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Obama's Climate Plan Tough on Coal, Supports NatGas

President Obama's much-anticipated climate action plan, which was rolled out last Tuesday, came down hard on coal-fired plants, while promoting renewable fuels along with fuel switching from coal to natural gas, a global market for natural gas, and the adoption of heavy-duty natural gas vehicles.

Speaking from the steps of Georgetown University in sweltering heat, Obama said the crackdown on carbon pollution by existing power plants "does not mean that we're going to suddenly stop producing fossil fuels." There is a place for natural gas. The nation should "strengthen our position as top natural gas producer," Obama said, endorsing "more cleaner burning natural gas, which provides safe, cheap power." He pledged to work with industry to make drilling safer and to contain methane emissions.

The long-pending question of permitting of the Keystone XL pipeline to carry crude from Canada's oilsands to the U.S. Gulf Coast remained in limbo. Obama said it would depend on a finding by the State Department that it is in the nation's interest and the "net effect" of the pipeline is not to exacerbate the problem of carbon pollution.

Through 2016, the president has directed the Environmental Protection Agency (EPA) to work closely with states, industry and other stakeholders to establish carbon pollution standards for both new and existing power plants. The federal government currently has no restrictions on carbon pollution from power plants, the president said.

To that end, Obama issued a presidential directive to the EPA to begin drafting rules governing carbon emissions from power plants.

"It's not right. Its not safe and it needs to stop...It's time for Washington to catch up with the rest of the country," he said. He also advocated greater reliance on fuel efficiency and fuel standards by the United States.

The goal of Obama's plan is to cut carbon pollution, which is the biggest driver of climate change in the United States and the world. Power plants are the largest source of emissions, accounting for 33%, with transportation coming in second at 28%, according to the White House.

The United States should take the global lead in lowering emissions. "We've got a vital role to play. We can't stand on the sidelines." The government should "partner with [the] private sector to apply our technological know-how in countries that transition to natural gas," Obama said. He further called for an end to public financing for power plants oversees unless they deploy carbon-capture technology. "They don't have to repeat all of the mistakes that we made."

Thanks to natural gas, he said, the U.S. has made some headway in reducing carbon pollution. "We produce more natural gas than anyone else," which has helped to drive carbon to the lowest level in 20 years, Obama said. "So it's a good start...But we've got more to do."

The president's sweeping climate change initiative, which some are calling a "war on coal," will add to the list of departing coal-fired power plants and could result in demand for an incremental 4-8 Bcf/d of natural gas by 2020, one analyst estimated.

The imposition of a carbon emission limit on power plants would lead to an estimated incremental retirement of about 70 GW of coal-fired capacity by 2020 over and above the approximately 40 GW of expected retirements engendered by the EPA's Mercury and Air Toxics Standards rules, according to consulting firm ClearView Energy Partners LLC.

"In the aggregate, this adds up to a shutdown of roughly one-third of U.S. coal-fired generation capacity within the space of a decade," ClearView said in a "climate and emissions" note that was issued after the president unveiled his climate action plan targeting the nation's largest source of polluting emissions.

ClearView used recent figures compiled by the Natural Resources Defense Council (NRDC) to calculate how retiring coal plants would impact carbon dioxide equivalent (CO2) emissions. Using NRDC's notional 1,500 pounds of CO2e/MWh as a starting point, that "implies an incremental retirement of about 70 GW of coal-fired capacity by 2020," said ClearView energy analyst Christi Tezak. She calculated the replacement of the total 110 coal-fired GW would mean an added 4-8 Bcf/d in natural gas-fired power.

Pennsylvania Gov. Tom Corbett called Obama's climate action plan a "war on coal," but analysts with Tudor, Pickering, Holt & Co. (TPH) said fossil fuels fared better than was expected in the president's plan.

"At the margin, [it was] positive for fossil fuels (really!). Coal [is] not going to be outlawed tomorrow, [Obama is] warming up to natural gas, and renewables promoted but largely rhetorical. ...Nat gas cited as 'critical bridge fuel,' promotion of coal-to-gas fuel-switching, development of a global market for gas, and adoption of heavy-duty natural gas vehicles encouraged."

The United States is working with international partners on an Unconventional Gas Technical Engagement Program to share best practices on issues such as water management, methane emissions, air quality, permitting, contracting and pricing "to help increase global gas supplies and facilitate development of the associated infrastructure that brings them to market," the climate plan said. "Going forward we will promote fuel-switching from coal to gas for electricity production and encourage the development of a global market for gas. Since heavy-duty vehicles are expected to account for 40% of increased oil use through 2030, we will encourage the adoption of heavy-duty natural gas vehicles as well."

Natural gas trade associations expressed their support for Obama's gas-friendly climate action plan even before he officially rolled it out last Tuesday.

"We're pleased that the president's...plan supports the important role of natural gas in achieving clean energy goals, not only in our country but also globally," said the Natural Gas Supply Association, which represents large gas producers and marketers. The increased use of natural gas in power generation has had a significant and immediate impact, reducing U.S. carbon emissions to a 20-year low in 2012. The companies that supply the nation's natural gas stand ready to help achieve a global market for natural gas."

Don Santa, CEO of the Interstate Natural Gas Association of America (INGAA), said, "We are pleased to see that President Obama's climate action plan recognizes natural gas as a key component of America's clean energy future. Like the president, we agree that the United States cannot make meaningful greenhouse gas emission reductions without employing our nation's abundant natural gas.

"INGAA recognizes methane as a potent greenhouse gas, and we support efforts to gain greater knowledge on methane emissions. We believe it important to use sound science to detect data gaps and identify technologies, best practices and incentive-based opportunities to reduce emissions."

Many believe that the president's climate plan, which will bypass Congress, may make it doubly difficult to get the nomination of Gina McCarthy as chief of the EPA past Senate Republicans. Her nomination has already been in limbo for weeks, but Obama remains optimistic. "She's terrific. Unfortunately she's being held up in the Senate. She's being forced to jump through hoops," he said.

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