White House Chronicle

News Analysis With a Sense of Humor

Gulf Spill Puts Energy Bill on Slippery Slope

by Leave a Comment

 

With energy, Senate Democrats find themselves between a rock and two hard places. Nonetheless, Sen. John Kerry, D-Mass., and Sen. Joe Lieberman, I-Conn., have introduced their climate and energy bill.

Its timing is awful. Its fate is uncertain. Yet its sponsors felt it had to be done now.

While the Gulf of Mexico is being damaged by a runaway well, spewing millions of gallons of oil-like bile from hell, any energy bill has the chance that it will be amended to become an anti-energy bill and will fail when hoped-for Republican support evaporates.

At present there is fairly wide industry support for the Kerry-Lieberman bill, particularly from the electric utility industry. Leaders of the industry and its affiliated groups, like the Nuclear Energy Institute, were in on the writing of the bill. Tom Kuhn, president of the Edison Electric Institute, and Jim Rogers, president of Duke Energy, stood shoulder to shoulder with Kerry and Lieberman when they announced their bill.

The three pressure sources driving the bill are:

•The November elections and the desire of endangered Democrats to show that they have done something about climate change and have tackled long-term energy problems.

•The Environmental Protection Agency plans to start regulating carbon dioxide as a pollutant next year, if Congress does not act.

•The environmental disaster in the Gulf, and its effect on public attitudes to energy development and energy companies.

The bill differs from the House bill, passed last June, which emphasized cap-and-trade to control carbon emissions; although both bills introduce carbon restriction by sector over time, and could be reconciled in a House-Senate conference committee, according to Chris Holly of The Energy Daily.

The carbon-reducing provisions in the Senate bill not only rely on pollution credits but also a wide range of incentives, including carbon capture, enhanced subsidies for nuclear and alternative energy.

The bill’s original intent was also to give a boost to offshore drilling, thus pleasing Republicans and the oil industry. But the Gulf disaster has changed that. The bill as introduced now contains language that will allow states to prohibit drilling off their shores—a potential killer of nearly all new leasing and exploration. And drilling is pushed 75 miles out to sea.

Just weeks ago, the bill looked as though it could pass the Senate with support from at least one Republican, Sen. Lindsey Graham of South Carolina, one of the original authors. But Graham withdrew when Senate Majority Leader Harry Reid, D-Nevada, said he would put immigration reform ahead of the energy bill.

While Sen. Mitch McConnell, R-Ky., the minority leader in the Senate, has come out against the bill, Graham still likes it but believes its chances of passage are slight. Kerry still believes Graham would vote with the bill, giving the Democrats that essential 60th vote, if the Democrats all stick together, which is unlikely with the bill’s nuclear and offshore leasing provisions.

A more likely result is that the bill will open old debates about big energy, like oil and nuclear, and pit it against alternative energy, mostly wind.

Comment on the bill has come slowly, as interest groups calculate the political alignment and realignment that the bill will bring about.

Offshore drilling gets more politically toxic as each day of failure to contain the situation in the Gulf passes. Nuclear gets more dubious as cost calculations rise. With or without legislation, the smart money is turning to natural gas for electrical generation and interstate trucking. At present, gas is cheap and plentiful.

There is a lot of money—$2 billion—in the bill for carbon-capture and sequestration, but this is ill-defined; and the idea of pumping millions and millions of tons of carbon dioxide into the earth remains a legal nightmare and a hard sell to some environmentalists. Clean coal, it seems, can never be pristine.

Here, then, is a bill for all seasons. Actually, more of a manifesto: an election manifesto. –For the Hearst-New York Times Syndicate

U.S. Chamber of Commerce Faces Its Own Guns

by 1 Comment

 

 

The U.S. Chamber of Commerce’s building on H Street in Washington glowers across Lafayette Park at the White House. It is a impersonal building, austere even, reminiscent of a British colonial post office.

 

With 3 million members, and the largest budget of any trade group in Washington, the chamber is a political force to be reckoned with, as is its hard-driving chief executive, Thomas Donohue.

 

Its stance is that American business is a kind of Gulliver, tied down by the Lilliputian strings of regulation and regressive public policy. Under Donohue, the chamber has relentlessly sought out threats to business, real and hypothetical. It opposes unions; regulation; government intrusion into markets; expansion of programs that cost tax dollars, which is all social programs; and raising the minimum wage. It is more ambivalent these days about health care. And Donohue can be quite capricious; for example, he has called for normalizing relations with Cuba.

 

Now the chamber is roiled as it seldom has been. The casus belli is climate change, and what a storm it has produced. Three large electric utilities have withdrawn from the chamber, accusing it of extremism in its stance on climate change. Sneaker giant Nike has resigned from the chamber’s board of directors in protest, but is still a member.

 

The utilities include Exelon, by some measures the largest utility; Pacific Gas & Electric, a giant in California; and PNM, the largest utility in New Mexico. As a percentage of membership, they do not affect the chamber much; but strategically, their rebuke means a great deal. They are the very constituency the chamber and Donohue are out to help. They burn coal as well as other fuels, and they are critically affected by what is to happen in climate legislation or regulation.

 

The utilities want Congress to pass cap-and-trade legislation. If Congress fails to pass the legislation, they fear Environmental Protection Agency regulation. The stakes are high. The chamber is opposed to the present cap-and-trade legislation before Congress, and has challenged the science that would be used by the EPA.

 

“If Congress does not act, the EPA will and the result will be more arbitrary, more expensive and more uncertain for investors and the industry than a reasonable, market-based legislative solution,” said John Rowe, Exelon’s chairman and chief executive officer.

 

Two of the big rebel utility CEOs are national business figures: Rowe of Exelon is revered as a prince-philosopher inside and outside of the electric industry; and Peter Darbee of PG&E, who wrote a strongly-worded letter of resignation to Donohue, is a major corporate friend of the environment.

 

All three utilities, along with their Washington trade association, the Edison Electric Institute, favor cap-and-trade legislation now being considered in Congress. Another utility savant, James Rogers of Duke

Energy, is pulling his utility conglomerate out of the National Association of Manufacturers, because of its opposition to cap-and-trade.

 

Darbee hit hardest at the chamber. In a two-page letter he wrote: “We find it dismaying that the chamber neglects the indisputable fact that a decisive majority of experts have said the data on global warming are compelling and point to a threat that cannot be ignored. In our view, an intellectually honest agreement over the best policy response to the challenges to climate change is one thing; disingenuous attempts to diminish or distort the reality of these challenges are quite another.”

 

The chamber has opposed not only the EPA’s plans to regulate carbon emissions in the absence of legislation, but also has attacked the scientific basis put forward by the agency. Yet Donohue insists that the chamber is neither denying the carbon emissions problem, nor is opposed to a legislative solution. Instead, it wants one tied to a global agreement on greenhouse gas emissions to protect U.S. companies from onerous conditions.

 

Friends of Donohue–who applaud much of what the chamber stands for–say that it is caught in a position where it has to say what it is for, not just what it is against. The chamber has always been at the barricades, not facing its own guns. The experience is novel and unpleasant for those on H Street. –For the Hearst-New York Times Syndicate

 

 

 

The Shocking Truth about Future Electric Supply

by Leave a Comment

 

 

TORONTO — “Nobody knows de trouble I see,” goes the Negro spiritual. It could have been playing as background music in Toronto, where the Edison Electric Institute (EEI) held its annual convention this week. Things are not terrible for the U.S. electric utility industry at the moment. But the industry’s future is more uncertain than it has ever been.

The challenge facing the industry is that we are using more electricity than ever before, with our bigger homes that have more appliances and gadgets. To meet future demand, according to Jeffry Sterba, chief executive officer of Albuquerque-based PNM Resources, the industry will need to spend $800 billion. Not only is it unclear whether it can raise this amount of money, in a time of constrained credit, but it is also unclear what expenditures public policy will sanction. Consider:

l The future of coal, which accounts for more than half of U.S. electricity production, is uncertain. It is the largest contributor to greenhouse gases, and the future promise of “clean coal” is yet to be realized on a large scale at an affordable price.

The second hope for coal, carbon capture and sequestration is a hot topic in electric utility circles. But David Ratcliffe, chief executive officer of Southern Company, confesses that it has been oversold, and it will be many years—if ever—before the technical and legal issues of diverting carbon dioxide and storing it by the millions of tons underground. The uncertainty has already caused 60 new coal-fired power plants to be canceled, according to speakers at the EEI convention.

l Nuclear power, a longtime favorite of utility executives, still faces public antipathy, and the cost of building the plants has gone up as the American engineering base has declined. The large steel forgings that are required for the construction of nuclear power plants can no longer be made in the United States. They must be imported from Japan at great expense.

Also the U.S. nuclear industry, thriving in the 1960s, has been sold off. Where once there were four U.S. companies that offered nuclear power plants, now General Electric is the only one, and it is in partnership with Japan’s Hitachi. The once mighty Westinghouse Electric is owned by Japan’s Toshiba. And the other vendor is France’s Areva. Only Ratcliffe’s Southern Company is sure that it is going to build two nuclear units. Other companies, including Baltimore-based Constellation Energy, have expressed interest in about 14 new plants—only about half of these are likely to be built.

The Nuclear Energy Institute reckons the nation needs a whopping 65 new nuclear plants to meet new demand and to allow for the retirement some of the more than 100 operating reactors.

l Wind is a bright spot. Wind power has proved more effective for most utilities than they thought, and they are now scrambling to find ways to store wind power as compressed air. But while the West and the North have good wind conditions, the Southeast suffers stagnant air at the time it most needs electricity: the summer. It is an energy option that is not open to every utility and because of its dispersed nature, it is not as manageable as a large coal-fired or nuclear plant.

l Then there is natural gas, which is the most desirable fossil fuel. In the past 25 years, the use of natural gas to turn utility turbines has grown exponentially, from 0 to 30 percent of generation. The trouble is that there is not that much indigenous natural gas around, and there are demands on it for home heating, cooking and fertilizer manufacturing, which are seen as higher uses than making electricity.

This has led to a boom in the import of liquefied natural gas from Asia and the Middle East. But James Rodgers, chief executive officer of Duke Energy, which is a large gas seller as well as a major electric utility, says that this is a dangerous route. By the time the gas gets here, after it has been liquefied and transported in an oil-burning tanker, Rodgers says it is only 20 percent less polluting than coal. Worse, he says this will harness U.S. electric rates to the global cost of oil and gas. That way he sees ruin.

Like their compatriots in the oil industry, utility executives talk a lot about technology coming to the rescue. But so far, there has been nothing that suggests a revolution akin to the one that transformed telephony is in sight. The only really happy thing here in Toronto is the realization that the plug-in hybrid car is coming, and that it will boost utilities’ revenues by recharging overnight when there is a surplus of electricity.