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Wednesday, March 28, 2012

Clean Energy Standard: Potential Qualifying Energy Sources


Kelsi Bracmort, Coordinator
Specialist in Agricultural Conservation and Natural Resources Policy

Phillip Brown
Specialist in Energy Policy

Peter Folger
Specialist in Energy and Natural Resources Policy

Mark Holt
Specialist in Energy Policy

Michael Ratner
Specialist in Energy Policy

Fred Sissine
Specialist in Energy Policy


A clean energy standard (CES) has been identified as one possible legislative option to encourage a more diverse domestic electricity portfolio. A CES could require certain electricity providers to obtain a portion of their electricity from qualifying clean energy sources. A CES is broader than a renewable energy standard (RES), including “clean” energy sources along with renewable sources. The RES has been a topic of legislative attention since at least the 105th Congress. A CES gained legislative attention with the introduction of the Clean Energy Standard Act of 2012 (S. 2146). The bill would require large utilities to sell a percentage of their electricity from clean energy sources—at least 24% in 2015 and gradually increasing over time to 84% by 2035. Some assert that a CES could lead to economic growth, reduce greenhouse gas emissions, and secure U.S. leadership in clean energy technology. Others argue that it could raise electricity prices, necessitate additional financial investment in grid infrastructure, and—in some cases—depend on energy technologies that are not yet established for widespread commercial-scale use.

Without a CES, some clean energy sources—mostly the renewables—may face barriers to penetrating and gaining traction in the electricity market. Renewable sources (including conventional hydroelectric) constituted roughly 12% of total electric power net generation in 2011. Analysis from the Energy Information Administration (EIA) suggests that without a CES or RES, electricity generation for renewable sources (including conventional hydroelectric) will grow from 10% in 2010 to 16% 2035. EIA analysis indicates that most of the growth in renewable electricity generation, excluding hydroelectricity, in the power sector from 2010 to 2035 will consist of generation from wind and biomass facilities.

Policy, economic, and technical considerations arise when evaluating CES options. A primary question in the CES legislative discussion is which energy sources would be eligible to participate. Congress could take into account the following clean energy source selection criteria: geographic location of the energy source, energy source supply levels, job creation associated with the energy source, the implementation time frame, environmental regulations (existing and forthcoming), and cost. Each potential qualifying energy source has advantages and disadvantages, and has different natural resource, economic, and technical challenges. For instance, the cost to build, operate, and maintain clean energy power plants varies widely, from $63 (natural gas advanced combined-cycle) to $312 (solar thermal) per megawatt-hour. Moreover, some of the sources proposed have encountered public opposition (e.g., nuclear energy). Many proposed sources (e.g., solar) have received government support in the form of research and development assistance or favorable tax treatment. In some cases, the technology that might allow certain sources to qualify for a CES is not yet at commercial scale (e.g., coalfired plants equipped with carbon capture and sequestration). Cross-cutting issues including electricity transmission, variability, and material cost and supply are associated with large-scale electricity production for many of the commonly discussed clean energy sources.

Many questions will need to be answered if a CES is established. How much clean electricity can be generated from each qualifying energy source, given the proposed CES time frame? Should a carbon accounting parameter be assigned to each source? Will a time come when some resources (e.g., wind, solar) used to generate clean electricity cease to be considered a “free” resource? Should energy efficiency be included in a CES, and if so, how should it be included? How would a CES interact with state renewable electricity requirements? Who would assume the costs of new transmission capacity?



Date of Report: March 13, 2012
Number of Pages: 26
Order Number: R41797
Price: $29.95

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Monday, March 26, 2012

Keystone XL Pipeline Project: Key Issues


Paul W. Parfomak
Specialist in Energy and Infrastructure Policy

Neelesh Nerurkar
Specialist in Energy Policy

Linda Luther
Analyst in Environmental Policy

Adam Vann
Legislative Attorney


In 2008, Canadian pipeline company TransCanada filed an application with the U.S. Department of State to build the Keystone XL pipeline, which would transport crude oil from the oil sands region of Alberta, Canada, to refineries on the U.S. Gulf Coast. Keystone XL would ultimately have the capacity to transport 830,000 barrels per day, delivering crude oil to the market hub at Cushing, OK, and further to points in Texas. TransCanada plans to build a pipeline spur so that oil from the Bakken formation in Montana and North Dakota can also be carried on Keystone XL.

As a facility connecting the United States with a foreign country, the pipeline requires a Presidential Permit from the State Department. In evaluating such a permit application, after consultation with other relevant federal agencies and public input, the department must determine whether a proposal is in the “national interest.” This determination considers the project’s potential effects on the environment, economy, energy security, foreign policy, and other factors. Pursuant to the National Environmental Policy Act, the State Department considered potential environmental impacts of the proposed Keystone XL project in a final Environmental Impact Statement (EIS) issued on August 26, 2011. A wide range of public comments both for and against the pipeline were received during a subsequent 90-day review period. The State Department noted, in particular, concerns about the pipeline’s route through the Sand Hills region of Nebraska, an extensive sand dune formation with highly porous soil and shallow groundwater.

The Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112-78) included provisions requiring the Secretary of State to issue a permit for the project within 60 days, unless the President determined the project not to be in the national interest. On January 18, 2012, the State Department, with the President’s consent, denied the Keystone XL permit, citing insufficient time under the 60-day deadline to obtain all the necessary information to assess the reconfigured project. On February 27, 2012, TransCanada announced that it would proceed with development of the Keystone XL segment connecting Cushing, OK, to the Gulf Coast as a stand-alone project not requiring a Presidential Permit. The company also informed the State Department that it intended to file a new Presidential Permit application “in the near future” for the segment of the Keystone XL project from the Canadian order to Steele City, NE, with a future supplement to the application specifying an alternative route in Nebraska. The company has stated that it expects to establish the new route by October 2012. The Obama administration supports TransCanada’s plan to proceed with the southernmost segment of the Keystone XL pipeline while reserving judgment on a reconfigured northern segment until completion of a new Presidential Permit review.

The North American Energy Access Act (H.R. 3548) would transfer the permitting authority over the Keystone XL pipeline project to the Federal Energy Regulatory Commission, requiring the commission to issue a permit for the project within 30 days of enactment. The Keystone For a Secure Tomorrow Act (H.R. 3811) would immediately approve the original permit application filed by TransCanada. S. 2041 and the Energizing America through Employment Act (H.R. 4000) would similarly approve the original permit upon passage. All four bills include provisions allowing for later alteration of the pipeline route in Nebraska. S. 2100 would suspend sales of petroleum products from the Strategic Petroleum Reserve until issuance of a Presidential Permit for the Keystone XL project. Changing, or eliminating altogether, the State Department’s role in issuing cross-border infrastructure permits may raise questions about the President’s executive authority, however. H.R. 3900 would seek to ensure that crude oil transported by the Keystone XL pipeline, or resulting refined petroleum products, would be sold only into U.S. markets, but could raise issues related to international trade agreements.



Date of Report: March 13, 2012
Number of Pages: 31
Order Number: R41668
Price: $29.95

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Friday, March 23, 2012

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. Recent pipeline accidents in Marshall, MI, San Bruno, CA, Allentown, PA, and Laurel, MT, have heightened congressional concern about pipeline risks and drawn criticism from the National Transportation Safety Board. Both government and industry have taken numerous steps to improve pipeline safety and security over the last 10 years. Nonetheless, while many stakeholders agree that federal pipeline safety programs have been on the right track, the spate of recent pipeline incidents suggest there continues to be significant room for improvement. Likewise, the threat of terrorist attack remains a concern.

The federal pipeline safety program is authorized through the fiscal year ending September 30, 2015, under the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112-90) which was signed by President Obama on January 3, 2012. The act contains a broad range of provisions addressing pipeline safety and security. Among the most significant are provisions that could increase the number of federal pipeline safety inspectors, require automatic shutoff valves for transmission pipelines, mandate verification of maximum allowable operating pressure for gas transmission pipelines, increase civil penalties for pipeline safety violations, and mandate reviews of diluted bitumen pipeline regulation. The Transportation Security Administration Authorization Act of 2011 (H.R. 3011) would mandate a study regarding the relative roles and responsibilities of the Department of Homeland Security and the Department of Transportation with respect to pipeline security.

As it oversees the federal pipeline safety program and the federal role in pipeline security, Congress may wish to assess how the various elements of U.S. pipeline safety and security 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: March
13, 2012
Number of Pages:
36
Order Number: R
41536
Price: $29.95

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Europe’s Energy Security: Options and Challenges to Natural Gas Supply Diversification


Michael Ratner, Coordinator
Specialist in Energy Policy

Paul Belkin
Analyst in European Affairs

Jim Nichol
Specialist in Russian and Eurasian Affairs

Steven Woehrel
Specialist in European Affairs


Europe as a major energy consumer faces a number of challenges when addressing future energy needs. Among these challenges are a rapidly rising global demand and competition for energy resources from emerging economies such as China and India, persistent instability in energy producing regions such as the Middle East, a fragmented internal European energy market, and a growing need to shift fuels in order to address climate change policy. As a result, energy supply security has become a key concern for European nations and the European Union (EU).

A key element of the EU’s energy supply strategy has been to shift to a greater use of natural gas. Europe as a whole is a major importer of natural gas. Russia is Europe’s most important natural gas supplier, accounting for 34% of Europe’s natural gas imports. Europe’s natural gas consumption is projected to grow while its own domestic natural gas production continues to decline. If trends continue as projected, Europe’s dependence on Russia as a supplier is likely to grow. And, while it could be in Europe’s interest to explore alternative sources for its natural gas needs, it is uncertain whether Europe as a whole can, or is willing to, replace a significant level of imports of Russian natural gas. Some European countries that feel vulnerable to potential Russian energy supply manipulation may work harder to achieve diversification than others.

Russia has not been idle when it comes to protecting its share of the European natural gas market. Moscow, including the state-controlled company Gazprom, has attempted to defeat Europeanbacked alternatives to pipelines it controls by proposing competing pipeline projects and attempting to co-opt European companies by offering them stakes in those and other projects. It has attempted to dissuade potential suppliers (especially those in Central Asia) from participating in the European-supported plans. Moscow has also raised environmental concerns in an effort to stymie other alternatives to its supplies, such as unconventional natural gas.

Successive U.S. administrations and Congresses have viewed European energy security as a U.S. national interest. Promoting diversification of Europe’s natural gas supplies, especially in recent years through the development of a southern European corridor, as an alternative to Russian natural gas has been the mandate of the State Department’s Special Envoy for Eurasian Energy. The George W. Bush Administration viewed the issue in geopolitical terms and sharply criticized Russia for using energy supplies as a political tool to influence other countries. The Obama Administration has also called for diversification, but has refrained from openly expressing concerns about Russia’s regional energy policy, perhaps in order to avoid jeopardizing the “reset” of ties with Moscow. Additionally, a change in tenor from the Obama Administration towards the Nabucco pipeline project may indicate waning interest in the southern corridor strategy.

This report focuses on potential approaches that Europe might employ to diversify its sources of natural gas supply, and Russia’s role, as well as identifying some of the issues hindering efforts to develop alternative suppliers of natural gas. The report assesses the potential suppliers of natural gas to Europe and the short- to medium-term hurdles needed to be overcome for those suppliers to be credible, long-term providers of natural gas to Europe. The report looks at North Africa, probably the most realistic supply alternative in the near-term, but notes that the region will have to resolve its current political and economic instability as well as the internal structural changes to the natural gas industry. Central Asia, which may have the greatest amounts of natural gas, would need to construct lengthy pipelines through multiple countries to move its natural gas to Europe.



Date of Report: March
13, 2012
Number of Pages:
32
Order Number: R
42405
Price: $29.95

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Tuesday, March 6, 2012

Oil and Natural Gas Industry Tax Issues in the FY2013 Budget Proposal


Robert Pirog
Specialist in Energy Economics

The Obama Administration, in the FY2013 budget proposal, seeks to eliminate certain tax expenditures that benefit the oil and natural gas industries. Supporters of these tax provisions see them as comparable to those affecting other industries and supporting the production of domestic oil and natural gas resources. Opponents of the provisions see these tax expenditures as subsidies to a profitable industry the government can ill afford, and impediments to the development of clean energy alternatives.

The FY2013 budget proposal outlines a set of proposals, framed as the termination of tax preferences, that would potentially increase the taxes paid by the oil and natural gas industries, especially those of the independent producers. These proposals include repeal of the enhanced oil recovery and marginal well tax credits, repeal of the current expensing of intangible drilling costs provision, repeal of the deduction for tertiary injectants, repeal of the passive loss exception for working interests in oil and natural gas properties, elimination of the manufacturing tax deduction for oil and natural gas companies, increasing the amortization period for certain exploration expenses, and repeal of the percentage depletion allowance for independent oil and natural gas producers. In addition, a variety of increased inspection fees and other charges that would generate more revenue for the Department of the Interior (DOI) are included in the budget proposal.

The Administration estimates that the tax changes outlined in the budget proposal would provide $22.133 billion in revenues over the period FY2013 to FY2017, and $38.56 billion from FY2013 to FY2022. These changes, if enacted by Congress, also would reduce the tax advantage of independent oil and natural gas companies over the major oil companies. They would also raise the cost of exploration and production, with the possible result of higher consumer prices and more slowly increasing domestic production.



Date of Report: February 27, 2012
Number of Pages: 12
Order Number: R42374
Price: $29.95

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Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.