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Senate Energy Committee Says Energy Bill's Success Already Evident

The latest Energy Information Administration (EIA) analysis is proof that last year's passage of the sweeping Energy Policy Act of 2005 (EPAct 2005) is already impacting U.S. energy supply, which, among other things, has provided incentives to discourage over-reliance on natural gas for power generation, the Senate Committee on Energy & Natural Resources said Wednesday.

The EIA issued a midterm forecast and analysis of U.S. energy supply earlier on Tuesday, which cited growth in nuclear power and renewable energy consumption (see Daily GPI, Dec. 6). The Senate committee, chaired by Republican Sen. Pete Domenici and including ranking Democrat Jeff Bingaman, both of New Mexico, noted the "positive trends" in the EIA forecast, which it said resulted from the passage of the EPAct 2005. President Bush signed the bipartisan bill into law in August 2005 (see Daily GPI, Aug. 3, 2005).

The committee cited projections by the EIA that U.S. gas consumption will grow to "only" 26.1 Tcf by 2030, "a significant drop" from last year's projection of 30 Tcf by 2030. "While the report does not refer to EPAct 2005 on this issue, one of the primary goals of the legislation was to discourage the U.S. over-reliance on natural gas as a source of electricity by providing incentives for the production of electricity from clean coal, wind, solar, geothermal and nuclear power," the committee stated.

EIA's forecast that average gas wellhead prices will fall to just under $5/Mcf (2005 dollars) by 2013, will follow increased exploration in the deepwater Gulf of Mexico and increased imports of liquefied natural gas (LNG) -- two issues clarified by the energy bill, said the senators.

"The energy bill brings clarity to the siting process for new LNG ports in an effort to facilitate construction of these ports where appropriate," the committee noted. "The bill also provides incentives for the production of natural gas from deep wells in the Gulf."

The EIA is forecasting increased production from unconventional energy sources, including oil sands, ultra-heavy oils and gas-to-liquids. "The energy bill includes incentives to encourage expanded exploration in the ultra deep waters of the Gulf of Mexico, as well as incentives for developing technologies that extract oil from unconventional sources," said the committee.

The EIA's upbeat projections for nuclear energy growth also resulted from passage of the bill, said the committee. Total operable nuclear generating capacity is projected to grow to 112.6 GW in 2030, including 3 GW of expansion at existing plants and 12.5 GW of new capacity. Total nuclear generation is projected to grow from 780 billion kWh in 2005 to 896 billion kWh in 2030.

"Much of this new capacity is stimulated by provisions in EPAct 2005, including the loan guarantee authority, the production tax credits, and the insurance protection against licensing delays and litigation," the committee noted. In addition, the growth in renewable energy consumption "includes certain EPAct 2005 provisions, including the extension and expansion of the production tax credit. The bill's tax credits encourage the production of electricity from wind, solar, geothermal and biomass."

Ethanol production's rise also was noted: EIA projects production will grow from 4 billion gallons in 2005 to 11.2 billion gallons in 2012 and to 14.6 billion gallons in 2030. "This standard far exceeds the Renewable Fuel Standard enacted as part of the energy bill," said the committee. The rise in biofuels, it said, "is supported by tax credits" in the bill. "The production of coal to liquid fuels is encouraged by the loan guarantees...for clean technologies.

And unconventional vehicle technologies, which will power vehicles through electricity, fuel cells or hydrogen, are projected to account for almost 28% of projected total new light-duty vehicles sales in 2030, up from 8% in 2005. The reason, said the committee, is the enactment of a tax deduction earlier this year to encourage more consumers to buy hybrids.

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