With natural gas from North American shale formations fundamentally altering the U.S. gas market, BP PLC and ConocoPhillips Co. yesterday announced they would stop work on a proposed $35 billion pipeline to bring gas from Alaska’s North Slope into Canada and to the Lower 48 states.
Since the energy giants came together in 2008 to propose the massive project they called Denali, shale gas production has boomed in Texas, Louisiana, Arkansas and the Northeast. Estimates by producers and government agencies suggest shale gas could account for nearly half of the domestic gas supply by 2035.
The shale gas, high gas storage across the country and lower industrial demand have conspired to keep the average price of natural gas near historic lows since 2009 at about $4 per million British thermal units. The prospect that the commodity price could remain low for decades because of the shale gas resource made it difficult for Denali to compete.
“This has created a very difficult environment in which to secure financial commitments from potential customers,” the pipeline sponsors said in a statement.
Denali President Bud Fackrell said the project has been talking with potential gas shippers for nearly 18 months, and it hasn’t yielded enough support to justify the massive financial commitment.
“Denali is a market-driven company,” he said. “As such, we cannot spend the billions of dollars necessary to advance the project unless we have binding agreements with shippers.”
To meet California’s new standard requiring the state to get 33 percent of its power from renewables by 2020, the grid operator will have to stop talking about the weather and do something about it. The California Independent System Operator Corporation (ISO) just brought its Mission Critical Wing, a new high tech control center, on line to do that.
“We partnered with Google and we went from your typical map board made of plastic tiles, with digital readouts, to an 81-foot video display wall,” said Stephanie McCorkle, the California ISO’s Director of Communications. “It’s like Minority Report, where Tom Cruise could pull into the wall whatever data he needed.”
The new center, in Folsom, California, incorporates security measures for vital grid operations and for energy delivery commensurate with a post-9/11 world. “It’s no secret that security was a big reason why we built this facility,” McCorkle said, “but we did need a new control center, especially with the thousands and thousands of megawatts of renewable power coming.”
The ISO’s job, McCorkle said, “is to keep the lights on” and “to balance the renewable goals with reliability and with reasonable cost.”
To do so, the system operator will have to “stay one step ahead of nature,” McCorkle explained. Wind and solar are variable but can be managed with accurate weather forecasts.
“That’s what our new control center allows us to do,” McCorkle said. “Advanced forecasting is what will allow us to have the standby power ready” or “to be able to back down the gas-fired generators when all of a sudden we have a surplus.” It is, she concluded, “the most efficient way to integrate the largest wave of renewables brought onto any grid in North America.”
In Washington, the House Armed Services Committee OK’d a defense budget bill that exempted the Department of Defense from Section 526 of the Energy Independence and Security Act, which had since 2007 required that fuels purchased by the military be no more carbon-intensive than standard fossil fuels.
The provision, if passed by the Congress and signed by the President, would permit the DoD to buy fuels made from coal and Canadian tar sands, which have “significantly higher [emissions] than conventional fuels, according to a recent EU study. ”
If this successfully passes both Houses and becomes law, it will end all biofuel options to DOD,” said Imperium Renewable CEO John Plaza told the Digest. “The oil and coal industry have been trying to run this behind-the-scenes gutting of 526 for the last two years, and they are making progress. We are working it and would be thrilled if others in biofuels took action with their representatives as well.”
Wind projects, along with other renewable energy technologies, have benefitted in a variety of ways from federal incentive programs. The Section 1603 cash grant program, the Department of Energy Section 1705 Loan Guarantee program and the Bonus Depreciation schedule are among the federal programs that are scheduled to expire by the end of 2012. The Production Tax Credit (PTC) and Investment Tax Credit (ITC) are also scheduled to expire for wind projects at the end of 2012. In today’s budget-cutting environment, it’s possible that none of these incentives will be renewed.
The Section 1603 cash grant has been a popular and successful program and is generally credited for keeping the U.S. wind industry healthy during the 2009-2010 recession1. Since the program was initiated in 2009 through the first quarter of 2011, $5.6 billion in cash grants has been awarded for wind projects, representing more than 80 percent of all Section 1603 funding to date.
WASHINGTON “” Maneuvering on oil drilling, gas prices and industry profits intensified on Capitol Hill on Wednesday. House Republicans pushed through a bill to accelerate offshore oil and gas exploration as Democrats vowed action on measures to rescind billions of dollars in tax breaks for major oil and gas companies.
The drilling bill was approved 263 to 163, with 28 Democrats joining unanimous Republicans, after the majority swatted down several Democratic amendments. The bill would force the Interior Department to act within 60 days on all applications for offshore drilling permits. The House then turned to a second Republican-sponsored bill that would open much of the Atlantic, Pacific and Arctic shorelines to new oil and gas exploration. A vote on that measure is expected Thursday.
The Obama administration vigorously opposed both measures, but stopped short of threatening to veto them “” in part because it is highly unlikely they will win enough votes in the Senate to overcome a filibuster.
Meanwhile, House and Senate Democrats continued their push to repeal a variety of tax breaks enjoyed by the oil industry, some of them a century old and others that apply to all companies, not just petroleum concerns.
Sen. Scott Brown’s floor votes to strip the EPA of its climate change powers have become a political jump ball in his 2012 reelection campaign.
Democrats think the Massachusetts freshman’s anti-environmental position can energize the party’s base and help attract a top-tier candidate to challenge the popular GOP incumbent.
The DOE Section 1705 loan guarantee program has a current allocation of $2.5 billion that can support up to $30 billion of loan guarantees. As of April 2011, three wind plants have received commitments for loan guarantees totaling $1.5 billion, including $1.3 billion for Caithness’s 845 MW Shepherd’s Flat project.