New York state drafts energy plan

While Congress continues to debate cap-and-trade proposals, some state governments are moving forward on their own energy plans. The latest example is New York state, which issued a draft policy setting forth a 10-year plan.

The New York plan identifies energy efficiency as an economic way to expand its clean energy economy.

“In the short-run, investments in energy efficiency reduce energy use and bills for participating customers,” said the plan’s executive summary. “In the long-run, a significant reduction in electricity demand has been shown to put downward pressure on wholesale electricity prices, reduce price volatility, and reduce emissions of carbon dioxide and other air pollutants.”

The draft plan notes efficiency improvements in transportation also would reduce greenhouse gas emissions. New York Gov. David A. Paterson issued an executive order last year calling for a state energy plan, which could be finalized by Dec. 31, 2009.

The plan calls for reducing electricity use by 15% below 2015 forecasts and increasing the proportion of renewable generation to 30% of electricity demand by 2015. Andrew C. Byers, an associate vice-president with Black & Veatch, believes that it could prove to be a stretch for New York to meet its renewable power goal.

“Although renewables make up about 21% of the state’s electricity already, large-scale hydropower accounts for 19% while wind and biomass are less than 2% combined,” Byers wrote in a recent Black & Veatch Pathfinder newsletter.

“Since the state’s hydropower resources are already developed, getting to 30% will require adding five times as much power from other renewables, which are much more expensive than traditional fossil fuel generation,” Byers said. “Skeptics fear that this means much higher subsidies, paid for through increases in ratepayers’ bills.”

Decades ago, people promoted conservation. Today, people are promoting energy efficiency. But as Byers points out, it remains to be seen whether the goals can be met in the timetables being proposed.

Proposed rule changes for US OCS operators

The US Minerals Management Service has proposed a rule that could mean more reporting requirements for operators of mobile offshore drilling units.

MMS proposed a safety and environmental system (SEMS) requirement for oil and gas operations on the Outer Continental Shelf.

“Though not directly addressed in this rulemaking, MODUs will likely feel its effect via the operator’s accountability for contractors and subcontractors,” the International Association of Drilling Contractors said in its August Drillbits newsletter.

The SEMS would consist of four parts: hazards analysis, management of change, operating procedures, and mechanical integrity. IADC believes the proposed SEMS rule could increase injury and illness record-keeping requirements.

Specifically, IADC believes the proposal means that the MODU owner needs to work with the operator to:
--Conduct a job hazard analysis to identify and evaluate hazards of all tasks for drilling operations.
--Review all operating procedure policies to ensure they reflect current practices.
--Verify procedures are in place to ensure equipment used in drilling operations are designed, fabricated, installed, and tested in a manner consistent with service requirements, manufacturer’s recommendations, and safety standards to promote safe and environmentally sound operations.

ASSE recognizes oil and gas practice specialty

The oil and gas safety community has established its own practice specialty within the American Society of Safety Engineers.

The process took a couple years, starting out with a meeting of four people over dinner. This resulted in the formation of an oil and gas branch that was sponsored by ASSE’s transportation practice specialty.

The oil and gas branch actively recruited members and sustained steady growth despite the distractions of active hurricane seasons that brought Hurricanes Katrina, Rita, Gustave, and Ike to the Gulf of Mexico.

The ASSE Council of Practice Specialties gave its blessing to an oil and gas practice specialty after the oil and gas branch had grown to more than 500 members by Oct. 31, 2008.

In June 2009, the oil and gas practice specialty scheduled an organizational meeting during the ASSE safety conference in San Antonio. Organizers say the practice specialty covers a large, diverse group of businesses including:
--Drilling, exploration, and development
--Gathering
--LNG production, storage, transportation, and distribution
--LPG operations
--Offshore operations
--Oil and gas equipment and services
--Oil and gas pipelines
--Refining and marketing

It's hard to replace energy infrastructure

Energy infrastructure is not easily replaced or retired from service, notes a Baker Institute report entitled “Sustainable US Policy Options to Address Climate Change: Highlights of the Debate.” The Baker Institute released the report in June outlining conclusions from climate change conferences that it organized on its campus within Rice University in Houston.

The 15-page report contains a lot of detailed information, yet it’s the infrastructure sentence that caught my attention. Despite extensive discussions nationwide about emerging climate policy, I am waiting to hear more about how the logistics of energy infrastructure will fit within any new policy.

Can the fuels of the future be distributed and marketed using existing refineries, pipelines, and service stations? This is where science and technology development will prove to be key, and it’s where the involvement of oil companies will prove to be key.

Steve Koonin, chief scientist at BP PLC, participated in a Baker Institute conference on climate policy last year. He said the need for adoption of climate policy is urgent because energy infrastructure is not easily replaced or retired.

“Apart from universality, greenhouse gas policies must also be timely—one of the defining characteristics of the energy infrastructure is its longevity,” Koonin said. “Power plants last 50 years, automobiles last 20 years, and buildings in which half the world’s energy is used last about 100 years.”

He noted future GHG emissions are being locked in for decades by infrastructure built today. Hence, the largest international corporations must be involved in GHG reductions and in figuring out the logistics for the fuels of the future.

“Materiality means that large corporations must be actively involved in GHG reductions, since it is through them that societies get things done, at least in the developed world,” Koonin said.

Energy’s buzzwords are changing

Part of my job as an Oil & Gas Journal reporter is to watch alternate energy sources evolve into commercial ventures. Clean technology used to be a common phrase among analysts, but another phrase appears to be in the making.

Michele Ashby, a former mining analyst and chief executive officer of MINE LLC, organizes investor meetings, including one called the Modern Energy forum. Modern energy is an umbrella term for all types of energy that will be needed in the future, Ashby said during a recent telephone call from her Denver office.

“This includes solar, wind, wave, hydro, biofuels, biomass, geothermal, nuclear, magnetics, energy storage, conservation, and new ways of generating and conserving energy we have yet to discover,” Ashby said.

Increasing demand for modern energy means venture capitalists and angel investors are asking for more information about what is available, how much it costs, and its carbon footprint, she said.

How are fossil and nonfossil companies and investors learning about one another? Through conferences and green energy networking events, Ashby said. She said Denver has 14 different organizations for green networking.

Ashby believes oil companies will help integrate nonfossil fuels with existing fuel distribution and marketing systems. She foresees more oil companies investing in and collaborating with modern energy companies.

A recent example is ExxonMobil Corp.’s $600 million investment into the development of algae-based biofuels. About half of that money goes toward internal expenses within ExxonMobil and half goes to Synthetic Genomics Inc.

The initial collaboration, expected to last 5-6 years, will study methods of growing algae and producing hydrocarbons that can be processed by a refinery into transportation fuels.

“Modern energy is a new market place with thousands of private companies and a few hundred public companies,” Ashby said. “Oil and gas companies have got the money to invest.”