William Yeatman

On Monday, September 16, the Cooler Heads Coalition held a Congressional staff and media briefing, “Our Cooling Climate—an Update,” with David Archibald, author of The Past and Future of Climate: Why the World is Cooling and Why Carbon Dioxide Won’t Make a Detectable Difference. Video of the briefing is below.

The analysis below subjects EPA’s proposed Carbon Pollution Standard to the D.C. Circuit Court’s rigorous standard of review under Clean Air Act Section 111. Previously, I explained how EPA’s proposed standard, whose purpose is to reduce greenhouse gases, is likely to increase greenhouse gas emissions in practice.

The Obama administration’s major new plan to reduce carbon dioxide emissions appears to have a major flaw: It would increase carbon dioxide emissions.

Talk about an unintended consequence!

Last Friday, EPA proposed a regulation, known as the Carbon Pollution Standard, which would require partial carbon capture and sequestration (CCS) at all new coal-fired power plants. In fact, it is highly debatable whether CCS can actually be achieved. Industry claims—and I agree—that the technology is not yet commercially viable, and therefore violates the Clean Air Act’s requirement that CCS be “adequately demonstrated” before it can be imposed as a regulatory requirement. EPA, on the other hand, claims that CCS is feasible.*

*For all the details: I’m currently working on a comprehensive review of the legality of EPA’s Carbon Pollution Standard. It will be done soon and then I will post it here.

However, whether or not CCS technology is achievable may become a moot point, in light of the fact that the technology as envisioned by EPA would increase greenhouse gas emissions, thereby rendering the rule plainly absurd. Allow me to explain.

Due to the high cost of capturing, transporting, and sequestering carbon dioxide, EPA expects that any new coal fired power plants built in the foreseeable future will defray the costs of CCS by selling its carbon dioxide to oil companies, which can use the gas to help extract oil by displacing liquid fuels deep underground, in a process known as CO2 enhanced oil recovery (or CO2-EOR). In the proposed rule, EPA states that, “as a practical matter, we expect that new fossil fuel fired EGUs that install CCS will generally make the captured CO2 available for use in EOR operations (p 262).”

Moreover, EPA expects the CO2 supply created by the Carbon Pollution Standard will spur development of oil recovery. The agency claims,

“oil and gas fields now considered to be ‘depleted’ may resume operation because of increased availability and decreased cost of anthropogenic CO2, and developments in EOR technology, thereby increasing the demand for and accessibility of CO2 utilization for EOR (p 232).”

So…EPA expects that plants complying with the Carbon Pollution Standard will sell their captured CO2 to oil producers. And by increasing the supply of commercial CO2 on the market, EPA posits that the price of CO2 will decrease, leading to a boom in oil and gas production.

But there’s a HUGE problem with EPA’s proposal. It completely fails to take into account the expanded carbon footprint of the oil industry caused by its power plant rule. And, if my admittedly simplistic calculations are correct, EPA’s rule would result in an increase of carbon dioxide emissions.

I should note here that CO2-EOR is an engineering marvel, one that I would never pretend to comprehend. So I called someone who does. And I asked him whether there was a relationship between the amount of CO2 injected in an EOR well, and the amount of oil that comes out. He replied that there was, and that it is known in the industry as the “utilization ratio.” He explained that a utilization ratio is not a static figure. Evidently, the initial stages of drilling require much more CO2 than the later stages. After cautioning that the calculation of a utilization ratio is highly sensitive to assumptions, he said that a reasonably representative utilization ratio is 5,000 cubic feet of CO2 per barrel of oil. I then asked how much does a standard cubed foot of CO2 weigh, and he answered .05189 kilograms. Finally, I looked up online the weight of CO2 emissions from the combustion of a barrel of oil. The answer is 433 kilograms.

With this data, it is possible to calculate a rough approximation of how much CO2 will be created by each kilogram of CO2 captured from a CCS coal plant, and used to enhance oil recovery.

1 Kg CCS CO2*(1 cubed foot CO2/.05189 Kg)*(1 barrel oil/5,000 cubed feet)*(433 Kg CO2/1 barrel oil)

This works out to 1.66 Kg CO2 emitted for each 1 Kg CO2 captured and then used in EOR.

Assuming that a CCS project captures 600 lbs CO2/MWh and that the plant is running at 85% capacity, then a typical coal plant in compliance with EPA’s Carbon Pollution Standard would result in the emission of 1.3 million more kilograms of CO2 than the plant would “save” per megawatt capacity annually. And that doesn’t include the emissions due to the energy input necessary to extract the oil.

Again, I’m no engineer. So if my math is wrong, please let me know (I can be reached at wyeatman@cei.org ). If I’m right, however, then this rule is toast.

President Obama’s Federal Energy Regulatory Commission (FERC) nominee Ron Binz was caught in a tangle of contradictions during his confirmation hearing Tuesday before the Senate Energy and Natural Resources Committee.

For starters, Ranking Member Lisa Murkowski (R-AK) suggested that Binz misled her during a previous face to face meeting. As reported by Politico’s Darius Dixon,

Murkowski suggested early in the hearing that Binz may have misled her last week when they discussed whom he has worked with to guide his confirmation.

“You’ve effectively got a team — a shadow team* — of lobbyists and PR experts that have been helping throughout,” she told Binz. She added, “But what I can’t reconcile is your statement to me that said the only ones that you were working were the FERC external team.” (full article here)

So that’s one instance of Binz seeming to bend the truth before the U.S. Senate.

Later, during the same hearing, Binz told another apparent whopper. According to our friend Todd Shepherd at Complete Colorado,

Mr. Binz attempted to defend his record on coal by telling Sen. Joe Manchin (D-West Va.), “I approved the largest coal plant that was ever built in Colorado.”* Mr. Binz is referring to the Comanche-3 power plant. Only the Colorado Public Utilities Commission would have the authority to approve new coal plants.

The problem is the fact the decision by Colorado’s PUC to build the largest coal plant in the state’s history came in 2004, according to Xcel Energy’s website. Mr. Binz did not become a member of the PUC board until 2007.

Alas, there’s more.

Regarding a 2010 fuel switching plan that Binz implemented as Chair of the Colorado Public Utilities Commission, the FERC nominee told the junior Senator from West Virginia, “The legislation told us to approve a plan to comply with future EPA regulations.”

Binz clearly was intimating to Sen. Manchin, who represents a pro-coal state, that it was Colorado lawmakers (rather than Ron Binz) who were responsible for the plan that required fuel switching from coal to gas for almost 1,000 megawatts of power generation. But that’s not the whole story. As I explain in this report on Binz’s Colorado history, Binz helped write the fuel switching law! Here’s the relevant excerpt from the report (citations omitted):

Binz’s operating thesis is that “today’s regulation may not be up to the task” of “making over” the utility industry. Thus, Binz sought to expand his regulatory role at the Colorado PUC, in order to facilitate clean energy investment and energy efficiency. To this end, he actually participated in the drafting of legislation that mandated fuel switching from coal to gas for almost 1,000 megawatts of power generation. From a separation of powers perspective, it is unsettling that Binz helped write legislation whose implementation he oversaw. Due to this appearance of impropriety, seven Colorado state senators sent former Colorado governor Bill Ritter a letter demanding that Binz recuse himself from implementing the fuel switching law.

Binz’s seeming difficulty telling the whole truth, and nothing but the truth, was not without consequence. At the hearing, Sen. Murkowski announced her intention to oppose his nomination. And yesterday, Sen. Manchin announced his opposition, citing Binz’s Colorado history.

Assuming that no Republican breaks ranks with Ranking Member Sen. Murkowski and all the Committee Democrats (other than Sen. Manchin) vote for Binz, the Senate Energy and Natural Resources Committee vote is 11 -11. This puts confirmation in doubt. According to National Journal, “since 1987 only five nominations that got a neutral reporting from a committee were brought to the floor, and only one was approved.”

A neutral committee report would be an extraordinary development coming from the Senate Energy and Natural Resources Committee, which is known for harmony. However, Binz is an extraordinary case. As I explain in the aforementioned study on his history in Colorado, Binz has a troubling record of pushing the boundaries of regulatory power in order to discriminate against fossil fuels and promote green energy.

*N.B. The existence of Binz’s “shadow team” was revealed earlier this week by the Washington Times’s Stephen Dinan. His report, in turn, was based on emails obtained by my colleague Chris Horner on behalf the Independence Institute and the Free Market Environmental Law Clinic.

Oklahoma has had a somewhat schizoid response to EPA’s war on coal. On the one hand, Attorney General Scott Pruitt and the state’s largest utility are fighting EPA in federal courts. On the other, the state’s second largest utility, PSO, sought a settlement.

Unfortunately, PSO’s settlement gave away the farm to EPA and the Sierra Club, which was involved in the negotiations. In order to achieve compliance with the agency’s ridiculous regulations, the utility agreed to shutter almost 1,000 megawatts of coal-fired electricity capacity, decades early.

Last week, Americans for Prosperity-Oklahoma published a study by me on the PSO-EPA-Sierra Club fuel switching plan. Relative to retrofitting existing coal units, PSO’s settlement will:

• Increase costs to PSO ratepayers by $529 million in net present value and $3 billion in nominal dollars;
• Reduce PSO system capacity by 210 megawatts, thereby stressing reserve margins—a key reliability metric—through at least 2021; and
• Eliminate fuel diversity on the PSO system, rendering ratepayers vulnerable to rate shock.

I posted the entire study below. On Thursday last week, I spoke about the study in Oklahoma City at a panel discussion with Oklahoma Attorney General Scott Pruitt and Rep. James Lankford (R-Okla.). Click here, here, and here for news accounts of the panel discussion.

What can PSO ratepayers do? At this point, the settlement agreement is in EPA’s hands. Last Wednesday, the Agency opened a public comment period on the fuel switching plan. Click here to comment. Meanwhile, Attorney General Pruitt continues to fight EPA’s nonsensical regulations in court. I wrote about the most consequential of his legal battles two weeks ago. The litigation remains in flux.

Ratepayers’ best hope is to win over Oklahoma Governor Mary Fallin. She signed off on the settlement at the outset, before it became apparent how costly it would be. Given that PSO used a number of budget gimmicks to suppress the actual cost of fuel switching–this is the subject of the report below–Governor Fallin would have plenty of cause to change her mind.

William Yeatman – EPA Overreach: Higher Cost, Less Energy, Greater Risk

Last week I wrote about a wonderful interview conducted by Platts Energy Week’s Bill Loveless with Devon Energy CEO Larry Nichols. In the course of celebrating the life of entrepreneur George Mitchell, the father of fracking, Mr. Nichols put the lie to the notion that the federal government was the primary impetus in the development of the drilling technologies that led to the American oil and gas boom. In addition, he posits that George Mitchell could never have perfected hydraulic fracturing had he operated in today’s regulatory environment. Watch the whole interview here. Below, we’ve provided a transcript.

MR. BILL LOVELESS: Hello, I’m Bill Loveless. Welcome to Platts Energy Week.

He was called the father of fracking, a man who found the way to blast natural gas from shale deposits using water, sand, and a mixture of chemicals. George Mitchell died recently at 94, but not before leaving a legacy as a man who put hydraulic fracturing on the map and paved the way for today’s resurgence in U.S. gas and oil production.

Joining me to discuss this industry pioneer is a man who knew George Mitchell well. In fact, his company bought Mitchell Energy Development in 2001. Larry Nichols, executive chairman of Devon Energy, joins us from Oklahoma City. Welcome to the program, Larry.

MR. LARRY NICHOLS: Glad to be here.

MR. LOVELESS: Larry, fracking has been around for decades, but Mitchell began to draw more attention to it in the 1980s when he experimented in the Barnett Shale in Texas. What difference did he make?

MR. NICHOLS: Well, yeah, fracking has been around for about 60 years. Clumsily done when it was first done, but over time, people experimented with it. And George Mitchell had this almost fanatical belief that he could frack the Barnett Shale and get gas out of it. We all knew the gas was there, but could not produce it, and he relentlessly over years and years kept pounding away, experimenting with different techniques, different refinements until he finally started making it work.

[click to continue…]

Platts Energy Week with Bill Loveless is a weekly treat. In most markets, it comes on early Sunday mornings, but if you sleep through its first broadcast, you can still access the show through its website.

This morning’s show featured a wonderful interview with Larry Nichols, executive chairman of Devon Energy, about the legacy of George Mitchell, the relentless entrepreneur who perfected the technology—known as hydraulic fracturing—that made possible the recovery of vast reserves of oil and natural gas from previously inaccessible (i.e., uneconomic to extract from) geologic formations. Thanks in large part to Mitchell’s work, there’s been a much-reported rebound in American energy production. Mitchell died on July 26^th.

Mr. Nichols is well qualified to comment on Mitchell’s lasting impact. Devon Energy was an innovator in horizontal drilling, which, when coupled with hydraulic fracturing, precipitated the oil and gas boom. Indeed, in the early aughts, Devon invested in Mitchell, and together they pioneered the new technologies.

Highlights of the interview include: Mr. Nichols putting the lie to the mistaken contention that the federal government’s role was instrumental in the development of the technologies that led to the oil and gas boom; and, his belief that it would have been impossible for George Mitchell to have perfected hydraulic fracturing in today’s overbearing regulatory environment.

I highly recommend watching the whole interview here: