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Thursday, December 30, 2010

Global Natural Gas: A Growing Resource

Michael Ratner
Analyst in Energy Policy

The role of natural gas in the U.S. economy is expected to be a major part of the debate over energy policy in the 112th Congress. This report briefly explains key aspects of global natural gas markets, including supply and demand, as well as major U.S. developments.

Natural gas is considered a potential bridge fuel to a low carbon economy because it is cleaner burning than its hydrocarbon rivals coal and oil. Natural gas combustion emits about two-thirds less carbon dioxide than coal and one-quarter less than oil when consumed in a typical electric power plant. Natural gas combustion also emits less particulate matter, sulfur dioxide, and nitrogen oxides than coal or oil. Additionally, improved methods to extract natural gas from certain shale formations has significantly increased the resource profile of the United States, which has spurred other countries to try to develop shale gas. If the United States and other countries can bring large new volumes of natural gas to market, then natural gas could play a larger role in the world’s economy. Several key factors will determine whether significant new quantities of natural gas come to market, particularly unconventional natural gas resources. These factors include price, technical capability, environmental concerns, and political considerations. Many countries, both producing and consuming, are watching how the development of U.S. unconventional natural gas resources evolves. 

Key Points:
  • Natural gas is likely to play a greater role in the world energy mix given its growing resource base and its relatively low carbon emissions compared to other fossil fuels.
  • The world used over 100,000 billion cubic feet (bcf) of natural gas in 2009, of which the United States consumed almost 23,000 bcf, the most of any country. Between 2008 and 2009, world consumption declined about 2.6%, while U.S. consumption dropped 1.6%, or 388 bcf.
  • In 2009, almost 84% of the natural gas the United States consumed was from domestic production. Another 14 % of consumption was met with Canadian imports. Liquefied natural gas (LNG), mainly from Trinidad & Tobago and Egypt, comprised just 2% of consumption. 
  • U.S. unconventional natural gas reserves and production, particularly shale gas, have grown rapidly in recent years. In 2009, shale gas reserves increased 76%, while production rose 47%, according to a recent U.S. Energy Information Administration (EIA) report. The new shale gas resources have changed the U.S. natural gas position from net importer to potentially a net exporter. Other countries are now exploring their own shale gas resources.
Date of Report: December 22, 2010
Number of Pages: 23
Order Number: R41543
Price: $29.95

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Wednesday, December 22, 2010

Keeping America’s Pipelines Safe and Secure: Key Issues for Congress

Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Nearly half a million miles of pipeline transporting natural gas, oil, and other hazardous liquids crisscross the United States. While an efficient and fundamentally safe means of transport, many pipelines carry materials with the potential to cause public injury and environmental damage. The nation’s pipeline networks are also widespread and vulnerable to accidents and terrorist attack. The 2006 partial shutdown of the Prudhoe Bay, AK, oil field, and the 2010 pipeline accidents in San Bruno, CA, and Marshall, MI, have heightened congressional concern about pipeline risks. Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. While many stakeholders agree that federal pipeline safety programs have been on the right track, recent pipeline incidents suggest there continues to be room for improvement. Likewise the threat of terrorist attack on U.S. pipelines remains a concern.

The federal pipeline safety program was authorized through the fiscal year ending September 30, 2010, and is currently operating under a continuing resolution. S. 3856 would reauthorize the program through FY2014. Both the House and Senate versions of the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2011 (H.R. 5850 and S. 3644) would provide appropriations for the federal pipeline safety program for FY2011.

The 111
th Congress is considering new legislation to improve the safety and security of the U.S. pipeline network. H.R. 6008 would require pipeline operators to provide immediate telephonic notice of a pipeline release to federal emergency response officials and would increase civil penalties for pipeline safety violations. S. 3824 would increase the number of federal pipeline safety inspectors, would require automatic shutoff valves for natural gas pipelines, and would mandate internal inspections of transmission pipelines, among other provisions. S. 3856 would increase federal pipeline safety inspectors, would require automatic or remote controlled shutoff valves on new gas pipelines, would require public access to pipeline emergency response plans, and would increase civil penalties for pipeline safety violations, among other provisions. H.R. 6295 would require automatic or remote shut-off valves for many pipelines and public disclosure of pipeline locations, among other provisions. S. 1333 would change natural gas pipeline integrity assessment intervals. H.R. 2220 would mandate a new federal pipeline security study.

As Congress debates reauthorization of the federal pipeline safety program and oversees the federal role in pipeline security, key questions may be raised concerning pipeline agency staff resources, automatic pipeline shutoff valves, penalties for pipeline safety violations, and the possible need for pipeline security regulations. In addition to these specific issues, Congress may wish to assess how the various elements of U.S. pipeline safety and security activity fit together in the nation’s overall strategy to protect transportation infrastructure. Pipeline safety and security necessarily involve many groups: federal agencies, oil and gas pipeline associations, large and small pipeline operators, and local communities. Reviewing how these groups work together to achieve common goals could be an oversight challenge for Congress.

Date of Report: December 13, 2010
Number of Pages: 32
Order Number: R41536
Price: $29.95

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Sunday, December 12, 2010

Cuba’s Offshore Oil Development: Background and U.S. Policy Considerations

Neelesh Nerurkar
Specialist in Energy Policy

Mark P. Sullivan
Specialist in Latin American Affairs

Cuba is moving toward development of its offshore oil resources. While the country has proven oil reserves of just 0.1 billion barrels, the U.S. Geological Survey estimates that offshore reserves in the North Cuba Basin could contain an additional 4.6 billion barrels of undiscovered technically recoverable crude oil. The Spanish oil company Repsol, in a consortium with Norway’s Statoil and India’s Oil and Natural Gas Corporation, is expected to begin offshore exploratory drilling in 2011, and a number of other companies are considering exploratory drilling. At present, Cuba has six offshore projects with foreign oil companies while two more projects are being negotiated. If oil is found, some experts estimate that it would take at least three to five years before production would begin. While it is unclear whether offshore oil production could result in Cuba becoming a net oil exporter, it could reduce Cuba’s current dependence on Venezuela for oil supplies.

In the aftermath of the Deepwater Horizon oil spill in the Gulf of Mexico, some Members of Congress and others have expressed concern about Cuba’s development of its deepwater petroleum reserves so close to the United States. They are concerned about oil spill risks and about the status of disaster preparedness and coordination with the United States in the event of an oil spill. Dealing with these challenges is made more difficult because of the longstanding poor state of relations between Cuba and the United States. If an oil spill did occur in the waters northwest of Cuba, currents in the Florida Straits could carry the oil to U.S. waters and coastal areas in Florida, although a number of factors would determine the potential environmental impact. If significant amounts of oil did reach U.S. waters, marine and coastal resources in southern Florida could be at risk.

With regard to disaster response coordination, the United States and Cuba are not parties to a bilateral agreement on oil spills. While U.S. oil spill mitigation companies can be licensed by the Treasury and Commerce Departments to provide support and equipment in the event of an oil spill, some energy and policy analysts have called for the Administration to ease regulatory restrictions on the transfer of U.S. equipment and personnel to Cuba that would be needed to combat a spill. Some have also called for more formal U.S.-Cuban government cooperation and planning to minimize potential damage from an oil spill. Similar U.S. cooperation with Mexico could be a potential model for U.S.-Cuban cooperation, while two multilateral agreements on oil spills under the auspices of the International Maritime Organization also could provide a mechanism for some U.S.-Cuban engagement on oil pollution preparedness and response.

Beyond U.S.-Cuban cooperation in anticipation of an oil spill, some U.S. businesses and policy groups have called for Congress and the Administration to allow U.S. investment in Cuba’s offshore oil sector, while others oppose any support for the development of Cuba’s offshore oil reserves. In the 111th Congress, legislative initiatives reflected two contrasting policy approaches toward Cuba’s development of its offshore oil reserves. One approach, as reflected in S. 774, H.R. 1918, and S. 1517, would allow for U.S. involvement in Cuba’s offshore oil sector, while a second approach, as reflected in H.R. 5620, would impose sanctions on foreign companies and individuals who assist the development of Cuba’s petroleum resources and would not affect current prohibitions on U.S. firms’ economic dealings with Cuba. Interest in Cuba’s offshore oil development is likely to continue in the 112th Congress, especially if exploratory drilling begins as anticipated in 2011.

Date of Report: November 29, 2010
Number of Pages: 19
Order Number: R41522
Price: $29.95

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U.S. Fossil Fuel Resources: Terminology, Reporting, and Summary

Gene Whitney
Section Research Manager

Carl E. Behrens
Specialist in Energy Policy

Carol Glover
Information Research Specialist

Discussions of U.S. and global energy supply refer to oil, natural gas, and coal using several terms that may be unfamiliar to some. The terms used to describe different types of fossil fuels have technically precise definitions, and misunderstanding or misuse of these terms may lead to errors and confusion in estimating energy available or making comparisons among fuels, regions, or nations.

Fossil fuels are categorized, classified, and named using a number of variables. Naturally occurring deposits of any material, whether it is fossil fuels, gold, or timber, comprise a broad spectrum of concentration, quality, and accessibility (geologic, technical, and cultural). Terminology is adopted to reflect those characteristics.

For oil and natural gas, a major distinction in measuring quantities of energy commodities is made between proved reserves and undiscovered resources. Proved reserves are those amounts of oil, natural gas, or coal that have been discovered and defined, typically by drilling wells or other exploratory measures, and which can be economically recovered. In the United States, proved reserves are typically measured by private companies, who report their findings to the Securities and Exchange Commission because they are considered capital assets. In addition to the volumes of proved reserves are deposits of oil and gas that have not yet been discovered, which are called undiscovered resources. The term has a specific meaning: undiscovered resources are amounts of oil and gas estimated to exist in unexplored areas. If they are considered to be recoverable using existing production technologies, they are referred to as undiscovered technically recoverable resources (UTRR). In-place resources are intended to represent all of the oil, natural gas, or coal contained in a formation or basin without regard to technical or economic recoverability.

In the United States, certain institutions are designated to determine and report quantities of oil, natural gas, and coal reserves and undiscovered resources. Other institutions also estimate these values, but differences in estimating methodology can produce significantly different values.

U.S. proved reserves of oil total 19.1 billion barrels, reserves of natural gas total 244.7 trillion cubic feet, and natural gas liquids reserves of 9.3 billion barrels. Undiscovered technically recoverable oil in the United States is 145.5 billion barrels, and undiscovered technically recoverable natural gas is 1,162.7 trillion cubic feet. The demonstrated reserve base for coal is 488 billion short tons, of which 261 billion short tons are considered technically recoverable.

Comparisons of different fuel types can be made by converting all of them to a common unit, such as barrels of oil equivalent, based on their heat content. The amounts of fossil fuels found in other nations as reserves and undiscovered resources are much more difficult to determine reliably because data are sometimes lacking or unreliable, but gross comparisons of national endowments can be made using available data

Date of Report: November 30, 2010
Number of Pages: 28
Order Number: R40872
Price: $29.95

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Friday, December 3, 2010

The U.S. Oil Refining Industry: Background in Changing Markets and Fuel Policies

Anthony Andrews
Specialist in Energy and Defense Policy

Robert Pirog
Specialist in Energy Economics

Molly F. Sherlock
Analyst in Economics

A decade ago, 158 refineries operated in the United States and its territories and sporadic refinery outages led many policy makers to advocate new refinery construction. Fears that crude oil production was in decline also led to policies promoting alternative fuels and increased vehicle fuel efficiency. Since the summer 2008 peak in crude oil prices, however, the U.S. demand for refined petroleum products has declined, and the outlook for the petroleum refining industry in the United States has changed.

In response to weak demand for gasoline and other refined products, refinery operators have begun cutting back capacity, idling, and, in a few cases, permanently closing their refineries. By current count, 124 refineries now produce fuel in addition to 13 refineries that produce lubricating oils and asphalt. Even as the number of refineries has decreased, operable refining capacity has actually increased over the past decade, from 16.5 million barrels/day to over 18 million barrels/day. Cyclical economic factors aside, U.S. refiners now face the potential of long-term decreased demand for their products. This is the result of legislative and regulatory efforts that were originally intended, in part, to accommodate the growing demand for petroleum products, but which may now displace some of that demand. These efforts include such policies as increasing the volume of ethanol in the gasoline supply, improving vehicle fuel efficiency, and encouraging the purchase of vehicles powered by natural gas or electricity.

Since the Clean Air Act Amendments, 15 distinctly formulated boutique fuels are required in portions of 12 states. H.R. 392, the Boutique Fuel Reduction Act of 2009, would further amend` the Clean Air Act to add temporary waivers for boutique fuels due to unexpected problems with distribution and give EPA authority to reduce the number of boutique fuels. The 2005 Energy Policy Act created the Renewable Fuel Program to substitute increasing volumes of renewable fuel for gasoline. The 2007 Energy Independence and Security Act expanded the program to cover transportation fuels in general, extended the program to calendar year 2022, and increased the target volume to 36 billion gallons renewable fuel annually. The 2008 Food, Conservation and Energy Act of 2008 reduced some of the federal subsidies and tax breaks favoring ethanol production. A 2007U.S. Supreme Court ruling found that EPA has the authority under the Clean Air Act to regulate carbon dioxide (CO2) emissions from automobiles. Though the ruling applied to automobiles, it had wider implications. In response to the FY2008 Consolidated Appropriations Act (H.R. 2764; P.L. 110-161), EPA issued the Mandatory Reporting of Greenhouse Gases Rule that requires suppliers of fossil fuels or industrial greenhouse gases (GHG), manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHG emissions to submit annual reports to EPA. H.R. 2454, The American Clean Energy and Security Act of 2009 (passed in the House June 26, 2009) would amend the Clean Air Act by establishing a “cap-and-trade” system designed to reduce greenhouse gas emissions (GHG) and would cap emissions from refineries and allow trading of emissions permits (“allowances”). As proposed, H.R. 2454 would require U.S. refiners to purchase emission credits for both their stationary emissions and the subsequent combustion of their fuels (predominantly consumed in the transportation sector). S. 3663, introduced in August 2010, would establish a Natural Gas Vehicle and Infrastructure Development Program to promote natural gas as an alternative transportation fuel in order to reduce domestic oil use.

The prospect of declining motor-fuel demand may persuade operators to idle, consolidate, or permanently close refineries.

Date of Report: November 22, 2010
Number of Pages: 43
Order Number: R41478
Price: $29.95

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