Natural Gas Price & Supply Concerns Bedevil Climate Change Bill

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

Cicio says, for example, if the electric power sector uses natural gas to displace coal to achieve 100 percent compliance with the GHG emission targets in S. 1733, it would consume the equivalent amount of natural gas of about 4.6 TCF or roughly a 70 percent increase above 2008 power industry consumption. The largest increase in domestic production was only a 3 percent increase from 2006 to 2007, he states. "Clearly, the ability to rapidly increase production of natural gas to meet even a small portion of this potential demand does not exist," Cicio argues.

That scenario was disputed in testimony to the Senate Energy Committee on Oct. 28 by Lamar McKay, chairman and president of BP America Inc. He said: "Our own forecasts indicate the potential for lower demand, as natural gas is squeezed over the next decade between growing renewable mandates and coal. Our analysis indicates legislative insulation for even the oldest and least efficient coal fired power plants."

McKay's analysis was seconded by Dennis McConaghy, executive vice president of pipeline strategy and development for TransCanada Pipelines Ltd. He cited Energy Information Administration (EIA) evaluations of the House bill, called Waxman Markey, after its two primary co sponsors, which "shows a potentially perverse result" of lower natural gas usage except in the scenario where other low carbon technologies, like expanded nuclear or carbon capture and sequestration, are not sufficiently available. McConaghy pushed for inclusion in the Senate bill of incentives to manufacturers and utilities to retire old, inefficient, coal powered facilities. These might be a "cash for coal clunkers" program or a "Bridge Fuel Credit."

John Podesta, president and CEO of the Center for American Progress Action Fund, a Democratic organization, says a Bridge Fuel Credit might make sense if the credits are taken out of reductions companies make voluntarily, instead of offsets which the government creates, making them essentially "free" credits.