New NPC natural gas report receives praise, criticism

Oct. 6, 2003
Congressional Republicans from energy-producing states and industry officials lauded a new National Petroleum Council natural gas report that calls for both expanding supply and increasing conservation measures to meet growing US gas demand needs by 2025.

Congressional Republicans from energy-producing states and industry officials lauded a new National Petroleum Council natural gas report that calls for both expanding supply and increasing conservation measures to meet growing US gas demand needs by 2025.

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But most environmental groups criticized the study, saying it focused too much on the drillbit and not enough on reducing demand.

NPC called on policymakers to increase access and reduce permitting impediments to developing Lower 48 resources. The report also calls for more conservation through market-oriented initiatives and consumer education (OGJ Online, Sept. 24, 2003).

"There are no quick fixes to the price spikes and volatility we have witnessed in recent years. And there are no simple solutions," Sec. of Energy Spencer Abraham told NPC members Sept. 25 in Washington, DC. "What is necessary is a balanced and comprehensive approach to ensuring greater energy efficiency and new sources of natural gas supply, and the resolve to see it through."

Hill, industry reaction

On Capitol Hill, House Resources Committee Chairman Richard Pombo (R-Calif.) and House Energy and Commerce Committee Chairman Billy Tauzin (R-La.) strongly endorsed the study. The two lawmakers are cochairmen of a Republican organization called the Speaker's Task Force for Affordable Natural Gas; the task force last week issued recommendations on boosting supply that largely reflected NPC's findings.

"The NPC study confirms that access to affordable natural gas is one of the nation's most urgent needs. It is absolutely critical that our new national energy policy addresses these needs by allowing for more natural gas exploration and development offshore and on nonpark federal lands," Tauzin said.

Both the NPC study and the task force report call on policymakers to simplify permits and boost access to restricted hydrocarbon-prospective lands.

Groups representing producers and integrated companies lauded the NPC study, while energy consumer groups and environmentalists called for a greater emphasis on efficiency and conservation.

"The National Petroleum Council has put forth a much-needed, insightful analysis of today's natural gas situation, which is the inevitable result of decades of public policy failure to adequately address our country's energy needs," said Red Cavaney, president and CEO of the American Petroleum Institute.

"If our nation is to meet its growing energy demands, we must further elevate efforts to promote greater energy efficiency while increasing and diversifying our natural gas supplies.

"We agree with the NPC that increased supplies from abroad—in the form of liquefied natural gas—and from within our own borders are needed. The construction of more import facilities is crucial if we are to increase LNG supplies. To increase domestic supplies, the impediments preventing the industry from producing natural gas on nonpark, nonwilderness government lands while protecting the environment must be significantly reduced. And to bring this new supply to consumers, our nation's pipeline system needs expanding, including construction of a pipeline to bring Alaskan natural gas to the Lower 48 states.

"These concepts form the core of the NPC report and deserve the immediate attention and action on the part of government officials if consumers are to be protected from the possibility of yet further constrained supplies and price volatility," Cavaney said.

Meanwhile, independent producers said they are still worried that the government may not be listening to important warning signs.

"The new NPC report makes clear that policymakers have not yet enacted the council's previous recommendations from 1999," said Diemer True, chairman of the Independent Petroleum Association of America and partner, True Oil Co., Casper, Wyo.

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"Today, we must act on the consensus of policy recommendations made by NPC. Our nation's future natural gas supply will mainly be found from wells developed here in North America. We expect government to continue its policies of encouraging clean-burning natural gas as a preferred fuel choice. We must now encourage domestic production—production that can be done with the best, environmentally sound technologies that our nation has to offer," True said.

Energy efficiency group comments

An energy efficiency group also praised NPC but said the group could have better emphasized ways to reduce demand.

"Given our nation's long history of short memories when it comes to energy crises, the National Petroleum Council is to be commended for putting energy efficiency at the top of its list of long-term recommendations for achieving a 'balanced future' for natural gas," said Alliance to Save Energy Acting Co-Pres. Mark Hopkins.

"The NPC recommendations that move us toward a balanced energy future include educating consumers about efficiency and promoting Energy Star and other efficient consumer products; upgrading building codes and equipment efficiency standards; deploying high-efficiency distributed energy, including cogeneration to capture waste heat for energy; encouraging energy control technology, including 'smart' controls; encouraging nationwide adoption of the best state-level practices for low-income weatherization; and facilitating consumer energy efficiency with appropriate price signals.

"We regret, however, that the NPC did not embrace other alliance recommendations, submitted last July at the council's request, to help reduce demand for natural gas and avoid price volatility. These include expanding federal incentives (tax breaks) for adoption of gas-saving technologies by consumers and industry; instituting a Public Benefits Fund that would funnel a small federal charge on natural gas and electricity at the wholesale level to state programs for improving natural gas energy efficiency; offsetting an agreed-upon percentage of energy demand growth by establishing efficiency performance standards for utilities; reforming electric and gas utility regulation to make it profitable for utilities to encourage energy efficiency; improving energy efficiency in some 500,000 federal buildings; and expanding federal research, development, and deployment of advanced technologies that would decrease natural gas use in the residential, commercial, industrial, and power sectors," Hopkins noted.

Environmental response

Environmental groups said the report was biased, arguing it was primarily put together by industry.

In a conference call with reporters Sept. 30, the Wilderness Society said that both the NPC study and the House task force were predicated on the false assumption that there are too many environmental impediments to developing public land.

"Environmentalists are not opposed to drilling," said Pete Morgan, Wilderness Society resource economist. "We just want to see more energy efficiency and conservation."

Wildnerness Society officials disputed NPC's claim that 205 tcf out of a total of 1,250 tcf technically recoverable natural gas resources is restricted to oil and gas drilling. Using the contested Rocky Mountain region as an example, they said that according to NPC, 69 tcf of the technical gas resource in the region is restricted. But that contradicts a Department of the Interior study released in January that found only 16 tcf is restricted in the same area, the group said.

Producers maintain that the Interior study didn't encapsulate all the bureaucratic red tape issues they face after securing a lease. But Wilderness Society says that the red tape industry complains about is exaggerated.

Permit and lease issues are part of a larger access battle lawmakers are tackling within comprehensive energy legislation that could be delayed until later in the month thanks to disagreements over ethanol and electricity.