McCurdy: Developing Natural Gas Vehicle Market Enhances Energy Security and Economy

Washington, D.C. – Dave McCurdy, president and CEO of the American Gas Association, testified today before the U.S. Senate Committee on Energy and Natural Resources about the opportunities for, current level of investment in, and barriers to the expanded use of natural gas as a fuel for transportation. Here is his opening statement as prepared for delivery:

Good morning, Chairman Bingaman, Ranking Member Murkowski, and members of the Committee. I am Dave McCurdy, President and CEO of the American Gas Association (AGA), and I am pleased to appear before you today.

The American Gas Association, founded in 1918, represents more than 200 local energy companies that deliver clean natural gas throughout the United States.  More than 65 million residential, commercial and industrial natural gas customers or more than 175 million Americans receive their gas from AGA members. Today, natural gas meets almost one-fourth of the United States’ energy needs.

I’ve been asked by the Committee to use my remarks to do two things: First, to explain why using natural gas to offset a measure of our petroleum dependence is a smart path forward for our nation. Second, to describe the momentum we are seeing today in building a national fueling infrastructure to support natural gas vehicles, and to outline the policies we need to keep that momentum going.

We are pleased that the Committee has decided to hold today’s hearing, because it is critical that the Congress remains current on the dynamic discussion regarding natural gas brought about by the shale gas revolution.  The new abundance of natural gas reserves in our country has fundamentally shifted our energy landscape. A decade ago, it seemed inevitable that the United States would become a major importer of natural gas.  Instead, today, we are the world’s leading producer of natural gas. As the President noted in his state of the union address earlier this year, we have at least a hundred years supply of domestic natural gas right here at home.

We have made great strides in “turning down the curve” of petroleum imports, through increased domestic petroleum production and landmark fuel economy standards for light duty vehicles.  But energy security means more than reducing our petroleum imports below the fifty percent mark.  In past decades, we have successfully reduced – or virtually eliminated – petroleum use in other sectors, such as electrical generation, and home heating.  Yet our transportation sector depends on petroleum for 94 percent of its primary energy.

Our singular dependence on oil for transportation fuel makes us vulnerable to economic and national security risks.  Every American recession over the past four decades has been preceded by—or occurred concurrently with—an oil price spike, including the most recent.  Our armed forces expend enormous financial and human resources ensuring that oil transit routes remain open and critical infrastructure is protected.  Our relations with foreign governments are too often influenced by our need to minimize disruptions to the flow of oil.

 

In 2011, the U.S. trade deficit in oil was $327 billion – and accounted for 58 percent of our total trade deficit.  The size of the U.S. trade deficit means we are incurring an international debt burden that dampens the prospects for our long-term economic health.

 

The path that we are on is not sustainable, and it is not smart.  A smart path forward includes diversifying our transportation energy mix, and seeking to displace high cost imports with lower cost domestic alternatives.  Greater use of natural gas as a transportation fuel delivers on both of these objectives.

 

And while natural gas provides 24 percent of the primary energy used to drive our economy, only 0.1 percent of transportation energy is supplied by natural gas.  Natural gas has tremendous potential as for the transportation sector, and many nations are ahead of the United States in grasping this opportunity.   There are over thirteen million natural gas vehicles (NGVs) in use worldwide today, up from just four million seven years ago.  Yet only about 120,000 vehicles – less than one percent of the global total – are on U.S. roadways.

 

Here is the good news –the market is recognizing that switching from gasoline or diesel to natural gas can mean significant cost savings.  Major fleet operators like Waste Management, Verizon, Ryder, and others are switching to natural gas vehicles because the business case is there.  Thirteen governors are working together to coordinate a multi-state purchase program for natural gas vehicles for their state fleets.

Natural gas utilities are also in the lead in providing early markets for NGVs.  Many of our companies have ambitious vehicle purchase programs aimed at transitioning their own fleets to run on clean burning natural gas.

As this market continues to grow, AGA member companies will play a key role in supplying the fueling infrastructure needed to support these vehicles.  The gas utilities in our membership maintain over two million miles of natural gas distribution pipelines nationwide.  This distribution network means that we can place compressed natural gas fueling stations around the country without the need to truck in fuel.   Currently, there are over 1,000 compressed natural gas (CNG) stations in the United States, and many of these are owned and operated by gas utilities.

AGA member companies can play a vital role in the next phase of building our national fueling infrastructure for natural gas vehicles.  Working with their regulators, a number of our companies are exploring innovative approaches to utility participation in this market.  Natural gas utilities are pioneering new business models, forming creative partnerships and investing in cutting edge technologies.

We believe that in the next few years, home refueling for natural gas vehicles will become increasingly available and attractive to residential consumers, and our companies will be involved in ensuring the safe and reliable operation of these refueling appliances.

The attractive price of natural gas – about half the cost of gasoline or diesel – is creating momentum in the market that is translating into growth in our fueling infrastructure for natural gas vehicles.  Since 2008, the number of CNG stations has grown by over 10 percent each year.  This sustained growth has occurred even as we have weathered the worst economic recession our nation has seen in decades.

In addition to utilities, natural gas producers have committed to building refueling stations along our nation’s highways. Two companies recently announced hundreds of millions of dollars in investments in 250 LNG fueling stations by the end of 2013.

To stay on the smart path forward, we need policies that help us sustain the momentum we are seeing in the adoption of natural gas vehicles and fueling infrastructure.  The most important component of this is maintaining a level playing field that allows natural gas vehicles to compete fairly in the market.  Unfortunately, some current policies – and some recent policy decisions – have failed to give adequate weight to the new opportunities presented by the new abundance of domestic natural gas.  The heavy duty fuel economy and greenhouse gas standards finalized a year ago are an unfortunate example of a significant missed opportunity.  The resulting program fails to create manufacturing incentives to accelerate adoption of natural gas vehicles in the heavy duty segment.

The Administration is working now to finalize the second round of the Obama Administration’s fuel economy and greenhouse gas standards for light duty vehicles, which will apply from 2017 to 2025.  This is a critical, once-in-a-decade opportunity to get the policy right.  The natural gas industry has asked the Administration to include the same manufacturing incentives for natural gas vehicles that their proposed rule included for electric drive vehicles.  Equal incentives make sense, because both alternative technologies provide the same energy security and environmental benefits.  It is vital for the success of the natural gas and alternative fuel sector that this rule expands consumer choice in the marketplace for alternative fuel vehicles, rather than being weighted to favor one technology.

There are two areas where changes in the tax code could remove barriers to growth in the natural gas vehicle market. Currently, each gallon of LNG sold incurs an effective excise tax rate or $0.41 per diesel gallon equivalent versus $0.243 for diesel fuel. This is because LNG has a lower energy density per gallon than diesel, but the tax is applied on a volume (gallon) basis rather than an energy equivalent basis.  This discrepancy has been corrected for the sale of CNG, but not for LNG, and provides an unfair disincentive to the sale of LNG.

Also, heavy duty natural gas trucks cost $30,000 to $60,000 more than diesel trucks.  The federal excise tax rate of 12 percent is imposed on the full cost of a truck. The effect is an additional cost premium of $3600 to $7200 towards a new natural gas truck.

On a positive note, AGA strongly supports a new $30 million ARPA-E program aimed at engineering light-weight, affordable natural gas tanks for vehicles and develop natural gas compressors that can efficiently fuel a natural gas vehicle at home.  We applaud the MOVE program and encourage the Department to develop a similarly focused, enhanced effort within the Vehicle Technologies Program on NGVs.

Developing the market for natural gas vehicles enhances our energy security, our competitiveness, and encourages the expansion of transportation fueling infrastructure and technologic advances.   We urge the Congress, and the Administration, to ensure that we set policies that set us on the path to capture these benefits to our nation.

AGA President and CEO to Testify Before the U.S. Senate Committee on Energy and Natural Resources on July 24

Washington, DC – On Tuesday, July 24, The Hon. Dave McCurdy, president and CEO of the American Gas Association, will testify before the U.S. Senate Committee on Energy and Natural Resources. The Full Committee will consider the opportunities for, current level of investment in, and barriers to the expanded use of natural gas as a fuel for transportation.

WHO:             The Hon. Dave McCurdy, president and CEO, American Gas Association

WHEN:         
Tuesday, July 24, 2012
10:00 AM

WHERE:       Dirksen Senate Office Building
Room 366

A live webcast of the hearing can be found at http://www.energy.senate.gov/public/index.cfm/live-webcast

FERC Schedules Conferences on Gas-Electric Coordination

The Federal Energy Regulatory Commission (FERC) today announced the dates and locations for five regional technical conferences on better coordination between natural gas and electricity markets. The conferences will explore gas-electric interdependence as well as ways to improve coordination and communication between the two industries.

Public comments filed with the Commission earlier this year identified a wide range of issues related to gas-electric interdependence. Many commenters suggested those issues differ on a regional basis.

Discussion at each conference will focus on: (1) communications, coordination and information sharing; (2) scheduling; (3) market structures and rules; and (4) reliability concerns. The conferences will be open to the public, and Commission members will attend.

The Commission has created a conference-specific Twitter feed, #FERC-GEC, to provide information about the conferences and allow the public, industry, and state officials to follow and discuss the issues. In addition, a new section on gas-electric coordination has been added to FERC’s website.

The schedule for the conferences is:

Central August 6, 2012 St. Louis, Mo.
Northeast August 20, 2012 Boston, Mass.
Southeast August 23, 2012 Washington, D.C.
West August 28, 2012 Portland, Ore.
Mid-Atlantic August 30, 2012 Washington, D.C.

Although natural gas infrastructure may not neatly fit into those divisions, the Commission said they are reasonable for discussing gas-electric coordination.

The Central region includes the organized wholesale electric markets of Midwest Independent Transmission System Operator Inc., Southwest Power Pool Inc. (SPP) and Electric Reliability Council of Texas (ERCOT). The Northeast region includes the ISO New England Inc. market. Southern Company, Duke and Progress Energy, the Tennessee Valley Authority, and other areas south of PJM Interconnection LLC (PJM) and east of SPP and ERCOT make up the Southeast region.

The West region covers the Western Interconnection. Finally, the Mid-Atlantic region includes areas covered by New York Independent System Operator Inc. and PJM.

Specific venues, times and agendas for the regional technical conferences will be announced at a later time. The Southeast and Mid-Atlantic conferences will be held at FERC Headquarters, located at 888 First St., N.E.

Natural Gas Utilities: Building and Enhancing an Advanced Energy Delivery System

Washington, D.C. – Advances in American technology for natural gas production have unlocked an abundance of this domestic clean energy source which has contributed to huge savings for residential and commercial customers. America’s natural gas utilities are using this opportunity to continue to improve our nation’s natural gas infrastructure, and they are working with local regulators to develop innovative models for making these capital investments possible.

“Natural gas is a key to our energy future and America’s natural gas utilities are upgrading our delivery system to meet this growing demand,” said Dave McCurdy, President and CEO of the American Gas Association. “There is a tremendous opportunity for consumers and our nation as a whole through greater use of natural gas and we see a future where natural gas is the foundation fuel that heats our homes, runs our vehicles, generates power and supports other forms of renewable energy. We are building and continually improving our infrastructure to deliver on this promise.”

Maintaining the safety and reliability of the nation’s natural gas pipeline system is the number one priority for AGA and its member utilities. Utilities invest billions of dollars annually in maintenance, safety upgrades and operating expenses.

The American Gas Association has released a new “Natural Gas Rate Round-up,” a periodic update on innovative rate designs. The report highlights several states that are on the cutting edge of innovative rate designs, working with their natural gas utilities to build and maintain an advanced energy delivery system while continuing to deliver natural gas at affordable prices.

Georgia was an early adopter of infrastructure cost tracking mechanisms, replacing 2,300 miles of natural gas pipelines over a span of 15 years. The state worked with a local natural gas utility on an innovative rate design to upgrade the backbone of the distribution system and liquefied natural gas facilities to improve system reliability and create a platform for economic growth in the state.  Further program expansions allowed an extension of pipeline facilities to serve customers without access to natural gas and to create new development corridors to help spur economic growth.

Ohio is enabling upgrades of their natural gas pipelines while keeping an eye on the bills their citizens receive. There is a large volume of pipeline replacement taking place in the state, but, under the current plan, the rates customers see are only allowed to increase by $1 per month for five years. At the end of the five year period, rates will stabilize at approximately $60 more per year than when the replacements began. The gradual increase enables Ohio utilities to modernize their infrastructure and prevent rate shock for customers.

Natural gas pipelines in Utah are relatively new, but they are getting an early start on replacements and upgrades. These upgrades provide customers with higher pressure service which allows the use of more energy efficient applications.  Replacing main lines also allows addition of safety measures, such as lines that can be monitored through the use of robotics, automatic shut-off valves and excess flow valves.

You can read more about these programs and what other states are doing to modernize their natural gas infrastructure here.

Northwest Gas & Power Groups Commend Planned FERC Workshops but Stress Regional Differences

PORTLAND, OR – The Northwest Gas Association (NWGA) and the Pacific Northwest Utilities Conference Committee (PNUCC) compliment the Federal Energy Regulatory Commission (FERC) for its decision to hold regional workshops on coordination as reliance on natural gas for power generation increases across the country.

In joint comments on FERC Docket AD12-12 submitted by the NWGA, PNUCC and the Bonneville Power Administration (BPA), the organizations called for FERC to consider regional differences in energy infrastructure and resource mix as it contemplates its role in facilitating greater coordination.

“The Northwest power system and its mix of resources are unique from other regions of the country,” said Dick Adams, Executive Director of PNUCC.  “That’s why we said any federal policies promulgated in this matter should accommodate regional differences.  We are pleased FERC will look at these issues in that regional context,” Adams continued.

For instance, the Pacific Northwest relies more on hydropower than any other region of the country and is near the top in wind power production.  This can create challenges for the natural gas system as the region leans more on natural gas to produce power in low water years and when the wind isn’t blowing.

Dan Kirschner, Executive Director of the NWGA said, “There is plenty of gas available to fuel additional generation in the region, and the pipeline systems by which it is transported here from production areas are highly reliable.

Kirschner noted that the region is already carefully planning to ensure continued reliability.  “Our goal is the safe and reliable delivery of natural gas where it is needed, when it is needed,” said Kirschner.  “We’ve been actively working on planning and operational coordination with our electric counterparts in the region for more than a year now.”

NWGA and PNUCC members, along with other stakeholders are developing communication and operational protocols should disruptions occur in the existing system.  PNUCC and the NWGA are also collaborating on a new initiative called the Power & Natural Gas Planning Task Force to ensure that the Northwest is planning effectively to maintain its record of reliability.

Plugging into Natural Gas

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AGA Report Details Responsible Natural Gas Development

Natural Gas and Climate Change in the Pacific Northwest

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Annual Energy Conference NATURAL GAS: Realizing the Potential

Click on the links below to download a .pdf version of the presentations from the Ninth Annual Energy Conference. Please note that some presentations are not available to be shared publicly online.

If you have any questions or would like to be put in contact with a speaker please contact Ben Hemson (bhemson at nwga.org)

Ninth Annual Energy Conference

NATURAL GAS:  Realizing the Potential

Presentations & Speakers:   

  • No Pipeline, No Problem, Kirt Montague, Plum Energy LLC & New Path Energy Capital
  • Washington State and Beyond, Representative Jeff Morris, Washington State House of Representatives

Thanks Again to our Sponsors!
Platinum:  BP/IGI Resources. 
Gold: 
Noble Americas Energy Solutions. 
Silver: Shell Energy North America, CMS, United Energy Trading, and TransAlta. 
Bronze:
Argus Media, Stoel Rives.