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Cap-and-Trade Exclusion Sought for Residential, Commercial Gas Users

Citing a favorable record on energy efficiency and emissions, the CEO of Piedmont Natural Gas Tuesday called for Congress to exclude residential and commercial natural gas customers from a "rigid" cap-and-trade system.

"Rather, we believe that with enhanced focus on programmatic improvements to energy efficiency, increases in conservation programs and energy [efficient] appliance products, we can continue to see a positive trend and lower consumption per customer without subjecting our customers to the cost of a cap-and-trade system" for reducing carbon emissions, said Tom Skains, chairman of the American Gas Association (AGA) and Piedmont CEO, during a Natural Gas Roundtable in Washington, DC.

"We believe that although there is merit in having an economywide approach to climate legislation, we don't believe that all sectors need to be covered necessarily under the cap-and-trade model that's being discussed" on Capitol Hill, he told energy executives and regulators.

"A sectoral approach, which recognizes the contributions of each sector to climate emissions and that proportionately addresses the status of each sector and the contributions and improvements that they've made in energy efficiency, we think has merit. And for natural gas residential and commercial customers, they have in fact led the way over the last 30 years in reducing energy use per household...and actually holding the line on greenhouse gas [GHG] emissions."

Skains noted that while the number of U.S. households using natural gas has risen almost 70% to 65 million from 38 million in 1970, the aggregate consumption of gas and GHG emissions have essentially remained flat during that period.

Moreover, he said natural gas from the wellhead to the burnertip is about 90% efficient, losing only 10% of its energy value along the way. Electricity in contrast is 35% efficient, Skains noted.

"Many around the country refer to natural gas as the bridge fuel. Well, we have no intention of being a bridge to nowhere. We intend [to be] a long-term, permanent solution in a low-carbon energy environment," Skains said. He noted that natural gas is the "cleanest of all fossil fuels," emitting 45% less carbon dioxide than coal and almost 30% less than oil..

Skains acknowledged that the Obama administration has been mute on natural gas so far. "We heard a lot [about] natural gas during the campaign, but not a lot since the inauguration. My personal belief on this is that the administration loves natural gas. They just take it for granted" because gas is a mature fuel compared to renewable energy.

"We need to continue with our message that natural gas should not be forgotten. We're invisible...[and] even have to add odorant to create the awareness of natural gas...We need to be something more than odorless and invisible" in Washington, he said.

Skains called President Obama's proposed $33 billion tax hike on producers an "impediment" to domestic gas development. "Those taxing changes are clear obstacles that we're going to have to work on and hopefully convince the administration and those on [Capitol] Hill that that's bad policy."

The administration's proposal to increase producer taxes could reverse what has been a "huge paradigm shift and fundamental change in our supply picture" to date, he said. "Not only is our supply base abundant, but it's increasingly domestic." Skains estimated that currently 85% of the nation's gas demand is met by domestic production and it's expected to grow to 90% in future years.

AGA continues to push for greater access to public lands for oil and gas producers; the "realization of the lifting of the moratorium on the OCS [Outer Continental Shelf];" greater development of liquefied natural gas infrastructure; and more pipeline and storage facilities to move gas supplies across the country from producing regions to consuming regions, Skains said.

AGA also is working with state regulators to promote innovative rate designs. It favors utilities abandoning historical volumetric rate design in favor of either true-up or other rate designs that do not penalize utility companies when customers use energy more efficiently, according to Skains. "We're promoting ratemaking such as decoupling tariffs and energy efficiency program incentives."

He noted that 28 companies in 16 states have adopted some form of decoupling tariffs, and 11 companies in six states are in the process of approving them.

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