Methane Regulations and Energy Bills with Marty Durbin – July 26, 2015

Today we talk about five things in the news for the week of July 20, 2015:

  1. House and Senate Drop Limited Energy Bills
  2. EPA Proposes New Voluntary Methane Leak Reduction Program
  3. Jeb Bush Wants to Eliminate Fossil Fuel “Subsidies”
  4. Gov. Jerry Brown and Mayor de Blasio Talk Climate at Vatican
  5. New Study Looks to Rain on the Natural Gas Parade

And our interview is with Marty Durbin, the President and CEO of America’s Natural Gas Alliance.

Click below to listen or find us on iTunes or Stitcher.

1.  House and Senate Drop Limited Energy Bills

Last week, both the House and Senate Energy Committees introduced their version of an Energy Bill.  On each panel, the Republicans and Democrats came together and introduced only provisions that were acceptable to both sides.  National Journal explained the outcome this way, in a story called “The House Has Its Energy Bill, But Almost Nothing’s In It.”

…even as Republicans and Democrats alike passed the fruits of that labor in a unanimous subcommittee vote, the buzzword “comprehensive” had been replaced with less exciting modifiers like “modest,” “first step,” and merely “good.”

Despite talk of wide-ranging energy legislation, the 95-page bill that House Republicans unveiled late Monday night takes a narrow bite by side-stepping top-tier controversial issues, including the Keystone XL pipeline, offshore drilling, and the repeal of the crude export ban. And Democrats say the bill misses the mark by not having enough language to expand renewables and increase energy efficiency.

The House Bill was introduced on Monday and approved by the Energy and Power Subcommittee on Wednesday.  At that the markup, the Subcommittee’s leaders, Chairman Ed Whitfield (R-KY) and Ranking Member Bobby Rush (D-IL) both expressed support for the bill, but said there was still work to do.  On the natural gas front, there was really only two provisions that are particularly noteworthy for natural gas:

  • Sec. 1101. FERC process coordination: This section reinforces the Federal Energy Regulatory Commission’s (FERC) role as the lead agency for siting interstate natural gas pipelines. This section would require FERC to identify all agencies considering an aspect of an application and set the schedule for review, including a deadline for a final decision…. FERC would be required to coordinate its efforts and make a recommendation on the scope of the environmental review.
  • Sec. 2101. Energy and manufacturing workforce development: This section directs the Secretary of Energy to establish a comprehensive program to improve education and training for energy and manufacturing-related jobs.
Rep. Joe Barton (R-TX) urged the Subcommittee to also move on crude oil exports, and Rep. Bill Johnson (R-OH) called for action on liquefied natural gas (LNG) exports.  The bill only contains some “sense of the Congress” language on that topic, saying  “allies and trading partners of the United States, including in Europe and Asia, are seeking stable and affordable energy supplies from North America to enhance their energy security.”

Over on the Senate side, they did not move their bill at all last week but they appear poised to do it this week.  The bill contains three provisions that are especially relevant to natural gas:

  • Section 2201. Action on applications to export liquefied natural gas. Requires the Secretary of Energy to issue a final decision, approving or disapproving, any application to export natural gas to countries that do not have free trade agreements with the United States no later than 45 days after the Federal Energy Regulatory Commission or Maritime Administration has concluded the review required by NEPA.
  • Section 2202. Public disclosure of liquefied natural gas export destinations. Amends Section 3 of the Natural Gas Act to require DOE to collect data on exports of liquefied natural gas. Requires that this data be made public.
  • Section 4403. State oversight of oil and gas programs. Adds a new section requiring the Secretary of the Interior to establish a program through which the Bureau of Land Management and a State, upon the request of the Governor of the State, can enter into a memorandum of understanding to consider the costs and benefits of creating consistent rules and processes governing oil and gas production activities on federal lands in the State.

2.  EPA Proposes New Voluntary Methane Leak Reduction Program

The EPA is proposing a new, voluntary Natural Gas STAR Methane Challenge Program.  It will be built around an existing program and will allow oil and gas companies to make and track ambitious commitments to reduce methane emissions.  The agency will be evaluating feedback received through September 1, 2015, and then intends to launch the program later this year.  It explained the program this way:

Since 1993, EPA’s Natural Gas STAR Program has successfully collaborated with the oil and natural gas industry on implementation of cost-effective methane emission reduction technologies and practices. To join Natural Gas STAR, partner companies commit to evaluating their operations to identify opportunities to reduce methane emissions, and to implement and report on their progress.

The Methane Challenge Program will expand on Natural Gas STAR by creating a structure through which companies can make specific, ambitious voluntary commitments …This is a significant departure from Natural Gas STAR, in which partner companies make a general commitment, participate at a range of levels (e.g., company-wide to facility or regional level), and only report information on emission reduction actions.

Industry reaction has been mixed.

3.  Gov. Jeb Bush Wants to Eliminate Fossil Fuel “Subsidies”

Bush appeared to make a fairly major policy announcement via a sketchy YouTube video made last week.  The New York Times reports:

At an event in New Hampshire on Wednesday, Mr. Bush was captured on video saying that the United States should phase out tax credits that subsidize the wind, solar, oil and gas industries and allow market forces to lower the cost of energy.

“I don’t think we should pick winners and losers,” Mr. Bush said. “I think tax reform ought to be to lower the rates as far as you can and eliminate as many of these subsidies — all of the things that impede the ability for a more dynamic way to get where we need to get.”

Now, that position is actually not that much different than what Mitt Romney said during his debates with President Obama:

Gov. Romney.  First of all, the Department of Energy has said the tax break for oil companies is $2.8 billion a year. And it’s actually an accounting treatment, as you know, that’s been in place for a hundred years. Now——

The President. It’s time to end it.

Gov. Romney. …But you know if we get that tax rate from 35 percent down to 25 percent, why, that $2.8 billion is on the table. Of course, it’s on the table. That’s probably not going to survive if you get that rate down to 25 percent.

4.  Gov. Brown and Mayor de Blasio Talk Climate at Vatican

As the Los Angeles Times reports:

Gov. Jerry Brown, speaking Tuesday at a conference hosted by Pope Francis, accused climate change skeptics of trying to “bamboozle” local leaders trying to cut emissions and said he had no faith that Congress would act on global warming.

“It’s up to you guys,” the governor told more than 60 mayors from around the world who were invited to the climate conference at the Vatican….

The former Jesuit seminarian threw his weight behind Francis’ recent encyclical, Laudato Si, a powerful document in which the pope spells out his belief that creeping climate change is contributing to global poverty.

New York Mayor Bill de Blasio also attended, but it was Gov. Brown who gave the most interesting remarks on climate change.  He called fossil fuels a “good” but said that good can become a “bad” when it is overused.  He has in the past stood up for natural gas and the safety of fracking, so he appears to be squarely in the camp of seeing natural gas as a bridge fuel to an all-renewable future.

5.  New Study Looks to Rain on the Natural Gas Parade

On Tuesday, Nature published a story that is kind of a downer for anyone in the natural gas business.  As, the BBC reported:

Politicians have argued that the US was able to significantly reduce CO2 between 2007 and 2013 because of fracking.  But scientists now believe an 11% cut in emissions in that period was chiefly due to economic recession….

“We couldn’t see that gas was the real driver,” lead author Prof Klaus Hubacek from the University of Maryland told BBC News.  “What we can show is that the main driver has been the level of consumption, GDP per capita. The decrease in this was the main driver. Gas was a driver but a very minor one.”  The biggest drop in emissions took place when the recession was really beginning to bite between 2007 and 2009 when CO2 fell by almost 10%, due to a sharp decline in the volume of consumed goods.

The study claims its analysis has been missing from the climate debate:

…there has been no quantitative analysis of whether the gas boom and changes in the fuel mix of the power sector are indeed driving the decrease in US CO2 emissions.  Here, we use input–output structural decomposition analysis (SDA) to assess sources of change in US CO2 emissions…

Concurrent with the global economic recession, 83% of the decrease during 2007–2009 was due to decreased consumption and changes in the production structure of the US economy, with just 17% related to changes in the fuel mix. During the economic recovery, 2009–2013, the decrease in US emissions has been small (<1%), with nearly equal contributions from changes in the fuel mix, decreases in energy use per unit of GDP, changes in US production structure, and changes in consumption patterns.

Energy in Depth, an industry group, has offered up a critique of the study.  They point out, for example, that the study conflicts with pretty much everyone else, including the Intergovernmental Panel on Climate Change (IPCC), U.S. EPA, the U.S. Energy Information Administration (EIA), and the National Climate Assessment.  Moreover, this new study divides up the years up into groups that fit their narrative.  Most importantly, the study stops in 2013 even though the positive impacts of natural gas on climate emissions continues to grow.

The bigger point that I would make is that this is not a new concept.  For one example, Trevor Howzer of the Peterson Institute presented a similar deconstruction analysis last year.  He also concluded that the recession was a much larger driver of carbon reductions than coal-to-gas switching over the last few years.  But the more important point is that America reduced its emissions about as much as Europe, which has imposed costly carbon laws.  Moreover, natural gas loses credit for emissions reductions in those studies because cheap energy leads to additional emissions caused by economic growth.  While it is certainly true, it is hard for policymakers penalize an industry for causing economic growth.

Interview with Marty Durbin of America’s Natural Gas Alliance (Starts at: 20:24)

Marty spent his early childhood in Illinois, but his father worked for the Department of Defense and the family was transferred to Washington, D.C. when Marty was eight.  So he is more or less a Washingtonian.  Marty attended the University of Maryland and right after college started as a staff member for Sen. Alan Dixon (D-IL).  Marty spent most of his time writing correspondence to constituents, but he quickly became a legislative assistant handling environmental issues.  After Sen. Dixon was defeated, Marty joined the staff of Rep. Rick Boucher (D-VA).  While on Capitol Hill, Marty worked on the Clean Air Act Amendments of 1990, the Energy Policy Act of 1992, and a range of other issues related to coal, ethanol, and nuclear power.

Marty spent his first eight years after leaving the Hill at the Plastics Council, which later merged into the American Chemistry Council (ACC).  During his time in the chemistry business, Marty was focused on security.  After that, Marty spent about five years at the American Petroleum Institute (API).  It was an interesting switch, because natural gas costs are an important issue for for ACC.  At ACC, he had started hearing about opportunities in the Marcellus Shale, but coming from the chemistry business he was a bit skeptical that it was real.  At API, he had the chance to see that the shale boom was real and that the oil and gas industry was about to change the energy dynamics in the United States.  A couple years ago, Marty left API to join America’s Natural Gas Alliance (ANGA).

ANGA is a relatively new trade association.  It was created just about six years ago, when many leaders in the shale boom decided they needed to band together to focus on developing the demand for natural gas.  That is not something that the oil and gas industry has traditionally focused on.  Marty compared the situation with coal, where coal companies have long had strong relationships with electric utilities.  Natural gas executives needed to develop those types of relationships if utilities were going to use more natural gas.  Moreover, ANGA was needed to ensure that regulatory policies allow natural gas to be utilized.  A big part of ANGA’s role is educational.  Marty says the association tries to make sure the public understands the role that natural gas can and does play, and ANGA also highlights its benefits.  ANGA focuses on downstream markets that are being changed by natural gas, in particular electricity generation, manufacturing, and transportation.

On methane leaks, Marty said the industry does have a challenge.  But the industry is already addressing it.  He touted the industry’s success, saying that even while production has jumped by 38% since 2005, emissions are down by 35%.  He said the industry is working collaboratively and not just telling regulators “leave us alone.”  ANGA does start to push back, however, when the industry gets blanketed with new regulations from multiple agencies.  New EPA emission standards for new oil and gas wells just took effect at the beginning of this year.  That rule may be expanded.  The Department of Interior is talking about stepping in to regulate methane on federal land, and EPA is considering creating a new methane regulatory program.  Many states also have their own rules.  Marty said many of his members have a comfort level with the existing Natural Gas STAR framework and while they are still sorting out the details of the expansion proposed last week, it is something they have traditionally been open to.  Marty also pointed out the industry has had tremendous success in reducing traditional pollutants.

Pipeline infrastructure is critical to the continued success of the natural gas industry.  Marty pointed out there are some serious price differentials developing in certain areas of the country because there is not enough pipeline infrastructure to connect supply basins to demand centers.  Natural gas pipelines are also critical, in Marty’s view, to renewables.  That is because natural gas generation is used to back up large-scale renewable projects.

Marty hopes to see a more rational process for permitting pipelines.  For example, he would like to see better coordination between the various state and federal agencies that have a hand in approving a pipeline project.  He said elected officials also need to take a greater role in infrastructure debates.  Local elected officials are able to weigh a community’s issues and concerns better than any regulator can.  ANGA supports the House Energy Bill introduced last week, which would strengthen FERC’s lead role in permitting.  Industry is comfortable with FERC’s process because it is consistent, albeit time consuming and costly.

On liquefied natural gas exports, Marty said the DOE’s recent change in the process was a clear improvement over the early process.  As it stands today, a company seeking to export LNG must first work through the time-consuming and costly process of getting a permit from FERC to construct the terminal.  Once that is done, a project can go to the DOE to get a permit to export gas.  Since the current process was put in place, DOE has moved quickly to approve projects that successfully make it through FERC.  Marty says Congress has an important role, however, in putting a clear timeline on the DOE.  ANGA would prefer that the market decide how much gas should be exported, but if the DOE must have a role, then ANGA feels DOE should at least act in a timely matter.

ANGA was disappointed that reforms to the LNG export permitting process were left out of the initial House Energy Bill.  Marty is hopeful that LNG export provisions will be added to the bill as it moves through the House.  He pointed out that LNG reforms had already passed the full House with strong bipartisan support.  Marty is also happy to see the House and Senate Committees working closely together on this issue.  The Senate Energy Bill unveiled last week would put a 45-day time limit on DOE after the FERC process is completed.  Marty says that is important, even though DOE is working in a timely manner today, because without a time limit there is no guarantee that DOE will not lapse back into indeterminable delays.  In addition, Marty says any pro-export policies passed by Congress will be a strong message to DOE that Congress thinks this issue is important.

ANGA is also working hard to explain how natural gas can help states comply with the President’s Clean Power Plan, which will require each state to reduce its carbon emissions.  That means ANGA is talking to 50 different decision makers.  ANGA recognizes that there is some uncertainty about the rule, as it is only a proposal at this point and is being opposed by more than half the states.  But ANGA feels that a lot more natural gas is going into electricity generation regardless of what happens to the rule.  Moreover, despite the uncertainty, nearly every state is putting together an implementation plan of some sort.  So the natural gas industry needs to be at the table to make sure states understand the benefits of natural gas.  ANGA sees natural gas as more than just a bridge fuel that is a short term fix.  Rather, it is a foundational fuel that will be an important part of electricity generation for decades to come.

The House Energy Bill also contains some workforce development provisions.  Marty said that the industry can and is doing a better job of focusing on workforce opportunities.  The oil and gas industry is talking about a “great crew change” as many of the current workers joined the industry in the 1980s oil boom and now they are starting to retire.  That creates a great need for the industry, but it also opens a lot of job opportunities.  In particular, the oil and gas industry creates a lot of well-paying blue collar and vocational jobs.  This has helped industry and the building and trade unions to become great allies on both workforce and policy issues.

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