US oil and gas producers were only indirectly affected by the US Environmental Protection Agency's June 2 announcement of stricter carbon emissions limits for existing coal-fired power plants. Association leaders still responded quickly because the regulations made more definite an expected demand for natural gas as a replacement.
American Petroleum Institute Pres. Jack N. Gerard was generally critical. "This proposal is not consistent with the administration's own 'all-of-the-above' energy strategy," he declared. "The uncertainty created will have a chilling effect on energy investment that could cost jobs, raise electricity prices, and make energy less reliable."
Three gas association leaders emphasized flexibility. "Natural gas has an excellent track record in lowering carbon emissions, as we witnessed in 2012 when power plants consumed more gas than ever in history, and emissions reached a 20-year low," Natural Gas Supply Association Pres. Dena E. Wiggins said.
"We are proud to play a part in lowering emissions and hope that as EPA and states design their carbon reduction programs, they will continue to realize the emission benefits provided by the competitive gas market," she indicated.
American Gas Association Pres. David K. McCurdy said gas utilities believe it's critical that EPA's rules include a flexible compliance approach, and allows flexible and affordable gas applications. America's Natural Gas Alliance Pres. Martin J. Durbin said EPA's rules should be flexible, fair, and recognize gas's ability to increasingly deliver reliable, safe, and clean power.
Both EPA and the US Energy Information Administration expressed optimism that more US gas could replace generation lost if electricity suppliers decide to retire, instead of renovate, many coal-fired plants.
Shutdowns increase
"In recent years, the number of coal and nuclear plant retirements has increased, in part due to a decline in profitability as low gas prices have influenced the relative economics of those facilities," EIA says in its 2014 Annual Energy Outlook.
Its Accelerated Coal Retirements case assumes more coal plants will close if coal prices and operating costs are higher than its reference case. "In this case, gas-fired generation overtakes coal-fired generation in 2019, and by 2040 the gas share of total generation reaches 43%," the forecast says.
Asked if US producers could supply more gas, API Chief Economist John C. Felmy told OGJ on June 3, "It's subject to a lot of caveats, including the regulatory and access framework. A lot of conventional gas is off-limits, and there are other challenges as state regulators try to determine how to meet EPA's requirements. But there is a lot of gas out there waiting to be produced. I'd say if we get a chance, we can deliver it."