Numerous U.S. government agencies and officials have essentially declared war on the natural gas industry.
Federal actions. Natural gas (NG) is demonized by the Biden administration and is a target of its climate agenda. This includes: 1) Suspension of new NG leasing on federal lands and increased federal scrutiny of NG pipelines; 2) The Biden administration announced a building decarbonization policy that will accelerate electrification and support the market for heat pumps; 3) Biden’s $1.7 trillion infrastructure plan requires adoption of all-electric heat pumps and induction stoves over NG options; 4) The congressional Democrats’ plan to decarbonize the grid excludes NG and will penalize electricity suppliers that use NG to generate electricity; 5) Congressional Democrats have introduced a bill—the Fossil Free Finance Act—that would prohibit U.S. banks from funding NG projects from 2030 onwards;
Continuing, we have 6) The Biden administration seeks to end all federal oil and gas “subsidies.” However, these are not Federal “handouts.” They are legitimate provisions in the tax code; 7) The Department of Energy has initiated a new round of efficiency standards for appliances, where there are both NG and electric versions that would make the NG versions prohibitively expensive; and 8) Congress has proposed adding a $1,680-per-ton fee on methane leaks, and the financial impact could total 8% to 10% of NG drillers’ earnings.
Most ominous, EPA recommends that the Federal Energy Regulatory Commission (FERC) include the social cost of carbon (SCC) in environmental reviews for NG projects. SCC is an estimate of the monetized damages associated with an incremental annual increase in carbon emissions and is currently in the range of $65 to $80/ton. FERC Chairman Richard Glick advocates using SCC in reviewing projects, and use of SCC could make most NG projects cost-prohibitive.
State and local government actions. Numerous state and local governments are banning NG usage. Six states comprising 25% of the U.S population have already banned new NG hookups or are considering such restrictions: California, Colorado, New York, Massachusetts, Vermont, and Washington. California is considering banning NG in newly constructed state buildings, beginning in 2022 and requiring decarbonization of all existing buildings by 2035. In New York, NG moratoria are necessitated by state efforts to block new NG pipelines. Washington State is considering phasing out gas utility service and giving local governments authority to impose more stringent energy standards than the state code.
The most restrictive measures are those imposed by localities that have banned new NG hookups. Beginning with Berkeley, California in 2019, over 100 municipalities—50 in California and 12 in Massachusetts alone—have limited or eliminated the availability of NG for new buildings. This effectively mandates electric space heating, water heating, and cooking instead of natural gas. Cities and towns across the country are rewriting local building codes, prohibiting new buildings from using NG. Some local entities are even considering phasing out use of NG in existing buildings, either by a specific date or at the time of resale or major renovations.
Major cities, such as Denver, Oakland, Sacramento, San Francisco, San Jose, Seattle, and New York, have either enacted or proposed measures to ban or discourage the use of gas in new buildings. Numerous small and medium-sized cities across the nation are also banning NG use, including (in addition to those in California and Massachusetts) Ann Arbor, Mich.; Bellingham, Wash.; Boulder, Colo.; Burlington, Vt.; and Takoma Park, Md.
The fight over these bans has clear political dividing lines, as it tends to be a battle between Democrat-led cities and Republican-run states. Nineteen states have enacted legislation prohibiting local governments from restricting NG usage. Ban opponents cite the higher costs of making buildings fully electric and note the added security of having a second energy source during extreme weather events—as happened in Texas in February 2021.
Assessment: Ironies abound. First, until recently, NG was touted as the bridge fuel to a sustainable future, and a large portion of the reduction in U.S. CO2 emissions over the past decade was due to the substitution of NG for coal in electricity production. Now, however, NG has become a “dirty” fuel that must be suppressed.
Second, NG bans will increase NG consumption and increase CO2 emissions. Using NG is efficient: It is conveyed into the building and burned in a furnace with 90%+ efficiency. However, when gas is burned in a power plant, only about 45% of its energy is converted into electricity. As electricity is distributed, an additional 10% is lost, and the electric energy delivered to a building is just 1/3 of the energy contained in the NG fuel. Thus, the efficiency of a gas heater is nearly 3x that of its all-electric counterpart.
Third, as with mandating electric vehicles, mandating electric appliances places more U.S. energy eggs in one basket, and does so at the very time the electric grid is under increasing strain caused by forced retirements of coal-fired generation and the addition of less reliable, intermittent renewables.
Finally, in 2020 for the first time, the value of U.S. energy exports exceeded the value of imports by $27 billion. NG accounted for 5% of 2020 energy import value but 22% of energy export value— a surplus of $26 billion. NG exports are continuing to increase, due to increased exports to Mexico, increased LNG exports, and the NG crunch in Europe.
In sum, the war on NG is misguided and is a war that the U.S. should not win.
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