C2ES BLOCKBUSTER REPORT: NATURAL GAS KEY FOR DEALING WITH CLIMATE CHANGE

By Michael Krancer
Follow me @MikeKrancer 

The Center for Climate and Energy Solutions (“C2ES”) released a comprehensive and stunningly interesting Report last week entitled “Leveraging Natural Gas To Reduce Greenhouse Gas Emissions” (“the Report”).  The Report can be obtained here:  http://www.c2es.org/docUploads/leveraging-natural-gas-reduce-ghg-emissions.pdf

The title itself is significant as it signals C2ES’ belief that natural gas is a key to lower and lowering greenhouse gas emissions. This belief sets C2ES’ position apart from groups that are viscerally and ideologically opposed to natural gas because, as it is variously said, it is a “dirty fossil fuel” which we must “get beyond.” Those epithets do not add to the intelligent public discussion and, thankfully, C2ES does not suffer from this “cross to the vampire” syndrome. C2ES is the successor to the Pew Center on Global Climate Change and it is an independent, nonpartisan, nonprofit organization working to advance strong policy and action to address the twin challenges of energy and climate change. Its motto is “working together for the environment and the economy.” The organization has been long recognized in the United States and abroad as an influential and pragmatic voice on climate issues.

The Report recognizes that natural gas is a cleaner burning fuel. Indeed, natural gas is a new dominant player as an energy source because of new technologies that have unlocked vastly expanded current and projected inexpensive domestic supplies. C2ES understands that the availability of domestic natural gas is a positive occurrence and that natural gas supplies are a critical part of the current accomplishments towards GHG reductions we are currently witnessing. Further, C2ES recognizes that the ongoing and continued use of natural gas as a fuel offers significant and continued opportunities to achieve the goal of global climate change.

C2ES acknowledges that natural gas has already been a major player in GHG emissions reductions and that current energy sector GHG emissions are at their lowest level since 1994. In fact, the Unites States leads the world in carbon emissions reductions and is ahead of the would-be Kyoto Protocol standards. Also, we are now, in 2013, without a government mandate, almost at the would-be 2020 target for emissions reductions that the Waxman-Markey carbon-tax bill would have established.

The initial focus of the Report is the use of natural gas as a fuel for electricity production. Indeed, this is where the lion’s share of GHG emissions reductions have been and will continue to be realized. An important aspect of the Report is its underscoring of the importance of a diverse energy generation portfolio and the synergy between natural gas and other zero-emitting energy generation sources like nuclear, wind and solar. This is important because the potential partnership between natural gas and renewable energy is often overlooked. A natural gas plant can be cycled on and off more efficiently and more economically than other large traditional generation sources. Since, as they say, “the wind doesn’t always blow and the sun doesn’t always shine”, that reality makes natural gas and wind and solar collaborative partners, not enemies. As the Report also notes, the synergy is even deeper when one considers that “the fixed fuel price (at zero) of renewables can … act as a hedge against potential natural gas price volatility.” It is debatable as to whether natural gas price volatility will be as pronounced as some other fuel feedstock commodity prices, but the point is well taken; renewable energy in tandem with gas-fired generation serves as a commodity fuel price hedge.

The importance of the use of natural gas in other sectors as well—such as buildings, manufacturing, distributed generation and transportation—is also recognized. C2ES is bullish on the use of natural gas for GHG emissions reductions which will result for fleets and heavy-duty trucks but not so much for passenger cars. It is noted that passenger cars offer a relatively smaller emissions reductions opportunity and that the public infrastructure transition for passenger cars will take too long. That view may be too narrow and too pessimistic. First, the inclusion of light-duty trucks, for both fleets and consumers, in the natural gas consumptive use market, offers significant benefits and that effort is well underway. Last year’s federal Corporate Average Fuel Economy (CAFE) regulations included robust incentives for auto manufacturers to manufacture natural gas powered light duty vehicles through a credit multiplier, a petroleum fuel equivalency factor, and new “utility factor” for such vehicles for model years 2017 and 2021. Accordingly, natural gas fueled light duty trucks will very quickly become a key part of the large automakers’ regulatory compliance strategy and provide further impetus to the already budding partnerships between the OEMs and entrepreneurs seeking to bring such infrastructure on-line.

In the Commonwealth of Pennsylvania, the Department of Environmental Protection recently launched another round of the “Alternative Fuels Incentive Grant“ program. The new program is directed towards encouraging the consumer’s use of natural gas vehicles in the light duty truck and passenger vehicle world. The private sector is well ahead of the government with respect to this strategy. The major automobile manufacturers have definitely taken note. Light duty trucks, like pick-ups for example, are an economic sweet spot for them. They are lining up to produce natural gas fueled light duty trucks and have their eye on passenger vehicles. The market is well underway to solving the “chicken and egg” conundrum as major entrepreneurs are entering the natural gas vehicle infrastructure business as we debate the issue.

C2ES does identify an important caveat in its message, and one that makes a lot of sense. Specifically, do not let the promise of GHG emissions reductions through the use of natural gas as a downstream fuel be eclipsed by methane leaks at the upstream production phase. Fortunately, the news is very good in this regard. The early pronouncements of a certain Cornell professor on the issue of methane leaks in upstream operations has been conclusively refuted by any number of later more credible studies. The EPA’s recent 18th Annual Greenhouse Gas Inventory Report documents a 66 percent decline in methane emissions from natural gas development from prior estimates. In fact, the EPA reports that oil and gas systems now emit less methane than waste facilities such as landfills and sewage treatment plants. Notably, EPA issued Clean Air Act New Source Performance Standards (the “Quad O” regulations) which call for green completions or flaring; in fact, such requirements are already regulations and/or “best management practices” in a number of states and locations. In brief, before the “Quad O” regulations came into effect, industry was trending towards the use of green completions more and more today. Even the seven Northeastern States’ December 2012 Notice of Intent to file suit under the Clean Air Act (challenging EPA’s decision not to regulate methane emissions under the Quad O regulations) acknowledges that the oil and gas industry have implemented numerous methane control technologies and practices which adequately control such emissions.

All in all, the Report is a very substantive and thoughtful contribution to the overall discussion of the new energy reality that we, as Americans and Pennsylvanians, are experiencing today, and the Report underscores the good news that the use of natural gas provides in connection with the protection of human health and the environment.

This entry was posted in Carbon Emissions (GHG), Policy, Shale Gas by Mike Krancer. Bookmark the permalink.

About Mike Krancer

Mike Krancer is an experienced and well known policy and substantive thought leader in energy development and deployment. He is a valued advisor to U.S. and global energy companies of all types regarding the full range of legal, public policy, government relations, state and federal regulatory, financial, corporate, and labor matters with his 20+ years of energy industry and public policy experience at the highest corporate and policy-making levels.

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