Sunday, December 27, 2009

Climate change is pushing U.S. energy policy into the background

Congressional focus on greenhouse gases and climate change is pushing U.S. energy policy into the background, lawyer says
Alan Bailey
Petroleum News
While debate in the U.S. Congress centers on greenhouse gas emissions and climate change, energy policy and U.S. energy security have become somewhat neglected, Tom Roberts, a member of Washington, D.C., law firm Van Ness Feldman P.C., told Law Seminars International’s Energy in Alaska conference Dec. 7.
“The fact is that climate change and energy are inextricably tied together,” he said. “The only way we are going to get a handle on our greenhouse gas emissions is to do things that affect the way we produce, transport and use energy.”
But climate change considerations are apparently driving the pace of progress of some key pieces of energy-related legislation currently wending their way through Congress.
House ACES bill
The Waxman-Markey bill, otherwise known as the American Clean Energy and Security Act, or ACES, that has narrowly passed the House of Representatives, has rolled together earlier bills that individually considered climate change, renewable energy and energy efficiency, and now contains two titles with provisions for renewable energy standards and for energy efficiency, in addition to major legislation that would enact a greenhouse gas cap-and-trade system.
The renewable energy standards in the bill apply to electricity utilities that generate more than 4 million kilowatt-hours per year, a size threshold that probably excludes any utilities operating in Alaska, Roberts said. By 2020 utilities of the appropriate size have to demonstrate that 20 percent of their sales come from renewable energy, with the possibility of demonstrating energy efficiencies as a contribution to that goal. But a limit imposed by the bill on the extent to which efficiency gains can be used to meet the standard suggests that the proposed standard has more to do with creating a market for wind and solar power than being more efficient, Roberts said.
It’s driven by the environmental community, and the wind and solar energy industries, he said.
The concept is that a utility can earn renewable energy certificates for submission to the U.S. Department of Energy, with the possibility of trading or banking for the future any certificates in excess of what the utility needs to meet the standard.
Two Senate bills
The Senate has two separate bills that together correspond to ACES, with the Clean Energy Jobs and American Power Act, or Kerry-Boxer bill, dealing with climate change and the American Clean Energy Leadership Act, or ACELA, dealing with energy. ACELA has bipartisan support but has been on hold for six months, waiting for action on climate change legislation, Roberts said.
ACELA contains a renewable energy standard for electricity generation, very similar to that in the ACES bill, with an identical threshold for the size of utility impacted but with a requirement for 15 percent of power to come from renewable sources by 2021. ACELA allows slightly more of the standard to be met from improved energy efficiency and the bill contains some types of renewable energy credit not available under ACES.
And both ACES and ACELA have buy-out provisions, allowing utilities to purchase renewable energy credits from the U.S. Department of Energy, if necessary, Roberts said.
Carbon capture and sequestration, a set of technologies aimed at removing and disposing carbon dioxide generated from fossil fuel use, also figures in both bills, with each bill spelling out a major program to help develop and demonstrate the CCS technologies. The carbon capture and sequestration provisions within ACELA include government indemnification of carbon dioxide storage site developers against future carbon dioxide leakage, one of the big CCS liability unknowns.
Both bills give the Federal Energy Regulatory Commission a new role in the oversight of electrical transmission line development, to facilitate the construction of interstate lines in support of renewable energy sources. And the bills include new energy efficiency standards for electrical appliances and other equipment.
ACELA also has a provision to establish a new quasi-independent agency within DOE to handle government funding support for energy development projects. The agency is supposed to be supplied with $10 billion of initial capitalization.
“This is a very far-sighted, aggressive approach,” Roberts said. “Whether it ultimately makes it in the end will be something to watch. If it does, it will drastically change the way the federal government supports energy project development, energy technology development.”
Oil and gas provisions
ACELA proposes the relaxation of some restrictions on oil and gas drilling in the eastern Gulf of Mexico and directs the Secretary of the Interior to establish an Alaska outer continental shelf lease and permit processing office. The bill also includes some amendments to the federal loan guarantee program for the Alaska natural gas pipeline — those amendments include an increase in upper limit for the loan guarantee from $18 billion to $30 billion and a guarantee that 80 percent of the total project cost will be covered, up to that $30 billion.
There is also a specific authorization to issue a right of way through non-wilderness areas of Denali National Park for an Alaska in-state natural gas pipeline.
However, as long as energy legislation remains tied to climate change it’s going to be a long time before any of the energy legislation passes into law, Roberts said.
“Right now the majority leader has kicked the climate-change can down the road until at least spring in the Senate,” he said.
And in 2010 it is unlikely that Congress will do much more than pass the annual appropriations bills ahead of the election that year — fear of unpredictable impacts on the U.S. economy of a cap-and-trade system will make passing climate change legislation in the Senate especially difficult, he said.
Some senators, including Sen. Lisa Murkowski, have been pushing to move an energy bill forward as standalone legislation, Roberts said.
And Roberts endorses that approach. It’s time to stop neglecting the energy stepchild, he said.
“Any study you look at shows you can get significant greenhouse-gas reductions from just simply doing energy things,” Roberts said. “… Let’s do some energy legislation. Let’s make a down payment on what we want to achieve on the greenhouse gas side and see what happens.”
Then people can expend time and energy working on climate change legislation, he said.

Monday, December 14, 2009

Tax program for oil industry makes exploration less attractive

Letter to the ADN editor:

Tax program for oil industry makes exploration less attractive
Some say Alaska's tax program, ACES, benefits the oil industry. Industry executives say while innovative technology opens opportunities, ACES takes away "the up-side" and Alaska is no longer attractive for oil exploration. What should Alaskans believe?
Alyeska Pipeline's reality is based on one thing: pipeline throughput. Setting aside debate over policies, taxes and regulations, Alaskans should be concerned that the Trans Alaska Pipeline System now carries just one-third of peak throughput. Since 1988, throughput has declined from 2.1 million to 700,000 barrels per day and should dip below 300,000 barrels a day within 15 years.
What does future declining throughput mean for Alaskans? Fewer jobs. Lower state revenue. Reduced services. Tougher economic times for all.
Alyeska is making dramatic changes to manage decline. Our 2010 budget is 14 percent lower than 2009. We have cut 60 well-paying Alyeska and contractor positions and are spending less with local businesses. Seeking efficiencies, we will likely close some facilities and relocate jobs to Anchorage.
These difficult changes will impact individuals and communities. But every change is designed to extend the pipeline's life. While we increase efficiency, we will still invest in pipeline renewal and maintain our keen focus on safety, integrity and environment.
Pipeline throughput is a harbinger of things to come in Alaska. Alaskans must pay attention to Alyeska's reality. We are carefully changing our processes, culture and operations so TAPS can stay viable despite declining oil throughput. Alaska, its communities and its citizens would be wise to do the same.
-- Kevin Hostler
President and CEO
Alyeska Pipeline Service Company