The American Gas Association (AGA) is pleased that the Senate Energy and Natural Resources Committee recently approved legislation to support the development of U.S. natural gas resources along the Outer Continental Shelf, which will benefit consumers, the economy and the environment. Specifically, the committee approved an amendment offered by Senator Byron Dorgan (D-ND) that will provide significant new access in the Eastern Gulf of Mexico by opening this area beyond 45 miles of the Florida coast for oil and natural gas development.

The Dorgan amendment also included the “Destin Dome” natural gas discovery, which lies approximately 25 miles south of Pensacola and is expected to produce anywhere from 110 to 165 billion cubic feet of gas every year for the next 20 years. Access to the Eastern Gulf of Mexico, which is known to have vast resources of natural gas that are close to existing pipelines and other vital infrastructure, will not only help supply more domestic natural gas to consumers but will also ultimately help make America more energy secure.

AGA was also encouraged that the Senate Energy and Natural Resources Committee legislation included biogas as a qualified renewable for the Renewable Electricity Standard (RES).  Biogas can be sustainably produced as a product of our waste-producing (landfills, agricultural processes and animal farms) lifestyle.  This efficient process also captures methane that otherwise would have entered into the atmosphere.

And while not included in the Senate Energy Committee’s recent energy legislation, AGA will continue to educate policymakers about a recently released National Academies’ (NAS) report to Congress, which found that the Department of Energy should consider changing its measurement of appliance energy efficiency to one based on the full-fuel cycle. This measurement takes into account the amount of energy produced and lost from the point of production to the final point of use. This more accurate measurement would provide consumers with more complete information on energy use and environmental impacts.  For example, 70 percent of the total amount of fuels used in producing, generating and transmitting electricity is lost by the time that electricity reaches a customer. By contrast, producing and delivering natural gas directly loses only about 10 percent of its usable energy.

The NAS study also supports the “carbon footprint labeling” provisions championed by AGA that were recently included in the Waxman-Markey climate change legislation.  These provisions would expand the existing Federal Trade Commission EnergyGuide labeling program for appliances to include carbon footprint information.

AGA looks forward to working with Congress as it considers energy and climate change legislation that strives to improve our environment and energy security, while also encouraging the increased use of clean, abundant, domestic natural gas. As the cleanest fossil fuel, emitting only one carbon atom when burned, natural gas can play a major part in reducing carbon emissions.

We believe nuclear power is one part of the solution to climate change, given that it emits no greenhouse gases.   In addition, our industry supports increasing nuclear power’s ability to generate electricity because of the current trend in which more and more natural gas is being used for that purpose. Because it is the cleanest burning fossil fuel, more and more electricity generators are turning to natural gas as a way to comply with increasingly stringent environmental standards.  Unfortunately, as demand for natural gas in this market increases, so does its price, which makes it more expensive for the residential and commercial customers that natural gas utilities primarily serve.   That is why our industry supports the availability of a variety of supply sources for electricity generation, including more nuclear power.

In addition, when natural gas going into electricity generation drives up its price in the residential and commercial market, that can actually have a negative effect on our national environmental goals because as the price of natural gas increases, residential and commercial customers might choose other, less expensive, but less efficient and dirtier fuel sources.   The best use of natural gas, both from an efficiency and environmental standpoint, is its direct use in homes and businesses.   To the extent that more nuclear power frees up natural gas to be used directly in America’s homes and businesses, that is a good thing.

Yes, building nuclear power plants can be an expensive investment, in great part because of the extensive regulatory hurdles put in their path, and because, for the most part, the general public is not well informed about the benefits, including the clear environmental benefits, of nuclear power.  We believe the federal government should promote nuclear power, both through loan guarantees and through a public education outreach effort that explains the rewards of nuclear power as well as the risks.

Specifically in the article “Lower Natural-Gas Price Leaves Coal Out in Cold,” Rebecca Smith and Ben Casselman reported that coal now accounts for about half of the nation’s electricity, compared with about 21 percent from natural gas. However, they stated that “natural-gas plants can be built more quickly and inexpensively than coal plants, and they release about half as much carbon dioxide as coal to produce similar amounts of electricity. That could be a big advantage if Congress passes a climate-change bill that would cap such carbon emissions.”

Natural-gas plants can be built more quickly and inexpensively than coal plants, and they release about half as much carbon dioxide as coal to produce similar amounts of electricity.

Additionally, new natural-gas discoveries in Texas, Louisiana, Pennsylvania and elsewhere, have created a large natural gas supply abundance that has changed the view of U.S. gas supplies and fuel outlooks for the near future. In fact, according to a research report released June 1, 2009 by Merrill Lynch & Co, ‘in parts of the U.S. where there are daily electricity auctions, gas generators are chipping away at coal market share with lower prices. Coal-to-gas switching has created incremental gas demand of three billion cubic feet a day, and ‘further switching potential is still large, in our view.’”

This article is very timely since the American Gas Association and the Potential Gas Committee are hosting a press conference this Thursday, June 18, 2009 at 10:00am in Washington, DC to announce the unprecedented abundance of U.S. natural gas supply, as well as future consumer impacts. With climate change and energy proposals being considered on Capitol Hill this summer, we think that that these new natural gas discoveries are changing the national debate on energy and future domestic energy supplies. After reading this article, what do you think?

Specifically, the May 2009 issue of the Natural Gas Rate Round-Up reported that 19 states have regulations that permit the recovery of revenues and margins lost due to utility-sponsored energy efficiency programs. In addition, 11 states as well as Canada have approved financial incentives for utilities that invest in energy efficiency.

These measures are important because they align utility incentives with helping customers reduce their energy usage.  As a result, where utilities are able to recover energy efficiency program costs and lost revenues, and earn a profit on energy efficiency services, they become stronger partners with customers in achieving conservation.

Effective regulatory approaches, such as decoupling and other innovative rate designs, are a true win for both customers and utilities.  Customers save money by using energy more efficiently, and utility companies can promote efficiency and conservation measures without placing themselves in financial jeopardy.

In fact, the report says that by the end of 2007, utility companies in states with energy efficiency or demand management programs achieved a savings of 9 percent of total natural gas usage per residential participant—a direct consumer cost savings.

After seeing these benefits and the opportunities for efficiency and conservation, would you support this type of energy efficiency program in your state?

The American Gas Association (AGA) agrees that while the House Energy and Commerce Committee vote was an important first step in trying to pass climate change legislation, there are several significant obstacles to overcome before a bill will get to President Obama’s desk for signature.  No matter how daunting the challenge, however, AGA is committed to working with Congress and the administration on this critical national issue.

We strongly believe that both natural gas utilities and their customers can and should contribute to improving the nation’s energy efficiency in order to meet the nation’s goals of optimizing our resources, maximizing our energy security, increasing conservation and reducing carbon emissions.  In fact, if you look at our member’s track record when it comes to energy efficiency, you will find that the number of natural gas customers has increased more than 70% (38 million homes in 1970 to 65 million in 2005) since 1970, yet total residential natural gas consumption has remained about the same as it was in 1970.  By insulating their windows and doors, by using energy-efficient appliances, and by conservation methods as simple as turning down the thermostat, natural gas residential and commercial customers have reduced their average natural gas consumption by about 1 percent annually since 1980-this rate of decline has accelerated to about 2 percent annually since 2000.

As the cleanest fossil fuel, emitting only one carbon atom when burned, natural gas can play a major part in significantly reducing carbon emissions. We look forward to working with Congress to craft sound policies that encourage the increased use of clean, abundant, domestic natural gas, which will improve our environment, enhance energy security and save American consumers money.

Full-Fuel-Cycle Measurement is the Way to Go

May 28th, 2009

The highly regarded National Academies came out with a report yesterday (commissioned by Congress) confirming what the American Gas Association (AGA) has long been heralding about energy efficiency measurements in appliances-that the Department of Energy should measure efficiency in appliances from the point of production (think the natural gas wellhead) and not just “on-site” (think the natural gas burner tip in your kitchen). This more complete and more accurate energy efficiency measurement, called a full-fuel-cycle measurement, takes into account the considerable amount of energy lost in producing, generating and transporting energy to the end use.

In that vein, the study supports the “carbon footprint labeling” provisions that were recently included in the Waxman-Markey climate change legislation, which would expand the existing Federal Trade Commission EnergyGuide labeling program for appliances to include carbon footprint information.

So why do we need this more expansive measurement for our appliances? The answer is so that we as consumers can be fully aware of the energy efficiency of the appliances we’re purchasing for our homes and businesses. For example, 70 percent of the total amount of fuels used in producing, generating and transmitting electricity is lost by the time that electricity reaches a customer. By contrast, producing and delivering natural gas directly only loses about 10 percent of its usable energy. The study issued by the Academies says consumers should be informed, ahead of time, of the full energy efficiency of their appliances. AGA agrees.

As a consumer, would it be helpful for you to know this kind of background information on appliances before you make a large purchase? Let us know what you think.

AGA noted the important step the House Energy and Commerce Committee took last night in reporting this climate change legislation and is looking forward to working with Congress as it considers this issue throughout the summer.

It is important to AGA that Congress pass legislation that will strive to improve our environment and energy security, while also encouraging the increased use of clean, abundant, domestic natural gas. As the cleanest fossil fuel, emitting only one carbon atom when burned, natural gas can play a major part in quickly reducing carbon emissions.

Since the House Energy and Commerce Committee action was covered extensively in the media, there are quite a few stories in the news today. Here are a few articles that I came across this morning:

The Washington Post reported the committee markup this week as, “a week of late-night debates that cemented the shift of climate change from rhetorical jousting to a subject of serious, if messy, Washington policymaking. ”

Here’s a story where the New York Times discusses the supporters and opponents of the cap-and-trade legislation. While some eagerly supported the bill, others were concerned that it was a burdensome tax on business that would drive companies and jobs overseas while doing little to address climate change.

The Wall Street Journal says that the Waxman-Markey legislation, “still faces significant hurdles, particularly in the Senate, where a similar proposal failed last year. But the committee’s action gives the measure a major boost in both chambers of Congress, because the panel is among the largest and most ideologically and geographically diverse in Congress, with members from Rust Belt, oil patch, farm and coastal states.”

After the Memorial Day congressional recess, several other House and Senate committees will address various aspects of the bill so the debate on this issue will likely continue throughout this summer.

What do you think about the Waxman-Markey legislation?

The American Gas Association (AGA) supports President Obama’s and Congress’ energy and environmental policy priorities that aim to further develop renewable energies. However, we need to recognize that it will be years before these alternative fuels will be available in quantities to replace existing fuels that are so important in sustaining our economy. Therefore, more attention should be placed on our energy security by encouraging more American fuel source development. As the cleanest burning fossil fuel, natural gas is being looked to with more frequency to generate electricity, putting upward pressure on its price and making it less affordable for residential customers who rely on it to meet essential human needs (98% of natural gas is produced in North America).  In the future, when renewables are able to take on more of that electricity generation, it will dampen demand for natural gas in that market and in turn make it more affordable for our customers to heat their homes, cook their meals and ensure hot water comes out of the tap.

While renewable energy initiatives are one part of a complex combination of future energy solutions, the timetables being discussed for substantially increasing the use of renewables for electricity generation are optimistic at best, meaning natural gas will remain the fuel of choice in the electricity generation market.

The good news is that natural gas is already here and it is efficient, clean burning and found in abundance throughout North America.

Natural gas currently comprises almost one-fourth of all energy used in the United States and is directly linked to the economic well-being of the nation. In fact, there are currently at least 5.8 million Americans who are employed either directly or indirectly by the natural gas and oil industries. Of those 5.8 million Americans, there are 1.8 million people who are employed directly by the companies that produce, ship and supply natural gas and oil to American consumers, with another 4 million Americans employed in supporting positions indirectly created by the development of America’s domestic energy.

Since America’s natural gas and oil workers earned an individual average of more than $66,000 in 2004, which is $20,000 more than the combined household income for the average American family, these higher paying jobs also help employ other Americans in a variety of businesses – including automobile manufacturing, housing construction, retail sales and more.

In the current financial and economic crisis, natural gas has a great opportunity to help revitalize our economy, to help fight climate change and to help enhance America’s energy security – all at the same time.

Earlier this year, the American Gas Association (AGA) issued a release on the President’s proposed budget, which details AGA’s concerns about the budget’s potential negative impact on natural gas customers through higher energy prices. It looks like we’re not alone on this.

Here’s a story from the New York Times where John Felmy, chief economist at the American Petroleum Institute, says the impact of the budget on the industry will be to raise taxes on producers. The concern then being that most of this impact will be passed on to consumers in the form of higher fuel costs.

The Independent Petroleum Association of Mountain States believes that the budget tax increases are most harmful to small American energy companies that produce the clean, affordable and abundant American natural gas that we need to increase energy security, make renewable energy sources viable, and address climate change.

In another story from the Oil and Gas Journal, Barry Russell, the president of the Independent Petroleum Association of America, says that the budget “does not recognize that in order to decrease our reliance on foreign oil, we need to increase our own American supplies of natural gas and oil.”

These are just a few of the articles I came across. Many are concerned that the President’s budget would make it harder to develop America’s domestic natural resources by repealing existing tax provisions that encourage American production, as well as creating new excise taxes on offshore production and new user fees that will add to the overly complex and costly permit process.

By discouraging the production of America’s cleanest-burning, domestically abundant fossil fuel, this budget could ultimately tighten domestic supplies of natural gas; therefore, causing financial burden on consumers through higher energy prices, higher monthly natural gas bills, and higher unemployment through the loss of well-paying American jobs.

After reading those articles, are you concerned?