EnergyBiz - September/October 2007 - (Page 8) » Financial Front natural gas challenges Coal Gains Ground By Ken silverstein some oomph. In the last 15 years it has gone from the hottest thing in fuel options to one that is expensive and untenable. The industry says it doesn’t have to be that way. It argues that with a sensible national energy policy that permits more drilling rights in areas that are now restricted, along with a streamlined permitting process for new plants and pipelines, it can fulfill expectations. There’s plenty of natural gas off shore and in the Rocky Mountains. Producers say they just can’t get to it because of restrictive national policies. When the Clean Air Act of 1990 passed, natural gas was labeled the “fuel of choice.” As such, its prospects soared — upward of 50 percent over 20 years. In effect, current consumption of about 23 trillion cubic feet a year was supposed to rise to 34 trillion cubic feet by 2020. But when policymakers enacted that 1990 law, they didn’t make amends for the fact that nearly one-third of all land in the United States is federally controlled and that the government owns those resources that lay beneath it. “The marketplace is a great way to allocate resources to their best use,” NewsFlash says Keith Bailey, former Chile Carbon chief executive of diversified Credits on sale energy supplier Williams Pacific Hydro, of Cos. in Tulsa, Okla. “But, Australia, will sell public policy is dampening European Union the ability of the market in a customers carbon way that is definitely not in credits tied to a hydroelectric plant the public interest. If comin Chile, reports the panies are unable to access International Herald resources or to site and Tribune. build infrastructure, then it is Pacific Hydro has not in the public interest.” registered the 155megawatt plant with a The logical conclusion is Dutch agency, allowing that all consumers would pay the sale to go forward ever-increasing prices. But it when the facility goes could reach a point at which into service the end of 2008. policymakers begin allocating Pacific Hydro, a a finite resource based on the renewable energy ability to pay — a process that producer, said it intends leads to dysfunctional economto invest $870 million in ics and one that exacerbates Chile over the next five years in projects that the problems. That’s not the generate carbon credits. role of government, says Bailey, The global value who still sits on boards affiliated of the trade in carbon with Williams. Government’s credits last year increased to $30.1 job is to foster incentives to billion, with more than create supply levels that will 80 percent of it in match market demand. It can the European Union, be done, he adds. But, the according to the World political will is lacking. Bank. The naTural gas secTor has losT When the Clean Air Act of 1990 passed, natural gas was labeled the “fuel of choice.” For better or worse, the current policies are creating more dependence on coal. While there are lots of promising new technologies that would scrub coal of its impurities before they are released into the air, the reality is that such a commodity is about twice as dirty as natural gas. At the same time, natural gas cost is at least twice that of coal. Utilities are therefore reluctant to build gas-fired power plants, which typically have a lifespan of about 50 years, if the underlying feedstock is both expensive and hard to get. In fact, in the 1990s, about 90 percent of all proposed generation facilities were to be fueled with natural gas. Now, most of those being proposed are coal-related. Others, meantime, are saying that green energy can fill the void while some experts are touting nuclear power as heir to the throne. In any event, without significant policy changes natural gas demand will exceed supplies for the foreseeable future. Depleting Wells It’s one thing to say that natural gas producers are unable to access gas-rich areas. It’s another to talk about the depletion of conventional gas wells. According to the Independent Petroleum Association of America, there are more drilling 8 E n E rgyB i z September/October 2007 http://www.energycentral.com
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