AGA SEES ADDED GAS USE IN AMENDED CAA

The 1990 Clean Air Act (CAA) amendments will increase U.S. natural gas demand by as much as 2.5 tcf/year by 2005, the American Gas Association predicts. William T. McCormick, AGA chairman, said the 13% growth over current demand will come from the acid rain control and natural gas vehicle provisions of the law. McCormick also is chairman and chief executive officer of CMS Energy Corp., Dearborn, Mich.

Feb. 18, 1991

6 min read

The 1990 Clean Air Act (CAA) amendments will increase U.S. natural gas demand by as much as 2.5 tcf/year by 2005, the American Gas Association predicts.

William T. McCormick, AGA chairman, said the 13% growth over current demand will come from the acid rain control and natural gas vehicle provisions of the law. McCormick also is chairman and chief executive officer of CMS Energy Corp., Dearborn, Mich.

McCormick said, "The acid rain and mobile source programs allow for a flexible approach to reaching the goals of the clean air law. Thus, plant operators are free to choose the most cost effective control option for their plants, including natural gas, rather than being forced to install scrubbers or some other specific control option.

"Natural gas vehicles will be competing on a level playing field with other alternative clean fuels because the law does not mandate a particular fuel or technology."

In an earlier study, AGA said increased gas use could reduce U.S. oil imports by 1.7 million b/d by 2000.

AGA Pres. Mike Baly said, "An aggressive national energy policy initiative to substitute natural gas for oil products could dramatically reduce U.S. dependence on unstable oil supplies within a decade, with a reduction of 130,000 b/d immediately."

POWER GENERATION

AGA found in the first phase of CAA amendments, increased gas demand will come from 110 large power generating plants and in the second phase from coal and high sulfur oil units emitting more than 1.2 million lb of sulfur dioxide per MMBTU.

Acid rain provisions aim to reduce power generating plants' sulfur dioxide emissions by 10 million tons/year and nitrogen oxide emissions by about 2 million tons/year.

AGA estimated additional gas demand flowing from acid rain provisions will range from 650 bcf/year to 1.5 tcf/year by 2005, with demand hitting 350-600 bcf/year by 1995 in the first phase. In the base, or likely, case added demand will reach 510 bcf in 1995 and a little more than 1 tcf in 2005.

It said the 510 bcf/year would contribute about 11% of the sulfur dioxide reduction in the first phase, scrubbers would provide 50-60%, and low sulfur coal 30-40%.

"Natural gas will be particularly attractive in older units and those with more modest reduction requirements, as well as those that would face difficulty in retrofitting scrubbers or changing coal sources," AGA said.

Gas demand at the 110 large plants will drop to 230 bcf/year as the sulfur dioxide reduction limit drops to 1.2 lb/MMBTU from 2.5 lb.

But other existing plants-about 400 units burning mainly coal and high sulfur fuel oil-will need another 530 bcf/year.

New power generating plants will turn increasingly to gas for fuel after 2000 because of the absolute sulfur dioxide cap of 8.9 million tons, resulting in a demand increase of 270 bcf/year by 2005.

MOBILE SOURCES

AGA said the mobile source program in the clean air law will result in a gas demand growth for vehicles of between 300 bcf and 1 tcf/year by 2005. Base case added demand will be 600 bcf in 2005.

As many as 6.7 million natural gas vehicles could be on the nation's roads by 2005, mainly in fleets, with a base case estimate of 3.8 million natural gas vehicles.

In 1990, there were more than 13 million fleet vehicles in the U.S.

The law contains a federal program that requires fleet owners in 22 urban areas to purchase clean fuel vehicles, in addition to an ambitious pilot program in California. Urban buses also will be required to release less emissions.

Of all alternative fueled cars, AGA projects natural gas will capture 75% of the market for light duty and medium duty fleet trucks. It predicts only a 40% market share for fleet cars as a result of competition from methanol and reformulated gasoline.

Heavy trucks and buses, which involve far fewer vehicles, have projected market shares of about 40% and 45%, respectively, in the base case.

OIL IMPORT REDUCTION

Baly told the New York Society of Security Analysts reducing oil imports by 1.7 million b/d with gas would make it possible to cut total U.S. imports by almost one third, as well as offsetting the current level of Persian Gulf imports.

Baly said, "it is shortsighted that so much oil is still being used in applications where gas can be easily substituted, There are enough natural gas supplies in North America to meet every foreseeable demand scenario at economic prices well into the next century."

The AGA study pointed out that most U.S. oil use is in the transportation sector, but 4.9 million b/d were used for stationary applications in 1989, including industrial plants, boilers, space heating, and power generation. That amounted to 68% of the year's crude oil imports.

AGA figures show that in an emergency or oil supply disruption, gas could immediately offset 130,000 b/d of distillate and residual fuel oil in stationary applications. Within 1 year the rate of displacement could increase to 420,000 b/d as significant penetration in the dual fuel capable boiler markets accumulates.

After 5 years the combination of growing conversions in the residential and commercial buildings sector, mainly on the East Coast, and further penetration in boiler and process markets would raise the gas penetration rate to 1 million b/d.

If a comprehensive government initiative were begun now with a 10 year horizon, 1.5 million b/d of fuel oil use could be offset by the end of the decade, AGA said.

Adding 240,000 b/d that would, in effect, be offsets of gasoline use in fleet vehicles, would bring total oil displacement by gas to 1.7 million b/d after 10 years.

AGA said, "An important component of this initiative would be increased gas pipeline capacity into oil dependent regions. The volume of current planned natural gas pipeline capacity would go substantially toward accommodating the projected level of oil displacements over 5 years. To achieve the 10 year goal, a similar increment in pipeline capacity and an increase in gas storage capacity would be needed."