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Affordable energy key to steel’s competitiveness

June 29, 2011 - 00:07 GMT Location: New York

This article is republished from www.amm.com with the permission of American Metal Market www.amm.com. Copyright © 2011 American Metal Market LLC, All rights reserved.

KEYWORDS: Marcellus Shale , Thomas J. Gibson , AISI , energy , steel

Energy-intensive domestic steel producers require cheaper, more affordable energy to be competitive, but so far have failed to garner support from Congress in adopting a comprehensive, national energy policy, Thomas J. Gibson, president and chief executive officer of the American Iron and Steel Institute (AISI), told reporters during a media call Tuesday.

Alongside other trade association executives drawn from the chemical, nuclear, and air and ocean transport sectors, Gibson argued competitiveness is directly related to access to affordable sources of energy, something the domestic steel industry’s competitors in China or Brazil have.

"The U.S. steel industry can out compete anyone in a fairly traded market," Gibson said on the call, which was hosted by the Texas-based Consumer Energy Alliance. "In steel, this is very much the fact, if we have access to affordable energy."

"We have the world’s best labor standards. We have the best energy intensity. There’s no issue more important to AISI and the steel industry than to secure an affordable future," he added.

While much of the energy consumed by the steel industry is delivered in the form of electricity and metallurgical coal, shale gas, a relative newcomer to the energy game, has been described by one steel industry executive after another as an absolute game changer.

But the emergence of the shales has also ushered in their own unique regulatory controversy, particularly when it comes to hydraulic fracturing or "fracking," which employs the pressure of a fluid as the source of energy to initiate and subsequently propagate a fracture in a rock layer to enhance the release of the trapped gas. While some argue that the Environmental Protection Agency (EPA) should lead investigations into how fracking affects drinking water, others say local governments should play a leading role because they are in closer touch with local issues.

"The federal government shouldn’t assume (anything)," Gibson said. "The states are qualified, confident and sophisticated, and we feel that the states should have the first crack on regulating developments of Marcellus within their own boundaries," he said.

Going a step further, Gibson cautioned that regulation—or overregulation—is a very real and potentially injurious matter to the steel industry. As a case in point, he cited the AISI member company AK Steel Corp., which shuttered a cokemaking facility in Ashland, Ky., after almost 100-years of production, because the battery was no longer cost competitive due to environmental and regulatory uncertainty.

Steel is not the only American industry facing record-high and rising energy costs and the competitive danger posed by the lack of a comprehensive national energy policy.

"The foundation for restoring America’s competitiveness internationally is built upon the foundation of a balanced energy policy fully committed to domestic energy production," said Cal Dooley, president and chief executive officer of American Chemistry Council.

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