INSIGHT: Give us more natgas - but no drilling allowed!

20 August 2009 16:56  [Source: ICIS news]

You can burn more natgas, but donBy Joe Kamalick

WASHINGTON (ICIS news)--Suddenly a lot of people are calling for greatly expanded use of domestic US natural gas in power generation and even as a transportation fuel for cars and trucks - but some of the same folks just don’t want gas production or want it to be strictly limited.

Not surprisingly, US chemical makers and other industries that are heavily dependent on natgas as a feedstock and/or power fuel are worried that broader use of gas combined with restrictions on domestic drilling will propel prices into low earth orbit.

Much of the new love affair with natural gas derives from the effort to “green” US energy consumption and to enact a national climate control mandate.

In a white paper issued earlier this month, the liberal think tank Center for American Progress (CAP) urged much broader use of natgas to help the environment.

“Natural gas can serve as a bridge fuel to a low-carbon, sustainable energy future,” the position paper said.  “In particular, natural gas can provide the critical low-carbon ‘firming’ or back-up fuel that can enable deep market penetration of both wind power and concentrated solar thermal power.”

Written by CAP president and chief executive John Podesta and former Democrat Senator Timothy Wirth, the paper declares: “Given its domestic abundance and its lower pollutant levels, natural gas should play a larger role in our energy mix”.

Podesta served as chief of staff to President Bill Clinton and headed the transition team for President Barack Obama. Wirth, who represented Colorado both as a senator and a House member, also worked with then Vice President Al Gore on environmental issues.

In the larger role they envision for natural gas, Podesta and Wirth say that federal incentives should enable construction of new power plants fuelled by natgas to replace aging coal-fired generators. Federal climate and energy policies also should provide incentives for gas-powered buses and heavy trucks and to subsidize municipalities that switch their mass transit vehicles to natgas.

As the US relies on coal to generate about half of its electric power, moving just a portion of that baseload to natural gas would create huge new demand.

So too with wind and solar. Every wind farm or solar array must be backed up by a natgas-powered generator of equal power capacity - and that generator must be kept running at minimum levels in order to be on-line and ready to crank up to maximum power when the wind dies or night falls.

On the other side of the political spectrum, Texas oil and gas developer T Boone Pickens, chief executive of BP Capital, has been beating the drum for years for wider use of natgas.

In a recent commentary he co-authored in the Wall Street Journal, Pickens argues that the US must harness its estimated 2,000,000bn cubic feet (bcf) of domestic gas reserves - largely in shale gas - to provide the nation with energy, economic and climate security.

Like Podesta, Pickens also advocates a broad shift to gas for electric power.  “...[T]he utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants,” he wrote. Even new coal-fired plants should be required to combine natgas with the coal they burn, he argues.

Pickens also urges that “we can begin transitioning the nation's fleet of 6.5m 18-wheelers that run regular routes” to natural gas by establishing refuelling stations along the major US truck routes.  Municipal government vehicle fleets and city-based commercial trucking and services firms should be moved to natgas as well, he said.

However, exploring, developing and producing all the additional gas that would be needed to meet existing consumption and these visionaries’ plans for much broader use is another matter altogether.

Congressman Doc Hastings, the senior Republican on the House Natural Resources Committee, contends that the Obama administration is doing all it can to block broad development of new domestic gas resources.

He notes that while federal bans on offshore drilling along the US east and west coasts were lifted a year ago: “A de facto ban remains in place only because the Obama administration has actively blocked the new five-year leasing programme which would open areas for offshore exploration and development”.

He cited the Interior Department’s decision in February to postpone for six months and perhaps longer the five-year offshore leasing plan issued in the waning days of the Bush administration.

Also in February, the department withdrew 77 parcels in Utah that had already been leased, and in June the administration suspended the sale of 31 other Utah oil and gas tracts just hours after they had been sold, citing environmental concerns.

While the Interior Department is moving to accelerate wind energy projects off the East Coast and solar farms on federal lands in the West, the administration also has suspended coal mining permits in the Appalachian Mountains and blocked new uranium mining for two years on 1m acres of federal land in Arizona.

In Congress, a bill has been introduced that critics say would impose a burdensome permitting requirement on the use of hydraulic fracturing.  Known as “fracking” in the energy industry, the process uses water, sand and some chemical additives under high pressure to fracture rock strata holding vast reserves of shale gas.  Fracking is essential to the recovery of those resources.

Even as the Center for American Progress advocates greatly expanded use of natural gas, it too urges limitations on development and production.

“Any proposal to incentivize the development of natural gas must also address the potential health and global warming impacts of developing this resource,” Podesta wrote in the center’s white paper.

He called for a major and comprehensive study by the Environmental Protection Agency (EPA) of the air, land, water and global warming impacts of natgas production, including a lifecycle greenhouse gas analysis.

Among other things, Podesta said that gas producers should be required to capture methane that typically leaks from gas wells, and gas producers should publicly disclose the chemical additives used in fracking.

All of this suggests that while green energy advocates press for greatly expanded use of natural gas in power and transportation, opponents of drilling and development may thwart production of enough gas to meet that broader demand.

Paul Cicio, president of the Industrial Energy Consumers of America (IECA), a coalition of petrochemical producers and other gas-dependent manufacturers, warns that if policymakers stimulate broad new demand for natural gas and yet restrict natgas production, “we are going to pay for it with much higher prices for both gas and electricity”.

“What’s happening is a very important shift in policy,” Cicio said, “with the government incentivizing demand for natural gas.”

“This is very troubling for industries and even homeowners who have no alternative to natural gas,” he said.  “It makes poor sense to subsidize natural gas use in these other applications.”

Especially if the good wise men of government make it increasingly difficult to produce the gas they want to burn more broadly.

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

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By: Joe Kamalick
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