EPA rule gives new boost to gas

WASHINGTON — Natural gas is poised to be one of the biggest winners of the Obama administration’s new plan to slash carbon dioxide emissions, accelerating the electric sector’s move away from coal toward the cleaner-burning power source.

Despite a modest climb in coal use for electric generation in 2013, it already has fallen out of favor in the power sector, as utilities increasingly turn to natural gas for its cheaper, lower-emission profile.

The Environmental Protection Agency’s proposed standards — requiring states to pare carbon dioxide emissions 30 percent over 2005 levels by 2030 — are likely to hasten that switch.

But natural gas industry executives weren’t eager to crow about their victory Monday.

Instead of showering effusive praise on the Environmental Protection Agency’s proposal, industry leaders talked up the agency’s decision to give states broad “flexibility” to meet the proposed mandates — an approach that ensures continued coal-to-gas switching is one of the options.

‘Efficient and affordable’

American Gas Association President Dave McCurdy stressed the importance of carbon standards that allow “efficient and affordable applications of clean natural gas.”

Marty Durbin, president of America’s Natural Gas Alliance, a group of producers looking to build demand for the fossil fuel, stressed it is “already providing significant economic and environmental benefits.”

Flexible rules can preserve that dynamic, Durbin suggested.

“The rules should be flexible and fair,” Durbin said, “and we believe they should recognize the ability of natural gas to play an increasing role in the delivery of reliable, safe and clean power.”

States would have wide latitude deciding how to meet the EPA’s proposed carbon dioxide emission cuts, with options including greater efficiency along transmission lines and among electric consumers as well as adopting more renewable power sources, such as wind and solar.

Retiring coal plants

While efficiency may be the cheapest, quickest option in the short run, retirements of coal-fired plants — or adding gas to existing facilities — will also help states meet the targets.

And simply increasing the use of existing U.S. power plants that run on natural gas could help move states toward their individual goals, said Derek Furstenwerth, senior director of Environmental Services for Calpine Corp., a Houston-based power company.

“By simply increasing utilization of these facilities sooner rather than later, meaningful greenhouse gas emissions reductions may be achieved . . . while ensuring electric reliability,” Furstenwerth said.

Natural gas production in the U.S. has surged as energy companies combine hydraulic fracturing and horizontal drilling to unlock the fossil fuel from dense underground rock formations, often as a byproduct of more highly prized oil.

Any increased power sector demand for natural gas could keep that activity going, suggested Marvin Odum, president of Shell Oil Co.

“While we are still evaluating the proposed rule, it’s clear the increased use of natural gas in the existing power sector could create the opportunity for the U.S. to further capitalize on abundant North American natural gas supplies – furthering an energy renaissance that continues to create jobs and a meaningful reduction of greenhouse gas emissions,” Odum said in a statement.

Driving demand

Natural gas industry analysts expect the new EPA rule will help drive electric sector demand for gas, building on a separate environmental regulation aimed at curbing mercury pollution and existing market trends.

A  rough calculation by America’s Natural Gas Alliance before EPA unveiled the carbon standards on Monday suggested the rules could raise the electric sector’s daily gas demand by as much as 10 billion cubic feet from the existing 22 billion cubic fee.

But not everyone is convinced.

Ross Eisenberg, vice president of energy and resources policy at the National Association of Manufacturers, which opposes the proposed carbon rule, said that natural gas’ gains could be short lived.

“There’s opportunity for gas in the short term,” he said. “But in the long term, any major reductions here will hurt coal and natural gas.”

Dangerous precedent

Some in the oil and gas industry also have warned that the EPA’s carbon-cutting plans — including a previously proposed rule aimed at new power plants — set dangerous precedents that could, eventually, be applied against their products.

Even ANGA took that position earlier this year, when it filed comments with the EPA saying the new plant proposal effectively locked in carbon capture and sequestration technology it said was not ready for prime time.

American Petroleum Institute President Jack Gerard said the EPA’s plan “will have a chilling effect on energy investment that could cost jobs, raise electricity prices and make energy less reliable.”

Air is getting cleaner under existing policies and because of the private sector’s technological advancements, he said, concluding: “We can continue to make environmental progress without damaging the economy.”