The Natural Gas Lobby Might Have Met Its Match
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| CNG Bus at Pentagon |
The natural gas industry has been lobbying hard to get incentives for additional markets put into whatever energy legislation comes out of Congress this year. Even in the Senate’s vastly reduced bill, Senator Harry Reid is pushing for a provision that establishes tax incentives for natural gas vehicle production and for installing natural gas fueling stations. This is a provision that T. Boone Pickens has been pushing for a long time.
However, a coalition of large natural gas customers including agriculture interests, food processing concerns and manufacturers of chemicals, fertilizer, glass, paper and steel, have sent a letter to Senator Reid protesting the inclusion of any measure that artificially increases the demand for natural gas. They are expressing their deep concern about the potential for significant price increases that will cause their production costs to increase and their competitive position in world markets to decrease.
Paul Cicio, president of the Industrial Energy Consumers of America (IECA), said legislating new demand would prompt increased price volatility and higher prices. Higher natural gas prices also mean higher electricity costs.
“The impact will be felt by all consumers, not just industrial users,” Cicio said. “Farmers will pay more for fertilizer, natural gas to dry their crops and electricity to run their irrigation systems; homeowners will pay more to heat and cool their homes; and manufacturers would be confronted with greater competitiveness challenges which threaten jobs at home.”
. . .The coalition acknowledged there is great hope that the large shale gas reserves will materialize as recoverable supplies. “However, history has shown that unforeseen circumstances, including the potential for both federal and state regulations to be placed on shale drilling, can either slow its production, increase its costs or otherwise dramatically alter these types of future projections.”
The industrial and agriculture consumers called for a coherent energy policy that balances gas demand with the economy’s need for affordable supplies.
If I was a betting man – and I have been known to make a wager or two – I would bet that the combination of the farm and manufacturing lobby will win this battle. As I often remind people who question how I can hope to win a battle against powerful fossil fuel interests, there are more energy consumers in the world than energy producers. Some of them know how to apply effective political pressure.
It’s very important to preserve our industries, especially from the effect of gas price fluctuations. I read something about Dow in Midland, Michigan (yes, the same location where the first CHP LWR nuclear reactor was supposed to be built by Consumers’ Energy to produce process steam for Dow and electricity for the grid) saying that the gas price issue was really threatening their ability to stay afloat. Apparently Dow’s plant is dependent on a gas CHP plant for process steam that was built after the nuclear plant got canceled.
They tried to get a coal plant built there after the gas CHP plant was built, but were prevented by people opposed to coal pollution. Can’t blame the citizens for that, but I can imagine that if gas prices spiked again, they’d be between a rock and a hard place. Probably a lot of the chemicals industry is in that position, too – dependent on natural gas for heat and as a feedstock.
I know that gas is used for fertilizer manufacture, too, as a source of hydrogen for the Haber-Bosch processors. If natural gas prices were high, the farmers would face high fertilizer costs, and consequently food costs would go up, which would have a cascading effect through several sectors of the economy. Plus you would have an increased push to feed crops into ethanol plants (which would be competing with natural gas for vehicle fuel); unfortunately, the ethanol plants are heated with natural gas, and you would have food prices rise even further, to astronomical levels. and eventually, it would probably hit the Third World. Tortilla prices in Latin America during the previous commodities price increase period a year or two ago caused riots to break out. Though there was no starvation, riots are never good, and I can only imagine what would happen if more fuel was added to the fire with ethanol and natural gas being used as a vehicle fuel.
You would have cascading gas price increases.
Not good.
@katana0182(Dave) — I ran across this article recently and would appreciate your thoughts. It seems to me that market competition would be a strong moderating effect of price spikes when there are several different sources of fuel – harder to collude the more players there are.
http://www.washingtontimes.com/news/2010/jul/2/open-standards-for-auto-fuel/
Please – call me Dave, Doc – I like the idea, I like it a lot. A vehicle fleet that can run on gasoline, but can switch to ethanol and methanol as systems for the production of these get underway. Best to switch to oil substitutes we can make now, a little more expensive in first cost, but in the long run, less expensive – in dollars – in blood – and in heartache, rather than continuing to get oil it the easy (but expensive) way from foreign sources.
If I had a choice, I would much rather see American fuels powering cars rather than oil from the Middle East; I’d be happy sending my gas dollars to an American miner, an American farmer, an American forester, or to an American nuclear plant rather than some oil sheik who launders his oil dollars to terrorists, or El Jefe Maximo down in Venezuela who uses the money to prop up his anti-American semi-dictatorship. I think nearly any American would.
Too much dependence – too long a “supply chain” – it develops the wrong sort of relations between America and the world. It makes us dependent on unreliable folks, rather than independent as a nation – and interdependent within our nation – and these relationships get us entangled in business – both real business, such as excessive importing – and other forms of business – like alliances and hostile relations outside our nation – that we have no need to get entangled in at all. (Especially since some of our “friends” are playing both sides.)
It would offer new frontiers in chemistry, for a real synthetic and biological fuel industry: all you have to do is find the right place, and feed in the right mix of carbon, water, electricity, and heat; carbon as a feedstock, electricity to power the air liquefiers, the pumps, and the CO2 compressors, water as a reactant and as a coolant, heat to pyrolyze the carbon and promote the reactions. You could build a bunch of plants right in Western Pennsylvania, Eastern Ohio, West Virginia, Eastern Kentucky and Eastern Tennessee. Especially with an HTGR to provide the heat at low cost, you could be swimming in methanol (which can be substituted for gasoline) or dimethyl ether (DiME can be substituted for diesel; it can also be substituted for LPG.) By clustering chemical and fuels industries like this with reactors, you could have an all in one setup for fuel synthesis, chemicals processing, and electricity production.
Dave — I knew I could count on you for an informed response! I really appreciate your thoroughness. What is your take on electric rail and mag lev rail? I found a couple of articles at http://www.21stcenturysciencetech.com that are thought-provoking, too. Look under the “Economic Development” tab on left-hand side.
Disclaimer: You will likely not agree with their assessment of Global Warming.
One hundred years from now, people will wonder why we burned such a wonderful chemical feedstock for electricity instead of getting our power from the rocks.
Of course as gas supply tightened our new mass produced nukes would be replacing power and heating applications just a fast a they are doing it in China. Right?
Unfortunately, the market in the US is severely distorted by regulatory constraints that disfavor nuclear.
For instance, the licensing/permitting process for a single OCGT is a matter of weeks to a month or two in many states, and might involve several hundred to several tens of thousands of dollars.
The licensing and permitting process for a modular nuclear reactor of the same capacity would be a matter of perhaps 5 years to a decade and would probably involve several times the reactor’s actual cost.
As such, the market, such as it is, would be unable to move to nuclear quickly, and it is likely that transition would not happen, unfortunately.
The true perversity of the situation is that the modular nuclear reactor is much safer than the gas turbine, much more sustainable, and better for the environment, too.
If Senator George Voinovich’s nuclear renaissance act gets passed much of the foolish and onerous NRC regulation and uncertainties will be removed and American reactors price and build times will drop to predicted factory produced build times of three years.
Plenty of time to pull gas generation of line.
If you were a investor would you buy into a plant that might be replaced in 5 years with a nuke? Shoreham for gas Hurrah.
Unfortunately, even if the Voinovich bill passed, it would not create a comparable regulatory climate.
There need to be several measures implemented to even approximate the level of regulation that fossil generators receive:
*First, all deliberate speed needs to be directed at designing a reactor qualified for general licensure if built to a certified design; e.g. a reactor that can be sited anywhere without involvement of the NRC in the siting decision; a reactor that can be operated without involvement of the NRC.
*Second, the NRC must be directed to consider the maximum realistic reactor accident for a design, and if the consequences of the maximum realistic reactor accident are less than the consequences of the maximum realistic accident for the safest type of fossil fuel generating equipment in general use, then the design shall be summarily certified and construction shall be allowed anywhere a comparable fossil fuel plant can be constructed.
*Third, in any substantial regulatory action, if the likely harm done to the common defense, the environment, and the public health by any source, including by sources of harm not regulated by the NRC – such as the combustion of fossil fuels or the importation of foreign oil or gas from terror-supporting or otherwise unfriendly nations – by not approving a regulated activity or delaying a regulated activity exceeds the harm done by allowing a regulated activity, then the regulated activity must be allowed.
*Fourth, all state regulation of nuclear power, except as to rates, should be pre-empted.
*Fifth, end court challenges to NRC decisions by anyone without a Constitutional property interest in an NRC proceeding (e.g. owning a nuclear plant) except if challengers prove beyond a reasonable doubt that the action by the NRC was arbitrary and capricious upon the face.
HI katana0182 (Dave)
These are interesting suggestions. Does the Voinovich bill even approach any of these?
The bill is excellent, especially in terms of increasing funding for SMRs, tax incentives, providing nuclear power shall be considered clean power, dealing with DOE legacies in a way that will bring future benefits to those communities with their unique skills in nuclear, and dealing with the used fuel issue by formation of a used nuclear fuel corporation.
As for the goals I mentioned earlier, it will help develop SMRs, and it will generally reduce NRC paperwork, and it will potentially develop energy parks where those SMRs can be tested out.
Of course, though this is an excellent start in NRC reform, there still remains quite a bit to be done until the goal of a “level playing field” is reached.
Prices increases for NatGas, and, beyond that, expectations of high prices for a long time in the future is actually good for the nuclear power industry. The price point for mobile transportation energy is much higher that the price point for electricity (consider that in Europe, the gasoline taxes are equivalent to 250 EUR/ton carbon tax whereas industrialists are up in arms for the prospect of a 30 EUR / ton carbon tax (non grandfathered !)), so it is logical that the necessary decreases of fossil fuel consumption ends with the transportation sector, no starts with it.
If the Industrial Energy Consumers of America want reasonable and stable prices for energy, they should support nuclear.
Hydraulic fracturing (fracking) is likely to become more controversial as the shale gas deposits are developed. All they need to do is damage the water supply for NYC (the best system in the world) and the idea of shale gas is going to become a lot less popular. Check out the ‘Now’ program entitled ‘Gasland. Will the boom in natural gas drilling contaminate America’s water supply?’ http://www.pbs.org/now/shows/613/index.html . This doesn’t seem definitive yet, but it is alarming.
There are reasons to oppose almost any energy technology. Hopefully a majority of environmentalists (I am one) will come to the realization that nuclear has by far the lowest environmental impact of any energy source.
Well worth reading.
http://theresilientearth.com/?q=content/nordic-nuclear-revival