EPA Clean Power Plan Could Drop Hammer On Natural Gas
When the US Environmental Protection Agency announced the Clean Power Plan last summer, the agency hinted that natural gas would play a big role in reducing the nation’s dependency on coal for power generation. That scenario has already been playing out, but as EPA prepares for final rule making, it looks like the natural gas industry is in for a rude awakening.
The EPA Clean Power Plan
For those of you new to the topic, the EPA Clean Power Plan was proposed on June 2, 2014, in support of the Obama Administration’s Climate Action Plan.
The goal, set for 2030, is to reduce carbon pollution from power plants in the US by 30% compared to 2005 levels.
Here’s why EPA is targeting power plants:
Power plants are the largest source of carbon pollution in the U.S., accounting for roughly one-third of all domestic greenhouse gas emissions.
The proposal will also cut pollution that leads to soot and smog by over 25 percent in 2030.
The Clean Power Plan doesn’t issue a one-size-fits-all solution for states to replace coal with other sources. The video that accompanied the 2014 announcement translates into a “main compliance strategy” that relies on a transition to natural gas before renewables, with natural gas factoring in strongly up through the 2030 target date:
Here’s another hint:
Notsofast On That Natural Gas Thing
All that must have been giving the natural gas sector the happiest last year, but this year other sorts of hints have been dropping.
The year started off with a bang in January, when President Obama announced new rules for reporting greenhouse gas emissions from oil and gas operations.
That might not seem like a huge deal but it is an obvious first step to addressing the issue of fugitive methane emissions.
The new reporting requirement also follows up on a 2014 ARPA-E initiative that pumped $30 million worth of R&D into new technology for measuring methane emissions, from gas and oil transportation as well as drilling operations. Stanford University also just kicked off a big methane detective initiative this summer, as part of a broader program aimed at resolving some thorny issues posed by natural gas.
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While natural gas is a cleaner-burning fuel than coal, the fugitive emissions issue is just one part of a whole huge bundle of risks and impact associated with natural gas fracking (short for hydrofracturing, a method of drilling that involves pumping millions of gallons of chemical brine underground at high pressure).
Throughout this year, several new natural gas studies have associated fracking with local impacts including increased hospitalizations and increased rates of low-birth-weight babies, as well as local economic and water resource issues. A particularly incendiary article in Newsweek, followed up in detail by Rolling Stone, anecdotally linked fracking to miscarriages and infant deaths in a region of Utah.
EPA also issued its long-awaited study on fracking and water contamination risks this year. Although the natural gas industry spun it as a win, the EPA study clearly stated that a “significant data gap for hazard identification” prevented it from reaching any immediate conclusion, other than to cite several examples that appeared to confirm a link between fracking and water contamination.
One More Thing About That Natural Gas Thing
All this bad news is bad enough for the natural gas industry, but so far the low price of natural gas has given it a leg up on competing alternative fuels, namely wind and solar energy.
However, that may all be about to change. The natural gas industry has been lobbying heavily for federal permission to increase exports of liquid natural gas (LNG), and the Obama Administration has been slowly but surely doling out more permits for LNG export terminals.
That’s going to put upward pressure on domestic prices, as described yesterday by Bloomberg. Under the title “Gas Awakening From U.S. Shale Slumber as LNG Shipments Near,” reporter Naureen MalikChristine Buurma had this to say:
Seasonal price swings will intensify as the country begins shipping liquefied natural gas cargoes to Asia and Europe later this year, said Bank of America Corp., RBC Capital Markets LLC and Wood Mackenzie Ltd. While that’s good news for traders yearning for volatility, it could be bad news for consumers.
Exports will help prices rebound from the slump caused by the U.S. pumping record amounts from shale formations. Growing domestic winter demand is already causing spikes and trading volumes in futures markets have rebounded to the highest level in three years…
Yoiks!
The Clean Power Plan Hearts Wind And Solar
For utilities and other energy stakeholders (such as the Department of Defense) looking for price stability, the ripple effect of LNG exports puts natural gas deep in the doghouse. However, it creates a huge opportunity for wind and solar, and that could be reflected in the latest iteration of the Clean Power Plan.
For that we turn again to Bloomberg, which yesterday reported that “Obama’s Power-Plant Rule Said to Include Boost for Renewables:”
The Obama administration plans to offer new incentives for solar and wind energy in its plan to cut power-plant emission as a way to counter delaying the initial deadline by two years, a person familiar with the rule said.
The renewable incentives will allow deeper cuts in carbon emissions in the long term while giving more flexibility to states that must implement the rule, said the official who sought anonymity before an official announcement.
Notably, as Bloomberg notes, renewables are expanding faster than anticipated and costs are dropping, particularly for solar.
If Bloomberg’s insider-y information bears out, it looks like the Clean Power Plan is prepared to skip over natural gas and cut straight to the mustard.
Stay tuned.
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Image Credits (screenshots): via US EPA, YouTube.
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