Natural gas prominent in governors' energy strategies

Feb. 22, 2010
Jobs and the economy have dominated a number of US governors' State of the State (SOTS) and budget addresses so far in 2010, and will be prominent issues as the National Governors Association holds its winter meeting Feb. 20-22 in Washington, DC. Direct references to oil and gas have been few and far between, but have been significant when they have occurred.

Jobs and the economy have dominated a number of US governors' State of the State (SOTS) and budget addresses so far in 2010, and will be prominent issues as the National Governors Association holds its winter meeting Feb. 20-22 in Washington, DC. Direct references to oil and gas have been few and far between, but have been significant when they have occurred.

Across the board, governors have emphasized fiscal responsibility as they submitted budget proposals to state lawmakers. Some observed that federal economic stimulus assistance that their states received in 2009 will be absent this year. Others emphasized the importance of continuing to leave "rainy day" funds alone, or replenishing them.

"I do not see a dramatic change that suggests this is going to be some aggressive and robust recovery. I believe that it is going to be slow; it is going to be difficult," Wyoming Gov. Dave Freudenthal (D) said on Feb. 8. "Part of it is simply the absence of credit availability, particularly for small businesses, and not a matter that I see being resolved very quickly. The state should remain, I believe, fairly conservative."

"As a state, one of our true economic competitive advantages is our relatively low cost of power. Our energy plan must focus on maintaining affordability, encouraging capital investment, and protecting our environment."Utah Gov.
Gary R. Herbert (R)

He congratulated legislators for fully funding a major scholarship program, capital construction, and other major state activities without increasing debt or taking on massive new unfunded obligations. "We arrive here today the envy of many states—not by accident, but by a design that many of you here supported and we implemented," he told them.

"I do not see a dramatic change that suggests this is going to be some aggressive and robust recovery. I believe that it is going to be slow; it is going to be difficult."
Wyoming Gov.
Dave Freudenthal (D)

Freudenthal said, "The other reason we are in pretty good shape is that since 2003, we have more than doubled the take-away capacity of natural gas out of this state." While gas prices have declined, higher export volumes have helped keep Wyoming's revenue from dropping by a corresponding amount, he said.

Newer technologies

Freudenthal also outlined proposals dealing with wind energy and carbon capture and sequestration. Several other leaders continued to emphasize alternative and renewable energy development in their economic plans.

"In these uncertain times, the New Energy Economy—which did not exist 3 years ago—continues to be our beacon to a brighter future," Colorado Gov. Bill Ritter Jr. (D) said on Jan. 14. "We're creating thousands of new jobs, new markets, and new revenues. We're nurturing a culture of innovation from the best energy research corridor in the world. We're manufacturing 21st century products from state-of-the-art factories."

Noting that Colorado was the first US state to pass a renewable energy standard, Ritter said that the use of renewable energy doubled in 2007 and the state is now 5 years ahead of schedule to meet the current 20% goal. He urged lawmakers to "think bigger, creating even larger markets for solar, wind, biomass, hydro, and geothermal" and increase renewable energy's share of Colorado's energy consumption to 30%.

"This session, we also have an opportunity to lead the nation in expanding the role of cleaner-burning natural gas in our energy portfolio. Gas has always been part of the New Energy Economy, and this year we look forward to solidifying its role for the future," Ritter added.

"Over the past few months, I've been working closely with the natural gas industry, with utilities, and with other stakeholders. We're looking at ways to increase the use of Colorado gas to generate electricity, reduce air pollution, stabilize energy bills for consumers, and create jobs," he said.

In his Feb. 9 budget address, Pennsylvania Gov. Edward G. Rendell (D) mentioned gas's potential contribution to his state in a different context: He proposed taxing Marcellus shale production—as well as cigars and smokeless tobacco products. "Once again, it's simply not fair that Big Tobacco and Big Oil and Gas are exempt from the obligations the rest of us have to bear," Rendell stated. "The revenues raised by these initiatives are overwhelmingly supported by our fellow citizens, and would provide a half a billion dollars for the Stimulus Transition Reserve Fund."

Utah initiative

In a state long-associated with oil, gas, and coal, Utah Gov. Gary R. Herbert (R) announced on Jan. 26 that he would assemble the state's top experts and have them create a 10-year strategy—the Utah Energy Initiative—with three main elements: to ensure continued access to clean and low-cost energy resources in the state; to be on the cutting edge of new energy technologies; and to foster economic opportunities and create more jobs.

"We have a rich abundance of diverse natural resources—everything from traditional fuels such as oil, gas, and coal to renewables such as solar, wind, and hydroelectric," he said in his first SOTS address. "Two new wind projects north of Milford and in Spanish Fork Canyon are now producing electricity. Geothermal is rapidly coming online. Blending solar and biomass with traditional fuels at existing generation sites shows great potential. Simply put, few other states have the energy resources with which we, in Utah, have been blessed."

Herbert noted that Utah is uniquely positioned in the heart of a western energy corridor stretching from Canada to New Mexico, with adequate power generation and transmission capacity. Investments totaling billions of dollars will be required to maintain and expand the infrastructure, and regulatory structures will need to reflect the state's long-term energy vision, he said. "As a state, one of our true economic competitive advantages is our relatively low cost of power. Our energy plan must focus on maintaining affordability, encouraging capital investment and protecting our environment," he maintained.

Keeping energy affordable and available also was a high priority for South Dakota Gov. M. Michael Rounds (R) in his Jan. 12 SOTS address. "We need access to a wide variety of affordable energy for our economy to thrive. We also need to do our part to help our nation become energy independent from the Middle East and Venezuela," he said.

"We need access to a wide variety of affordable energy for our economy to thrive. We also need to do our part to help our nation become energy independent from the Middle East and Venezuela."South Dakota Gov.
M. Michael Rounds (R)

Changes in the state's laws to promote and accelerate wind power development since 2002 have expanded South Dakota's generation capacity from that source to 314 Mw from just 4 Mw, with another 309 Mw under construction, according to Rounds. The biggest challenge now is constructing transmission lines, which can cost $1-3 million/mile, he noted.

Traditional projects

Rounds noted that more-traditional energy projects are moving ahead, including the proposed Hyperion energy complex, which will include a 400,000 b/d refinery, create thousands of jobs in its construction and operation, and be the largest private development in the state's history. Construction of two TransCanada oil pipelines, the Keystone system, which will carry 1.1 million b/d from Canada to Gulf Coast refineries, also is on schedule, while ethanol production has grown to 990 million gal/year from 165 million gal/year in 2002, he indicated.

"I have made exploring and developing the OCS our priority. I have met with all the stakeholders, from whaling captains to oil company executives. We do not have to sacrifice traditional subsistence whaling to have jobs from OCS exploration and development."
Alaska Gov.
Sean Parnell (R)

Oil and gas were prominent in Alaska Gov. Sean Parnell's SOTS address on Jan. 20 because they are such a big part of the state's economy. "Alaska's numerous oil fields send approximately 650,000 b/d down the Trans-Alaska Pipeline System. For 3 decades, oil has substantially funded our state treasury, and provided jobs and income to thousands of Alaskans," he noted.

Noting the potential of future offshore discoveries on the Outer Continental Shelf "and maybe even one day" on the Arctic National Wildlife Refuge's coastal plain, Parnell said that Alaskans need the estimated 35,000 jobs and $72 billion in salaries that responsible OCS development would create. "I have made exploring and developing the OCS our priority. I have met with all the stakeholders, from whaling captains to oil company executives. We do not have to sacrifice traditional subsistence whaling in order to have jobs from OCS exploration and development. We can have both," he maintained.

"We cannot now let Washington bureaucracy undermine the clear desires of the people of Virginia…. There are many unemployed Virginians who are ready to work in the oil and gas production industry."Virginia Gov.
Robert F. McDonnell (R)

Shale gas activity in the Lower 48 won't keep Alaska's abundant gas supplies from being developed because they have environmental and production advantages, Parnell said. Both major pipeline projects to move gas to Lower 48 markets are moving toward their first open seasons in the spring, and Parnell suggested that construction could start in another 4-5 years. He said that the state also is evaluating proposals to build in-state gas pipelines.

Perhaps the boldest declaration came from Robert F. McDonnell (R), who said in his Jan. 18 budget address: "I am committed to utilizing all of our vast, God-given natural resources to make Virginia the 'Energy Capital of the East Coast.'"

'Clear desires'

Noting that a 2011 lease sale is part of the US Minerals Management Service's current 5-year OCS plan, McDonnell told state lawmakers: "The state that is first will reap an economic bonanza. We can lead or be left out. Four years ago you had the foresight to pass legislation giving us a critical advantage. We cannot now let Washington bureaucracy undermine the clear desires of the people of Virginia."

McDonnell said he has written US Interior Secretary Ken Salazar and notified Virginia's congressional delegation that this is a top priority. "Several studies show that environmentally safe offshore exploration and production will create thousands of jobs, put hundreds of millions [of dollars] into our depleted state coffers, and spur billions in capital investment in the Old Dominion," he said. "There are many unemployed Virginians who are ready to work in the oil and gas production industry."

He also asked Virginia's senate and house to prepare for OCS production this session by mandating that 20% of new tax revenues and any future royalties be invested in renewable energy projects, with the other 80% going to transportation.

"We must also promote coal and natural gas industries in southwest Virginia. As carbon sequestration and coal gasification technologies become cost-efficient, coal production can grow," McDonnell continued. He also called for more nuclear power incentives. Virginia has more private sector nuclear capability than any other state, and new partnerships between Areva Inc. and the University of Virginia are producing the engineers needed to make this sector grow, he said.

Finally, McDonnell asked Virginia lawmakers to pass legislation making the entire state a "Green Jobs Zone" where any business creating green energy jobs in the next 5 years would receive a $500/position income tax credit. "'Virginia is for Lovers…,'" he said, quoting one of the state's most popular tourism slogans, then added, "…of renewable energy."

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