, especially in Europe and Asia. The strong dollar made U.S. chemicals less attractive to foreign customers. For the first nine months of 2001, the latest data available, U.S.
producers exported $60.8 billion in chemicals, a slight increase of 2.7% over the same period last year. At the same time, the U.S. became the place for foreign producers to sell to, with chemical imports into the U.S. up 9.0% to $59.4 billion. This caused the chemical trade surplus, long a point of pride in the industry, to fall 70% to just $1.4 billion. The trade situation also affected chemical shipments. Imports supplied some U.S. demand, but the U.S. recession had an even greater impact--shipments of chemicals through October contracted by about 3% to a total of $359.6 billion for the year to date, according to Commerce Department data. Of even greater concern has been the increase in inventories relative to shipments as the economy slowed throughout this year. Although chemical inventories have actually declined somewhat, the sell-off has not kept pace with the drop in shipments and has produced a high inventories-to-shipments ratio of about 1.50, which represents 1.5 months of demand. In December of last year, the ratio was 1.39. This inventory overhang has impacted both production and prices throughout the year, especially among commodity chemicals. After reaching an all-time high in February as producers tried to offset the high energy and feedstock costs, the government's producer price index for industrial chemicals has fallen 8.4%. Production of industrial chemicals

and synthetics, based on government data, declined about 9% from last year. The downward spiral of the chemical economy this year has of course put tremendous pressure on sales, earnings, and profitability. For
the first nine months of 2001, aggregate results for the 25 chemical companies regularly tracked by C&EN show year-to-year declines of 6% in sales and 44% for earnings. The aggregate profit margin for the group fell to 4.6% from 7.9% in the first nine months of last year. Economic conditions forced Borden Chemicals & Plastics to file for bankruptcy in April and Sterling Chemicals to file in July. Penn Specialty Chemicals also filed in July, and its assets were sold off in December. During the year, W.R. Grace also filed for bankruptcy, but to protect itself from asbestos liability litigation. However, Pioneer Cos., which filed in August, has reorganized and expects to emerge from bankruptcy by the end of December. After selling and closing some its businesses,

LaRoche Industries emerged from bankruptcy in October. With earnings and profitability declines, one might think that Wall Street would be less than keen on chemical company stocks. However, stocks of chemical companies, as well as those in many other "old economy" industries, have actually benefited this year from the highly publicized technology meltdown as investors looked for safer havens for their money. Despite the ups and downs of the stock market throughout the year, by mid-December C&EN's stock index--based on the same 25 companies used for earnings--was down just 3% from where it closed in 2000. At the same time, the Dow Jones industrial average was off 8%.

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2AC – Chemicals Impact
No impact to chemical industry – higher prices for natural gas can be diffused due to increased commodity demand Purchasing 1-13-2005 "The fortunes of the industry began to turn around in the last quarter of 2003 and that accelerated through 2004," says Swift. "Demand, production and operating rates are up, and, at that point, pricing power shifts from the buyer to the producer." Chemicals producers are not only passing on the increased natural gas and feedstock costs to buyers, but they are going well beyond it, in some cases, to improve their profit margins. In a recent update, Merrill Lynch analyst Donald Carson feels that pricing power is accelerating for many commodity chemicals producers. "Pricing power has decisively shifted from buyers to sellers in commodity chemicals. Polymer buyers have begun to recognize that supply has tightened, and in many cases [they] have become more concerned about reliable supply than price." For example, Dow Chemical Chairman William Stavropoulos said recently that his company is raising prices faster than the increasing costs of gas and oil. Dow Chemical's prices in its plastics unit rose 31% in the third quarter and profits increased a whopping 86%. "The chemical industry is now in a strengthening volume and price environment, and Dow continues to see improvements in product supply-demand balances across most businesses and in all geographic areas," said CFO J. Pedro Reinhard in a statement. "Elevated and extremely volatile feedstock and energy costs continue to give cause for concern within Dow both in relation to the immediate impact on margins and the long-term toll on consumer confidence." The price increases are hitting buyers hard. Buyers in Purchasing magazine's monthly business survey report that "prices in resins have risen the past few months due to the price of gas," according to one industrial commodities buyer, while many others report higher resin prices without specifically citing natural gas costs as the culprit. "Business is strong but price pressures on plastic resin are of great concern," is the way a buyer at one Midwest manufacturer puts it. GE Advanced Materials, maker of high-performance plastics, recently said increased demand and prices for plastic resin may boost operating profit for the unit by 25% in the fourth quarter. Chemicals giant BASF, in its third-quarter earnings statement, said "high oil prices allowed the company to pass on some necessary price increases to the market." Westlake Chemical said in its third-quarter earnings statement that increased sales volumes and prices outpaced higher feedstock and energy prices. And Neville Chemical cited "continued escalation of petrochemical related feedstock" for its decision to raise prices on its resins between 3¢ and 4¢/pound in November.

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1AR – High Prices Kill Chemicals Now
High energy prices now killing the chemical industry Investor’s Chronicle, 12/22/2004 (lexis) Meanwhile, higher energy prices remain a problem. The Chemical Industries Association (CIA) claims that unsustainable price hikes are putting the sector under severe pressure, and it's calling on the government to review what it sees as a serious threat to the industry. "A competitively-priced and secure supply of energy is a key element to the sustainable future of the UK chemical industry," says CIA director general Judith Hackett. "The present position leaves business unable to plan for either the short term or long term." In October, the House of Commons' Trade and Industry Select Committee began an enquiry into the recent increases in gas and electricity prices. In the meantime, the CIA claims that companies will be paying up to 40 per cent more for gas than European counterparts.

Chemical industry losing now The Advocate, 2004 (10/12, lexis) Despite oil prices of more than $50 per barrel, exploration and production activity in the Gulf of Mexico has lagged, and the state as a whole has not seen economic activity on par with some of the other oilproducing states such as Texas and Oklahoma. Revette said his office will be looking into the reason for the lag. High energy prices also have been hurting the chemical industry, which uses natural gas as a fuel and feedstock to make its products. The industry has been shutting down production and indicated the bulk of its expansion and capital investment will go overseas, where prices are cheaper.

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1AR – High Prices Don’t Impact Chemicals
No impact to price volatility on chemical industry- they’ll bounce back Mitsch, Fulcrum Global Analyst, 2/7/2005 (Fortune, lexis) But isn't the prospect of rising natural gas and crude oil prices a real threat to the profitability of chemical companies--and ultimately to the stocks? Obviously those are very important input costs for the chemical companies. But one of the things that I think is a bit of a fallacy is that high energy prices in and of themselves mean low profits for the manufacturers buying at those high prices. I believe that profitability is more a function of operating rates than it is of input costs. So you may get a very near-term hit if for some reason oil or natural gas prices spike up. But over a medium-term time frame, the chemical companies will be able to price accordingly and pass it through. Let me give you one example of why I believe that the power has shifted to the chemical companies rather than to their customers: Between October and December, the price of crude oil dropped from $ 55 a barrel to the low 40s. During that same time frame the spot price of ethylene, which is a bellwether chemical, went from 32 cents a pound to 47 cents a pound. It just shows you that there's a shortage here.

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1AR – High Prices Increase Chemical Revenues
Higher prices translate into increased revenues for chemical companies due to strong capacity utilization Deseret Morning News 2-12-2005 Peter Huntsman said he remains optimistic about the future of the chemical industry, which in recent years has been plagued by overcapacity and volatile prices of oil and natural gas, used as feedstocks for the production of many chemicals. "Our capacity rates are operating for the most part across the board around the world in excess of 90 percent," Huntsman said. "And there is very little new capacity coming on almost any of our products for some years to come. Typically anything above 90 percent capacity utilization means that producers have pricing leverage over customers."

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