There was a divergence of opinion last week within the gasindustry on President Bush’s broken campaign promise to press forrestrictions on carbon dioxide (CO2) emissions from powergeneration. Several energy officials, some within the same industryassociations, had different positions on the matter.

The apparent split occurred over the need to avoid exacerbatingthe current energy crisis while at the same time maintaining a fuelneutral energy policy that doesn’t jeopardize the position ofnatural gas as the fuel of choice for power generation over thelong-term.

While many agreed Bush’s decision not to push for curbing CO2emissions was a political reaction to energy prices and theCalifornia crisis, some said his letter to several Senators on thematter had a distinctly anti-natural gas tone that could return tohaunt the gas industry unless corrected.

Curbing CO2 emissions certainly would boost demand for naturalgas at the expense of other dirtier fuels, particularly coal andoil. CO2 reductions had been promoted recently by EnvironmentalProtection Agency Administrator Christine Todd Whitman, who mayhave been a little ahead of Bush on the issue. In recent testimonybefore a Senate subcommittee and in other recent statements,Whitman advocated the regulation of carbon dioxide under the CleanAir Act. She called for “putting [carbon dioxide] into the processand recognizing that we have to deal with it, which would be to puta cap of some sort, a target anyway.”

That drew a response from Sens. Chuck Hagel (R-NE), Jesse Helms(R-NC), Larry Craig (R-ID), and Pat Roberts (R-KS), who requestedclarification of the Administration’s policy. The senators urgedthe president to consider the opinions of some prominent scientistswho say CO2 emissions are less harmful than other gases andparticulates.

But Bush chose to focus instead on the more important and moreimmediate impact on the price of energy. He cited recent analysisfrom the Department of Energy indicating that greater restrictionson CO2 would lead to “an even more dramatic shift from coal tonatural gas for electric power generation and significantly higherelectricity prices compared to scenarios in which only sulfurdioxide and nitrogen oxides were reduced. This is important newinformation that warrants a reevaluation, especially at a time ofrising energy prices and a serious energy shortage.”

Bush added that while California and other western states areconcerned about price volatility and energy shortages this summer”we must be very careful not to take action that could harmconsumers,” particularly when there is incomplete scientific proofthat such restrictions would improve climate conditions.

In his response to the senators he said he intends to work withCongress on a multipollutant strategy to “require power plants toreduce emissions of sulfur dioxide, nitrogen oxides and mercury.Any such strategy would include phasing in reductions over areasonable period of time, providing regulatory certainty andoffering market-based incentives to help industry meet the targets.

“I do not believe, however, that the government should impose onpower plants mandatory emissions reductions for carbon dioxide,which is not a ‘pollutant’ under the Clean Air Act,” said Bush.

His apparent reversal on CO2 was sharply criticized by Democratsand environmentalists, and the president was accused to caving intodemands from special interests. However, gas distributors laudedthe change.

“We appreciate that President Bush expressed sensitivity tohomeowners and businesses that have encountered sticker shock fromrecent higher natural gas bills, which resulted from increaseddemand, tight supply and colder than normal weather,” said AmericanGas Association President David Parker. “The president indicatedthat imposing CO2 controls on coal and oil could have put upwardpressure on the market price of natural gas, and we agree withthis.”

Bob Cave of the American Public Gas Association, whichrepresents municipal gas utilities, told the president he shareshis concern about relying too heavily on natural gas as a fuel forfuture power generation. “By some estimates 90% of the 393gigawatts of new electric generation expected to come on-lineduring the next 20 years will be fueled by natural gas,” he notedin a letter to Bush. Currently gas fuels only 16% of the nation’spower generation. Such a complete reliance on gas for generationwill “place an incredible demand on a finite supply of fossil fueland will cause even higher prices for energy consumers in thefuture.” But fuel diversity and conservation are the “fundamentalelements of a sound and successful national energy policy,” saidCave.

Major gas and oil producers share that view, according to JohnSharp of the NGSA. Sharp said the president’s decision was arational one given the current energy market. “The facts havechanged in the market since the debates during the campaign,” hesaid, noting the California energy crisis has worsened. “As aconsequence, I think he is more than entitled to change hisposition on it. I think he is doing it to respond to current marketneeds.” However, others at NGSA warned of a growing bias againstnatural gas.

Gas pipeline representatives said they hope the decision is nota permanent one. Interstate Natural Gas Association of America(INGAA) Chairman Stan Horton said although it was a good short-termpolitical move, over the long term CO2 emissions restrictionsshould be revisited. “First of all, I think it was a politicaldecision driven by immediate things that are happening in themarket,” Horton said at last week’s Natural Gas Roundtable inWashington, D.C. “We have high prices for electricity in manyregions of the country. People are concerned that some of theproblems we are having in California are going to spread to otherregions of the country. If you impose additional air qualitystandards on electric utilities, the result would probably be thatmore coal plants might not be able to run and you are going toexacerbate the current problem..”

However, INGAA would hope that in the next 12 to 18 months asprices come down and return to more normal levels that the issue ofpossibly restricting CO2 emissions would be reconsidered, saidHorton.

Rocco Canonica

©Copyright 2001 Intelligence Press, Inc. All rightsreserved. The preceding news report may not be republished orredistributed in whole or in part without prior written consent ofIntelligence Press, Inc.