Don L. Owen, Public Service Commissioner for 21 North Louisiana parishes, told the Piney Woods Journal, "I would be a hero if I could solve the high utility bills that we are currently experiencing. I would like to be the hero but there is nothing the Public Service Commission can do to curtail the utility bills going up due to the fuel adjustment cost."
Commissioner Owen, a veteran of 15 years on the Commission, also added, "We are talking with the utility companies about working with the consumer as much as possible in setting up payment plans to spread out the utility bills over several months. I've been very concerned for the last couple of years that we were going to see a big jump in natural gas prices."

"The reason for these natural gas price jumps is very simple,'' Owen said. "The environmentalists have blocked natural gas and oil drilling at every step in the past several years. This has resulted in an actual natural gas shortage."
In response to the Journal's question: "If there was a true natural gas shortage, then natural gas would not be available even at the higher rates, correct?" Commissioner Owen replied, "There maybe a price shortage. In California, natural gas has been quoted on the `spot market' as high as $40 per unit."

A spokesman for the Louisiana Public Service Commissions said the Public Service Commission is 'powerless' to do anything about the recent double and tripling of natural gas and electricity bills. "The rise in utility bills is not due to rate increases but is due to fuel adjustment cost. Electricity and gas distributors do not have long-term fixed rate contracts with natural gas suppliers."

The Public Service Commission spokesman also added, "The Public Service Commission allows the energy distributors to pass along to the consumers the added cost of fuel when fuel prices goes up. The distributors of electricity and natural gas to the consumer do not make a profit off the increase in natural gas prices, therefore, the Louisiana Public Service has no jurisdiction to regulate fuel adjustment cost or natural gas prices."

With out-of-control natural gas prices, the farming industry is facing crop failure even before planting season arises. Ninety percent of the cost of producing ammonia, the base ingredient for fertilizer, is the cost of natural gas which not only is a feed stock but also the fuel used to produce the ammonia.

"The farmer is the guy really caught in the middle on these natural gas prices," Bob Odom, Commissioner of Agriculture and Forestry told the Piney Woods Journal. "Ammonia and fertilizer is going to be so high this spring that farmers can't borrow enough money to cover the cost of planting."

``I've heard that nitrogen may be as high as $500 per ton by planting season,'' Odom added. ``I don't think that the producers are even quoting prices for ammonia to be delivered this spring.''

``Seven of the eight plants producing ammonia in Louisiana are shut down long term or on temporary shutdown,'' the Commissioner pointed out. ``The only solution for the farmers for the 2001 crop is on the national level. The new administration and Congress will have to declare the farming sector a disaster area before they even plant and provide farm disaster payment relief so the farmers can afford the fertilize the plant.''

State Senator Bill Jones of Lincoln parish told the Journal, ``There is no doubt that we have a huge problem with utility rates going up so much so quick. We have to figure out some way to do something about it, but we can't make the same mistakes that were made in California. They have a much worse energy crisis than we do.''

``I'm getting calls all the time from people who are having trouble paying $300 to $1,000 a month in utility bills,'' Senator Jones added. ``In California, they tried to deregulate the energy by getting the utility companies to put a cap on rates. That didn't work and now the California companies are bankrupt having lost billions of dollars since natural gas prices started going up because they couldn't pass through to the customer the fuel adjustment cost.''

It is unclear at the present what effect the skyrocketing prices of fertilizer will have on the forest industry's recent trend to fertilize plantation stands of pine trees. The most common fertilizes used to boost the growth of trees is urea and Dap, both which are experiencing price increase.

The operating rate of production for in U.S. plants for both urea and ammonia have changed dramatically in the past year. In February 2000 production of ammonia reached the highest point of the year with plants at 90% capacity. In December ammonia production levels were at 55% of capacity.

On the other hand, urea reached its highest level of production for the year in both February and April at 97% of capacity. In December, 2000 actual production of Urea was at the 60% level while ammonia production was even lower at 55% of capacity.

Jim Harris, spokesman for the Louisiana Ammonia Producers told the Piney Woods Journal, ``We've already seen two plants in Louisiana-Borden and Monsanto-get out of the ammonia business completely, and many others have temporarily shut down in part because of the high cost of natural gas. More than 80 percent of the ammonia made right here in Louisiana is used to make fertilizer.''

``With these shutdowns have also come layoffs,'' Harris added. ``Over 200 people have been laid off just in Louisiana. Most companies that have curtailed production haven't laid off but have kept their people doing maintenance work.''

``Many of the ammonia producers are waiting until late January to make production and operational decisions based on the price of natural gas at that time,'' Harris explained. ``Natural gas prices have gone from $2 per million BTU in 1999 to $10 per million BTU as of December of 2000.''

The Louisiana Ammonia Producers are a group of seven ammonia producing facilities in the state. Together, they account for 40 percent of the U.S. production of ammonia. LAP members employ nearly 2,000 people and pay approximately $30 million in state and local taxes. One LAP member is Farmland Industries near Pollock in Grant parish Louisiana.

John McDaniel, Farmland plant manager told the Piney Woods Journal ``We only produce ammonia here in Pollock. All of our production capacity is currently down and probably will remain down for sometime if natural gas prices stay high.''

``Since the end of May we have run production only four weeks; two weeks in August and two weeks in December,'' McDaniel a native of Oakdale and a Louisiana Tech School of Engineering graduate pointed out. ``We haven't had to lay anyone off yet because we have put our people on maintenance. We have actually sent some of our people from Pollock to other Farmland plants to do maintenance in the last several months.''

Farmland Industries is a huge Farmer owned Co-op that did over $12 billion in business in their last fiscal year that ended in September 2000. First quarter results have been in the black but the natural gas hikes and downtown at Farmland ammonia plants could severely alter Second quarter results for Farmland.
``Farmland Industries is committed to have products available to the farmer for the spring planting season,'' McDaniel emphasized. ``The ammonia that we produce here at Pollock is shipped by pipe line to the mid-west,'' McDaniel explained. ``However, some of Farmland ammonia plants are in the mid-west and their production can be trucked directly to fertilizer plants and directly to the farmer. This will be less expensive than shipping by pipeline from Pollock.''

Louisiana State Senator Mike Smith, whose 31st Senatorial District includes Grant parish told the Journal, ``We are not powerless to do something about the rising natural gas prices. There just are not enough people who want to do something about it is the problem. In past legislative sessions, I've introduced resolutions asking that national and state energy policies be established.''

One Farmland Industries ammonia plant is located in Trinidad in the Caribbean. Although its production capacity of 2,000 tons per day is relatively small, natural gas prices in Trinidad remain at a steady $1 per cmf versus the $8 to $9 per cmf now paid in the United States for natural gas.

David Earheart with Farmland's Kansas City office provided the Journal with further written information on ammonia, nitrogen, and fertilizer prices:
Natural gas is the primary component in producing nitrogen fertilizers, accounting for 75-90 percent of the total cost of production. As a results nearly half of the U.S. nitrogen production capacity is now idled or curtailed. This sharp reduction in supply could threaten the availability of nitrogen fertilizer to U.S. farmers with a potential shortfall of as much 1-2 million tons or 10-15% of total nitrogen fertilizer demand.

As for ammonia production of which natural gas accounts for 90% of the cost, at a natural gas rate of $2.30 MMBtu, the cost would be $100 per ton with $75 being the cost of natural gas. Using recent natural gas prices of $9 per MMBtu, the cash production cost of ammonia jumps to $330 per ton.

Ammonia prices are expected to reach $400 per ton by planting season in comparison $210 per ton cost in the year 2000 planting season.

Without nitrogen fertilizer, corn yields could drop as much as 40 percent. Nitrogen is applied on 98% of the corn crops in the USA, 88 percent of the wheat and 86 percent of the cotton crops.

Benny Dobson, who lives near Creston in east Natchitoches parish and has 5 producing natural gas wells on his property told the Journal;
``Since the jump in natural gas prices, I have not seen an increase in my royalty check either in increased production or just higher well-head prices.''

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