Download Climate Policy and Natural Gas

BACK TO BASICS
IN AN ALL-CLIMATE-ALLTHE-TIME POLICY ERA
WILLIAM F. WHITSITT, PH.D.
PRESIDENT
AMERICAN EXPLORATION & PRODUCTION COUNCIL
OIPA
June 8, 2008
THE CLIMATE CHANGE CHALLENGE
Why are we here?

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
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“All-Climate-All-The-Time” policy environment
New climate policy seems highly likely
Assumption that gas is a climate policy winner
An “upstream” approach could require natural gas processors
and/or producers to buy billions of dollars of “allowances” for
end user emissions
E&P investment and resulting supply effects could be
devastating
THE POLICY EFFECTIVENESS CHALLENGE
Why else are we here?
Issue politics –
and a need to rethink
our energy policy
advocacy effectiveness
THE CLIMATE CHANGE CHALLENGE:

Senate debate on the Lieberman/Warner – Boxer Substitute
cap and trade bill began on June 2.

The Administration now supports a modest legislative program
(not Lieberman/Warner that it has threatened to veto).

House legislation will be different….
THE CLIMATE CHANGE CHALLENGE:

L/W/Boxer: cap greenhouse gas emissions at 2005 levels in
2012; achieve about 70% emission reductions by 2050.

Obligations can be satisfied one of four ways: 1) acquire
allowances; 2) use less carbon intensive fuel; 3) use technology
to capture/offset emissions; and 4) improve efficiency.

Estimates of allowance costs vary according to one’s view of
these options and allowance markets.
THE CLIMATE CHANGE CHALLENGE
Examples of projected allowance costs (per metric ton)
API
MIT
CRA
NAM
EPA
CBO
2012 2015 2020
$41 $48 $57
51-59 62-72
60
70
37-38 55-64
22-77 15-98
28
35
2030
$87
91-107
90
228-271
24-160
THE CLIMATE CHANGE CHALLENGE
Range of Impacts on the Natural Gas Industry
(API estimates, in billions)
Costs
$41/ton
$57/ton
Producers Processors End Users
$5.0
$1.85
$39.6
$7.0
$2.2
$59.9
THE CLIMATE CHANGE CHALLENGE
Wood Mackenzie Analysis
(on E&P costs of consumer allowances)

Natural gas supply at risk
32% in 2012, 45% in 2017 @ 100%
 5% in 2012, 14% in 2017 @ 50%
in addition to ICF study facility emission cost effects

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Prices
 “…sharply
higher…in response to any threat to US
natural gas supplies.”
THE CLIMATE CHANGE CHALLENGE
Where are we?

AXPC and some others arguing that an upstream approach will
distort investment decisions, hurt consumers. Some refiners
and others are opposing.

AGA position: downstream coverage of utilities, industrials;
residential and small commercial users initially outside cap to
continue reductions; LDCs to work with state commissions.
Review progress in 2020.

Arguments for: LDC customer emissions already reduced to
1970s levels; home and appliance efficiency programs more
effective than price signals.
THE CLIMATE CHANGE CHALLENGE
If the bill isn’t going to pass, why are we so concerned?

All three Presidential candidates are senators who support cap
and trade programs.

The next Congress and/or Administration is likely to use L/W/B
as the blueprint for it’s program.

Climate change policy can be an early “win” for the next
Congress and Administration.
Strong, coordinated, effective advocacy is needed
THE POLICY EFFECTIVENESS CHALLENGE

If past House votes on energy taxes, permitting
and new regulatory actions are an indication –

If larger Democrat majorities are possible –

No matter which president we have –
We must do better by getting “back to basics”
THE POLICY EFFECTIVENESS CHALLENGE
Back to Basics
Improving our Policy Effectiveness
_____________________________________________________________
AXPC B2B Good Practices Guidelines
Government Relations
Candidate Support
Communications
B2B
Government Relations: We recognize the
importance of building strong relationships with
federal elected/appointed officials for the
development of sound federal legislation.
 Candidate Support: We encourage the
formation of company-established political
action committees (PACs) which can provide
financial support on a bi-partisan basis to probusiness/oil and gas candidates.

B2B

Communications: We must share our views with
both policymakers and our employees! We
should seek active volunteer employee
involvement in the political and electoral
process through effective communications.
Together we can improve our policy effectiveness!
Thanks!
Questions?