Natural Gas Price & Supply Concerns Bedevil Climate Change Bill

By Stephen Barlas, Washington Editor | December 2009 Vol. 64 No. 12

A Senate climate change bill passed in early November by the Senate Environment and Public Works Committee will probably be pushed aside by a version more acceptable to Republicans and moderate Democrats.

Critics of the bill that passed the committee argue it will hit manufacturers hard as they are forced to switch from coal to natural gas for their energy needs, creating a price spike in natural gas due to a big increase in demand. However, the natural gas industry is disputing scenarios forecasting galloping gas demand.

The Senate bill, called the Clean Energy Jobs and Power Act of 2009 (S. 1733), calls for cutting U.S. greenhouse gas emissions (GHG), such as carbon dioxide and methane, by 20 percent from 2005 levels by 2020 and by 83 percent by 2050. It is slightly more aggressive than a House bill passed in June. S. 1733 passed the Environment committee by a vote of 11 1, with all Republicans on the committee declining to vote, and one Democrat, Sen. Max Baucus (MT), voting against it. That substantial opposition had much to do with worries about how a mandated GHG reduction and an associated "cap and trade" emissions program would affect manufacturers.

Some manufacturer's lobbies argue that the Senate bill, and its House counterpart, will send natural gas prices through the roof. Natural gas partisans, on the other hand, are complaining that the Senate bill, because of free "allowances," actually insulates coal users, including utilities, from having to switch to natural gas, while at the same time imposing new costs on pipelines, for example, with regard to stopping leaks of methane and carbon dioxide from compressor stations. Martin Edwards, an Interstate Natural Gas Association of America (INGAA) vice president, says the industry prefers the Senate bill because it opens the door to pipelines receiving "offsets" to use against emission reduction requirements when a pipeline controls fugitive methane emissions beyond a legislated level, a concession not contemplated by the House bill.

Edwards argues that worries voiced by manufacturers about potentially severe natural gas price hikes are unjustified. Those worries have been expressed by lobbyists such as Paul Cicio, president of the Industrial Energy Consumers of America, a group of large manufacturers. He says the IECA is "is deeply concerned that S.1733 will immediately and significantly drive up the demand and price for natural gas and electricity."