Nick Snow
Washington Correspondent
WASHINGTON, DC, Oct. 1 -- While the oil and gas industry has made progress in voluntarily reducing greenhouse-gas emissions, it also must develop technology that accelerates environmental improvement while meeting growing energy demand, government and industry representatives suggested here Wednesday.
"The real challenge of this decade and next is how we integrate voluntary approaches with changing economies," said Mark Maddox, acting assistant US energy secretary for fossil fuels, in a conference on voluntary actions on climate change sponsored by the US Department of Energy and American Petroleum Institute. Noting that the process involves a combination of experienced, maturing businesses and emerging alternative technologies, he added, "Government should not make the choices but make sure they are available to be looked at."
Rep. Rick Boucher (D-Va.), ranking member of the House Energy and Commerce Committee's energy and air quality subcommittee, agreed that voluntary initiatives produce results that are superior to mandatory controls. New approaches could include emissions trading credits involving application of US technology to less efficient power systems in developing countries, he said.
"I think there's much to be gained from offering tax credits for new technologies to generate electricity domestically," Boucher said.
Technical knowledge
The Bush administration still intends to lower greenhouse gas emission intensity 18% worldwide through 2012, according to Maddox. The goal is to create a body of technical knowledge that will allow governments to create the most-effective regulatory regimes, he said in an interview following his remarks.
"I think it's very conceivable, as new technologies from hydrogen to IGCC [integrated gasification combined cycle] plants come in, you can improve energy efficiency by 50% while reducing emissions," Maddox said.
He said he recently returned from a carbon sequestration leadership forum in Australia where representatives of the European Union and 16 other nations endorsed five projects dealing with capturing carbon dioxide and five others involving carbon sequestration (OGJ Online, Sept. 27, 2004).
"We've seen a real turnabout from the first forum a year ago last June," Maddox said following his address. "Governments are beginning to see a potential to divert carbon streams and either store them underground or use them productively."
He sees growing interest in linking technology with legislative initiatives, particularly in supplementing natural gas supplies with coalbed methane.
Boucher, noting growing interest in LNG, suggested that a national port safety standard might ease community resistance to construction of LNG-import terminals. He also applauded government programs to stimulate energy technology development and urged the Bush administration to fund such efforts more aggressively.
Maddox responded later that the federal government already spends $5 billion/year on energy technology research and development.
Specific programs
Other speakers described government and industry voluntary greenhouse-gas emission-reduction programs more specifically.
Laurisa Dobrinsky, deputy assistant secretary in the National Energy Policy Office, said DOE launched the Climate VISION (Voluntary Innovative Sector Initiatives: Opportunities Now) program in February 2003 to pursue cost-effective greenhouse-gas emission reduction strategies.
"We are encouraging industry to take voluntary actions, using available cost-effective technologies and best practices to reduce greenhouse-gas emissions intensity," she said.
Enabling initiatives include considering credit-based incentives—including loan guarantees, direct loans, and lines of credit—to tip private investment decisions and accelerate commercial use of advanced energy technologies, according to Dobrinsky.
"Risk-sharing is efficiently and relatively inexpensive. It can be targeted effectively to comanage business risks. And it offers greater flexibility on financing structures for clean energy facilities," she said.
Maddox said a major problem arises as companies spend money to comply with immediate and growing environmental requirements without fully considering more-efficient long-term solutions.
"Basically, they need to understand that what may be cheap today will be more expensive to retrofit in 10 more years," he explained.
Industry effort
The oil and gas industry's own effort combines such near-term greenhouse-gas emissions-intensity reductions with longer-term development of technology and reliable measurement and reporting practices, API Policy Analysis Director Bob Greco said.
Goals include improving aggregate refinery energy efficiency by 10% during 2002-12 and increasing industry participation in cost-effective voluntary programs such as the Environmental Protection Agency's Natural Gas STAR, he said.
Roger Fernandez, who manages the program at EPA, said its 111 gas industry partners represent 72% of the pipeline sector, 60% of the local distribution companies, 55% of the nation's gas producers, and 76% of the processing segment.
"The program works because the gas industry decides what projects to implement, based on its capital resources and needs," he said.
While the oil and gas industry accounts for only 20% of the country's total annual methane emissions, it's still a significant amount, Fernandez said. Each year, he noted, methane releases reach 98 bcf from transmission and storage, 94 bcf from production, 73 bcf from distribution, 57 bcf from petroleum systems, and 36 bcf from processing.
"The good news is that methane is a commodity that can be sold," Fernandez said. "By putting gas into the pipeline instead of releasing it into the air, it produces more value as it reduces greenhouse-gas emissions."
Developing alternatives to flaring gas associated with oil production at sites too far from pipelines is the single biggest opportunity to reduce greenhouse-gas emissions while improving gas-resource utilization, according to John H. Shinn, senior staff adviser for global issues at ChevronTexaco, Richmond, Calif.
"Gas that is flared is a wasted resource—about 110 billion cu m or about 3.5 tcf/year. It's also an environmental problem, representing more than 300 million tonnes of CO2-equivalent," he said.
Barriers to making better use of the gas include distance from markets, lack of local use or export infrastructure, competition from nonassociated gas, unfavorable fiscal terms, and regional political stability, Shinn said.
He cited the West African Gas Pipeline Project, in which ChevronTexaco is participating, as a solution. Without it, 80 million tonnes of carbon would be emitted from flaring of gas associated with Nigerian oil production, while a further 100 million tonnes would go into the air in Ghana from its use of fuel oil. With the pipeline, the 80 million tonnes of carbon still would be emitted as the Nigerian gas is consumed in Ghana, but it would be 20 million tonnes less than before and, in Nigeria, a complete reduction of these greenhouse gas releases.
