WASHINGTON — The Obama administration’s looming new plan to cut carbon dioxide emissions from power plants could help boost electric utilities’ demand for natural gas by as much as 45 percent, according to rough estimates from a leading industry trade group.
The back-of-the-envelope calculations by the America’s Natural Gas Alliance take into account the changes expected as a result of the greenhouse gas emission proposal the Environmental Protection Agency will formally propose on June 2, as well as natural market changes and a separate regulation requiring power plants to reduce mercury pollution.
The resulting demand climb could add 3 billion to 10 billion cubic feet per day of natural gas to the current 22 bcf now used daily by the electric sector.
Erica Bowman, ANGA’s chief economist, stressed that the ballpark forecast was based on assumptions about how existing natural-gas combined-cycle power plants would be used. The analysis assumes that the facilities will run at 75 to 80 percent of capacity, instead of the 40 to 45 percent they are working at now, she said.
Still, even at the bottom end of the forecasted range, the change would represent a hefty climb in domestic demand, potentially as U.S. facilities start selling more natural gas overseas. Cheniere Energy Inc. is slated to bring its liquefied natural gas export terminal in southwest Louisiana online next year, and other projects are seeking government permits with ambitions to launch foreign sales by 2018.
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Bowman and ANGA president Marty Durbin told reporters during a roundtable Thursday that gas producers can meet the surge in demand — even if it climbs by an additional 20 billion cubic feet per day by 2020.
“We can absolutely support that without major price spikes,” Bowman said.
She referenced current estimates that the U.S. contains 4 quadrillion cubic feet of economically recoverable natural gas reserves, with only about 25 trillion cubic feet being harvested annually. Current estimates are that 1.5 quadrillion cubic feet can be recovered economically at $5 or less, Bowman added.
Climbing demand could cause domestic natural gas prices to lift enough to restart production from “dry gas” fields where that is the primary product. Most of the domestic activity recently has been concentrated in areas where wells pull gas out of the ground along with higher-value crude and other liquids.
Some manufacturers and heavy industrial users of natural gas have warned that broad exports of the fossil fuel along with climbing domestic demand could cause prices to spike.
Electric utilities are already adopting more natural gas — frequently using it to supplement or replace coal-fired power — because of its relatively low cost and cleaner-burning profile. The EPA regulation for existing power plants set to be unveiled June 2 could accelerate the electric sector’s transition from coal to gas, building on a previous proposal that focused on new power plants.
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ANGA filed comments with the EPA opposing the rule aimed at new power plants, largely out of concern it would set a dangerous precedent by effectively requiring any new coal-fired facilities to use still-developing carbon capture and sequestration technology.
Although the details of the EPA’s coming proposal have not been disclosed, the agency is expected to direct states to cut emissions by as much as 25 percent by boosting efficiency, tapping cleaner energy sources and making other changes.