|
Analysts see small savings from energy bill Report from U.S. government agency says legislation will have little effect on production, consumption or price Larry Persily Petroleum News Government Affairs Editor
A federal analysis of key provisions of the energy bill stalled in Congress says the combination of tax credits, royalty relief, energy efficiency initiatives and fuel standards will have only a small effect on the nation’s total energy production, consumption and prices over the next 20 years.
“On a fuel-specific basis, changes to production, consumption, imports and prices are negligible,” said the report, prepared by the U.S. Energy Information Administration at the request of Sen. John Sununu, R-N.H.
The report measured the probable effects of the legislation against the department’s latest projection of energy production and consumption. It determined domestic energy consumption would remain “virtually identical” through 2020 with or without the bill, with a 0.3 percent drop in consumption after 2020.
Toward the goal of reducing the nation’s dependence on foreign energy imports, the bill would result in only a 1 percent drop in foreign oil imports by 2025, the Energy Department report said. Provisions in the bill would produce a 1 percent increase in domestic natural gas production by 2025.
The study included a note of caution: “The projections … used in this report are not statements of what will happen but of what might happen.” Report looks at wide range of issues The report considered the bill’s tax credits and other financial incentives for a wide range of production and consumption issues, including the Alaska North Slope natural gas pipeline, offshore royalty relief, unconventional natural gas production, motor vehicle fuel standards and increased use of ethanol in blended gasoline, nuclear plants, coal technology, initiatives for residential and commercial energy efficiencies and alternative-fuel vehicles.
The agency did not analyze unfunded provisions in the bill — authorization for the work but no money to do the job — or any of the provisions that authorize a target for energy savings but fail to set the target.
Although the House passed the bill by an easy margin, supporters in the Senate have been unable to find enough votes to block further debate and bring the bill to the floor for a vote. Senate Republican leadership the second week of February released a stripped-down version of the bill in the hope that a less expensive package could win passage, though it’s not expected to reach the floor for a vote until the first week of March at the earliest. Bill’s price tag, effectiveness questioned Sununu, a fiscal conservative, is one of several Senate Republicans who voted to block passage of the bill last November, citing its bulging multibillion-dollar price tag, its questionable effectiveness, and its provision to release from product liability claims the manufacturers of the gasoline additive MTBE, methyl tertiary butyl ether. Sununu’s state was the first to sue the octane-enhancer manufacturers, seeking cleanup costs and damages for pollution of underground water supplies.
The Energy Department reviewed the version of the bill that passed the House — not the proposed substitute waiting for Senate action. The Feb. 19 report included the following conclusions:
• The federal loan guarantee, accelerated depreciation and tax credits for construction of an Alaska North Slope natural gas project to serve Lower 48 markets would reduce the line’s tariff by about 15 cents per thousand cubic feet of gas. The lower cost and financial incentives, the report said, would prompt an earlier decision to build the line, advancing by one year the start-up date for the first gas flow, to 2017 instead of 2018.
• Despite the bill’s royalty relief provisions for shallow-water, deep wells in the Gulf of Mexico, lower natural gas prices would slow development of the expensive wells.
• Weatherization funding and tax credits for existing homes, solar, wind and fuel-cell energy “are not large enough to measurably affect” energy consumption.
• Natural gas wellhead prices in 2015 would be a just dime less with the energy bill, but unchanged by 2025.
• Electricity prices would be a tenth of a cent lower with the energy bill in 2015 and 2025. Bill would help Alaska gas line In reviewing the bill’s provisions for the Alaska gas line project, the report said the tax credit for the $2-billion-plus gas conditioning plant needed on the North Slope would reduce costs by 5 cents per thousand cubic feet. Adding that to the savings from the presumed lower interest rate the borrowers would receive with the federal loan guarantee for the project, the report calculated, the gas tariff would be about 15 cents less per mcf than if the energy bill does not pass.
The accelerated depreciation provision for the pipeline itself would improve the owner’s cash flow but would not “appreciably alter the tariff,” the report said.
Other projections in the report include:
• Imports of liquefied natural gas would remain unchanged from current projections without the energy bill, as domestic production will fall far short of demand — even with increased unconventional gas production and the Alaska gas pipeline. LNG imports are expected to increase more than 20-fold from 2002 levels, up to almost 13 billion cubic feet per day in 2025 with or without the bill, the report said.
• Regardless whether the energy bill passes, Lower 48 onshore conventional gas production would drop 10 percent by 2025, and Lower 48 onshore unconventional gas production would jump more than 50 percent by 2025, to more than 25 bcf per day. Offshore production would increase just a few percentage points from 2002 to 2025, regardless of the bill.
| 