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Vol. 13, No. 23 Week of June 08, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Wood Mac report says climate bill makes gas uneconomic

Proposed legislation in the U.S. Congress aimed at reducing greenhouse gases would make more than one third of all domestic natural gas projects uneconomic, according to a new report from the research and consulting firm Wood Mackenzie.

Commissioned by the American Exploration and Production Council, the report looks at how the Climate Security Act of 2007, specifically provisions requiring producers to pay for greenhouse gas emissions by consumers, would impact the upstream economics of natural gas projects across the country.

Although the report looked at the impacts of the legislation by region, it did not include figures specific to Alaska, considered a relatively isolated market for natural gas.

The study determined that if producers bore the entirety of consumer emission costs, the additional financial burden would make approximately 32 to 46 percent of domestic production between 2012 and 2017 uneconomic to develop, equivalent to roughly 18.1 billion cubic feet per day to 25.9 bcf per day.

Bill features ‘cap and trade’

The bipartisan bill, also known as the Lieberman-Warner bill after its original sponsors in the Senate, would create a “cap and trade” program, limiting the amount of greenhouse gas emissions from power plants and factories, and allowing companies to purchase “allowances” for emissions. The proceeds would go toward researching renewable technologies.

According to the Congressional Budget Office, the bill as written would bring in nearly $1 trillion through 2018, possibly through costs passed on to taxpayers.

The Senate began debating the bill on June 3, and early reports suggest diminished hope of the bill receiving the 60 votes needed for it to pass. President Bush said he would veto the bill as it is currently written.

—Petroleum News



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