The polar vortex blast of Arctic air brought record- breaking frigid temperatures across parts of the United States last January. It also caused peak electricity loads across parts of the country and almost forced one of the nation’s largest electric utilities to shut off power to some customers to keep most of its system running.
That narrow miss for American Electric Power (AEP), which serves an 11-state region, is a red flag, AEP executive vice president for generation Mark McCullough said at a 2 October energy supply forum. A proposed regulation by the U.S. Environmental Protection Agency (EPA) would require companies to retire so much electrical generating capacity that customers could be at greater risk during potential future extreme weather events, he said at the Washington, D. C., forum sponsored by the United States Energy Association. McCullough and other industry experts at the event railed against U.S. federal government regulations and proposals that they said place burdens on industry and restrict increased exploration and development of oil, gas, and other energy resources.
McCullough said that EPA’s proposed regulation—the draft Clean Power Plan to reduce carbon dioxide emissions from existing fossil- fueled power plants, also known as 111(d)—includes a timeline for retiring electrical generation plant units that is too aggressive. EPA’s proposed model assumes shutting down 46–49 gigawatts of coal-fired generation between 2016 and 2020 due to the Clean Power Plan, in addition to the retirement of 71 additional gigawatts between 2010 and 2020, according to McCullough. Reduction targets are set for 2030, but compliance would likely start in 2020 even though state implementation plans will not be finalized until 2018 or 2019, he said.
Although generating units would not be retired prior to any potential polar vortex event this coming winter, there is worry about meeting electricity needs in 2017 and beyond, McCullough said. “Closing this much generation in that kind of time frame presents very large issues,” he noted. The proposed rule, he said, “is flawed and needs to be modified if it is going to have a chance to be implemented and executed in a rational way.” McCullough added that the amount of renewable energy assumed in the EPA model would come at a high cost and would not provide the same ability to be dispatched according to the needs of the electricity load.
Concerns About Regulations on the Oil Refining Industry
Greg Goff, president and CEO of the Tesoro Corporation, an independent oil refiner, said the recent growth in U.S. crude oil and natural gas production has created a favorable industry environment and some significant potential advantages for U.S. refiners. However, he complained that “the greatest threat to the refining industry and the needed infrastructure is really the unduly burdensome government policies that are put in place and the implications they have [for] what we do.”
Goff singled out the Merchant Marine Act of 1920, commonly known as the Jones Act, which requires U.S.- produced goods to move between U.S. ports aboard U.S.- flagged vessels. The act places a significant cost on U.S. manufacturers moving oil feedstocks to the refinery system, he said.
Goff and Robert Stout, vice president and head of regulatory affairs for BP America, Inc., also expressed concern about EPA’s proposed rule on the National Ambient Air Quality Standards for ozone that would lower the standards from 0.75 parts per billion (ppb) to 0.7 or 0.6 ppb.
“If natural gas is to serve as a cornerstone in the [Obama] administration’s climate change strategy, setting an impractically low ozone limit risks undermining that very strategy,” Stout said. “Domestic gas production will inevitably be curtailed, permitting problems will be created, and this will fundamentally change the economic calculus that is moving the U.S. power sector toward reliance on gas. That’s a risk.”
Offshore Energy Development
Randall Luthi, president of the National Ocean Industries Association, gave the federal government high marks for offshore wind generation project approvals that he said have been moving fairly quickly. However, Luthi expressed concern that 87% of the U.S. outer continental shelf currently is closed to oil and gas development.
He also cautioned against national coastal marine spatial planning, which is part of the U.S. national ocean planning process. Luthi said that while spatial planning sounds like a good idea, it could close off portions of the ocean from development. “We don’t know what’s out there because we haven’t looked for 40 years,” he said. “How can you make an intelligent decision of whether to allow oil and gas development or not develop it when you really have no clue of what is there?”
Luthi acknowledged the current onshore energy boom and said that offshore energy development also would be very beneficial. “It makes sense to me that the United States would be wise to diversify its sources of energy as well as its different types of energy.”
–Randy Showstack, Staff Writer