INSIGHT: Renewed concern for energy as Congress returns

14 January 2010 16:52  [Source: ICIS news]

By Joe Kamalick

US energy sector says it is being squeezed by CongressWASHINGTON (ICIS news)--As the US Congress returns from its three-week holiday recess, there are renewed concerns among US energy and chemical interests that well-meaning legislators and White House policymakers could cripple the nation’s economy in the name of climate control.

By most accounts, prospects for congressional passage this year of a cap-and-trade emissions reductions mandate are slim at best.

It’s an election year, and many in Congress are both weary and wary of any major legislative undertakings that will be seen to raise energy costs and jeopardise jobs and the economy just as things are starting to look a bit better.

But while cap-and-trade was to form the core of a climate change bill, such as the measure approved by the House last year, there may be an effort to seek Senate approval for a “climate lite” bill.

Such a bill would lack the scary elements of a cap-and-trade mandate but would seek to reduce US emissions of greenhouse gases (GHG) by creating still more funding and tax incentives for alternative and renewable “green” energy resources - at the expense of conventional hydrocarbon energy development.

A top US energy industry leader this week warned that Obama administration policies and efforts by Congress to impose climate change mandates will destroy jobs and undermine chemicals production and other manufacturing.

Jack Gerard, president of the American Petroleum Institute (API), told an energy forum that “Some of the policies advanced recently seem aimed at chilling the job creation potential of domestic oil and natural gas development”.

The US Department of the Interior (DOI) recently announced broad new restrictions for oil and gas exploration and development on public lands, an action that was criticised by Gerard and other energy industry officials.

Speaking at the US Energy Association’s annual outlook conference, Gerard also was critical of various bills pending in Congress that would impose emissions reductions on US utilities and the broad manufacturing sector in order to combat global warming.

“Some climate proposals would put US refiners at a competitive disadvantage, driving jobs out of the country, along with their emissions,” he said. “Other proposals would increase costs on the oil and natural gas industry, depressing new investment in domestic oil and gas prospects.”

While endorsing efforts to move the US toward a clean energy future - and noting that the nation’s oil and gas producers are leading investors in alternative power technologies - Gerard cited US Department of Energy (DOE) studies showing that oil and gas will still be needed to supply more than half of the country’s energy in 2030.

“We need to be investing now to meet that demand,” Gerard added. “The International Energy Agency has warned that failure to develop now the oil and natural gas resources to meet future needs could lead to a supply crisis.”

He charged that some policymakers claim to support broader energy goals “even as they consistently espouse policies that would put that goal farther and farther out of reach”.

Gerard, who previously was president of the American Chemistry Council (ACC), voiced particular concern over policies that restrict natural gas development, potentially undermining chemicals production and the broad range of US manufacturing.

“Natural gas is one of our most flexible and clean-burning energy sources and can play an indispensable role in reducing greenhouse gas emissions,” he said, noting that natgas “can serve as a stable domestic energy supply for US manufacturing.”

“Ninety-six percent of everything manufactured in the US is touched by the business of chemistry,” Gerard said, “and the US chemical industry relies on natural gas as its primary feedstock.”

“Reducing acreage leased for oil and natural gas development by 75% as occurred in 2009 will not put America on a path of preparing for its real energy future,” he said.

Critics have charged that the Interior Department sharply reduced leasing of federal lands for energy development last year.

“Cancelling leases, delaying lease sales, delaying environmental studies, holding back the next OCS [outer continental shelf] five-year plan, and adding layers of bureaucracy and new procedures will not ensure Americans have ample supplies of the oil and natural gas that every projection shows they will be demanding in the near future,” Gerard said.

Skip Horvath, president of the Natural Gas Supply Association (NGSA), also is worried that members of Congress hoping to clear the air of greenhouse gases will inadvertently muddy the waters for natgas and other much-needed conventional fuels.

“There’s a false perception that natural gas will come out a winner in any climate change scenario because of its low emissions and reliable performance record,” Horvath told the same Washington energy conference.

Indeed, many in Congress favour legislation that would reduce US greenhouse gas emissions by inducing more electric utilities to switch from coal to natgas as a generating fuel.

“The environmental benefits of natural gas will allow it to hold its own on a level playing field,” Horvath said, “but not if the field is dramatically tilted by subsidies for coal or overly rigid mandates for renewable energy sources.”

He was referring to provisions in the House-passed climate bill that give huge emissions allowances to coal-fired utilities to smooth the transition to lower carbon fuels - provisions much favoured by members of Congress from states that are heavily dependent on coal mining and/or coal-fuelled power.

Without that free-pass caveat for coal in the House bill, it would have lost the support of scores of coal-state Democrats. As it was, the House climate bill barely squeaked by with just two more votes than the 217 needed for passage.

Even if Congress fails to pass a cap-and-trade emissions cutback bill of some sort, federal legislators in their wisdom still might seek to solve global warming by forcing utilities to use more solar, wind and geothermal energies to generate electricity.

That sort of climate-lite mandate could erode market share for natural gas, Horvath cautioned.

“Analyses by the US Energy Information Administration and independent economists show natural gas losing market share under some climate change scenarios,” he said.

“We believe that if climate change legislation is adopted, it should encourage behaviours that reduce greenhouse gas emissions, provide for market-based solutions to the extent possible, and treat all forms of energy fairly so that no low-carbon source of energy is disadvantaged,” the NGSA said.

In other words, the energy industry doesn’t want Congress to enact legislation that arbitrarily creates winners and condemns losers among resources.

Congress is to reconvene next week and legislators are expected to again focus on climate legislation that they had hoped the Senate could pass before the end of 2009.

To discuss issues facing the chemical industry go to ICIS connect
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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