EEI's compromise solution, giving coal-heavy companies not enough to cover all their emissions while giving non-emitting utilities a goodly share, is unfair, the coal utilities say. And with 14 senators vowing to support their position, the EEI allocation formula looks to be on the skids.
But Exelon's John Rowe doesn't think so.
]]> Speaking to state utility regulators at their annual meeting in Chicago this week, Rowe was asked whether he thinks the EEI so-called 50-50 allowance allocation can survive.Of course, Exelon doesn't have much in the way of emissions, and so it is one of the companies that want some allowances not associated with carbon emissions. But still, Rowe is in touch with a lot of people, and he's been around a long time. His take: Tom Kuhn at EEI is "doing a pretty good job keeping the utilities together. They are closer to united than is normally the case." Rowe had nothing to say against his CEO brethren; the costs at stake are very large, he observed.
And he suggested that "there might be some difference between what utilities are saying in EEI meetings and what they're saying in the halls of Congress."
If what Congress ends up with in the spring is cap-and-trade legislation, which Rowe strongly believes it should, his prognostication is that if a cost collar is "tightened so the costs in the early years are fairly predictable, I think most of the industry can be brought together to support a bill ... but only ... between midnight and 3 o'clock, when it's this or face EPA" regulation.
Whether that's wishful thinking is unknown at this point, as the Senate seems to have thrown the door open to alternatives that don't look like the Waxman-Markey or Kerry-Boxer bills. But Rowe's middle-of-the-night scenario sure has a lot of basis in history.
Asked in Chicago about his stand on a carbon tax instead of cap-and-trade, Rowe conceded he would be just as happy with a tax ("but remember I've got an easy ride" with so much no-carbon power). But it wouldn't be as simple as many think, he cautioned. And the biggest "but," he said -- the real reason he is not promoting a tax -- is that whenever he mentions it to someone important in Washington, they tell him, "Little boy, take your great ideas and go home."
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"If you took away intangible drilling costs, it would decimate the industry. If you took away the depletion allowance, it would be terrible," he said at this week's roundtable session. For the uninitiated, intangible drilling costs are expenses incurred while exploring for gas and oil. Federal tax law lets producers write off those costs. The depletion allowance includes deductions from gross income that are allowed by the federal tax code to investors in commodities like oil for the depletion of the minerals deposits.
]]> To drive home his point, he said, "My stepfather is an independent (producer) in east Texas," he said. "The only way he has been able to survive through all these years is to have the intangible drilling costs written off. If he didn't he would have gone broke."In his proposed budget submitted last May, President Obama said he wanted eight changes to the tax code "to cut unjustified tax loopholes that benefit oil and gas corporations." The administration argues that "ending these subsidies would raise about $26 billion over the next 10 years."
In addition to intangible drilling costs and depletion allowances, the president also said he wants to eliminate the enhanced oil recovery credit, the marginal well tax credit, the deduction for tertiary injectants, the passive loss exemption for working interest in oil and gas properties, and the manufacturing tax deduction for oil and gas companies.
Boren also noted that some in Congress oppose the practice of hydraulic fracturing. "If you take away hydraulic fracturing, if you take away intangible drilling costs and depletion allowance, we won't be talking about this 118-year supply of natural gas," he insisted. "We won't have it."
]]>Natural gas: It's the bridge fuel. No, it's crack cocaine. And now it's the fuel that's a bit "bitchy." That is what Exelon chief John Rowe felt comfortable enough to say this week, when state utility regulators had their annual meeting in the company's home city, Chicago.
]]> Rowe covered a good deal of ground Monday speaking to the crowd turned out for the National Association of Regulatory Utility Commissioners meeting. On the natural gas front, he allowed as how gas has a role to play in the road to a low-carbon future. Right now it's low-cost, but the price will rise, he said, helping to give nuclear if not a renaissance, then "at least a new spring."But Rowe titillated the audience when he described gas as a bit "bitchy" in its price behavior. An incorrect thing to say, doubtless, but he may be protected (or not?) by Exelon's having a strong record of strong women in important positions.
His characterization of natural gas is welcome, though, for anyone looking for some more zest in what seems to be a serious battle about how much to depend on the fuel. Before Rowe's remark, the best we had was Duke's Jim Rogers calling gas the "crack cocaine" of the power industry. That was getting a little old.
Gas interests keep pushing very hard to be written into a concrete role in energy/climate legislation. Perhaps the best of them (or maybe he's just having the most fun) is Aubrey McClendon at Chesapeake Energy. Quite the battler against dirty coal, he told the HIS Herold energy conference in Connecticut this fall that Chesapeake could demonstrate the cleanliness of natural gas by buying a coal mine and drilling a gas well next to it. Let people compare, he said. Asked after his talk if he was serious, McClendon's eye's twinkled. "I don't know," he grinned. "Am I? Pretty good idea, though."
Bring it on.
]]>Needless to say, TV makers are giving the new rules a bad reception.
Under the policy adopted by the California Energy Commission on Wednesday, all new 42-inch TV sets sold after January 1, 2011, must use less than 183 watts; by 2013, that drops to 116 watts. By comparison, according to the CEC, a 42-inch plasma TV sold in 2007 uses about 313 watts, while a 42-inch LDC set uses 232 watts.
]]> Golden State officials hope their action is just the beginning. At a meeting Wednesday, CEC members said they hope the rest of the nation follows suit."It will save consumers money, it will help protect public health, and it will spark innovation," Commissioner Julia Levin said, noting that TV sets account for as much as 10% of an average household's electricity usage.
Not so fast, says Jason Oxman, a vice president with the Consumer Electronics Association. "Instead of allowing customers to choose the products they want, the commission has decided to impose arbitrary standards that will hamper innovation and limit consumer choice," he told the Associated Press. "It will result in higher prices for consumers, job losses for Californians, and lost tax revenue for the state."
The new standards will apply to new televisions up to 58 inches, the CEC said, explaining that sets bigger than that account for a tiny share of the overall TV market and are typically part of high-end home theater systems.
Writing to Energy Secretary Steven Chu yesterday, California Senator Dianne Feinstein noted that her state was a pioneer in enforcing minimum efficiency requirements for refrigerators and other products, in 1979, and she urged him to have the Department of Energy "take a serious look" at following suit with national TV standards. It may be significant that Chu is a fellow Californian and a self-described efficiency junkie.
So will other states -- or the federal government? -- consider similarly aggressive efficiency standards on TVs, or is that just a remote possibility? We will monitor ....
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Under the headline "Devon Energy's Asset Sale May Draw China's Interest," the newspaper reports that CNOOC might be a logical bidder for Devon's Gulf properties.
Government-controlled CNOOC got a short, sharp lesson in US energy nationalism in 2005 when it bid $18.5 billion for California-based Unocal and its GOM fields, topping Chevron's bid by a few billion (back when billions with a "b" meant something).
A zero-dollar penalty requires enough thought process, thank you. It just seems like too much work to parse a sentence about a non-zero-dollar anything. Power system reliability is already hard enough.
]]> The reliability regime is a dauntingly, maybe numbingly, technical topic. The myriad set of requirements that different kinds of industry participants have to follow appears endless, and since the reliability regime became mandatory it has grown seemingly like Topsy. It certainly has become more visible to non-participants, thanks to Federal Energy Regulatory Commission oversight (though it remains pretty black-boxy.)FERC's issuance Friday of an order on an "omnibus notice of penalty" from the North American Electric Reliability Corp. approved NERC's determination of 564 proposed penalties for non-compliance with reliability standards. Of the total, 541 included assessment of zero-dollar penalties. That is, non-monetary penalties.
The other penalties included monetary assessments, from $1,000 to $15,000 -- dubbed non-zero-dollar penalties.
Did we say double negative? Actually, it verges on a triple, but we can't think about it long enough to be sure.
]]>The Associated Press recently reported that
The interest is stimulated by several factors. Kiplinger's Newsletter said last week that all the aforementioned countries are hoping to lay claim to big stretches off their continental shelves before the United Nations Law of the Sea treaty kicks in late next year. Once it does, it will be tough for any country to legally challenge claims.
The area also is becoming more accessible than it has ever been in recorded history. The Associated Press reported last month that the North Pole will turn into an open sea during summer within a decade, according to data released by a team of explorers who trekked through the
Last but not least, the US Energy Information Administration last month said the
It doesn't appear those concerns are shared by the Russians or anyone else with a potential claim.
]]>In an interview with the Hard Assets Investor website ("Common Sense on Commodities"), Dr. Nouriel Roubini, who called the top on the market in 2005 with predictions of, well, doom by 2008, said speculators pouring cash into commodities funds were to blame for oil prices near $100/barrel and above.
]]> And those high prices, the NYU business professor says, will cripple any global economic recovery. "At current levels, oil prices aren't justified," Roubini told the web site Friday, "but they can go higher because of market dynamics and speculation; much higher.""If oil were to go because of nonfundamental reasons toward $100, then I would say oil at $100 would be like a big hammer beating on the head of the global economy," he explained.
Position limits would dampen volatility that Roubini says is damaging the global economy. "It's time to control it. If we don't control it, these booms and busts are going to become more severe, more damaging and more risky."
Position limits would hamper, if not kill funds that depend on trading in energy futures and financials, but Roubini says their death serves a better world: "It might kill them off, but frankly, who cares? I care about the real economy. I care about not having another global recession. If people are speculating on oil, and that pushes oil up to $145 like last year--I'm in favor of limits on that."
The Dallas Morning News reported Friday that T. Boone Pickens said
"Natural gas is just a bridge," he said in a speech at the
On Tuesday, Chris McGill, the Managing Director Policy Analysis at the American Gas Association, said on AGA's blog that there is more than a 100 years of natural gas supply at current production levels. He based his assertion on findings by 2008 Potential Gas Committee and the US Energy Information Administration.
"These are not short-term phenomena," McGill insisted. "They are indications that natural gas is poised to serve a growing market of low-carbon fuel requirements.
Could be, but some news organizations reported last week that US electric utilities aren't convinced huge increases in US natural gas output mean it's time to make bigger bets on the fuel.
Several utility executives said they're cautious about ramping up the use of gas to generate electricity. Utilities have been stung before by the fuel's volatile prices, and they remain reluctant to make long-term commitments to gas by building or expanding plants.
Companies such as Duke Energy, Xcel Energy and American Electric Power see sizable risks to new supplies, including emerging environmental issues, possible global exports and uncertainties over production costs.
This public dispute over gas supplies probably isn't going to do much to assure utility executives that gas is the way to go. Likewise, the conflicting messages probably aren't reassuring to members of Congress who are trying to figure out what role natural gas should play in addressing climate change.
The Kansas Supreme Court has now upheld a county government decision banning utility-scale wind farms, which the county commissioners determined "would be incompatible with the rural, agricultural and scenic character" of the place.
]]> The Flint Hills region in east-central Kansas is a mecca for wind developers, with strong winds and an already established transmission network, our correspondent Housley Carr reports. But it is also scenic, containing most of the "remaining Tallgrass Prairie that once covered much of the central United States," as the high court put it.Governor Kathleen Sebelius in 2004 had asked developers not to put wind farms in the heart of Flint Hills. But some did sign contracts with landowners, and other landowners hoped to sign deals, too. After the Wabaunsee County ban was enacted, they sued, unsuccessfully.
The court still has some issues to hear: whether the ban is an unconstitutional "taking" of property rights and whether it violates the Commerce Clause. The latter has to do with the fact that the county's ordinance, while banning utility-scale facilities, does permit small turbines that "reduce onsite consumption of purchased utility power." Oral arguments on these points are set for January.
Meanwhile, on the Atlantic ... The Interior Department is supposed to issue a decision soon on the Cape Wind project that has been the object of celebrity-fueled opposition from Cape Cod, Nantucket and Martha's Vineyard, plus Native American tribes that claim the ocean vista as part of their cultural, spiritual heritage. The New York Times endorsed the project Monday: "Rejecting, even delaying it, would send a dispiriting message to other developers who are further behind Cape Wind," the Times said. "In Europe, wind farms are a familiar sight. If this country is going to do its part to address climate change, they must become more common, and welcome, here."
]]>Horvath's assertion was prompted by a question posed in National Journal's blog by Senate Energy and Natural Resources Committee Chairman Jeff Bingaman: Should we start swapping coal-fired power plants for natural gas-fired plants? (A timely question as the gas lobby presses for incentives in the climate change bill.)
Bingaman, a Democrat from New Mexico, said the idea was posed October 28 by Lamar McKay, chairman and president, BP America. McKay testified before Bingaman's committee "that replacing about 8-10 of these old coal plants per year in this manner would account for about 10% of the cumulative 2020 domestic emissions reduction contemplated by pending climate bills, and that these reductions would come at a cost equivalent to about $13/ton of CO2 reduced," the senator said.
]]> Not only is Bingaman chairman of the energy committee, he is also a member of the environment committee and obviously a significant player as energy/climate change legislation is written."What would be the pluses and minuses of such an initiative?" Bingaman asked. "If we greatly expand our use of natural gas in the utility sector, how would that affect the manufacturing sector, which also has a growing need for natural gas? How likely is it that utility fuel will switch to natural gas in any case, independent of the passage of climate legislation or specific initiatives?"
In his entry on the blog site, Horvath said NGSA is aware of concern that pushing gas could send prices up. But with new shale-gas drilling techniques sending reserve estimates up aboug 40%, he said, Congress should encourage gas use for generation.
"It's a no-brainer that we should provide incentives to encourage the retirement of power plants that are inefficient and produce high amounts of carbon, so that they can be replaced with cleaner, more efficient power plants," he said. Whether generators would switch to gas anyway is "hard to say," he said, "because both the House and Senate climate bills contain measures that disadvantage natural gas in the distribution of emission allowances to a degree that could distort and delay a shift to natural gas-fired power generation."
William O'Keefe, former executive vice president and chief operating officer of the American Petroleum Institute and now head of the George C. Marshall Institute, advises steering clear of pushing the industry one way or another. Recalling the unhappy history of government mandates both against and for natural gas, he says:
"The development and use of shale gas should be determined by the cost of production and technology, not policies that distort market forces. Policy barriers that impede the market's ability to determine the highest valued use of additional gas supplies -- such as permit and leasing restrictions or tax policies -- should be removed.
... Given our recent experience with bubbles and busts -- and the tendency to underestimate costs to attract investments -- it would probably be prudent to go slow in pushing shale gas. ...Policymakers should also examine ... the existing policies that result in "older and inefficient" generating facilities remaining [in] service. It is likely that New Source Review requirements and other Clean Air Act regulations along with depreciation rules create impediments to building new, more efficient generating facilities.
Weighing in with an industrial's viewpoint, Frank O'Brien-Bernini, chief sustainability officer of Owens Corning, endorses policy that encourages gas, but also calls for energy efficiency as a front-line strategy. "Fuel switching to cleaner primary fuels for the production of electricity, while we build a more renewable infrastructure, is a perfectly logical bridging strategy," he says. "... One strategy that is often overlooked, or at least rarely treated analytically inside climate and/or energy policy options, is the major role buildings can play in this."
Policy should drive fast retrofits of buildings and require new buildings to be at least 50% more efficient than today's average, and it should "assure that the saved on-site combusted fuels and delivered electricity are fuel-switched and managed to maximize carbon reductions."
Late afternoon, O'Brien-Bernini had an "agree" tally of 14; Horvath 2, O'Keefe 1.
]]>The gas industry is still seeking more from the climate change bill Congress will pass ... sometime. Probably. After having been scolded roundly by former Senator Tim Wirth and others several months ago for having missed the boat on the issue, the gas sector got itself in gear.
It hasn't succeeded so far in getting provisions it wants the Senate to include, so the industry, along with coal and nuclear, and efficiency interests, is continuing to work senators on the issue. The Kerry-Boxer bill is the vehicle for action, though it could be viewed as only a kind of position paper: A lot of horse-trading is yet to come.
]]> The gas sector's efforts so far apparently resulted in a Kerry-Boxer provision ordering the Environmental Protection Agency to set up a program for promoting dispatchable generation projects "that can accelerate the reduction of power sector carbon dioxide and other greenhouse gas emissions." By three years after the bill's enactment, EPA would have to give "incentives for eligible projects that generate 300,000 GWh" a year. The provision is in a section of the bill entitled "natural gas."This clearly represents a gesture toward getting gas plants built as lower-carbon alternatives to coal. But as one industry executive said to our colleague Rodney White, it is an unfunded item and just has no real impact. What would EPA incentives be?
Meanwhile, though, lots of people see gas having some strong prospects without any special provisions in a climate program. The North American Electric Reliability Council says gas will displace coal as the leading peak-capacity fuel by 2011. It also said "flexible, fast-acting resources that can help deal with the volatile availability of wind power" will be needed; this is code for gas plants, although a number of grid executives have said in recent months that they want batteries and other storage devices to ramp up to the point where they can play significant wind-balancing roles.
Municipal utilities, through the American Public Power Association, want the Senate to "provide the electric utility sector with the amount of allowances necessary to operate under the bill's established targets and timelines without having to fuel-switch," presumably from coal to gas.
A Department of Energy analyst said the other day that the nuclear industry's prospects are threatened by expanding gas reserves that make gas generation increasingly attractive, our colleague Randy Woods reports. Nuclear plants are horribly expensive to build, but their ongoing generation costs are low. Gas works the other way around, at least if gas prices go up -- and that's the rub for people looking at the fuel's historically impressive volatility.
If gas prices remain low and are less volatile because of the vast shale reserves that have been identified, gas could provide a "big challenge" to new nuclear plants, said James Joosten, senior energy analyst at DOE's Energy Information Administration. (There are those, however, who challenge that sunny supply-price outlook.)
And renewable-energy luminaries like Robert Kennedy Jr. have been pushing gas as a bridge to a low-carbon future and a natural partner for solar plants, in which he has an interest. He also favors requiring power system operators to dispatch plants according to carbon content (gas would go before coal). So far this idea hasn't caught on in Congress, and it would be impossibly incongruous with the coal-supportive measures in climate bills so far.
Bottom line: Despite the optimism about gas in some quarters, the industry isn't feeling secure. And to be sure, Jim Rogers of Duke Energy did not long ago warn away from it, labeling it the "crack cocaine" of the power sector, and that must hurt.
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"Like the House climate change bill, the Senate's Kerry-Boxer bill would hurt our economy by killing American jobs, increasing energy costs and undermining our nation's energy security," said API President Jack Gerard, the bad cop in what is shaping up as a bad cop-good cop routine. "The cost of Kerry-Boxer is even more than the House bill, and punishes consumers and businesses that depend on transportation fuels. Anyone who drives, rides a bus, flies on an airplane or ships goods to market is likely to see their costs rise."
He cited the statistics on why natural gas is good for the environment and the country and added: "With more than 75% of Americans expecting abundant natural gas to play a significant role in
No mention by ANGA -- a new producer trade group aimed getting gas a bigger voice in the debate -- of killing jobs or imposing excessive taxes or putting the country's energy security at risk. It will be interesting to see which approach -- if either -- succeeds as the Senate advances the bill.
In a recent chat with analysts, the chairman and CEO of Schlumberger indicated that his company is willing to accept federal regulation of the widespread gas drilling practice of hydraulic fracturing.
Schlumberger is a French-American oilfield services company based in
That point of view is not shared by Bruce Vincent, incoming chairman of the Independent Petroleum Association of America. Speaking on behalf of the IPAA before the House Natural Gas Caucus the same week, he said: "Those who seek to inhibit or prevent the development of natural gas recognize the linchpin role that fracturing plays in shale gas production."
]]> "They regularly demean the effectiveness of the state regulators despite a history of success -- turning to a federal solution where none is warranted and would freeze the development of shale gas if it were imposed," said Vincent, who also is president ofAccording to Vincent, "the industry now has under development materials designed to provide producers with better guidance on managing the surface areas of our sites, on hydraulic fracturing techniques and on well casing and cementing procedures. We will be sharing these materials with state regulators to enhance transparency in the regulatory process. We work with state regulators to improve the efficiency of the process."
Whether the services companies like Schlumberger or the independent producers IPAA represents wins out remains to be seen as Congress debates the increasingly contentious issue this fall.
]]>Glenn English, CEO of the National Rural Electric Cooperative Association, suggested Tuesday that there might be "the basis for a deal" with environmental interests on transmission-line siting, though it was not quite clear just what the elements would be. Still, it almost refreshing to have the transmission issue come up in discussion of climate-energy legislation. It hasn't gotten much play over the last few months, though it remains one of the nightmares lurking in the closet.
At a CQ-Roll Call Group event in Washington, our colleague Cathy Cash reports, English identified what is unarguably "not a scientific problem" but "a political problem. ... Are we going to have renewable energy play a major role? If so, then we're going to have to have the political will and stomach to vote the authority to the Federal Energy Regulatory Commission to accomplish this objective."
]]>If the mishmash of issues at play in the climate change legislation can be settled out enough to get a package ready for a full Senate vote, there will still be the energy issues: renewables and efficiency mandates, transmission planning/siting (and maybe cost allocation) and more.
English's rural electric co-ops want FERC to get authority to site extra-high-voltage lines. These lines should be cost-shared across an entire interconnection; anyone should be able to take an ownership share; and rate incentives for builders of these lines should be limited, NRECA says. This is all provided that new lines are arrived at through inclusive planning processes.
The inclusive planning process seems to have a lot of support; the Department of Energy is now studying applications for grants to groups that will do that work. The awards should be coming soon.
But the part about cost allocation across the interconnection? There are already battles over that, over the principle that beneficiaries should pay -- and the question of identifying, quantifying benefits is one that triggers fundamental issues for some. And giving FERC the siting authority? Shall localities simply knuckle under? Shall state officials relinquish their authority? These are very big, very intrusive structures, not like gas pipelines that go through siting controversies but are then buried out of sight.
English was talking at the CQ-Roll Call event with Dan Lashof of the Natural Resources Defense Council, which "totally" agrees about the need to build out a transmission system to enable big deployment of renewables. But if the big new transmission is "used to run existing dirty coal power plants," Lashof said, "that is where our resistance comes from."
If the transmission buildout measures were linked to "a real commitment to cleaning up the grid," he said, the resistance could diminish. It was then that English said, "Sounds like the basis for a deal."
If environmentalists' opposition were the only factor, it's possible something could be worked out. But it isn't. And then there are the other climate bill issues, like carbon allowance allocations.
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