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Climate bill seen raising gas use, lowering supply

Bob Tippee
Editor

Climate-change legislation in the US Senate would boost demand for natural gas while limiting supply, according to analyses by two industry groups.

The Climate Stewardship and Innovation Act sponsored by Sens. Joseph Lieberman (I-Conn.) and John McCain (R-Ariz.) would raise gas demand by an average 14%/year against reference-case levels during 2020-30, warned the Natural Gas Council in a Mar. 11 letter to lawmakers (OGJ Online, Mar. 12, 2008).

NGC challenged a US Energy Information Administration assertion that the legislation could lower gas use. It said EIA assumed construction of 145 nuclear plants by 2030 and argued the number more likely would be 25.

Since the council began its study, the Lieberman-McCain bill has evolved into the Climate Security Act, with Sen. John Warner (R-Va.) replacing McCain as lead cosponsor.

Like its predecessor, the newer bill would impose a declining cap for greenhouse gas emissions, enforced with tradable allowances. Emission targets are more aggressive in the newer version of the legislation, which the Environment and Public Works Committee passed last December.

If NGC is right, the new legislation, with its toughened emissions targets, would raise gas demand by more than its study projects.

But the measure also would discourage investment in gas supply, warns the American Exploration & Production Council (AXPC).

The new law would require gas producers and processors to buy allowances for emissions by gas end-users, AXPC says. Contract and market structures would keep them from passing through all the new costs.

The effects: Lower profits on production, lower spending on gas drilling and development and, therefore, lower supply.

"Less natural gas supply in the face of increased demand will drive consumer prices sharply higher," the council says.

Political pressure is strong to cut emissions of greenhouse gases without regard to cost. But the costs, according to recent studies of climate-change legislation by the Environmental Protection Agency and National Association of Manufacturers working with the American Council for Capital Formation, are high.

The simultaneous if unintended suppression of gas supply and stimulation of demand can only drive overall costs even higher.

This feature will appear online next on Apr. 4.

(Online Mar. 21, 2008; author's e-mail: bobt@ogjonline.com)


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