Publication Date:
Sun, 1899-12-31 18:00
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If the right incentives are put in place, annual U.S. natural gas consumption could increase by 60 percent to 35 quadrillion Btu (quads) over the next 20 years, according to "Fueling the Future: Natural Gas and New Technologies for a Cleaner 21st Century," a recent demand forecast produced by Washington Policy Analysis for the American Gas Foundation (see "Fueling the Future,").
The forecast is based on an assumption that the nation's policymakers will make a commitment to replace the barriers to increased natural gas consumption with incentives that boost gas production and use. While the forecast does not recommend specific actions policymakers should take, AGA does so in "Fueling the Future: A Policy Blueprint to Realize the Promise of Natural Gas & New Technologies for a Cleaner 21st Century." This 24-page policy blueprint presents eight national policy goals and the actions necessary to achieve those goals and turn the 35-quad forecast into reality. Here's a brief summary.
8 Proposed Policy Goals
1. Energy markets will be free and competitive, and natural gas utilities will be allowed to compete fairly in these markets.
Because state utility commission actions could harm the competitive stance of gas utilities, AGA works closely with the National Association of Regulatory Utility Commissioners (NARUC), which develops policy guidelines that state regulators often choose to follow.
Currently, NARUC is looking at standards of competition that govern the relationship between regulated utilities and their unregulated affiliates. The standards address such topics as an affiliate's use of the utility's name and the hiring of separate staffs at the utility and the affiliate to handle competitive functions, such as scheduling gas shipments. The blueprint advocates developing standards of competition that neither limit a customer's gas service choices by precluding a utility or its affiliate from offering energy services nor prevent an affiliate from operating under the parent utility's brand.
Another issue the blueprint highlights involves efforts to set national uniform business practices for gas utilities and marketers. While this is a worthy objective, says the AGA document, adoption of uniform business practices should be optional for utilities because many of them have invested substantial sums in systems that implement practices already approved by their state regulators.
The blueprint also calls for repeal of the 1935 Public Utility Holding Company Act, saying it is a seriously outdated law given the nature of today's competitive energy market.
2. The historic reputation of the natural gas industry for safety and reliability will not be compromised.
The policy document urges gas pipeline safety regulators to promulgate performance- and risk-based regulations because these alternative regulatory approaches offer greater flexibility than the traditional "one-size-fits-all" prescriptive rules that do not take into account the differences among gas delivery systems.
Other recommendations include stronger regulatory mandates to prevent pipeline damage caused by excavators and development of state utility service unbundling plans that answer the questions about who is responsible for equipment and programs related to the gas sales function now that many utilities transport but do not sell gas.
3. Energy efficiency and environmental regulations will be comprehensive, equitable and balanced.
One path to reaching this goal involves scrapping the traditional method of measuring energy efficiency solely at the point of use and instead measuring the efficiency of the entire energy cycle from production through delivery and use. To do otherwise, says the blueprint, is misleading and defeats the national priorities of conserving energy and reducing air pollution.
In addition, environmental policymakers must make sure that air-quality regulations do not discourage the use of natural gas or inadvertently defeat their own emission-reduction goals. For example, says the blueprint, a business planning to install new equipment or modify existing equipment must obtain a permit and put in expensive emission-control technology if the project will become a "significant new source of emissions" as defined by the Environmental Protection Agency. As a result, says the document, the goal of reducing emissions is defeated because businesses will keep older equipment running as long as possible to avoid the environmental clearance process.
4. The federal government will aggressively promote the use of natural gas through its research and development program and by using innovative gas technologies in federal facilities.
To help ensure that natural gas is the fuel of the 21st century, the blueprint calls on the federal government to boost spending on gas-related research and development for promising technologies such as fuel cells, microturbines, natural gas vehicles, cooling systems and distributed generation systems that business owners and homeowners can install to generate their own electricity. The document also urges Congress to fund R&D that enhances the safe and reliable operation of the gas infrastructure. To aid gas industry-funded R&D efforts, the blueprint advocates setting up a tax credit for public-purpose collaborative R&D that improves public safety, environmental protection and energy conservation.
The blueprint goes on to push for full implementation of a Clinton administration executive order designed to conserve energy and reduce emissions at federal facilities, such as military bases. The order recognizes the concept of "total energy efficiency" and draws a clear link between natural gas and environmental quality and energy efficiency.
5. The potential of new technologies will be fully recognized in regulations, codes and standards affecting the natural gas industry.
To achieve this goal, the federal government and the standard-making bodies need to take into account proven technological advances and best practices when amending existing or writing new standards and rules. Citing just one example, the blueprint notes that remote monitoring for pipeline corrosion using meters and phone lines should be encouraged and accepted in place of the traditional method of physically walking the system mile by mile.
Recommendations on the end-use side are offered, too. For instance, codes and standards developers should recognize that corrugated stainless steel piping, which is safe and more economical than the steel pipe traditionally used for interior gas piping, is a viable alternative to steel pipe, says the document.
Rules, codes and standards that impede market penetration of promising new technologies need to be amended as well. The blueprint points to gas-based distributed generation as an example, noting that wider use of that technology is constrained by outmoded regulations governing interconnections to the electricity grid.
6. Access to the natural gas resource base will not be unduly restricted.
Today, access to significant portions of the U.S. gas resource base is either totally or partially restricted by laws and regulations, some of which were adopted decades ago. In light of the improved environmental protection offered by advances in exploration and drilling technologies, it's time to reevaluate these laws, says the blueprint.
It recommends that the federal government establish a high-level interagency task force to resolve issues associated with domestic gas resource base development and gas delivery infrastructure expansion and that it provide a baseline the numerous federal and state agencies can follow so their policies on the use of public lands are consistent.
7. The cost of providing gas service to new electricity generating plants will not be borne by residential, commercial and industrial customers.
Demand for natural gas to generate electricity will continue to grow. Consequently, gas pipelines and utilities will need to invest in facilities and make operational changes. Regulatory policy should recognize that these expenses should be borne solely by the power plant operators and not by other gas customers. To do otherwise, says the blueprint, would artificially constrain gas consumption in the residential, commercial and industrial markets.
The increased demand for natural gas by power plants also poses a possibility that pipeline service to utilities and their customers could suffer. To guard against that possibility, the blueprint asks that the Federal Energy Regulatory Commission, which regulates gas pipelines, ensure that the level of reliable service the pipelines have always provided to gas utilities is maintained.
8. The regulatory environment will facilitate expansion of the natural gas infrastructure.
To meet the 35-quad gas demand projection, gas utilities will need to invest about $100 billion to upgrade and expand their delivery systems over the next 20 years. To facilitate this expansion, state regulators need to recognize that utilities compete for funds in the capital markets against companies that earn higher returns, says the AGA document, adding that regulators also must find ways to reduce the time it takes for utilities to obtain construction permits.
In addition, the blueprint recommends establishing an investment tax credit for utility system expansion and abolishing the tax utilities pay on "contributions in aid of construction" because it inflates the consumer's cost of hooking up to the gas system by 35 to 50 percent.
For More Detail
For print copies of "Fueling the Future: Natural Gas & New Technologies for a Cleaner 21st Century," which is a 40-page summary of the American Gas Foundation gas demand forecast, and "Fueling the Future: A Policy Blueprint to Realize the Promise of Natural Gas," contact Tracy Burleson at tburleson@aga.org [1].
Karen Ryan is a contributing editor of American Gas and provides freelance editorial services. She may be reached at .
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