As a boy growing up near the Louisiana Gulf Coast, I remember looking out of the car window at times and seeing gigantic flames over the bayous: gas flares. Around 1970, the flaring of natural gas peaked. Oil prices were so low back then that marketing gas would not have been profitable.

Today, far less natural gas is flared off both in terms of volume and, consequentially, as a percentage of our much higher current energy consumption. Oil prices have, of course, risen dramatically over the past 40 years, but environmentalists have also been working hard to get oil and gas companies to reduce gas flaring. Nonetheless, it is estimated that the world still flares off several weeks' worth of natural gas supply each year.

Left with far fewer resources, future generations will be dumbfounded at our wastefulness. Why did we not take action sooner?

Ask anyone today, and the answer would be that we leave matters up to the market. And for a long time, the market's answer was that natural gas was a waste product of oil extraction in many cases. We chose to implement legislation banning gas flaring; here, government intervention trumped the market. Another option would have been to mandate a higher price for gas so that the profit margin for oil and gas would have been more equal. Utilities would have at least been encouraged to use gas turbines to generate electricity where gas is plentiful; the higher prices could then have been spread across all power consumers. The market would still have been free -- companies still could have done whatever they want -- but it simply would have covered more resources.

Here, we see why this option was not pursued: while our resources would have been used more efficiently, electricity rates would have gone up. Rate hikes are politically unpalatable in the Anglo world, even if they help us use resources more efficiently. So we let oil compete with gas, and oil won for decades. And we flared off tremendous amounts of natural gas.

Competing companies: While the proposal I describe above -- leveling the profit margins for energy resources -- was not implemented for fossil fuels, it has been used successfully for renewables. It is called feed-in tariffs (FITs), and it is the driver behind Europe's main success stories.

Its detractors in the English-speaking world used the same logic that was used 40 years ago in the petroleum industry: we need competition, and price fixing is anathema to free markets. Of course, the United States has had price fixing in the electricity sector since the 1930s (that's what is meant when we say that utilities are "regulated") -- but let's focus on what is meant by "competition."

Normally, when we think about competition, companies come to mind: GM versus Toyota, Dell vs. Apple, etc. Of course, there is also competition between products and technologies, such as between VHS and Betamax (or, for my younger readers, between Blu-ray and HD DVD). Notice that Betamax and HD DVD disappeared from the market completely -- which is itself a considerable waste of effort and investment, though having a single format certainly has its advantages.

If we now look at ways of generating electricity, we see that it would be nice to have competition between companies, but what sense does it make to have competition between resources? If we can leave the resource untouched, then it remains available for future generations -- no problem. But if we have to discard one (natural gas) in order to get at another (crude oil), then it makes sense to ensure that the profit margins on the both resources are roughly equal so that it pays to exploit both resources instead of wasting one. The resources need not compete as long as the extraction companies do.

Wind and solar may seem to differ in one respect: we cannot exhaust them. The sun will not be depleted regardless of how many solar panels we have, and no number of wind turbines will measurably reduce the amount of wind on Earth. Nonetheless, the amount of renewable energy we neglect to use can also be considered waste. Each day, we get a certain amount of potential solar and wind power. Were we to use more of it, our consumption of non-renewable resources would be reduced. As a result, the range of our fossil fuels could be extended dramatically.

RPS, cap-and-trade, FIT: If we agree that we would be willing to pay more today in order to use both our renewable and non-renewable resources more efficiently, the question is which policy promotes competition among companies, not resources. Renewable Portfolio Standards (RPSs) are old-school thinking; utilities have to meet a target for "renewables," and if no further specifications are made, then renewables compete with each other. The cheapest wins, and the rest go nowhere.

Emissions trading is a more recent idea, but it is even worse in a way. Here, large energy producers and consumers are required to reduce emissions. The scheme is praised for allowing decision-makers the flexibility to choose the cheapest way to meet their target: technology overhauls ("clean coal"), investments in third-party offsets (tree plantations funding for technological overhauls abroad), the purchase of allowances from other market players, new low-carbon technologies (renewables), or perhaps just paying a fine. Here, renewables not only compete with each other, but also with all of these options.

Neither RPSs nor emissions trading ensures a comparable, reasonable return on investments in both wind and solar. FITs do. Critics of FITs charge that the policy "picks winners," but the charge only applies to the energy sources promoted -- not to any particular companies or technologies. True, those of us who support FITs for solar and wind have picked these two resources as winners -- guilty as charged. But we have not, to take the example of solar, picked any particular company, nor have we even picked a particular technology. Who can say whether crystalline or thin film panels (or perhaps something else) will be more popular in 2020? Indeed, if we provide roughly the same profit margin for concentrated solar power and photovoltaics today, we may find that the one or the other is clearly preferable by 2030 -- but then, we may nonetheless choose to keep the more expensive one as a niche product despite the price difference. After all, it would have been the sensible thing to do with natural gas 40 years ago.

We have a history of taking only the cheapest energy first. Our children will pay the price that we refused to pay, so they may very well view our old-school thinking as myoptic. FITs are the new school.

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Cross-posted from TomDispatch.

Oil and natural gas prices may be relatively low right now, but don't be fooled. The new great game of the twenty-first century is always over energy and it's taking place on an immense chessboard called Eurasia. Its squares are defined by the networks of pipelines being laid across the oil heartlands of the planet. Call it Pipelineistan. If, in Asia, the stakes in this game are already impossibly high, the same applies to the "Euro" part of the great Eurasian landmass -- the richest industrial area on the planet. Think of this as the real political thriller of our time.

The movie of the week in Brussels is: When NATO Meets Pipelineistan. Though you won't find it in any headlines, at virtually every recent NATO summit Washington has been maneuvering to involve reluctant Europeans ever more deeply in the business of protecting Pipelineistan. This is already happening, of course, in Afghanistan, where a promised pipeline from Turkmenistan to Pakistan and India, the TAPI pipeline, has not even been built. And it's about to happen at the borders of Europe, again around pipelines that have not yet been built.

If you had to put that Euro part of Pipelineistan into a formula, you might do so this way: Nabucco (pushed by the U.S.) versus South Stream (pushed by Russia). Be patient. You'll understand in a moment.

At the most basic level, it's a matter of the West yet again trying, in the energy sphere, to bypass Russia. For this to happen, however -- and it wouldn't hurt if you opened the nearest atlas for a moment -- Europe desperately needs to get a handle on Central Asian energy resources, which is easy to say but has proven surprisingly hard to do. No wonder the NATO Secretary General's special representative, Robert Simmons, has been logging massive frequent-flyer miles to Central Asia over these last few years.

Just under the surface of an edgy entente cordiale between the European Union (E.U.) and Russia lurks the possibility of a no-holds-barred energy war -- Liquid War, as I call it. The E.U. and the U.S. are pinning their hopes on a prospective 2051 mile-long, $10.7 billion pipeline dubbed Nabucco. Planning for it began way back in 2004 and construction is finally expected to start, if all goes well (and it may not), in 2010. So if you're a NATO optimist, you hope that natural gas from the Caspian Sea, maybe even from Iran (barring the usual American blockade), will begin flowing through it by 2015. The gas will be delivered to Erzurum in Turkey and then transported to Austria via Bulgaria, Romania, and Hungary.

Why, you might ask, is the pipeline meant to save Europe named for a Verdi opera? Well, Austrian and Turkish energy executives happened to see the opera together in Vienna in 2002 while discussing their energy dilemmas, and the biblical plight of the Jews exiled by King Nabucco (Nebuchadnezzar), a love story set amid a ferocious struggle for freedom and power, swept them away. Still, it's a stretch to turn aluminum tubes into dramatic characters.

Of course, the operatic theater here isn't really in the tubing, it's in the politics and strategic implications that surround the pipeline. In Eastern Europe, for instance, Nabucco is seen not as a European economic or energy project, but as a creature of Washington, just like the Baku-Tblisi-Ceyhan (BTC) pipeline from Azerbaijan to Turkey that President Bill Clinton and his crew backed so vigorously in the 1990s and which was finally finished in 2005. For those who have never believed the Cold War is over -- the Eastern Europeans among them -- once again it's the good guys (the West) against the commies ... sorry, the Russians ... at an energy-rich OK Corral.

The Great Borderless Gas Bazaar

Russia's answer to Nabucco is the 746 mile-long, $15 billion South Stream pipeline, also scheduled to be finished in 2015; it is slated to carry Siberian natural gas under the Black Sea from Russia to Bulgaria. From Bulgaria, one branch of the pipeline would then run south through Greece to southern Italy while the other would run north through Serbia and Hungary towards northern Italy.

Now, add another pipeline to the picture, the $9.1 billion Nord Stream that will soon enough snake from Western Russia under the Baltic Sea to Germany, which already imports 41.5 percent of its natural gas from Russia. The giant Russian energy firm Gazprom holds a controlling 51 percent of Nord Stream stock; the rest belongs to German and Dutch companies. The chairman of the board is none other than former German Chancellor Gerhard Schroeder.

Put this all together and Russia, with its pipelines running in all directions and firmly embedded in Europe, spells trouble for Nabucco's future and frustration for Washington's New Great Game plans to contain the Russian energy juggernaut. And that's without even mentioning Ukhta which, chances are, you've never heard of. If you aren't in the energy business, why should you have? After all, it's a backwater village in Russia's autonomous republic of Komi, 350 kilometers from the Arctic Circle. Built by forced labor, it was once part of Alexander Solzhenitsyn's Gulag archipelago. By 2030, however, you'll know its name. By then, a pipeline from remote Ukhta will be flooding Europe with natural gas and the village will be one of Nord Stream's key transit nodes.

While Nabucco as well as South Stream remain virtual, Nord Stream is a Terminator on the run. By 2010, it will be tunneling under the Baltic Sea heading for Germany. By 2011, it should be delivering the goods and a second pipe -- 39 foot wide, 100,000 tubes long -- will be under construction to double its capacity by 2014. Gazprom CEO Alexei Miller pulls no punches: this, he says, will be "the safest and most modern pipeline in the world."

How can Verdi lovers possibly compete? In the middle of a global recession, Gazprom is spending at least $20 billion to conquer Europe via Nord and South Stream. The strategy is a killer: pump gas under the sea directly to Europe, avoiding messy transit routes across troublesome countries like Ukraine. No wonder Gazprom, which today controls 26 percent of the European gas market, is expected to have a 33 percent share by 2020.

In other words, in many ways, the Nabucco versus South Stream energy war already looks settled. Nabucco is, at best, likely to be a secondary pipeline, incapable, as Washington once hoped, of breaking the E.U. away from energy dependence on Russia.

Brussels, predictably, is in its usual multilingual policy mess. Most bureaucrats at its monster, directive-churning body, the European Commission, publicly bemoan the "pipeline war." On the other hand, Ona Jukneviciene, chairwoman of the committees at the European Parliament dealing with Central Asia, admits that Nabucco cannot be the only option.

As for Reinhard Mitschek, managing director of the Nabucco consortium, he tries to put a brave face on things when he stresses, "we will transport Russian gas, Azeri gas, Iraqi gas." As for the top European official on energy matters, Andris Piebalgs, he can't help being a pragmatist: "We'll continue to work with Russia because Russia has energy resources."

From a business point of view, it's tough to argue with South Stream's selling points. Unlike Nabucco, it will offer cheaper, all-Russian natural gas that won't have to transit through potential war zones, and while Nabucco will always deliver limited amounts of Caspian natural gas to market, South Stream, given Russian resources, will have plenty of room to increase its output.

The fact is that, as of now, Nabucco still has no guaranteed sources of gas. In order for the gas to come from energy-rich Turkmenistan, to take but one example, the Turkmen leadership would have to break a deal they've already made with Russia, which now buys all of that country's export gas. There's no way that Moscow is likely to let one of the former Soviet Republics do that easily. In addition, both Russia and Iran could well be capable of blocking any pipeline straddling the floor of the Caspian Sea.

Gazprom will pay to build South Stream, and then distribute and sell gas it already controls to Europe; Nabucco, on the other hand, has to rely on a messy consortium of six countries (Austria, Hungary, Romania, Bulgaria, Turkey, and Germany) simply to finance one-third of its prospective costs, and then convince wary international bankers to shell out the rest.

The Pentagon does the Black Sea

So what does Washington want out of this mess? That's easy. Rewind to then-prospective Secretary of State Hillary Clinton in her Senate confirmation hearings on Jan. 13, 2009. There, she decried Europe's dependence on Russian natural gas and issued an urgent call for "investments in the Trans-Caspian energy sector." Think of it as a signal: The new Obama administration would be as committed to Nabucco as the Bush administration had been.

What is never spelled out is why. Enter the Black Sea, that crucial geo-strategic stage where Europe meets the Middle East, the Caucasus, and Central Asia. Enter, thus, Bulgaria, home to a new Pentagon air base in Bezmer, one of six new strategic bases being built outside the U.S. and as potentially important to Washington's future games as the stalwart air bases in Incirlik, Turkey, and Aviano, Italy have been in the past. (Aviano was the key U.S./NATO base for the bombing of the Bosnian Serbs in 1995 and the 78-day bombing campaign against Serbia in 1999.)

With the Pentagon's bases already creeping within a stone's throw of Southwest and Central Asia, it doesn't take a genius to imagine the role Bezmer might play in any future attack on Iran (something the Russian defense establishment has already taken careful note of). With both Romania and Bulgaria now part of NATO, Article 5 of the alliance's charter now applies. NATO can take action "in the event of crises which jeopardize Euro-Atlantic stability and could affect the security of Alliance members."

In this way, Pipelineistan meets the American Empire of Bases.

Young Turks and Wily Russians

Why is everyone so damn hooked on Central Asian oil and gas? Elshad Nasirov, deputy chairman of the state-owned Azerbaijani oil company SOCAR, sums the addiction up succinctly enough: "This is the place where there is oil and gas in abundance. It is not Arab, not Persian, not Russian, and not OPEC."

It's the Caspian and, unfortunately for Europe, the region could, in energy terms, turn out to be not the caviar for which it's renowned but so many rotten fish eggs. No one knows, after all, whether the E.U. will ever be able to buy Iranian gas via Nabucco. No one knows whether the Central Asian "stans" have enough gas to supply Russia, China, and Turkey, not to mention India and Pakistan. No one knows whether any of their leaders will have the nerve to renege on their deals with Gazprom.

Ever since a 2008 British study determined that Turkmenistan may have natural gas reserves second only to Russia on the planet, the European Commission has been on a no-holds-barred tear to lure that country into delivering some of its future gas directly to Europe -- and not through the Russian pipeline system either. Turkmenistan's inscrutable leader, the spectacularly named Gurbanguly Berdymukhammedov, just has to say the word, but despite the claims of E.U. officials that he has agreed to send some gas Europe-wards, he's never offered a public word of confirmation. No wonder: with Nabucco unbuilt and a pipeline from his country to China still under construction, Turkmenistan can play Pipelineistan games only with Russia and Iran. In fact, Russia essentially controls the flow of Turkmen gas for the next 15 years.

Should Gurbanguly someday say the magic word -- and assuming the Russians don't throw a monkey wrench into the works -- he can marry Turkey, as the key transit country, with the E.U. and let them all sing Verdi till the sheep come home. In the meantime, angst is the name of the game in Europe (and so in Washington).

A declassified dossier from the FSB, the Russian heir to the KGB, is adamant: considering Nabucco's shortcomings, "Russia will remain the primary supplier of energy to Europe for the foreseeable future." Call it a matter of having your gas and processing it, too. Prime Minister Vladimir Putin has been making the point for years. If Europe tries to snub it, Russia will simply build its own liquefied natural gas (LNG) plants, to facilitate storage and transport, and sell its LNG all over the world.

Anyway it's worth paying attention to what the St. Petersburg State Mining Institute (where Putin earned his doctorate) has to say. According to the institute, Russia has only 20 years' worth of its own natural gas reserves left. Since Russia plans to sell up to 40 percent of its gas abroad, "Russian" gas may in the future actually mean Central Asian gas. All the more reason for the Russians to make sure that those massive Turkmen and other reserves flow north, not west.

Whatever Washington thinks, the Europeans know that energy independence from Russia is, in reality, inconceivable. Bottom line when it comes to natural gas: Europe needs everything -- Nord Stream, South Stream, and Nabucco. The bulk of the natural gas in this Pipelineistan maze may well turn out to be Central Asian anyway and a substantial part could be Iranian, if the Obama administration ever normalizes relations with Iran.

That, then, is the current state of play in the European wing of Pipelineistan. Russia seems to have virtually guaranteed its status as the top gas supplier to Europe for the foreseeable future. But that brings us to Turkey, a key regional power for both the U.S. and the E.U. As President Obama has recognized, Turkey is both a real and a metaphorical bridge between the Christian and Muslim worlds. It is also an ideal transit country for carrying non-Russian gas to Europe and is now playing its own suitably complex Pipelineistan game.

Chances are that, like Ukhta in far off Siberia, you've never heard of Yumurtalik either. It's a fishing port squeezed between the Mediterranean Sea and the Taurus mountains, very close to Ceyhan, the terminal for two key nodes of Pipelineistan: the Kirkuk-Ceyhan pipeline from Iraq and the monster BTC pipeline. Turkey wants to turn Yumurtalik-Ceyhan into nothing less than the Rotterdam of the Mediterranean.

Even as it dreams of future E.U. membership, however, Turkey worries about antagonizing Moscow. And yet, being aboard the Nabucco Express and already fully committed to the functioning BTC pipeline puts the country on a potential collision course with Russia, its largest trading partner. Of course, this does not displease Washington.

On the other hand, the Turkish leadership draws ever closer to Iran, which provides 38 percent of Turkey's oil and 25 percent of its natural gas. Ankara and Tehran also have geopolitical affinities (especially in fighting Kurdish separatism). Together, they offer the best alternative to the Caucasus (Azerbaijan, Georgia) in terms of supplying Europe with Iranian natural gas. All this, of course, drives Washington nuts.

Needless to say, the Nabucco consortium itself would kill to have Iran as a gas supplier for the pipeline. They are also familiar with realpolitik: this could happen only with a Washington-blessed solution to the Iranian nuclear dossier. Iran, for its part, knows well how to seduce Europe. Mohammad-Reza Nematzadeh, managing director of the National Iranian Oil Company (NIOC), has insisted Iran is Europe's "sole option" for the success of Nabucco.

Is Russia just watching all this gas go by? Of course not. In October 2007, Putin signed a key agreement with Iranian President Mahmoud Ahmadinejad: If Iran cannot sell its gas to Nabucco -- a likelihood given the turbulence of American domestic politics and its foreign policy -- Russia will buy it. Translation: Iranian gas could end up, like Central Asian gas, heading for Europe as more "Russian" gas. With its European and Iranian policies at cross-purposes, Washington will not be amused.

When Turkish Prime Minister Recep Tayyip Erdogan threatened to "rethink Nabucco" if the tricky negotiations for Turkey to enter the E.U. drag on forever, E.U. leaders got the message (as much as France and Germany may be against a "Europe without borders"). Pragmatically, most E.U. leaders know very well that they need excellent relations with Turkey to one day have access to the Big Prize, Iranian gas; and that puts Europe's energy and E.U. membership inclinations at loggerheads.

Last July in Ankara, Nabucco was formally launched by an inter-governmental agreement. The representatives of Turkey, Austria, Bulgaria, Romania, and Hungary were there. Obama's special Eurasian envoy, Richard Morningstar (a veteran of the BTC adventure), was there as well. The Central Asian stans were not there.

But crucially, Gurbanguly, ever the showman, finally made an entrance without ever leaving Turkmenistan, (almost) uttering the magic words in a meeting with his ministers in the capital, Ashgabat, on July 10: "Turkmenistan, staying committed to the principles of diversification of supply of its energy resources to the world markets, is going to use all available opportunities to participate in major international projects -- such as, for example, [the] Nabucco project."

At the Vienna headquarters of Nabucco the mantra remains: this is "no anti-Russian project." Still, everyone knows that Russia's leaders are eager to kill it, and not a soul from Brussels to Vienna, Washington to Ashgabat, knows how to link Central Asia to Europe via a non-Russian pipeline, at the cost of more than $10 billion, without some assurance that Turkmeni, Kazakh, Azerbaijani, and/or Iranian natural gas will be fully (or even partially) on board. Who would be foolish enough to invest that kind of money without some guarantee that hundreds of miles of aluminum tubes won't remain empty? You don't need Verdi to tell you this is one hell of a quirky plot for a global opera.

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One often hears opponents of clean energy say that renewable sources are too expensive; they can't get by without subsidies; they can't compete in a "free market." One of the many reasons this is a daffy argument is that there is no such thing as a free market, certainly not in energy. Existing energy sources, fossil fuels, have benefited from a century of subsidies and supporting infrastructure -- and are still subsidized lavishly relative to their scrappy little competitors.

This is a point enviros often make, but a new report from the Environmental Law Institute and the Woodrow Wilson International Center for Scholars puts some teeth in it. "Estimating U.S. Government Subsidies to Energy Sources: 2002-2008" makes a fairly simple point, captured in this graphic:

Publicly funding climate change.

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Louis Meeks' well water contains methane gas, hydrocarbons, lead and copper, according to the EPA's test results. When he drilled a new water well, it also showed contaminants. The drilling company Encana is supplying Meeks with drinking water.Abrahm Lustgarten / ProPublicaThis story was written by ProPublica reporter Abrahm Lustgarten.

Federal environment officials investigating drinking water contamination near the ranching town of Pavillion, Wyo., have found that at least three water wells contain a chemical used in the natural gas drilling process of hydraulic fracturing. Scientists also found traces of other contaminants, including oil, gas or metals, in 11 of 39 wells tested there since March.

The study, which is being conducted under the Environmental Protection Agency's Superfund program, is the first time the EPA has undertaken its own water analysis in response to complaints of contamination in drilling areas, and it could be pivotal in the national debate over the role of natural gas in America's energy policy.

Abundant gas reserves are being aggressively developed in 31 states, including New York and Pennsylvania. Congress is mulling a bill that aims to protect those water resources from hydraulic fracturing, the process in which fluids and sand are injected under high pressure to break up rock and release gas. But the industry says environmental regulation is unnecessary because it is impossible for fracturing fluids to reach underground water supplies and no such case has ever been proven.

Scientists in Wyoming will continue testing this fall to determine the level of chemicals in the water and exactly where they came from. If they find that the contamination did result from drilling, the placid plains arching up to the Wind River Range would become the first site where fracturing fluids have been scientifically linked to groundwater contamination.

In interviews with ProPublica and at a public meeting this month in Pavillion's community hall officials spoke cautiously about their preliminary findings. They were careful to say they're investigating a broad array of sources for the contamination, including agricultural activity. They said the contaminant causing the most concern -- a compound called 2-butoxyethanol, known as 2-BE  -- can be found in some common household cleaners, not just in fracturing fluids.

But those same EPA officials also said they had found no pesticides -- a signature of agricultural contamination -- and no indication that any industry or activity besides drilling could be to blame. Other than farming, there is no industry in the immediate area.

In Pavillion, a town of about 160 people in the heart of the Wind River Indian Reservation, the gas wells are crowded close together in an ecologically vivid area packed with large wetlands and home to 10 threatened or endangered species. Beneath the ground, according to the U.S. Geological Survey, the earth is a complex system of folded crusts containing at least 30 water-bearing aquifer layers.

EPA officials told residents that some of the substances found in their water may have been poured down a sink drain. But according to EPA investigation documents, most of the water wells were flushed three times before they were tested in order to rid them of anything that wasn't flowing through the aquifer itself. That means the contaminants found in Pavillion would have had to work their way from a sink not only into the well but deep into the aquifer at significant concentrations in order to be detected. An independent drinking water expert with decades of experience in central Wyoming, Doyle Ward, dismissed such an explanations as "less than a one in a million" chance.

Some of the EPA's most cautious scientists are beginning to agree.

"It starts to finger point stronger and stronger to the source being somehow related to the gas development, including, but not necessarily conclusively, hydraulic fracturing itself," said Nathan Wiser, an EPA scientist and hydraulic fracturing expert who oversees enforcement for the underground injection control program under the Safe Drinking Water Act in the Rocky Mountain region. The investigation "could certainly have a focusing effect on a lot of folks in the Pavillion area as a nexus between hydraulic fracturing and water contamination."

Tanks hold natural gas condensate and mark the spot of producing gas wells in the Pavillion field, in Fremont County, Wyo., in the heart of the Wind River Indian Reservation. The Environmental Protection Agency has found chemicals that are used in gas drilling in water wells near this site.Abrahm Lustgarten / ProPublicaThe Superfund investigation follows a series of complaints by residents in the Pavillion area, some stemming back 15 years, that their water wells turned sour and reeked of fuel vapors shortly after drilling took place nearby. Several of those residents shared their stories with ProPublica, while other information was found through court and local records. Several years ago a one resident's animals went blind and died after drinking from a well. In two current cases, a resident's well water shows small pooling oil slicks on the surface, and a woman is coping with a mysterious nervous system disorder: Her family blames arsenic and metals found in her water. In two of those cases the Canadian drilling company Encana, which bought most of the area's wells after they were drilled and assumed liability for them, is either supplying fresh drinking water to the residents or has purchased the land. In the third case a drilling company bought by Encana, Tom Brown Inc, had previously reached an out-of-court settlement to provide water filtering.

Though the drilling companies have repeatedly compensated residents with the worst cases of contamination, they have not acknowledged any fault in causing the pollution. An Encana spokesman, Doug Hock, told ProPublica the company wants "to better understand the science and the source of the compounds" found in the water near Pavillion before he would speculate on whether the company was responsible. 

Precise details about the nature and cause of the contamination, as well as the extent of the plume running in the aquifer beneath this region 150 miles east of Jackson Hole, have been difficult for scientists to collect. That's in part because the identity of the chemicals used by the gas industry for drilling and fracturing are protected as trade secrets, and because the EPA, based on an exemption passed under the 2005 Energy Policy Act, does not have authority to investigate the fracturing process under the Safe Drinking Water Act. Using the Superfund program gave the agency extra authority to investigate the Pavillion reports, including the right to subpoena the secret information if it needs to. It also unlocked funding to pay for the research.

EPA officials have repeatedly said that disclosure of the fluids used in fracking -- something that would be required if the bill being debated in Congress were passed -- would enable them to investigate contamination incidents faster, more conclusively and for less money. The current study, which is expected to end next spring, has already cost $130,000.

About 65 people, many in jeans, boots and 10-gallon hats, filled Pavillion's community hall on Aug. 11 to hear the EPA's findings. They were told that a range of contaminants, including arsenic, copper, vanadium and methane gas were found in the water. Many of these substances are found in various fluids used at drilling sites.

Of particular concern were compounds called adamantanes, a natural hydrocarbon found in gas that can be used to fingerprint its origin, and 2-BE, listed as a common fracturing fluid in the EPA's 2004 research report on hydraulic fracturing. That compound, which EPA scientists in Wyoming said they identified with 97 percent certainty, was suspected by some environmental groups in a 2004 drilling-related contamination case in Colorado, also involving Encana. 

EPA investigators explained that because they had no idea what to test for, they were relegated to an exhaustive process of scanning water samples for spikes in unidentified compounds and then running those compounds like fingerprints through a criminal database for matches against a vast library of unregulated and understudied substances. That is how they found the adamantanes and 2-BE.

An Encana representative told the crowd the company was as concerned as they were about the contamination and pledged to help the EPA in its investigation.

Some people seemed confounded by what they were hearing.

"How in god's name can the oil industry dump sh*t in our drinking water and not tell us what it is?" shouted Alan Hofer, who lives near the center of the sites being investigated by the EPA.

"If they'd tell us what they were using then you could go out and test for things and it would make it a lot easier right?" asked Jim Van Dorn, who represents Wyoming Rural Water, a non-profit that advises utilities and private well owners on water management.

"Exactly," said Luke Chavez, the EPA's chief Superfund investigator on the project. "That's our idea too."

Now that the EPA has found a chemical used in fracturing fluids in Pavillion's drinking water, Chavez said the next step in the research is to ask Encana for a list of the chemicals it uses and then do more sampling using that list. (An Encana spokesman told ProPublica the company will supply any information that the EPA requires.) The EPA is also working with area health departments, a toxicologist and a representative from the Centers for Disease Control's Agency for Toxic Substances and Disease Registry to assess health risks, he said. 

Depending on what they find, the investigation in Wyoming could have broad implications. Before hydraulic fracturing was exempted from the Safe Drinking Water Act in 2005, the EPA assessed the process and concluded it did not pose a threat to drinking water. That study, however, did not involve field research or water testing and has been criticized as incomplete. This spring, EPA administrator Lisa Jackson called some of the contamination reports "startling" and told members of Congress that it is time to take another look. The Pavillion investigation, according to Chavez, is just that.

"If there is a problem, maybe we don't have the tools, or the laws, to deal with it," Chavez said. "That's one of the things that could come out of this process."

Reprint courtesy ProPublica.org.

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I was fully prepared to hate this op-ed from T. Boone Pickens and Ted Turner, mainly because Pickens is kind of shady and I'm generally sick of rich old establishment white guys telling us how to transform our energy systems. However! It turned out to be pretty good -- far better than what you normally see on the Wall Street Journal editorial page.

The one sticking point for greens will be the heavy focus on natural gas, a vexed topic that's more and more central to climate policy conversations.

The politics of natural gas are extremely interesting. In a nutshell, the interests of coal utilities and natural gas executives are at odds. To the extent carbon is penalized and coal is phased out, natural gas wins.

Coal has dominated the development of ACES so far, securing tons of free permits and handouts, while natural gas has stood by, quiescent. Ex-senator Tim Wirth addressed a group of natural gas utility execs recently and told them to get off their asses and start lobbying for a stronger climate bill. They seem to be moving in that direction, trying to rally behind some concerted Senate lobbying.

Here, the American Gas Association's Roger Cooper puts a good face on natgas's presence in ACES:

I have no idea how it's going behind the scenes, but at the very least natural gas is a lot more sexy these days. It was the subject of a high-profile Senate hearing recently. Senate Majority Leader Harry Reid (D-Nev.) has done everything but carry T. Boone around on a perfumed litter to spread his natural gas evangelism. (Says Reid, "I've been converted. I now belong to the Pickens church." Yeah, I puked in my mouth a little too.)

Randy Udall has argued passionately on behalf of natural gas as a bridge climate solution. So has Robert Kennedy Jr. So has John Podesta.

The question for enviros: Is the enemy of our enemy our friend? Is it worthwhile to ally with the natgas industry to reduce the influence of coal and strengthen the climate bill?

To answer these questions, we need to look at the substantive roles being envisioned for natural gas. Pickens and Turner propose two.

Power plants

First:

Adopting a "cash-for-clunkers" program in the utility sector can save money and reduce emissions right away by retiring the oldest, least efficient and most polluting power plants in exchange for modern gas-powered plants. New coal plants should be required to combine natural gas with the coal they burn, resulting in cleaner emissions, and every power plant should meet strict carbon-emissions standards.

It's good that the oldest coal plants -- built in the 1950s and '60s, grandfathered under the Clean Air Act, and responsible for a substantial chunk of total U.S. emissions -- are back in the news. There was a great Washington Post piece on them (and how some might escape unscathed under ACES) this week. They also play a prominent role in Carl Pope's account of the Clean Air Act's original sin.

It's true, as Sean Casten and Joe Romm have pointed out, that rapidly shifting the nation's power dispatch from coal to gas would be the fastest way to reduce emissions in the short-term. Emissions from the average gas plant have plunged lately as new combined-cycle plants, which emit less than half the CO2 of the average coal plant, come online. (Meanwhile, average coal plant emissions are rising.)

As an added benefit, natural gas plants can be built more quickly than coal or nuke plants, smaller, and closer to load, enabling them to capture and use their waste heat. Natural gas can also be co-fired -- with coal to immediately reduce emissions from coal plants; with biomass, which (with sequestration) could produce carbon-neutral or even negative power; and perhaps most intriguingly, with solar thermal.

Natural gas really does seem like an important tool when it comes to short- and mid-term reductions in the electricity sector. Efficiency -- getting more power from less fuel -- should be the top and overwhelming priority, but natgas can certainly help at the margins.

Vehicles

The second proposal:

In the transportation sector, renewable energy and natural gas can also be deployed immediately. ... We can begin transitioning the nation's fleet of 6.5 million 18-wheelers that run regular routes. It would take just 20 refueling stations along a single highway to get trucks from one coast to the other. Centrally fueled urban business and government fleets also can quickly move to natural gas.

This I'm not so sure about. It's already a considerable walk-down from Pickens' original plan; he has now embraced electricity for light-duty vehicles. But still it ignores that natural gas is vastly more energy efficient burned to make electricity than it is burned in internal combustion engines. And even if compressed natural gas (CNG) vehicles produce lower emissions per unit of fuel than gasoline vehicles, there's still an enormous energy penalty in gathering and compressing the fuel, which in the end yields a roughly equivalent environmental situation as gasoline. (Of course, Pickens doesn't care about the environmental situation -- he only cares where the fuel comes from -- but the rest of us should care.)

I get that we're not going to see electric buses or 16-wheelers any time soon, but all told, it seems ill-advised to build large new long-term infrastructure in the name of "transitioning." Better a strategy focused on moving freight to rail while researching advanced biofuels for heavy-duty vehicles; for personal vehicles, there are better batteries and transit-oriented development.

Of course, if U.S. policymakers took both the Turner/Pickens proposals to heart, it would represent a massive increase in demand for natural gas. Is there enough to satisfy that demand?

Supply

It's been conventional wisdom in progressive energy circles for a while now that domestic supplies of natural gas have plateaued and that the bulk of future supplies will come from overseas. But some new developments cast that into question. Craig A. Severance notes that just a couple months ago ...

... the nonprofit Potential Gas Committee industry group, assisted by the Colorado School of Mines, released the results of its 2008 assessment, indicating a total increase of U.S. natural gas resources of 39% since its last assessment, for 2006. The report notes the new natural gas resource estimate is the "highest resource evaluation in the Committee's 44-year history" -- indicating the U.S.has far more resources of natural gas than previously considered.

That's due to new discoveries and new technology that makes it easier to get at unconventional sources like shale. Others say the cost-effectiveness of getting at shale is speculative at best, and no one yet knows how much it will cost. We should have a much better idea of what's available in two or three years.

Of course if domestic supplies don't pan out, we can always revert to foreign sources in the short-term. Severance points out that "liquid natural gas (LNG) imports are being sold at incredibly low prices. With a glut of LNG terminal and tanker capacity, foreign producers now have the LNG loaded and ready to sell, and often are merely trying to cover their marginal costs of operation."

Ultimately, the signs seem to point to plentiful supply and, at least in the short-term, fairly low prices.

Still, what about the environmental consequences of embracing a fossil fuel?

Oh, right, the environment

Many long-time enviros want nothing to do with natural gas. There's worry that natural gas drilling endangers water supplies, in part thanks to the so-called Halliburton Loophole in the Safe Water Drinking Act, which exempts a technique called hydraulic fracturing from the law's provisions. It's the subject of lawsuits in Pennsylvania and protests in Texas right now. New York City has demanded a ban on natural gas drilling near upstate reservoirs, for fear of drinking water contamination. Legislation has been introduced to bring fracturing under federal rules.

As Udall himself admits:

The gas industry has not been gentle on Western landscapes -- but climate change could be worse. So pick your poison. To displace coal with gas, we'd need to complete 30,000 to 40,000 new wells a year for decades to come.

Vastly expanded natural gas drilling would no doubt create more ecological sacrifice zones populated by the poor and powerless. After sitting through sessions on mountaintop removal and New Orleans at a recent conference, I've lost my taste for that kind of "poison."

And of course, insofar as the domestic motherload doesn't pan out, we'll end up importing vast quantities of LNG, with all the vexing environmental issues that raises.

Non-conclusion

This is a lot of words to read for no conclusion, I know, but I'm torn. In a perfect world, we'd be committed to reducing the use of all fossil fuels as rapidly as possible, through efficiency and rapid buildout of renewables. Alternatively, one can envision a U.S. policy whereby natural gas is extracted carefully and used judiciously to carry the U.S. on a slightly slower transition to clean energy.

But as we have surely learned by now, politics is not a precise instrument. Sleep with dogs, wake with fleas. Sometimes you've got the bull and sometimes the bull's got you. Grab a tiger by the tail ... etc. If enviros ally with the natural gas industry, it's hard to know how much they'd ultimately be able to shape the result. Then again, it's not like there are lots of other powerful allies in the fight against coal just waiting in the wings, and it sure would be nice to get a better climate bill in the Senate ...

'Tis vexing. What do y'all think?

Related Links:

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Pennsylvania environment officials are investigating another natural gas well leak, after residents near the town of Roaring Branch complained last month that rust-colored water was flowing from a spring and two small creeks were bubbling with methane gas.

The incident is the latest in a string of more than 50 similar cases related to gas drilling in the state, and comes as ProPublica published an article last week reporting that such events were more frequent than officials said.

According to the Department of Environmental Protection, at least four homes in the rural north-central part of Lycoming County are now being supplied with drinking water and 18 are having their water tested or their homes monitored for gas while the investigation continues. At least one woman was temporarily evacuated from her home last week as a precaution, according to Robert Yowell, north-central regional director for the DEP's oil and gas bureau.

Officials suspect that a well casing on one of three natural gas wells drilled by East Resources failed, allowing the gas to migrate into the ground and the streams, according to Yowell and a statement e-mailed to ProPublica from DEP headquarters. The wells were drilled into the Oriskany geologic formation, not the Marcellus shale, where much of the state's new development is targeted. The department is analyzing water and gas samples and has promised to post the results on the DEP Web site by the end of the week.

The well casing consists of several layers of steel pipe and concrete that surround a well structure and is intended to protect groundwater supplies from the gas and drilling fluids inside of the well. Unlike many other gas drilling states, Pennsylvania doesn't have regulations that require this concrete and casing be tested to confirm its strength.

East Resources referred questions to its general counsel who was not immediately available for comment.

According to Yowell, the company has temporarily shut down the suspected problem well by filling it with drilling mud, a slurry of the waste produced from the drilling of the well hole, and has been working to reduce pent-up pressure inside its wells that could be forcing stray gas out of cracks in the casing. To release that pressure, East Resources flared -- or burned off gas -- from two of the suspected wells.

"It looked like the sky was on fire," said Margaret Yaggie, a Roaring Branch resident who can sit on her porch and see the East Resources wells a few miles away. Yaggie said the flames stretched hundreds of feet and carried fumes and smoke. "It's above the trees, on the side of a mountain. It looks like hell."

It appears the measures have been effective in slowing the gas leak.

"One well that was suspect has been plugged and killed," Yowell said, adding that the plugging dramatically reduced pressure. "The readings (of methane) around the stream have gone down. We believe things are getting under control but [they're] certainly not abated yet."

Though Pennsylvania has more gas wells than any state other than Texas, Lycoming County hasn't seen such development until recently. According to Yowell, who only began to oversee oil and gas operations in April when the state established a regional headquarters to handle the rush to drill, the Roaring Branch contamination is the first of its kind in the area.

In a weekend article in the Wayne Independent, a local newspaper, East Resources spokesperson Douglas Mehan — who later referred ProPublica’s questions to the company’s attorney — was quoted as saying "the gut feeling of everybody is that this is very, very rare — a unique incident."

ProPublica has documented a series of cases in seven other Pennsylvania counties and across the nation in which methane has leaked from natural gas drilling operations. On Friday ProPublica published an article challenging Pennsylvania officials' claims that such cases were "an anomaly," noting that the state has hired a full-time inspector dedicated to stray gas problems and has recorded at least 52 cases similar to the one in Lycoming County. In several instances houses exploded as a result of the gas leaks. In one case, three people were killed.

Asked whether these cases constituted a pattern, the Department of Environmental Protection official who first described methane contamination as an anomaly, Craig Lobins, told ProPublica that the number of safely drilled wells in Pennsylvania far outweigh those that cause problems. "We are just dealing with a very small percentage," he said.

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An observation on the greenhouse gas policy debate: Excluding those who question whether we need a GHG policy at all, the debate is fundamentally one about where certainty is most important.  Some think the most important thing is price certainty and argue for a tax.  Others think the most important thing is emissions certainty and argue for a cap.  Every lobbyist in Washington these days assures us that the most important thing is path certainty and argue for special diversions of resources to their pet cause.

What all agree on is that uncertainty is unacceptable.  And so, not surprisingly, we get policies like Waxman-Markey that are neither a pure cap nor a pure tax nor a pure subsidy, but a bit of certainty scattered hither and thither. Sausage making at it's finest.

But do we really have that much uncertainty?  At least in the electric sector (which is, after all, responsible for over 42% of US CO2 emissions), we have a fairly high degree of certainty on two ponits: in the short term, we'll shift from coal to gas.  And in the long-term, power prices will fall.

Which is probably sufficiently heretical to demand explanation.

Near Term

So why can we be certain of a near term shift to gas?  That's fairly easy: because we don't have any other choice. 

The current US power mix is supplied by coal (49%), natural gas (22%) and nuclear (19%).  Everything else is piddly.  6% hydro, 2% petroleum and 3% from all other renewables combined.  Given the 24+ month timeline required to design, finance, build and commission any new power plant, the only near term response to GHG pricing is to shift the resource allocation amongst those generators that are already built.  And while nuclear is a low-carbon power source, it can't generate any harder than it already is.  As noted here (see Fig 4), the nuclear fleet is currently running at a 90% capacity factor, and on historically trends, appears to have pretty well maxed out.  Which means that short of building new nuclear plants - hardly a quick, near term solution - there's no way to swap coal-fired electricity for nuclear. 

The gas fleet, on the other hand, hardly runs at all.  In 2006, the fleet had a 20% capacity factor.  Roughly speaking, this means that any given plant was shut down for four days out of every five.  Gas fleet capacity factor bounces a bit from year to year, but generally stays in the 20 - 30% range.  Thus, if we immediately put a price on carbon that immediately applies to all generators (color me politically naive if you wish), the immediate impact would be to shut some coal plants off and run some gas plants a bit harder.  It's not a long-term solution, and its cost depends solely on the price spread between coal and natural gas.  But as noted here, it does have the potential to quickly and massively lower the CO2 signature of the US electric sector.

Long Term

Now to the heretical part.

Let's extend our gaze sufficiently far into the future that new capital has been deployed, facilitating the retirement of the old dirty stuff.  What's it likely to look like?

I'm not foolish enough to make technology-specific predictions.  But I will go out on one very small limb: power plants deployed in response to GHG controls will be less GHG-intensive than the ones we build today.  Wind, nuke, solar, CHP, biomass, geothermal... and probably lots of other things we haven't thought of (not to mention lots of end-use conservation).

Here's the unifying feature of all those technologies: they cost less to operate on the margin than the stuff we use today.  That's not to say they're all cheaper.  After all, many of the technologies we will deploy in response to GHG regulation are technologies that today are held back due to high capital costs (solar, nuclear, etc.)  But once a power plant is installed, the decision to run it one more hour isn't based on capital cost recovery, but on the marginal cost of production.  If it costs me $2.50 to make one more widget and I can sell it for $2.51, I'll make that widget regardless of how much the widget factory cost me.  That, in a nutshell is why our nuclear fleet today runs all the time and the gas fleet doesn't.  Inclusive of capital recovery, the gas plants have lower all-in costs... but on the margin, the nuke plants make more sense to run.

This point is key, and too often overlooked.  We assume that new, low-CO2 technologies are held back by economics - but forget that those economics include both capital and variable costs.  And in the long-run, it is only the variable cost that matters.  Shifting to low-CO2 power is therefore a shift to low variable cost power.  Which in turn is a shift to low cost power. 

I should emphasize that it may take a while to get to this point, as initial prices from high-cost construction have to be amortized.  A comparison with nuclear in the 1970s is instructive, when huge cost overruns put upward pressure on prices until the political will was broken and owners went bankrupt... but the plants kept running, and today form the low-cost base for much of our grid.  This will happen again with new low-CO2 sources, for the simple reason that CO2 sources (e.g., fossil fuel) cost money.  Cut the source, save the money.

I should also note that there is one exception to the low cost/low CO2 paradigm: Coal with CCS.  It's low CO2 (if it works) but high cost.  Which is why it will never matter.  It won't be built unless subsidized, and if it is built, it won't run.  I'm certain.

Related Links:

Ask Umbra on ditching dirty things

Climate Hope: Inspiring 2009 Books for Clean Energy

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Converting rapidly from coal-generated energy to gas is President Barack Obama's most obvious first step towards saving our planet and jump-starting our economy. A revolution in natural gas production over the past two years has left America awash with natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight - and without the expense of building new power plants.

So writes Robert F. Kennedy Jr., president of Waterkeeper Alliance, in the Financial Times.

RFK Jr. echoes many key points of my series on gas.  There appears to be a lot more natural gas than previously thought (Part 1) and therefore unconventional gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet (Part 2), which is great for low-cost climate action, bad for coal (Part 3).  And it always bears repeating, as Part 3 discusses, that natural gas is the critical low-carbon "firming" resource that can enable deep penetration of both windpower and concentrated solar thermal power.

Interestingly, the investment site Motley Fool writes about RFK's article:

[Note:  Do not consider this link an endorsement of their stock picks.]

I've been touting the success of [Exploration and Production companies]  in tackling unconventional gas resources on this site since 2007, I think the impact of shale plays on America's energy supply has only more recently come to be appreciated. It's wonderful to see a bona fide environmentalist like RFK Jr. lend his support to natural gas as an abundant and vastly cleaner alternative to coal. With luck, we will see other public figures join him in this call.

Now if the natural gas industry only learned to lobby as effectively as Peabody Energy and the rest of the coal crew, we could see some serious climate progress in relatively short order.

Precisely (see Tim Wirth delivers "extreme words" to natural gas execs: "You don't have the right to sit back and do nothing" about climate change. "We are in very deep trouble, the edge of catastrophe, and you can help." (Part 4)

Here are some comments on the rest of the RFK, Jr. piece:

Whatever the slick campaign financed by the powerful coal barons might claim, coal is neither cheap nor clean. Ozone and particulates from coal plants kill tens of thousands of Americans each year and cause widespread illnesses and disease. Acid rain has destroyed millions of acres of valuable forests and sterilised one in five Adirondack lakes. Neurotoxic mercury raining from these plants has contaminated fish in every state and poisons over a million American women and children annually. Coal industry strip mines have already destroyed 500 mountains in Appalachia, buried 2,000 miles of rivers and streams and will soon have flattened an area the size of Delaware. Finally, coal, which supplies 46 per cent of our electric power, is the most important source of America's greenhouse gases.

Actually, petroleum is a bigger source of U.S. GHGs, but Obama has already begun a major effort to reduce transportation-related GHGs, and far more low-carbon substitutes for coal exist.

America's cornucopia of renewables and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our energy needs with clean, cheap, green power. In the short term, natural gas is an obvious bridge fuel to the "new" energy economy.

Since 2007, the discovery of vast supplies of deep shale gas in the US, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently needed to meet national energy demand, 336 are coal-fired. Surprisingly, America has more gas generation capacity -- 450 gigawatts -- than it does for coal.

However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilised first, we could quickly reduce coal generation and achieve massive emissions reductions.

In an instant, this simple change could eliminate three-quarters of America's coal-burning generators and save a fortune in energy costs. Around 920 US coal plants -- 78 per cent of the total -- are small (generating less than half a gigawatt), antiquated and horrendously inefficient. Their average age is 45 years, with many over 75. They tend to be located amidst dense populations and in poor neighbourhoods to lethal effect.

Well, it wouldn't happen in an instant -- you need to bring on the natural gas supply while pushing very hard on natural gas efficiency.  The good news is that Waxman-Markey would help do this in a variety of ways.

The carbon price would switch the dispatch order (which I discussed at length here).  I confirmed this with a leading expert on electric generation.  Coal is dispatched first wherever it is cheaper -- even by a little.  Also, coal producers have been willing to sign long-term contracts, which natural gas producers are only now beginning to contemplate.  Natural gas providers need to demonstrate that after a decade of multiple major price spikes, they can guarantee a long-term moderate and stable price, which will enable utilities to embrace the fuel with confidence.

The climate bill has massive amounts of direct natural gas efficiency as well as general energy efficiency measures, both of which together will free up a great deal of natural gas to power generations (see The triumph of energy efficiency: Waxman-Markey could save $3,900 per household and create 650,000 jobs by 2030).

These ancient plants burn 20 per cent more coal per megawatt hour than modern large coal units and are 60 to 75 per cent less fuel-efficient than combined cycle gas plants. They account for only 21 per cent of America's electric power but almost half the sector's emissions. Properly assessed, the costs of operation, maintenance, capital improvements and repair of these antiquated facilities make them far more expensive to run than natural gas plants. However, irrational energy sector pricing structures make it possible for many plant operators to pass those costs to the public and make choices based exclusively on fuel costs, which in the case of coal appear deceptively cheap because of massive subsidies.

Mothballing or throttling back these plants would mean huge savings to the public and eliminate the need for more than 350m tons of coal, including all 30m tons harvested through mountain-top removal. Their closure would reduce US mercury emissions by 20-25 per cent, dramatically cut deadly particulate matter and the pollutants that cause acid rain, and slash America's CO2 from power plants by 20 per cent -- an amount greater than the entire reduction envisaged in the first years of the pending climate change legislation at a fraction of the cost.

To quickly gain further economic and environmental advantages, the larger, newer coal plants that remain in operation should be required to co-fire with natural gas. Many of these plants are already connected to gas pipelines and can easily be adapted to burn gas as 15 to 20 per cent of their fuel. Such co-firing dramatically reduces forced outages and maintenance costs and can be the most cost effective way to reduce CO2 emissions.

Natural gas comes with its own set of environmental caveats. It is a carbon-based fuel and its extraction from shale, the most significant new source, if not managed carefully, can have serious water, land use and wildlife impacts, especially in the hands of irresponsible producers and lax regulators. But those impacts can be mitigated by careful regulation and are dwarfed by the disaster of coal.

Let's do it!

Related Links:

George Voinovich (R-Ohio) [UPDATED]

Al Franken (D-Minn.)

Dick Durbin (D-Ill.)

UPDATE: Here is the video of the speech (courtesy of Clean Skies). It is worth seeing since Wirth does not keep to his text and he is very blunt in the Q&A:

I have been running a multipart series on how new unconventional natural gas supplies may be a game changer for low-cost climate action over the next two decades. But natural gas may be a game changer for climate politics much sooner. In fact, if a serious climate bill passes the Senate in the next several months - and I believe it will - then activism by the natural gas industry may prove decisive.

If so, the speech former Colorado senator Tim Wirth gave last week at the Colorado Oil and Gas Association's huge annual meeting my turn out to have been the turning point. Wirth, now head of the UN Foundation, sent me the entire speech, which I reprint below. But you can get the key message from the Denver Business Journal piece, "Wirth delivers ‘extreme words' on climate change to energy execs at COGA conference."

The key point of this series is that There appears to be a lot more natural gas than previously thought (Part 1) and therefore unconventional gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet (Part 2), which is great for low-cost climate action, bad for coal (Part 3). And it always bears repeating, as Part 3 discusses, that natural gas is the critical low-carbon "firming" resource that can enable deep penetration of both windpower and concentrated solar thermal power.

So far, the coal industry has had its way with the climate bill, in part because the single biggest near-term, low-cost, low-carbon baseload alternative to coal power - natural gas (in existing, underutilized natural gas plants) - has sat on the sidelines. But the fact is many of the key fence-sitting Senators come from states with major unconventional gas reserves, including Arkansas, Louisiana, and the Dakotas.

A well written Senate bill could help accelerate this crucial bridging fuel, while garnering enough support to beat the inevitable, immoral, and ultimately self-destructive conservative filibuster.

Here is the full speech:

Climate and Natural Gas: The Opportunity

Remarks by the Honorable Timothy E. Wirth
Colorado Oil and Gas Association
Rocky Mountain Natural Gas Strategy Conference
Denver, Colorado
July 8, 2009

Thank you. I am pleased to be with you, and to share with you ideas and common purpose, as we have shared together for most of the last 30 years.

When I was a young Congressman, Fred Julander and Tom Vessels wandered into my office to introduce me to the industry; subsequently we worked together for the years I was in the House and Senate. Through changes in the Public Utilities Holding Company Act and other regulatory statutes, we built the coalitions necessary for natural gas to expand its market base. We eliminated statutory and regulatory barriers and various price controls, advanced transmission opportunities, and even were able to get some provisions concerning natural gas as a transport fuel enacted into law. My car was even fueled with compressed natural gas, courtesy of Colorado Interstate and the Public Service Company.

Working with this industry was one of the most satisfying aspects of my political career, and I was proud and grateful for your advice and support.

In 1992, I decided that 20 years of elected politics was enough, and headed in some new directions. For five years, I worked for the Clinton-Gore Administration, with broad responsibilities for some of the most difficult areas of our nation's foreign policy: counter-narcotics, human rights, population and refugees, the environment and climate change - what Tom Congdon once described as "the portfolio of impossible problems."

When Ted Turner made his billion-dollar gift to help the United Nations and work on global problems, I left the government and have been running his global philanthropy ever since, focused in particular on children's health, population, and climate change.

I cite this brief history because it has led me into deep involvement with the science, technology, diplomacy, and politics of climate change and global warming. The critical climate issue brings us together today - it is time once again to work together - to share ideas and common purpose, as we have over the years, and to identify the remarkable opportunities which this industry now has to stabilize, to prosper, and to grow.

Let me summarize my message: The time has come for the natural gas industry to get organized, take the gloves off, and get thoroughly engaged in helping our country advance rapidly toward a low-carbon economy. You will help yourselves, leave a legacy for your grandchildren, and play a major role in saving the world. But you have to ask for the order.

You have huge supply, you have low demand; good government policy will go a long way to putting a sound base under the industry. You can help form that policy, or you can stay in the wilderness.

Let me expand:

o Neither is it a certainty that Iranians are trying to build a nuclear weapon;
o Or that food crops in India will lose their nutritional value as it gets warmer - or that drought will propel more people North across our borders.

But the realistic possibility of disaster recommends a very serious response.

We know that carbon is the central issue - we are using the atmosphere as a mammoth garbage dump. Each of us in the United States is responsible for about 20 tons per year - and most of our carbon waste stays in the atmosphere for 100 years or longer.

Even as we better understand the science, our emissions are growing much faster than predicted, the concentrations in the atmosphere are getting denser, and the time horizon in which we can effectively act is getting shorter.

This is where you come in. I would argue with anyone at any time that this industry has more to gain, and a greater contribution to make, than any other industry in America or, for that matter, in the world.

You can be the winners from climate action - and the more aggressively you act, the more you will gain. And the more the world will benefit.

Our economy is largely dependent on fossil fuels - coal, oil and natural gas - and will be so for many years to come. But we have to slowly and steadily reduce this dependency; to stabilize the atmosphere, we have to reduce our carbon output by at least 90% by the year 2050. Instead of 20 tons, we will have to reduce our carbon emissions to about 2 tons per person.

That is a mighty challenge, and will require all the technologies in our current portfolio:

Washington has made a start on this challenge - the House of Representatives passed the Waxman-Markey bill, and the legislation now moves to the Senate.

The House bill is certainly the most far reaching and important energy legislation ever passed - in more than 1200 pages, it includes a staggering array of energy policies, tax incentives, regulatory requirements and national standards:

Every industry was deeply engaged - except one. Yours. The natural gas industry - the industry with the most to gain and the most to offer, was largely not at the bargaining table:

All of these policy measures should have been in the House legislation; almost none of them was even proposed. A senior Committee staffer told me that "no coherent argument came together, the industry seemed atomized."

The natural gas industry missed the biggest national commitment to generate a host of new energy jobs, to move toward a low-carbon economy, to sharply grow the industry, and become a major player in the future of energy policy.

What happened? There are probably a variety of explanations - none dispositive, but all interesting:

No doubt the House legislation was a missed opportunity - but as one of the Committee members told me, while the hour is late, this can be recouped in the Senate.

The stakes are too big for you to be absent:

This is a big task, but meeting it should be fun, rewarding and successful. I remember when you pulled yourselves out of the shambles of pipeline regulation and price restrictions, and from that chaos the industry took a major step forward.

Now it is time to move to another level - you have the base and the resource to be aggressive and adventurous - but only if you decide to become a mature, organized and effective industry.

The hour is late, and so far the record isn't very encouraging. But you have so much to offer - and so much to gain - the possibilities and opportunities are breathtaking. But the only way you will get the order is to ask for it.

Thank you.

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This story was written by ProPublica's Adam Lustgarten.

The two key arguments that the oil and gas industry is using to fight federal regulation of the natural gas drilling process called hydraulic fracturing -- that the costs would cripple their business and that state regulations are already strong -- are challenged by the same data and reports the industry is using to bolster its position.

One widely-referenced study (PDF) estimated that complying with regulations would cost the oil and gas industry more than $100,000 per gas well. But the figures are based on 10-year-old estimates and list expensive procedures that aren't mentioned in the proposed regulations.

Another report (PDF) concluded that state regulations for drilling, including fracturing, "are adequately designed to directly protect water." But the report reveals that only four states require regulatory approval before hydraulic fracturing begins. It also outlines how requirements for encasing wells in cement -- a practice the author has said is critical to containing hydraulic fracturing fluids and protecting water -- varies from state to state.

One recommendation in that report flies in face of industry's assertion that its processes are safe: hydraulic fracturing needs more study and should be banned in certain cases near sensitive water supplies.

Hydraulic fracturing -- where water and sand laced with chemicals is injected underground to break up rock -- is considered essential to harvesting deeply buried gas reserves that some predict could meet U.S. demand for 116 years.

In 2005 hydraulic fracturing was exempted from the Safe Drinking Water Act, based on assurances that the process was safe. But a series of ProPublica reports has identified a number of cases in which water has been contaminated in drilling areas across the country, and EPA scientists say they can't fully investigate them because of the exemption.

Now, Congress is considering legislation to restore the Environmental Protection Agency's oversight of the process. And industry -- leveraging its money and political connections -- is using the recent reports to fight back.

Since January at least five studies have been published making the case that state laws (PDF) are adequate and that new regulations could hamper exploration (PDF), raise fuel prices and eliminate jobs. Three of the studies were paid for by the Department of Energy and produced by consulting firms that also work with the industry. One of the DOE reports (PDF) was written by the same person who authored a study for the Independent Petroleum Association of America (PDF)

The industry argues (PDF) that federal oversight would amount to a redundant layer of bureaucracy that is not needed because states already require the same environmental safeguards that might be required by the EPA, and that those safeguards are effective.

"We don't think the system is broke, so we question the value of trying to fix it with a federal solution," Richard Ranger, a senior policy analyst at the American Petroleum Institute, told ProPublica in May. "So proceed with caution if you are going to proceed with regulating this business because it could make a very significant difference in delivering a fuel that is fundamental to economic health."

How Many Natural Gas Wells Does Your State Have?ProPublicaIndustry reports say that if federal regulations are applied to hydraulic fracturing, more than a third of onshore gas wells would be closed and oil and gas companies would spend $10 billion complying with the law in its first year. The federal government would lose some $1.2 billion in revenue.

But advocates for the federal legislation say the industry is misleading the public into a false choice between the economy and the environment.

"We are all for using science-based information," said Amy Mall, a senior policy analyst for the Natural Resources Defense Council. "But the underlying information doesn't really tell the story they claim it does."

Nonetheless, the arguments have gained traction in Congress and have eroded support for new regulation.

Rep. Dan Boren, D-Okla., told his fellow members in a recent hearing that "these folks are laying people off -- people are hurting in my district." Rep. John Salazar, D-Colo., who sponsored legislation to regulate fracturing in 2008, but declined to add his name to this year's bill, told ProPublica that "developers may have legitimate concerns about the impact that removing the exemption may have on their ability to find and extract oil and gas."

To keep the legislation alive, Diana DeGette, D-Colo., its main sponsor, has shifted gears to seek environmental studies and hearings rather than a quick passage into law.

"The opposition has been throwing out scare tactics and mischaracterizations of what she is trying to do," said DeGette's spokesman, Kristofer Eisenla. "Unfortunately the oil and gas guys came out of the barn storming."

Fuzzy Numbers

The study that has received the most publicity (PDF) is also among the most misleading.

The report, which evaluates the costs of regulations for the oil and gas industry, was written for the Department of Energy by a consulting company also used by the energy industry, Advanced Resources International, or ARI. It contains a table (PDF) listing seven specific processes it says would be mandated under the proposed federal regulations, and what those processes would cost -- a total of $100,505 per well. Among the listed items is "state of the art" fracture imaging, at a per-well average cost of $37,500, and three-dimensional fracture simulation, at a cost of $7,500.

But a footnote reveals that these figures are based on memo sent to a DOE official by another consulting firm in 1999. The report's author said they haven't been updated to reflect technological advances or substantial shifts in the drilling business over the last decade.

Furthermore, none of the tests listed in the table are mentioned in the text of Safe Drinking Water Act, the federal law that would apply to hydraulic fracturing, according to an EPA spokesperson in Washington. And they aren't mentioned in the bill being floated in Congress either.

"It's a sense of magnitude of the impacts, not a sense of absolute accuracy," said Michael Godec, Vice President of ARI and author of the report. The regulatory requirements were interpolated on a "bad-case" scenario, he explained, because the federal laws are not specific. "We took some liberties. You have to make some assumptions about what might be required."

One of the industry reports raises serious questions about the construction of the pits used to store toxic drilling waste and what happens when dangerous fluids are spilled.ProPublicaGodec believes that many of the processes listed in the report are already being practiced to a greater degree than they were in 1999, meaning that even if they were required they may not be additional burdens at all. But he said that anecdotal conversations with drilling companies confirm that the report's conclusions are still "about right."

Godec said he did not obtain recent cost figures from drilling companies, which are closely guarded. Halliburton -- one of the largest hydraulic fracturing service providers -- did not return calls from ProPublica for comment about the expense of the procedures listed.

Asked whether the age of the data was a concern, Godec said it had been discussed with Nancy Johnson, the DOE official who commissioned the report. He said he was instructed that the report was needed quickly, that the budget was limited and that he should move forward because "this is a hot topic and people are testifying."

Nancy Johnson did not return calls for comment and the Department of Energy's office of fossil energy did not make its officials available for an interview after repeated requests. It said, through a spokesperson, that the Department did not author the report.

Godec also produced a similar report on costs and state gas regulations for the Independent Petroleum Association of America that was published in late April. Titled "Bringing Real Information on Energy Forward," (PDF) that report also makes the case that state regulations of drilling practices are effective. Godec says his company's work is impartial and his conclusions would have been the same whether he was contracted by the oil and gas industry, or the federal government.

Even if the costs Godec laid out in the DOE report were up-to-date and accurate, it's doubtful they would have the devastating financial impact the industry claims.

The estimated expense of regulating hydraulic fracturing amounts to between one and three percent of the total cost of drilling a new well when factored into operating costs estimated by financial analysts at Deutsche Bank. If all the testing that Godec includes is factored out, the regulations would cost the industry just $4,500 per well, according to his report, or just six hundredths of a percent of the cost of establishing a typical new well.

"I think at the end of the day it's unlikely to have a real huge impact,"says John Freeman, a senior vice president for energy equity research at the investment bank Raymond James. "It's a lot of fuzzy stuff that I can't get my hands around. This just seems to be more of a soft number that I frankly have more of a hard time connecting the dots on."

State Regulations Leave Gaps

In May the Ground Water Protection Council, a group made up mostly of industry representatives and state oil and gas regulators, released the first comprehensive review (PDF) of oil and gas regulations across 27 of 31 drilling states it surveyed. The report, paid for by the DOE, concluded that most states have requirements to encase wells in cement and protect groundwater, and that a majority also require they be notified after hydraulic fracturing takes place.

"The study confirms what the industry has been saying (PDF): that regulation of oil and gas field activities, including hydraulic fracturing, is best accomplished at the state level," the American Petroleum Institute said a press release about the study.

But the GWPC report -- which focuses on what regulations are in place, rather than what may be missing -- raises important points that are downplayed in its summary. It reveals that regulatory oversight is inconsistent from state to state and has substantial gaps. It also says hydraulic fracturing requires "comprehensive" further study "to determine the relative risk" and to determine best practices.

In fact, the report calls for some of same measures found in the congressional bill the industry is so hotly contesting.

See Where States Fall on Oil and Gas RegulationProPublicaRegarding fracturing in areas close to the surface or near shallow aquifers, the report reads: "States should consider requiring companies to submit a list of additives used in formation fracturing and their concentration." It also says that shallow fracturing very close to certain drinking water aquifers "should either be stopped, or restricted to the use of materials that do not pose a risk of endangering ground water and do not have the potential to cause human health effects."

A close examination of the appendices (PDF) attached to the research also showed that 21 of the 31 states listed do not have any specific regulation addressing hydraulic fracturing; 17 states do not require companies to list the chemicals they put in the ground; and no state requires companies to track how much drilling fluid they pump into or remove from the earth -- crucial data for determining what portion of chemicals has been discarded underground.

"The tone is that in general states do an adequate job of protecting water," said Michael Nickolaus, the report's author, special projects director for the GWPC and former director of Indiana's state Oil and Gas Division. "There are certain gaps in certain states ... it's not a hundred percent world."

The GWPC report does not name the states that lack more stringent regulations, a detail that is important because one or two states can account for a large proportion of the drilling in the United States. To extract that information from the report would require analyzing all the state regulations included in the appendices (PDF) and repeating much of the GWPC's original research. Nickolaus also declined to name the states in an interview with ProPublica, saying that the GWPC was obliged to protect its members.

Nickolaus says well construction -- especially the cementing process that keeps drilling fluids and gas from seeping into groundwater -- is more important than the fracturing issue. But according to the report, state regulations about cementing are sometimes vague and often don't specify standards that makes the protection fool-proof.

While most states have regulations that protect drinking water near the surface, a third don't require that the cement casing extends far enough to completely isolate wells from geologic layers and the deepest aquifers, according to the report. Twenty-two percent don't require the cement to harden before the well is used for fracturing, and don't test cement quality and consistency -- one of the surest ways to protect against contamination.

Reprinted courtesy ProPublica.org.

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Water, conflict, and security on the banks of the Hudson

George Voinovich (R-Ohio) [UPDATED]

Recently, I met with the CEO of a utility to discuss how to get at carbon reduction goals. He asked two insightful questions.

The first was, "Why doesn't the natural gas industry support climate legislation?"

One of the key points turned up in the utility's analysis of future supply is that we're going to have to switch massively from coal to natural gas in the next fifty years to address climate change.  Because of that, the natural gas industry can't lose: it's a key transition fuel because its carbon intensity is half that of coal, and it's a proven source of baseload power. Why then, doesn't the natural gas industry, at least in this CEO's experience, support climate legislation full force?

The second question the CEO asked is why the coal industry doesn't support efficiency more avidly. After climate legislation passes, utilities will have to decarbonize their  power supply while addressing growth. If they rely on wind to do that, they will necessarily have to replace existing coal with natural gas to back up those renewables, since gas, which can be cycled on and off quickly, is a far superior way to offset the intermittency of wind. In that scenario, coal loses. But with huge efficiency efforts that cut total demand, utilities can decarbonize without adding as many renewables. This would keep the coal-fire power intact.

 So...unless I'm missing something here (very possible), utilities that burn lots of coal should be all over radical energy efficiency. But, again in the CEO's experience, the coal business is not.

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Climate Hope: Inspiring 2009 Books for Clean Energy

What Do Coal and Dirty Dorm Rooms Have in Common?

It was the best of half-centuries, it was the worst of half-centuries ...

Broadly speaking, there are only three things we can do to lower CO2 emissions: switch fuels, use energy more efficiently, or use less energy (conserve).

Our CO2 conversations too often focus on one of those three in isolation: Coal bad. Recycled waste heat good. Conservation isn't an energy policy. Each assertion is both narrowly true and broadly incorrect, to the extent that each simplifies three prongs into one.

To understand why, try to answer a simple question: if we shifted our power generation fleet to preferentially dispatch natural gas plants instead of coal plants, how much would CO2 emissions fall?

That would seem to be an easy bit of math: just measure the CO2/MWh of each plant, multiply the difference by the MWh switch, and we have our answer, right? Turns out it's a tad complicated, for the simple reason that the fuel switching strategy is also an efficiency strategy. Does a newly dispatched gas plant look like one of the old, 30% efficient, natural gas-fired Rankine "steamers," or does a newly dispatched gas plant look like one of the new, 50% efficient combined cycle gas turbines? What about the coal plant that gets turned off?

Better still, let's ask an easy question: how has the CO2 signature of our nation's coal and gas-fired power fleet changed with time?

DOE/EIA keeps voluminous records of fossil fuel consumption and power generation by fuel type. On the following charts, I've divided total fleet fuel use by total fleet MWh and then multiplied by a consistent 0.06 tons of CO2/mcf of natural gas / 2.7 tons CO2/ton of coal to yield the following:

Interesting. From 1960-1990, there was no statistically significant change in gas fleet CO2 emissions, which held steady at 0.63-0.65 tons/MWh. Then all of a sudden in the 1990s, the fleet transformed itself, reducing its CO2-intensivity by 25% in just 10 years. What happened?

In a word: competition. The introduction of competitive access in the 1992 Energy Policy Act (and subsequent FERC rulings) brought forth a flood of natural gas plants, many of which were nearly twice as fuel efficient as the old junk that the grid had previously relied on. Prior to that point, costs were simply something that you passed along to customers. After that point -- for much of the grid -- cost control was a route to greater profits. Not surprisingly, generator owners suddenly got religion on cost-control. And when your number one cost is fuel, that means they got religion on fuel control. That's good.

Now let's look at what happened to the coal fleet during the same period:

From 1960-1970, the coal fleet holds steady at 1.17 tons/MWh, but then starts an inexorable upward trend. While the gas fleet became more efficient with time (after 1990, at least), the coal fleet is steadily less efficient. Way less in fact -- to the point that the CO2 emissions associated with a MWh of coal-derived electricity are 18% higher today than they were in 1960.

What happened here? Two things:

1. Unintended consequences. 1970 saw the passage of the Clean Air Act, a deeply flawed bill. It was good in terms of what it did for regulated pollutants, but lousy in terms of what it did for unregulated ones (e.g., CO2). By effectively mandating pollution control approaches that impose parasitic loads on coal plants, the CAA is directly responsible for lowering coal plant energy efficiency, so that we now burn way more coal per MWh than we did before passage. We therefore emit way more CO2 per unit of useful electricity. That's not to ignore the beneficial elements of the CAA, from sulfur to particulate control, but simply to point out that an environmental regulation that encourages energy inefficiency leaves much to be desired.

2. Dispatch considerations. As noted here, the last 30 years have seen virtually no construction of new baseload power plants in the US, but have seen a steady increase in the annual load factor of currently existing baseload plants. In other words, plants that used to spend most of their life turned off now spend most of their life turned on. In the coal fleet, that means that the least efficient stuff runs more now than it used to. So in addition to the unintended consequences of the Clean Air Act, we also have the simple fact of steadily growing electricity demand that causes us to pull our power from ever-more-undesireable sources.

Why didn't the competitive forces unleashed by the 1992 EPACT also drive up the efficiency of our coal fleet, like they did for gas? Again, it's an easy answer: competition. Coal plants are lousy investments. No one builds them who has to put their own money at risk.

One last thing

Here's the tragedy: If we had run the gas fleet at a constant fuel efficiency from 1960-present, we would have emitted an additional 1.3 billion tons of CO2 into the atmosphere. That's 1.3 billion tons not in the atmosphere today thanks to energy efficiency.

On the other hand ... if we had run the coal fleet at a constant fuel efficiency from 1960-today, we would have emitted nearly 9 billion fewer tons of CO2 into the atmosphere over the last fifty years.

1,300,000,000 steps forward, 9,000,000,000 steps back.

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What Do Coal and Dirty Dorm Rooms Have in Common?

Is the electric sector capable of rapid, large scale reform? Many policies implicitly assume the answer to that question is No, especially when it comes to greenhouse gas (GHG) emission control.

The result is a policy conversation that hinges on the assumption that it is hard to change. How much must we spend to accelerate new technology? How many decades should we allow for a phase-in of new regulations?

As it turns out, the industry can change -- and indeed, has changed -- at a much faster pace than you might think. Contrary to conventional wisdom, it turns out to be quick and fairly painless to replace meaningful fractions of our power fleet in very short time frames.

Why should that be surprising?

The electric sector is arguably among the most regulated part of the U.S. economy. From municipal light boards to state utility commissions to the Federal Energy Regulatory Commission (FERC), there are layers upon layers of regulatory bodies designed primarily to ensure electricity reliability and cost recovery for what have historically been monopoly franchises. What those bodies were most certainly not created to provide is a rapid rate of change.

By and large, those bodies have delivered on their promise. They've kept the lights on, kept electric utility profits low enough to protect consumers but high enough to attract capital, and maintained a fairly sleepy industry with very little default risk, virtually none of the "creative destruction" that idles assets in competitive industries, and virtually no significant technological innovation. (The power plant serving your town today not only looks like the power plant that served your town 50 years ago, but most likely is the same power plant.)

While these regulations have maintained predictability within the regulated industry, they have not prevented innovation and change external to the industry. Like flood levees, these regulations have kept the external weather at bay -- but they haven't changed the weather. From new generation technologies to smart grids to emerging concerns about the environment, volatility outside of the regulated enterprise has been persistent, invisible to customers of regulated utilities only to the degree that the regulatory levees hold.

Every once in a while, the levees are breached, exposing regulated markets to the volatility those of us who live in normal markets have come to take for granted. Perhaps unsurprisingly, those historic events have brought about the most dynamic periods in the industry. GHG regulation is, without question, a massive external change to the regulated enterprise. As such, rather than presuming a static, lumbering industry response, we ought to be looking at what happened the last time external changes breached the regulatory levee.

Specifically, let's look at two recent events: the advent of wholesale market competition in the late 1990s and the creation of capacity markets in New England in the early 2000s.

1992 EPACT and FERC 888

In 1991, the U.S. had 581 GW of combined coal, natural gas, and nuclear capacity (307 GW coal, 174 GW natural gas, 100 GW nuclear). New additions were essentially zero, as the combination of Three Mile Island, the Clean Air Act, and a high fleet reserve margin gave little incentive for new construction. Meanwhile, a broader political push for deregulation was afoot. Into this environment came the 1992 federal Energy Policy Act (EPACT), which -- among other things -- provided full market access for any electric generator. (Previously, such access had been limited to regulated utilities and the narrow suite of technologies allowed under the 1978 Public Utility Regulatory Policy Act, or PURPA.)

After EPACT became law, there was essentially no discernible impact on new generator deployment; by 1995, we still had 100 GW of nuclear, had 311 GW of coal, and were up to 196 GW of natural gas.[1] It became apparent that while generators were now allowed to sell into deregulated power markets, access to the transmission grid -- which was still largely controlled by regulated monopoly utilities -- was being constrained for non-utility generators. FERC responded with Order 888, mandating non-discriminatory access to the transmission system for all power plants in 1996. That ruling was contested in the courts, but became final in 1998.

Within just 10 years after the final implementation of Order 888, nearly 200 GW of new generation capacity was added to the U.S. power grid, or 20% of the entire fleet. Nearly all was natural gas. This is a remarkable statistic: having taken nearly a century to build the first 800 GW[2] of total U.S. generation, it took us just one decade to build an additional 200 GW. Moreover, our generation fleet, which had to that point been dominated by coal, was now dominated by gas.

This is a massive rate of change in any industry, but especially in one that is supposedly resistant to quick change. Today, we take it for granted that much of our power grid is gas-marginal, but it was not self-evident that this would happen in 1995 (or, for that matter, in 1991). Arguably, we didn't even have the lens to contemplate this type of change prior to deregulation.

Note, after all, that the big, capital intensive plants that had historically been built by regulated utilities (coal and nuclear) weren't built prior to EPACT/888 and weren't built after. In that narrow sense, our belief that the industry was incapable of quick change was correct; what we failed to recognize was the scope of innovation that would occur once new players entered the industry. Those 200 GW of new gas plants were built largely by unregulated companies with fundamentally different appetites for risk than the companies that had heretofore dominated the space. And while many of those new entrants subsequently ran into financial constraints, it bears noting that in many parts of the country, the lights are on today precisely because of this unpredicted, largely unregulated construction of new natural gas facilities.

Building out 20% of the generation fleet in 10 years was a remarkable and unprecedented rate of change. But just as the deployment of new natural gas assets was starting to level off, ISO-New England would make that rate of change look downright glacial.

ISO-NE Forward Capacity Markets

In the early 2000's, ISO-New England began to consider markets for capacity services (e.g., MW, as distinct from MWh), the better to encourage long term investments in the New England grid. The Forward Capacity Market (FCM) that was ultimately developed had several noteworthy features:

ISO-NE has now completed two years under their FCM, and two corresponding forward capacity auctions (FCAs). As of their most recent auction, they had brought forth a total of 2,936 MW of demand-side resources. To put that total in perspective, the peak demand on the New England grid ranges from 19,000-24,000 MW in a typical year, with the all time peak demand recorded on August 2, 2006 of 28,130 MW.[4]

In other words, in just 2 years, the FCM program has brought forth more than 10% of the all time peak capacity demand on the New England grid, without building a single central power plant. Put another way, that's equivalent to bringing on line more than two Seabrook Nuclear plants (a 1200 MW facility in New Hampshire) in just 24 months.[5]

Note the similarity with the natural gas fleet deployment in the wake of EPACT/888. In both cases, minor market reforms allowed non-traditional entities to participate in power markets, and in both cases, the rate at which those entities engaged vastly exceeded any historical precedent.

What it means for GHG policy

Successful greenhouse gas policy will require, first and foremost, a massive reallocation of capital in the electric sector. Electricity generation accounts for over 40% of U.S. CO2 emissions, thanks to an antiquated, inefficient, fossil-fuel dominated fleet. The discussion of possible CO2 policies tends to be framed around a handful of technologies (coal, nuclear, renewables, carbon sequestration, etc.), most of which have historically been dominated by regulated monopolies. Noting the slow pace of change in that sector, this conversation inevitably turns to near-term winners and losers, with the presumption that there will be no short-term change in the fleet -- just a differential dispatch order as we migrate to lower-carbon sources.

But as the two examples above show, this assumption doesn't wash. Like New England's FCM, GHG pricing is nothing more than the monetization of an externality that was previously subsidized by the system. Like EPACT/888, it contemplates revenue streams and market participation by a host of companies and individuals who are not currently a part of the traditional power industry. Both factors suggest that the pace of fleet overhaul will be vastly quicker and cheaper than we anticipate. Will we replace 20% of the fleet in 10 years, like we did after 888? Will we move 2.5 times as fast, as we did in New England after FCM? Might it be possible to move faster still?

The one thing that is certain is that it will be decidedly faster and cheaper than we think.

Conclusions

In addition to speed, there are two broad lessons that can be taken from the examples above.

First, note that in neither case did the reform require a drain on government coffers. Governments did not have to throw money at natural gas generators, nor at demand-side resources. They simply needed to modify regulations to allow market participation by non-traditional actors.

We ought to bear this in mind as we move towards a national GHG policy. Regulators and commentators, schooled in the merits of cost-benefit analysis, have a chronic temptation to assume that any GHG reduction will cost money, and fiscal prudence demands that those costs be minimized per unit of CO2 reduction. That's a healthy approach, but one that paradoxically tends to overlook the lowest cost forms of CO2 reduction -- namely, those which cost nothing more than the political capital necessary to remove existing regulatory barriers. In a market as heavily regulated as the electric sector, one can safely presume that massive volumes of private capital stand ready to invest as soon as those barriers are removed, even before providing any explicit fiscal incentive.

Second, note that neither of the reforms that led to these investments were preconditioned on the removal of the entire regulatory edifice. A common skepticism with respect to the potential for barrier removal derives from the sheer scale of regulatory barriers. We have 100 years of regulated power monopolies in this country, with regulations at the state and federal level (not to mention jurisprudence in courts and utility commissions) designed to sustain that model. The sheer magnitude of those barriers compels one to question the hubris of anyone who thinks that reform is easy.

However, if we stand back to look at the data above, we discover the obvious: you don't need to tear down an entire dam to restore the flow of a river. You need only remove enough bricks to let the water pressure behind do the rest of the work for you. Modest regulatory reform, targeted only at the critical barriers, is sufficient to unleash massive energy sector reform.

Both lessons are cause for great optimism. Fundamentally changing the GHG signature of our economy will undoubtedly be easier, cheaper and faster than we think ... once we start.

-----

[1] Data here and throughout on generator fleet capacity taken from U.S. DOE/EIA.

[2] I've omitted hydro and oil capacity from this discussion, which account for the remaining ~200 GW up to the 1998 800 GW base (and were largely unchanged during the period in question).

[3] In fact, load-sited resources participate on more favorable terms than central plants, as the FCM explicitly recognizes the savings in line losses and reserve margins innate to locally-sited capacity investments.

[4] Source: ISO-NE website and personal correspondence.

[5] For comparison, 14 years elapsed between the issuance of Seabrook's permit in 1976 and full power production in 1990, and was directly responsible for the bankruptcy of Public Service of New Hampshire.

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Climate Hope: Inspiring 2009 Books for Clean Energy

What Do Coal and Dirty Dorm Rooms Have in Common?

In Part 1: Is there a lot more natural gas than previously thought? I asserted it now appears likely that, thanks to unconventional supplies, natural gas alone could meet a great deal of the Waxman-Markey CO2 target for 2020 - without requiring gobs of new power plants to be sited and built or thousands of miles of new transmission lines.  In this post I will explain the two key reasons why.

First, today, dirty coal plants are being "dispatched" (or utilized) to provide electricity by grid operators first, while natural gas plants that could provide electricity with far lower emissions of carbon dioxide remain unutilized or underutilized - even though their electricity costs are only slightly higher.  This is occurring in at least two regions of the country, according to a major under-reported May study by the Energy Information Administration, "The Implications of Lower Natural Gas Prices for Electric Generators in the Southest."  A cap on CO2 emissions and even a low price of CO2 will switch the dispatch order, generating large emissions savings at low cost (if the gas is available, as now seems likely).

Second, the fundamental flaw in Waxman-Markey is that the 2020 target is too weak both from the perspective of what climate science says is needed (see "The U.S. needs a tougher 2020 GHG emissions target") and from the perspective of what straightforward energy analysis suggests can be done at $15 a ton of CO2 or less.

Let me run through a rough analysis.  The W-M bill requires a 17% emissions cut by 2020.  Now EIA's amazing April report - Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Changes in the Economic Outlook - forecasts that just on the basis of the clean energy deployment from the stimulus (together with the lingering impact of the recession), U.S. energy-related carbon dioxide emissions will be some 2% lower in 2020 than in 2005 (see "EIA projects wind at 5% of U.S. electricity in 2012, all renewables at 14%, thanks to Obama stimulus!").

But then we have to throw in the oil reductions from Obama's recent fuel economy deal (see Obama to raise new car fuel efficiency standard to 39 mpg by 2016 - The biggest step the U.S. government has ever taken to cut CO2) - and, of course, from higher oil prices than EIA forecasts since it mostly ignores peak oil (discussed here).  Let's call that another 2% emissions drop.

Then we have Waxman-Markey itself.  It achieves huge energy efficiency savings.  The American Council for an Energy-Efficient Economy (ACEEE) projects "such savings will avoid about 293 million metric tons of carbon dioxide emissions in 2020" (see "Waxman-Markey could save $3,900 per household").  That's another 5% drop.

So far we are maybe 9% below 2005 levels in 2020.  I'm going to skip the large low-cost savings potential from conservation - although I think by 2020 that the painful reality of global warming will be so obvious to all that a large fraction of the public and businesses will want to pitch in to avert Hell and High Water (but then, I'm an optimist or is that a pessimist?).

Now we have to meet the remaining 8% cut with some combination of low-cost renewables, natural gas, and offsets.  How will that break out by cost?

The EPA projected maybe 100 million domestic offsets in 2020 using the original Waxman-Markey draft (see here).  That version had tougher targets and more renewables and a higher 2020 permit price than the current bill does.  So let's say 1% of the target will be met with domestic offsets.

International offsets are going to cost more than $25 a ton in 2020, as I explained here.  In 2020, the low-cost renewables and especially natural gas will cost a lot less than $25, as I will discuss shortly.  Let's say 1% of the target will be met with international offsets.

So we are left with needing to meet another 6% reduction - some 360 million metric tons of reductions.  [Yes, I am slightly conflating carbon dioxide emissions with total greenhouse gas emissions, but that's because only 85% of total U.S. GHGs are capped by the bill and this is only meant to be a simple, rough analysis.]

What kind of low-cost renewables are available in quantity at a price of, say, $15 a ton of CO2?  Remember, we are competing to reduce coal use at existing largely-paid-for plants for which the primary operating cost is the purchase of coal.  At the margin, the price might be 2.5 cents a kilowatt hour - and $14 a ton CO2 price adds another 1.5 cents a kilowatt hour to coal power (and 0.5 cents a kWh to combined cycle gas plants) .  So we need renewables that can deliver substantial baseload-type electricity at around four cents a kilowatt hour.

There really is only one obvious choice - cofiring biomass in those same coal plants (see "If Obama stops dirty coal, as he must, what will replace it? Part 2: An intro to biomass cofiring."  After all, those plans have already been sited, built, and largely paid for.  They are already connected to transmission and the country's freight train delivery system!

You just need to pay for collecting the biomass and shipping it to the power plant.  That's why a 1997 study by five U.S. national laboratories that I oversaw concluded biomass cofiring was the single biggest potential contributor to near-term greenhouse gas reductions of any renewable energy strategy.

We found that within 13 years (2010), you get get maybe a 60 million ton reduction in CO2 emissions and 3 times that by 2020 (again, starting in 1997).  Let's say we try hard and get 2% of the 2020 target with cofiring.

So we still need some 240 million metric tons of reductions more to hit the target.  This requires switching, say, 350,000 gigawatt-hours of coal - maybe 50 GW (with 70% capacity factor) - to high-efficiency gas.

Two questions remain:  Are the gas plants there and will the natural gas be available at a reasonable price?

The answer to the first is definitely yes.  Indeed, EIA's analysis "The Implications of Lower Natural Gas Prices for Electric Generators in the Southest" gives this stunning statistic for just two regions -  the East South Central (ESC) and the South Atlantic (SA):

The average utilization rate of natural‐gas‐fired capacity by electric generators was about 13 percent in the ESC in 2008 compared with nearly 68 percent for coal‐fired capacity. In the SA, the average utilization of natural‐gas‐fired capacity by electric generators was about 11 percent in 2008, compared with more than 62 percent for coal.

That is, we built a lot of gas plants we are barely using.  And a large fraction of these natural gas plants are quite efficient.

The EIA has a detailed analysis of the dispatch curve in those two regions:

The Dispatch Curve

A simple measure of the generation cost for each facility can be determined by combining the facility's heat rate with the delivered fuel price. This analysis ignores other costs such as emissions allowances and other variable operating and maintenance costs. Facilities with the lowest generation cost will generally be deployed first (Figures 7 and 8). As electricity demand increases, the next higher cost capacity will be utilized. Due to the distribution of heat rates for various coal‐ and natural‐gas‐fired electric power facilities discussed above, a significant amount of coal‐to‐gas switching is possible as delivered prices converge.

Note how flat the line is.  Virtually all of the capacity being used below about $27/MWh ($0.027 kWh) is coal.  But there is a huge amount of natural gas, some 10 GW or more, at just $5 to $10 a MWh more.

Again, note how flat the line is.  Most of the capacity being used below about $20/MWh ($0.02 kWh) is coal.  But there looks to be more than 15GW of natural gas for just $5 MWh more.

Now $14 a ton of CO2 adds $15/MWh to coal and $5 to combined cycle gas. So somewhere between, say $7 a ton of CO2 and $14 a ton you bring in a huge amount of gas in those two regions - assuming the gas is available at a reasonable price in 2020 (compared to coal).

So in just two regions, you could get 25 GW of fuel switching at a low CO2 price.  You just need to find another 25 GW of fuel switching in the entire rest of the country.  Not hard.

This post is long enough, so I'll address the availability of gas - and the future price relative to coal - in Part 3.

But the key point for now is that the U.S. has so many domestic low-cost clean energy solutions that we can easily meet the Waxman-Markey 2020 target at a low cost, without relying on much more expensive offsets.

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I have been researching what may be the single biggest game changer for climate action in the next two decades — U.S. natural gas supply.  Last week I attended a workshop where some of the country’s leading gas experts presented the remarkable new projections for near- and medium-term supply and then answered questions from some of the country’s top energy experts.

The bottom line is staggering.  As one of the presenters put it, “If the current trend continues” for production of unconventional gas, then by 2020 “natural gas could displace half of the coal burning power plants.” If that is true, and the projections by the other experts were comparable, then natural gas alone could essentially meet the entire Waxman-Markey CO2 target for 2020 — without requiring gobs of new power plants to be sited and built or thousands of miles of new transmission lines.

There is simply no doubt that, other than energy efficiency and conservation, the lowest-cost option for achieving large-scale CO2 reductions by 2020 is simply replacing electricity produced by burning coal with power generated by burning more natural gas in the vast array of currently underutilized gas-fired plants (as I will discuss in more detail in Part 2).  Natural gas is the cheapest, low-carbon baseload power around.

And it’s not just suppliers and industry experts calling for a major expansion of natural gas.  In its detailed analysis of how the U.S. can quickly slash CO2 emissions and transition off of coal without building new nukes, Energy [R]evolution, Greenpeace (!) assumes a 50% growth in natural gas power generation by 2020.

UPDATE:  I should note that a modern natural gas combined cycle plant has 60% or more lower CO2 emissions per kilowatt-hour than a typical coal plant — and substantially lower (if not near-zero) emissions of a variety of toxic pollutants harmful to human health, perhaps most notably mercury.  That’s why it is widely seen, even by groups as green as Greenpeace, as a plausible transition fuel for the next two to three decades as we aggressively ramp up wind, solar PV, concentrated solar thermal, biomass, geothermal, and other ultra-low-carbon energy sources.

The explosion in unconventional gas supply is being led by so-called shale gas (see Wikipedia entry here).  Significantly, candidate Obama’s energy plan actually called for “early identification of any infrastructure obstacles/shortages or possible federal permitting process delays to drilling in “Unconventional natural gas supplies in the Barnett Shale formation in Texas and the Fayetteville Shale in Arkansas.”  But shale gas extends way beyond those two plays:

Everyone who cares about clean energy and climate issues needs to become knowledgeable on shale gas — both its supply potential and the environmental risks associated with extracting it.  Where to start?  I’m glad you asked.

On Thursday, June 4 at 10 AM, “The House Natural Resources Committee, Subcommittee on Energy and Mineral Resources, led by Rep. Jim Costa (D-CA), will hold an oversight hearing on “Unconventional Fuels, Part I: Shale Gas Potential.”

This hearing will be webcast live on the Committee’s Web site at: http://resourcescommittee.house.gov/.

Witnesses:

Mr. Douglas Duncan
Associate Coordinator, Energy Resources Program
United States Geological Survey

Mr. Scott Kell
President
Ground Water Protection Council

Mr. Mike John
Vice President of Corporate Development and Government Relations, Eastern Division
Chesapeake Energy Corporation

Mr. Lynn Helms
Director, Oil and Gas Division
North Dakota Industrial Commission

Mr. Albert F. Appleton
Infrastructure and Environmental Consultant
Former Director of the New York City Water and Sewer System

This looks to me to be a very good place to start.  E&E Daily (subs. req’d) has more on the hearing:

Lawmakers on a House Natural Resources subcommittee this week will hear testimony about the potential of the nation’s vast natural gas reserves in shales to contribute to U.S. energy supplies, as drillers continue their rush to tap unexplored plays like the Marcellus in Appalachia and the Haynesville in Louisiana despite the economic downturn and depressed oil and gas prices….

… the plays have only recently become economically feasible to develop as horizontal drilling and hydraulic fracturing technology has progressed.

And some scientists have said the shales’ potential to contribute to U.S. energy supplies is vast. Researchers have estimated the Marcellus to hold some 50 trillion cubic feet of natural gas — one-fourth of total U.S. proven reserves — locked away in the tightly packed, fine-grained rock. And the Haynesville play could be the largest in the United States if estimates of its potential 250 trillion cubic feet of recoverable gas are correct.

Shale plays could produce 15 billion to 20 billion cubic feet of natural gas per day within a decade, according to Terry Ruder, vice chairman of the Natural Gas Supply Association. Americans use about 60 billion cubic feet of natural gas per day, he said at a Federal Energy Regulatory Commission conference last fall

But as with any major energy resource, legitimate environmental concerns exist:

Those testifying will likely also field questions about the production technology’s effect on water supplies and the environment.

Democrats in Congress are currently pushing legislation that would repeal natural gas drilling technology’s exemption from clean water regulations.

Congress exempted hydraulic fracturing from the Clean Water Act in 2005 after a U.S. EPA study determined the process posed little risk to water supplies. But environmentalists say that study is flawed and the exemption poses health risks because of the chemicals used (Greenwire, Jan. 21).

Industry is staunchly opposed to such legislation, saying such a bill would increase costs, strain development and reduce jobs in the burgeoning field.

So tune into the hearing for introductory course in shale gas, costs and benefits.

I’ll be posting more this month on this important subject — and I very much welcome recommendations for studies and articles to read.

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Jumpin’ Jack Verdi, it’s a gas, gas, gas

Hey, remember George Allen, the former Republican senator from Virginia best known for using the racist slur "macaca" on camera during his failed bid for reelection in 2006? Apparently, he's making his comeback as the Republican anti-climate bill poster boy, flacking on behalf of the coal and oil lobbies.

Allen reemerged this week as the chairman of the American Energy Freedom Center, a new project from the Institute for Energy Research. IER does research and public-policy work on behalf of the oil, gas, coal, and electricity industries, and has been campaigning against the House climate and energy bill on behalf of its industry benefactors. Their new "energy freedom movement" is an astroturf effort to rally support for increased use of domestic fossil fuels like oil, coal, and natural gas.

Allen, who at one time was considered a strong favorite to be the GOP presidential nominee in 2008, appears in a new web ad standing awkwardly in a living room and calling on Americans to "rise up and act" against the climate and energy bill put forward by House Democrats.

"America's abundant, reliable energy resources under lock and key," Allen says in the video. "And it's about to get worse."

Instead, he says, Congress should pursue "clean, creative, and thoughtful utilization of American energy" – i.e., fossil fuels. The video then dwells for a second on a sign reading, "If not us, who? If not now, when?"

"Let's power on, America, and choose the path of prosperity and opportunity for all," Allen concludes.

More on what Allen's been up to on his website. And here's the video, in all its shaky, schmaltzy glory:

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Two interesting observations:

When it runs, the natural gas fleet emits just 50% of the CO2 of the coal fleet, which raises a rather interesting question: what would we have to do to make it run harder? And how big a difference would that make in our national CO2 footprint?

MW vs. MWh

So why, if we have more natural gas generation capacity, do we get more of our power from coal?

Simple: we have a lot of gas-fired generation (449 GW, as of 2007), it doesn't run very often. The coal fleet is comparatively smaller (336 GW), but runs a lot more frequently. It is as if our vehicle fleet were dominated by Priuses, but they stayed parked while we drove our Escalades to work.

We have a huge resource that is already built that could massively lower CO2 emissions. Taking a page from the NRA, what if the problem isn't that we need to build more low-carbon generation, but that we just need to make better use of what we have?

Environmental potential

To understand the opportunity, let's look at a bit of simple math.

In 2006, the gas fleet generated 816,441,000 MWh, or 20% of what it could have produced if it had run 24/7/365.

The coal fleet, by contrast, generated 1,990,551,000 MWh, or 68% of what it could have generated if it had run 24/7/365.

If we never built another gas-fired power plant, but simply increased the annual capacity factor of the gas fleet up to the coal fleet's 68% capacity factor, it would generate an additional 1,845,485,000 MWh, effectively displacing 93% of our coal fleet without the construction of a single new power plant.

Looking at the comparative CO2-signatures of those two fleets, that would reduce total power sector CO2 emissions by 37%. Since the power sector is responsible for 42% of U.S. CO2 emissions, that implies a 16% reduction in total U.S. CO2 emissions, just from changing generator dispatch order.

That's a massive opportunity. What would it take to get there?

Economic considerations

There is an obvious limitation to the Prius/Escalade analogy: it's cheaper to drive a Prius per mile, but it's more expensive to generate a MWh of power from a gas plant than a coal plant. That, after all, is why the gas fleet doesn't run as often.

But historic dispatch choices were made in a world in which the costs of CO2 pollution were not monetized. So the real question becomes: how big a CO2 price would be required to change dispatch order?

Intriguingly, while the environmental potential is huge, the economic cost to realize that potential turns out to be quite small.

The great economic disadvantage of gas-fired generation relative to coal is that gas is more expensive per unit of energy. The great economic advantage of gas-fired generation relative to coal is that it is more fuel efficient: while the U.S. coal fleet has an average generation efficiency of about 27%, the gas fleet has an average efficiency of about 38%.

The gas fleet also tends to have much lower non-fuel operating costs (less $ for fuel handling, fewer moving parts, etc.). Taking these factors into consideration -- and assuming $2.50/MMBtu coal vs. $6/MMBtu natural gas -- the variable costs (e.g., exclusive of capital recovery) of a coal plant are about $18/MWh lower than a gas plant (1.8 cents/kWh). Obviously, that is very sensitive to fuel price assumptions, but this range is hardly unreasonable for current markets.

But remember, the gas fleet has a much lower CO2 signature than the coal fleet. On a fleet average basis, every MWh shifted from coal to gas reduces CO2 emissions by 0.56 tons. So if we look at a $18/MWh cost differential to achieve 0.56 tons/MWh of CO2 reduction, that implies a (18/.56) = $32/ton CO2 price would be sufficient to tip the scales. That's not insignificant -- but not implausible either. And -- here's the key point -- massively less than what any reasonable person might think it would take to shutter most of the coal industry.

Finally, note that this doesn't require a carbon price of $32/ton to happen; it simply requires a net change in the relative costs of coal and gas-fired generation equal to $32/ton. You could get there by giving the gas guys nothing and hitting the coal plants with a $32 fine, but you could also get there by giving the gas guys $10 and hitting the coal guys with a $22 fine. A functioning cap-and-trade with bilateral rights will allow some sort of transaction between those two parties and -- without speculating on those specific rules -- one can assert with confidence that a $32 delta between coal and gas does not need anyone to buy or sell carbon credits at a $32/ton price.

Practical constraints

To be sure, we're never going to shut down 93% of the coal fleet just by running gas harder. There are parts of the grid (like West Virginia) so devoid of gas assets that there's no way to maintain voltage stability if you rely on far-away gas. And of course, there is the supply and demand issue (booming gas demand + slumping coal demand is almost certainly incompatible with $6 gas and $2.50 coal).

On the other hand, the gas fleet is hardly capped out at 68% capacity factor. Moreover, if we started the switch, we'd start by running the most efficient gas plants harder and the least efficient coal plants less so the first 20% is much cheaper, per ton of CO2 reduction, than the last 20%.

Of course this isn't a panacea. You can't get to the end game only with gas any more than you can get to the end game only with solar. It'll take a lot of steps. But what's fascinating about this analysis is that the gas fleet is uniquely able to quickly and -- at least initially -- quite cheaply make a huge dent in our CO2 emissions. It's a tool we ought to use, and we ought to examine our proposed CO2 regulations carefully to make sure it gets put to use. Free allowances to coal plants don't get you there ...

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This story was written by ProPublica's Abrahm Lustgarten.

From left, former Vice President Dick Cheney, Rep. John Salazar, Rep. Dianna DeGette and Sen. Bob Casey are all trying to leave their mark on how natural gas is drilled in the U.S. Abrahm Lustgarten / ProPublicaFour years after Vice President Dick Cheney spearheaded a massive energy bill that exempted natural gas drilling from federal clean water laws, Congress is having second thoughts about the environmental dangers posed by the burgeoning industry.

With growing evidence that the drilling can damage water supplies, Democratic leaders in Congress are circulating legislation that would repeal the extraordinary exemption and for the first time require companies to disclose all chemicals used in the key drilling process, called hydraulic fracturing.

The proposed legislation has already stirred sharp debate.

The energy industry has launched a broad effort in Washington to fend off this proposed tightening of federal oversight, lobbying members of Congress and publishing studies that highlight what it says are the dangers of regulation. In mid-May, the industry released a detailed report asserting that the changes in current law would cost jobs and slash tax revenues. A key advocate of past efforts to regulate gas drilling, Rep. John Salazar (D-CO), has declined to support the legislation, expressing concern about how it would affect the energy companies.

However, with a strengthened Democratic majority in Congress and the party's capture of the White House in last year's election, the fracturing legislation is viewed as having its best chance at passage in years. Its House sponsor, Rep. Diana DeGette (D-CO), aims to attach a bill to a larger piece of legislation with broad support -- possibly a bill on climate change or a new energy policy measure – where it would be shielded from industry resistance. On the Senate side, according to congressional staff close to the effort, Sen. Bob Casey (D-PA) has a companion bill ready to follow.

The drilling process involves injecting millions of gallons of water and sand mixed with tens of thousands of gallons of chemicals -- some that are known to cause cancer -- deep into the ground, where as much as a third of those fluids typically remain after the gas is removed.

Global companies including Halliburton and Schlumberger have fought hard to shield from public view the chemical recipes they use to drill, saying that the formulas are valuable trade secrets. Scientists say that is precisely the information they need to determine if drilling caused the water pollution that has been reported in Colorado and elsewhere.

"The regulatory loophole for hydraulic fracturing puts public health at risk and isn't justified," said Henry Waxman (D-CA), chair of the House Energy and Commerce Committee that will offer the bill, in an e-mail. "The current exemption for the oil and gas industry means that we can't even get the information necessary to evaluate the health threats from these practices."

The industry argues that state laws and regulators are doing an adequate job of regulating the hydraulic fracturing process, and that more layers of regulation would be burdensome and expensive.

"We don't think the system is broke, so we question the value of trying to fix it with a federal solution," said Richard Ranger, a senior policy analyst at the American Petroleum Institute. "So proceed with caution if you are going to proceed with regulating this business because it could make a very significant difference in delivering a fuel that is fundamental to economic health."

Proponents of regulation, including DeGette, the author of the bill, say protecting water resources is worth the slightly higher gas costs that might come with regulation, but that the industry's assessment of those costs is dubious. The exemption, they say, has artificially lowered drilling costs because it means the companies don't always have to follow the safest practices.

"I find it kind of a novel argument that it will be burdensome to comply with one federal law when they could potentially have to comply with 50 state laws," she said. "I just think that they don't want to have to do it."

A key question for proponents and opponents alike is how strong a stance President Barack Obama's administration will strike on this legislation. A White House spokesman said that the administration hasn't yet taken a position.

The Safe Drinking Water Act, enacted in 1974, governs what chemicals can be injected underground and applies to essentially every industrial activity in the United States. It limits what levels of pollution are allowed, but then permits states to create more detailed regulations if they choose. The law also sets minimum standards for well design and other protections of health and safety.

"We are not aware of any other industries that have an exemption," said Stephen Heare, director of the Drinking Water Protection Division at the Environmental Protection Agency.

As the law currently stands, the EPA is not allowed to set conditions for hydraulic fracturing or even require states to have regulations of their own.

States often look to the federal agencies for guidance on how to craft environmental rules. And hydraulic fracturing is an especially complicated process that scientists say warrants more study. The current regime leaves state agencies -- which are often understaffed and underfunded -- to do their own research and develop their own best practices, according to EPA scientists.

Natural gas, used for heating, electricity and manufacturing, supplies a fifth of the energy used in the United States and is an increasingly valued resource. According to the Energy Information Administration, domestic gas reserves, including those held in vast shale deposits that underlie the Appalachian states, could meet the country's natural gas needs for more than 100 years. Without hydraulic fracturing, which is now used in almost all new gas wells, much of this supply would remain beyond reach, according to the American Petroleum Institute.

Natural gas is also widely viewed as an important transitional fuel in American climate and energy policy -- emitting 23 percent less carbon dioxide per unit of energy than oil. Its development has spurred jobs and economic activity in some of the poorest and most rural parts of the U.S.

But as gas drilling has expanded, a wave of reports have emerged that the drilling is affecting water. In Colorado and Wyoming, state and federal officials have concluded that benzene and other contaminants have made their way into aquifers, streams and well water as a result of drilling accidents or spills of drilling fluids. Officials have linked methane gas in groundwater to drilling in Colorado (PDF), Ohio (PDF) and Pennsylvania. Fracturing may or may not be to blame, EPA officials say; it's hard to tell because they don't oversee the process and can't trace chemicals that are unidentified.

"We're not talking about banning fracking here. What we're for is regulating it," said Rep. Jared Polis (D-CO), a co-sponsor of the House bill, emphasizing that his hope is to give scientists the tools to measure, and to control, its impact on the environment. "Other than oil and gas companies, I am not aware of anyone that supports allowing that to continue in an unregulated way."

Even so, DeGette will need to gather support from some representatives in states that stand to reap substantial economic benefits from drilling. The retreat of Salazar, a prominent moderate whose co-sponsorship helped draw support for a similar measure in the House last year, is a warning sign that the passage is not preordained.

"I think Salazar is a very strategic target on all of this," said Sarah Tucker, an analyst for Trout Unlimited, a sportsman's group that is lobbying for more oversight of drilling. "He is from an oil and gas district ... that gives him a lot more credibility when working on these issues ... Those moderate Democrats are always the sticking point as to whether or not a bill actually moves."

In an e-mailed response, Salazar said he would still consider voting for the bill, but that he may pursue an alternative compromise.

"I believe that developers may have legitimate concerns about the impact that removing the exemption may have on their ability to find and extract oil and gas," he said. "But ... the current regulatory approach is probably not sustainable and will probably need to be revised in some way."

Passing such legislation has proved difficult in the past. This year's efforts to reverse the exemptions will constitute at least the fourth effort by Democrats to shore up protections against hydraulic fracturing since it became a focus of the White House's Energy Task Force in 2001. According to records of committee debates from 2003, the exemptions were forced through against objections, without hearings by a Republican majority and eventually tucked into the 2005 Energy Policy Act (PDF). Ever since, in the face of intense lobbying, any efforts to address the topic have stalled in committee.

Last year the bill's authors, including Salazar, received a flurry of letters and phone calls urging them not to pursue the legislation. One, addressed to DeGette from Jerry McHugh, president of Denver-based San Juan Resources, said "Now is not the time to impede development of any domestic resources. Please pull your sponsorship."

The industry has spent millions of dollars lobbying Congress on issues including fracturing since 2008, according to disclosure forms filed with Congress. Now, it's circulating new research to bolster its arguments.

The industry -- which has long argued that fracturing has never been proven to have contaminated water -- points to a study published in April by the Department of Energy, which asserts that state laws adequately regulate hydraulic fracturing. But that report, titled "Modern Shale Gas Development in the United States: A Primer" (PDF), and written by the Ground Water Protection Council, a broad consortium that includes industry groups, contains several questionable statements. One passage notes that "the Safe Drinking Water Act regulates the injection of fluids from shale gas activities," without mentioning that the exemptions have created significant exceptions, and that on the whole the act does not regulate all injections.

"You have very substantial economic elements that are concerned about their abilities to do whatever they want to for their own economic advantages," said Rep. Maurice Hinchey (D-NY), who is also sponsoring the bill. "They are going to do whatever they can to ensure that there is not a majority of the members here voting for something like this bill."

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Obama going to Copenhagen

‘Copenhagen Diagnosis’ offers a grim update to the IPCC’s climate science

House Republicans are ramping up their campaign against the Democratic leadership's climate and energy bill -- and telling business leaders to get with the program or get out of the way.

On Tuesday, a group of key Republicans hosted a summit on Capitol Hill to bash the Waxman-Markey bill as an "energy tax" that would cost average Americans $3,100 a year (though that figure has been thoroughly debunked). "This legislation represents, and is tantamount to, an economic declaration of war on the Midwest by liberals in Washington, D.C.," said Rep. Mike Pence (R-Ind.), who spearheaded the event.

Representatives from industry groups that oppose the climate bill, like the National Association of Manufacturers, spoke at the summit, but there were no panelists from companies and business groups calling for a carbon cap. The number of businesses advocating climate action is growing, and they're becoming more vocal -- witness Johnson & Johnson and Nike's recent demand that the U.S. Chamber of Commerce stop opposing the House climate bill.

Grist asked Pence during a press conference after the summit what he would say to business leaders who argue that a climate bill is needed. "I don't want to confirm that business leaders are asking for a cap or not asking for a cap," he replied.

Reminded that the U.S. Climate Action Partnership is asking for a cap -- its members include the leaders of Duke Energy, ConocoPhillips, and DuPont, who told the House on April 22 that climate action is needed -- Pence was dismissive.

"Well, I am aware that some are," said Pence. "I just would say to any American who is prepared to endorse a national energy tax, that there's a better solution, and that they should keep their powder dry, and take their case to the American people that they don't need, particularly during this very difficult time in the economic life of our nation, to raise the energy cost on our businesses and on American families."

Watch the exchange on video (and then keep on reading below):

Believe it or not?

Another reporter asked Pence whether he and other House Republicans believe climate change is a problem that needs to be addressed.

"I think you would find among House Republicans varying opinions on the man-made origins of global warming," Pence said.

"But let me assure you, whatever Republicans may think about the science and the arguments over global warming, Republicans are all committed to a cleaner environment," he continued. "We're all committed to encouraging the development of clean-coal technologies, and cleaner air. And so while some may like to bog this debate down in the science over the man-made origins of global warming, we prefer rather to focus on let's all move toward a horizon of cleaner air, and we believe we can do that without costing American jobs and putting an extraordinary energy tax on the American people."

Asked about his personal beliefs on the subject, Pence said, "There's no question there have been [climatic] changes ... I am a skeptic whether or not man-made actions are responsible for that."

The party of "no"

The summit also served as the kick-off event for a new coalition of Republicans calling themselves the "American Energy Solutions Group." Chaired by Pence, the group includes familiar House climate skeptics like Joe Barton (R-Texas), John Shimkus (R-Ill.), and Michele Bachmann (R-Minn.).

They plan to introduce an energy plan of their own that's heavy on oil, gas, "clean coal," and nuclear -- much like the bill they introduced last summer and touted during an unsuccessful sit-in at the Capitol. Pence said they would have a new bill written by the end of the summer.

For now, though, the group's focus will be saying "no" to the Democratic climate and energy bill. "Our first objective is to really expose the profound error of a national energy tax," said Pence.

The Republicans also hope to foment disagreement among House Democrats, who are having a tough enough time on their own coming to agreement about the climate bill. "We call upon our fellow Democrats to say, let us reject this now," said Fred Upton (R-Mich.). "Let us not proceed with this issue."

Tuesday's summit is just the first of a series of similar events to be held around the country. The next one is scheduled for May 27 in Indiana -- Pence's home state -- to be followed by more in Pennsylvania and California.

The House Republicans are betting that this road show and the larger strategy of attacking a Democratic climate bill will give them a leg up in the 2010 elections. "The American people have a year and a half to decide whether to change management around here," Pence said.

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On “climategate”

Climate Hope: Inspiring 2009 Books for Clean Energy

It seems to me that we suffer from a failure of imagination.

We dream of a low-carbon world, but can't quite fathom how to get around the massive lobbying clout (and inertia) of the coal lobby. We dream of a world with no more utility obstacles to energy efficiency, but can't imagine how to undo laws in fifty states (plus the feds) to undo utility disincentives. And we dream of a renewable future, but find it implausible that the tiny amount of solar currently on the grid can be scaled up to a level that matters in any reasonable time frame.

And so we scale back our ambitions. Rather than confront the coal lobby, we craft carbon bills with escape hatches and allowances to buy off the biggest carbon sources. We encourage decoupling, but don't confront the regulatory paradigm of regulated utilities. And we throw a few incentives out for renewables, but still send most of the DOE budget to the nuclear industry.

Big changes are not easy. You can't force the economy (or the federal government) to change course on a dime. But that doesn't mean big changes are impossible -- it just means we don't anticipate them.

This limitation isn't limited to policy endeavors. As a species, our predictions tend to be biased toward linear extrapolation from the last few data points -- as a result, we do a really lousy job of predicting non-linear trends. It's why we find compound interest so fascinating (and global warming so frightening). As Nicholas Taleb put it in The Black Swan, we're like a turkey on the day before thanksgiving who reviews the last 364 days and concludes that tomorrow will be a great day, full of sun and cracked corn.

So when we see massive barriers to reform, we look at the size of the barrier, evaluate how much work it would take to break through, and conclude we'll never be able to mobilize that degree of effort -- so we leave the barrier intact, and fiddle around the edges. But here's the deal: that's not how barriers come down. If you want to knock down the Hoover Dam, you don't need to remove every brick -- you just have to knock out a couple in the middle and let the force of the water behind the dam do the rest.

In a perverse way, that's cause for great optimism. Our energy and environmental policy is rife with barriers to the deployment of low-carbon, low-cost technologies. There's a lot of water behind those barriers, waiting to get through if only we'd loosen a couple bricks. It's probably nowhere near as hard as we think to make rapid, massive changes in our energy infrastructure.

Want proof?

Those are truly amazing numbers. In 10 years, we built a fifth of the entire US generation fleet -- and it took 100 years to build the first four-fifths. It is no exaggeration to say that in many parts of the country, your lights wouldn't be on today but for FERC 888. In less than three years, New England has figured out how to bring on the equivalent of two nuclear plants worth of generation (avoiding new generation investments in the meantime), cutting 7 percent of demand out of the system. New England is now just about the only place in the country that isn't facing capacity constraints, thanks only to a decision to pay people for the demand reduction services they provide.

In both cases, success didn't come because of years of patient barrier removal, and it didn't come gradually. It came in one massive deluge once the critical brick was removed -- unencumbered grid access in the first case and monetization of a previously-subsidized externality in another. But did anyone think that pace of change was possible before hand? I doubt it.

So can you imagine going into Congress today and saying, "I've got a simple regulatory reform that will cost the government nothing and within a decade will completely transform our electric grid to drastically reduce it's carbon signature and give everyone a rate cut"? Can you imagine anyone taking you seriously? Probably not -- because it doesn't comport with what we dream is possible.

But that's only because we're not good dreamers. As someone said recently: yes, we can.

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