Friday, October 23, 2015

Natural Gas: The bridge (fuel) to nowhere for New England

I wrote this back in late June.  So much has changed.  The NH PUC is advising against divestiture of Eversource's generating assets and for imposing a tariff on electric ratepayers to build out natural gas infrastructure.

But, here' how it looked back in June.  The link is a result of the lobbying efforts mentioned below.
And here is a link that lists the status and co-sponsors of SB 1312

This is NOT a partisan issue.  There's no "liberal" versus "conservative" view.  President Obama is pushing the fossil fuel agenda for increased drilling, fracking, pipelines and export at the same time that he supports the EPA's Clean Power Plan.  Keystone XL is temporarily stopped, but only because of the terrible optics of the tar sands and the devastating spills from their pipelines.  New drilling is being allowed in the arctic on President Obama's watch...even as climate scientists note it is thawing even faster than expected.
On a conference call sponsored by the US Chamber of Commerce, Senator Murkowski of Alaska assured the audience that if Senate Bill 1312 passes both chambers, they expect President Obama's support.  That bill lifts the export ban on crude oil exports which have been in effect since the 1970s.
Among other things, the Chamber claims that exporting crude oil on the world market will lower prices at the gasoline pump.  To whose benefit?  The Energy Information Administration reports that exporting at the levels suggested will raise prices at the pump.  But, the Chamber isn't listening to them. 
Look for a big push on exports over the 4th of July and August recesses.  The Chamber is sending out marching orders to all their member Chambers on how to create a "grassroots" surge in support of exports.  Supporting exports also means supporting pipeline infrastructure. 
The other drumbeat being sounded is "strengthening" foreign policy and providing an alternative to fossil fuels from Russia and/or Iran.  Senator Murkowski calls the lifting of sanctions on Iran's oil exports an affront to American businesses which have had a ban in place for more than 40 years.  She argues that if they lift the ban on Iran, they should lift the ban on American exports. 
In a June 25, 2015 article by Keith Johnson for Foreign Policy Magazine, the dysfunctional nature of relationships between members of the energy sector can be demonstrated in two paragraphs.  Despite the Chamber's arguments that exporting oil will lower energy prices, this first paragraph shows exactly why the industry is dying to ramp up exports.
"The prospect of an end to sanctions, which have targeted Iran’s energy sector and have sharply curtailed oil exports, have raised hopes inside the country and fears without that the long-shunned Persian giant will storm back onto global energy markets. Other oil producers inside OPEC — as well as U.S. oil producers working in the shale patch — fear that quick sanctions relief could unleash a glut of Iranian oil, which would push already low prices down even further."  (Bold and underlined emphasis is mine.)
And, how is this loyalty from the Chamber rewarded by the big oil giants?
" In early June, international firms including Shell, BP, Total, and Eni expressed interest in pouring money into Iran’s oil and gas fields as soon as sanctions are lifted. After meeting Iranian energy officials in Vienna this month, Shell’s boss told Bloomberg that Iran is a “wonderful country with a fantastic resource base”; Total’s chief simply declared, “We like Iran.” Shell has also trekked to Tehran to talk business. Iranian officials themselves are even courting U.S. firms, which unlike their European rivals, have kept Iran at arm’s length so far."
Needless to say, there was no discussion of the impact such exports and enthusiastic extraction will have on climate change during the Chamber conference call.
If we really wanted to help countries like Poland, we would be exporting renewable technology and supporting capital investment in storage and energy efficiency.  That's what would make sense for everyone; except the oil and gas industry, of course.
In New Hampshire, Democratic Representative Howard Moffett (Hills 07) has submitted testimony in support of building natural gas pipeline infrastructure in the NH Public Utilities Commission (PUC) Docket IR 15-124.  He joins three of the four NH utilities, the Business Industry Association, BAE Systems, and the front group for Kinder Morgan, the Coalition to Lower Energy Costs (CLEC).
Have you seen the television commercials pushing the pipeline projects?  The disclosure says it's paid for by CLEC, but Kinder Morgan is a major donor to the organization which formed in November of 2014.
The Kinder Morgan propaganda campaign is in full swing and in addition to running ads, KM is joining all the local and state level chambers of commerce.  They sponsored "The Best of New Hampshire" celebration and "The Granite State Music Festival" this year.
Good.  I hope all this propaganda will make people throughout the State of New Hampshire start paying attention to these projects and what they mean for our future.
The television ad makes two major assertions that are not factual:
1.) Bringing more fracked gas to New England will lower our energy costs
2.) We need these plants so that we can shut down the "dirty" nuclear and coal plants.  In other words, natural gas is the "bridge" to some far off future when renewable energy is cost effective.

The first claim to bring cheaper energy to New Hampshire with additional pipeline capacity seems reasonable on its face.  More supply brings lower prices, right?  Should be a "no brainer" until you examine the true situation.

Here are the basics.  NE has pipeline capacity of about 3.4 BCF/day.  Electric generation requires about 1 BCF/day year round.  During the winter months, on about 40 days, for a few hours, heating demand for the pipeline soars to 100% of capacity and this pushes up the price for natural gas for electric generation which is purchased on the "spot market" without long term contracts for reserving capacity. During these times they can use LNG and some have the capability to burn oil as well. 

For eight months out of the year, New England has plenty of pipeline capacity.  Electricity prices during those eight months are as low as natural gas generators can make them.  In fact, during the summer months, the shortfall that requires some oil and coal plants going online comes from not having enough generators.  So, if you think you're going to get electricity for several pennies less per KWH, think again.  All the gas we could possibly use would only help during four months of the year.  Based on the difference between the January and July default utility prices, an average bill in NH during plentiful summer gas capacity will save the average residential customer about $6 on a monthly bill.  So, for example, we could argue that the annual cost to residential customers with default service from Eversource is $36 (since prices are set twice per year) because of constrained pipelines.

One could ask why the electric power generators don't reserve capacity just the way the gas/heating utilities do.  Why aren't they buying pipeline capacity and committing to long term contracts?

The New England Power Generators Association (NEPGA) has argued that the market problem caused by too little generating diversity is already being addressed with the Pay for Performance program and building/converting dual oil/gas generating plants.  They point out that the first BCF/day will produce most of the savings and that projects set to come online in 2016 (AIM and C2C) should address the biggest spikes in price.  They caution the NH PUC to wait for the market to respond before launching into an infrastructure project that will prove burdensome to ratepayers.

So, because NEPGA won't commit to reserving capacity, three of the four utilities and some politicians have decided that the ratepayers should commit to those long term contracts.  Why not?  There's no risk to them and, like the Scrubber on the Merrimack Coal Plant, they make a 10% profit and we pick up any losses.

Here we are, just finishing the settlement agreement for Eversource to divest of all it's generating assets, and we're being asked to pick up new obligations.  The settlement agreement is probably a good idea, but the Large Commercial and Industrial customers will bear a lighter burden of the settlement costs ($100s of Millions) than Small Commercial and Residential customers.  This is in part because there was a lawsuit by business customers over the cost overruns on the Scrubber.