Energy

EPA Says Its Climate Plan Will Help Natural Gas Beat Out Coal — So Why Does the Biggest Oil-and-Gas Lobby Hate It?

They fear their industry is the next target for strict rules.

WATFORD CITY, ND - JULY 30: Pumpjacks are seen in an aerial view in the early morning hours of July 30, 2013 near Watford City, North Dakota. North Dakota has seen a boom in oil production thanks to new drilling techniques including horizontal drilling and hydraulic fracturing. 
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Ben Geman
June 4, 2014, 12:08 p.m.

Natural gas would be a winner in coming years under the Environmental Protection Agency’s plan to cut carbon emissions from power plants, a proposal that would push electricity production away from coal toward cleaner-burning gas and renewables.

But that doesn’t mean the Beltway’s most powerful oil-and-gas-industry lobbying group is going to endorse the proposal, or even stay neutral. Instead, the American Petroleum Institute has come out guns blazing, even though the rule is projected to boost demand for natural gas for several years (and the U.S. barely uses oil to make electricity anymore).

“The uncertainty created will have a chilling effect on energy investment that could cost jobs, raise electricity prices, and make energy less reliable,” API President Jack Gerard said.

But in contrast to API, America’s Natural Gas Alliance, a group that represents large independent gas producers, offered an agnostic take that steered clear of any criticism and notes that ANGA looks forward to working with the administration on the rule as the “process moves forward.”

“As we consider EPA’s proposal with our members and with our power-generation customers, we agree the rules should be flexible and fair, and we believe they should recognize the ability of natural gas to play an increasing role in the delivery of reliable, safe, and clean power,” said ANGA President Marty Durbin.

Concerns among refining and petrochemical interests are likely among the major reasons why API, which represents all facets of the oil-and-gas industry, is taking such a strong position.

Electricity is the “second-largest cost component for the refining sector and is also a major cost for petrochemical facilities,” according to Charles Drevna, head of a separate refining industry trade group — American Fuel and Petrochemical Manufacturers — that also opposes the rule.

And beyond concerns about higher power prices expected under EPA’s rule, industry sources say the petroleum industry has another motivation to battle regulation of carbon emissions under the Clean Air Act: They could be next.

For now, EPA has punted on an earlier pledge to write carbon emissions standards for refineries, the nation’s second-largest source of industrial carbon pollution after power plants. But lobbyists are still bracing for that fight to happen eventually.

“Cheering [EPA] now because they’ll offer a temporary boost to one product would look pretty silly in a few years when the same agency proposes a similar restriction on refineries or even upstream activities,” said one gas-industry source. (“Upstream” refers to oil-and-gas exploration and production.)

“There are some companies within the oil-and-gas industry that are willing to attack coal, but most of them are not. In this particular instance [EPA’s carbon rule], I think the energy industry sees not just a limited threat to one power source, but the beginning of a wave of restrictions on greenhouse gases,” this source adds.

And more broadly, many fossil-fuel interests see EPA, in the main, as an adversary when its entire regulatory agenda is looked at in sum.

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