Deciphering the US Natural Gas Market

Posted on Oct. 16, 2009

By Allen Brooks

 

In the last six weeks natural gas futures prices have jumped from a modern day low to nearly $5 per thousand cubic foot (Mcf) as commodity traders and investors started to cover their short positions in this fuel as the days moved closer to the beginning of the winter heating season. The jump in the gas price ends what has been an extended price slide that started back in summer of 2008 when prices were in excess of $13 per Mcf and early signs of the developing global recession emerged.

The traders and investors who have been covering their negative bets on natural gas prices have been motivated by signs the nascent U.S. economic recovery is gathering strength, especially among sectors such as automobiles and home construction that are large consumers of natural gas and its components as feedstocks for petrochemical materials. Additionally, there was the realization that the ratio of crude oil to natural gas prices, which at one point this summer stood at 27:1 (27.08) in contrast to the inherent energy- value ratio of 6:1, was way out of line historically and certainly unsustainable.

At the start of 2009, the oil-to-gas price ratio stood at slightly under 8:1 (7.94). It subsequently dropped in early January to the low so far for the year of 7:1 (6.79). Since that point the ratio has climbed steadily, reaching its peak on September 3rd. After falling to a recent low of 13.67, the ratio has bounced around due to volatility in both crude oil and natural gas prices, but it seems to be locked into a range of 14 to 15:1. The big question is with winter energy demand about to arrive will cold temperatures drive natural gas prices higher while at the same time crude oil prices remain stable, or possibly weaken further, given the continuing sluggish economic recovery?

Natural Gas Is Historically Cheap Even After Recovery; sources: EIA, PPHB

 When we look at the ratio of crude oil to natural gas prices for the past 15 years, it is interesting to note how the ratio has become more volatile and higher in recent years following almost a dozen years of a relatively stable relationship fluctuating around a 7:1 ratio as shown by the dark blue line from 1994 up until 2006 on the accompanying chart. The most recent years have demonstrated considerably greater price volatility between the two energy fuels. It appears the ratio averaged closer to 11:1 from 2006 through 2008. Volatility in the ratio has exploded in 2009. We have marked the low, high and current ratios with small red lines. It was this volatility and the extreme undervalued nature of natural gas that enticed more and more investors and traders into the commodity trade of the decade, which was to buy natural gas futures while at the same time selling crude oil futures. For significant parts of this year that trade didn’t work, but in recent weeks it has. Part of the success of the trade has been the calendar working against commodity traders who earlier in the year had sold natural gas futures with the expectation that gas prices would continue to fall. If they sold them early enough in the year, then they had profits locked in when natural gas prices started to climb. As time passes, bringing the start of the winter heating demand season closer, the impetus for higher natural gas prices strengthens. As a result, these commodity traders are now covering their short positions by buying near-month natural gas futures adding upward pressure to the gas price.

 If one looks at the current prices for physical deliveries of natural gas, there is almost a $1 spread between them and the current November futures price. If we average all the physical gas price points as of October 8th, contained in the Enerfax Daily schedule, it comes to $3.98 per Mcf. This is when the November natural gas futures price traded for $4.96, or a spread of $0.98. This spread is truly reflective of the near-term oversupply situation for natural gas and the optimistic demand outlook associated with the futures price.

 The nearly 100 percent increase in natural gas prices since the beginning of September seems counter-intuitive given the industry’s fundamentals. Natural gas storage facilities and pipelines are nearly all at full capacity forcing gas producers to involuntarily shut-in some of their current production. In other words, near-term industry fundamentals suggest the market should be experiencing weaker natural gas prices, which is consistent with the physical gas prices. On the other hand, the intermediate and longer term outlooks for natural gas demand point to higher prices in the future.

 The brighter over-the-horizon outlook reflects a universal belief that industrial demand for natural gas will recover with the economy and the recent growth in gas production volumes will slow and eventually reverse as the impact of the significant cutback in gas-focused drilling takes its toll on output.

 

Rigs Drilling For Gas Have Been Cut In Half; sources: Baker Hughes, PPHB

 From the peak in natural gas drilling activity, the gas-oriented rig count has been cut by more than half. In recent weeks the number of rigs drilling for natural gas has begun to rise. It is this rig count increase in the face of an essentially stable natural gas production level that has investors, commodity traders and industry people puzzled. While a simple graph of onshore natural gas production is showing a decline since late last year, overall gas production has remained relatively flat for the past nine months as production from the Gulf of Mexico has risen to offset the decline in onshore gas production.

 After dropping due to Hurricane Ike last September, Gulf of Mexico natural gas production has recovered and is now above the declining trend line that extends back to the start of 2005. In fact, current gas production is back to where it was at the start of the summer of 2008. The recovery and subsequent production growth of offshore natural gas helps explain why total U.S gas production has remained healthy in the face of weak prices for most of this year.

 What continues to be absent from the dynamics of the natural gas market is a sustained pickup in industrial gas demand. Increased heating-related gas demand is inevitable as winter arrives. The issue will be the amount of heating demand increase if other economically-sensitive gas demand remains dormant. A recent forecast by Matt Rogers of Commodity Weather Group suggests that the U.S. Northeast may experience its coldest winter in a decade due to the development of a weak El Niño in the southern Pacific Ocean region. Mr. Rogers point is that 75 percent of the time a weak El Niño develops, colder than normal temperatures are felt in this region of the country. Of course, there is a 25 percent chance that it won’t develop.

 When an El Niño develops, which it does periodically, the path of the upper atmosphere’s jet stream across North America is altered. Typically the alteration involves the jet stream dipping lower on the continent, i.e., shifting from Canada down into the United States, which allows Arctic cold weather to move further south than normally and into the Midwest and Northeast regions of the country. The challenge with predicting this jet stream shift is whether it becomes a more permanent shift during the winter months or only shifts occasionally.

 Even the Farmers’ Almanac is calling for a colder winter than in recent years for at least two-thirds of the nation. Importantly, that means more periods of bitter cold weather for two of the major populous regions of the U.S. That should boost natural gas demand. The one naysayer seems to be the Energy Information Administration (EIA) that is calling for heating bills this winter to be about 8 percent lower than last winter due to both milder temperatures and lower oil and gas prices. The EIA says it expects winter temperatures to average 1 percent warmer than last year – a sharp contrast to the independent weather forecasters. Maybe their forecast is tied to their view about the role of global warming. The real problem for the natural gas industry is that it really needs a recovery in industrial gas demand to help smooth out the industry’s supply/demand trends, and the latest government economic statistics suggest a mixed bag in that regard.

 So far this year, natural gas prices have fallen from $6 per Mcf at the start to a recent low of $2.50 before rallying back to $5 in recent days. These prices are a far cry from the $13-$14 per Mcf prices achieved in the halcyon days of the summer of 2008. The extended price decline, while partially explained by the fall in industrial gas demand, has largely been attributed to continued over-production of natural gas from the industry’s highly successful gas-shale drilling efforts that are spreading across the country. The growth in the past several years of natural gas production associated with these successful gas-shale developments reversed an eroding production profile for the industry that had existed for decades. The questions facing the industry now are whether gas-shale production will eventually overwhelm traditional natural gas drilling and production efforts and whether it is possible that the U.S. becomes a net gas exporter at some date in the future.

 To help arrest the growth in natural gas production and boost gas prices, producers have cut back their drilling activity by roughly 50 percent since last fall, but because gas-shale wells are so prolific compared to conventional gas wells, the drilling reduction appears to be having limited impact in slowing production growth. In the latest monthly data from the EIA’s industry survey, gas production does appear to be falling, at least on land. The challenge, however, is to try to decipher whether this production decline is real or involuntary.

 Natural gas storage as of September 25th was at 3,589 billion cubic feet (Bcf) out of an estimated industry-wide capacity of 4,000 Bcf. The problem is that natural gas storage facilities are spread around the country in the eastern and western consuming regions and in the gas producing areas. Additionally, there are limitations on the amount of natural gas that can be transported via pipelines from the producing regions to the consuming markets. As a result of these infrastructure limitations, the overall storage capacity ratio may not accurately reflect the true impact that high storage volumes are having on gas production.

 When we look only at industry-wide storage volumes plotted against total natural gas production, the surge in storage appears to be coinciding with a flattening, and now declining gas production.

 The level of gas storage volumes and the amount of injections shows even more clearly how the nearly full storage levels are impacting gas production.

 As total gas in storage has climbed to a record high, even after a roughly 100 Bcf of new storage capacity added, injection rates have fallen to low levels as there is little appetite or room for more gas. Some portion of the fall in current natural gas production has to be associated with involuntary production curtailments. The challenge is to determine how much of a fall-off is due to curtailments and how much is a fall in well productivity.

 To begin to look at this issue, we were provided data for monthly natural gas production in Texas. At this point we cannot vouch for its correctness, but we plotted it against the initial daily production by month for the state coming from the EIA’s Form 914 survey of gas producers. Lastly, we went to the Texas Railroad Commission web site and took only the 2009 monthly natural gas production data currently available, converted it to daily production figures, and plotted that data. The point of the exercise is to show that all these Texas natural gas production data sources are consistent in their pattern – steadily down. The interesting thing is to look at the shapes of the curves for 2009. The production data provided to us shows flat production for several months and then a steep decline. The EIA’s data shows a decline but at a more modest pace for all of 2009. The Texas Railroad Commission data shows a steady decline, but at a much faster rate than the EIA data. Unfortunately, these curves don’t answer the question: Is the decline due to falling natural gas well productive capacity, or is it a function of low prices, or is it due to involuntary cutbacks due to rapidly filling storage capacity?

 Since a lot of Texas natural gas tends to have higher finding and developing costs we suspect that some of the fall in gas production has been due to the weak gas prices. Producers must have been looking at their costs versus market prices and deciding to shut-in gas production. But some of the fall off in production has to be associated with older, less productive wells. Our guess is, however, that between these two explanations, the former is more important than the latter, but we cannot prove this conclusively.

 So while we wrestle to understand the current falling gas production figures, we are drawn back to looking at what the industry is doing with its drilling effort. The sharp fall-off in gas-oriented drilling rigs will eventually take a toll on production, but for the time being one has to be concerned about the recent uptick in the gas-oriented rig count before we know why production has fallen.

 At the same time, when we look at gas production compared to the number of rigs drilling horizontal wells, although we know not all rigs drilling horizontally are seeking natural gas, the strong upturn there could be a precursor of future gas supply challenges since the gas- shale wells, drilled horizontally, are so much more productive than conventionally drilled gas wells.

 The chart of gas production versus the total number of rigs drilling either directionally or horizontally shows a potentially less ominous supply challenge for the natural gas industry.

 The recovery in natural gas prices back to the $5 per Mcf level is certainly a positive for the industry. The latest production figures suggest that gas supplies are shrinking, but the weekly gas injection figures continue to reflect the impact of nearly full storage capacity. We can safely assume that gas production volumes are being reduced due to involuntary well shut-ins. What we don’t know is whether the industry is Wiley Coyote having run off the mountain road and is now suspended in air waiting to fall.

 Is natural gas production about to drop like a rock? Or is it possible we just need to get rid of some of the gas storage volumes with cold weather allowing producers to ramp back up their shut-in wells? That last scenario will come with current or higher winter gas prices. The former scenario suggests a natural gas price that rockets straight up. Unfortunately an exploding gas price will bring with it the seeds of the next price collapse.

 We reiterate our view that without a healthy economy the natural gas market will struggle to regain solid economic footings.

Our Perspective:

The market has presented great opportunites for companies to lock in their natural gas and electric prices in the deregulated market. Many of our clients have found unexpected savings.

Although the market has ticked up in the last couple of days, lack of demand have still kept the market price competitive from what you spent over the last 12 months.

If you have not looked into these opportunities, it still is not too late. Prices are dynamic and timing is everything.

Take the first step and ask the question, ” How much can we save?”

You might be surprised by the answer.

If you would like to know more about growing your bottom line from savings in the natural gas and electric market, feel free to contact us?

You may email george@hbsadvantage.com or leave a comment and we will contact you.

There are no upfront fees and all the savings fall to your bottom line!

 Allen Brooks is a managing director at Parks Paton Hoepfl & Brown, a Houston-based energy-focused investment banking firm. This article previously appeared in the October 13 issue of Musings From the Oil Patch.

2009 Electricity Prices Plummet

 

By REBECCA SMITH  as reported in Wall Street Journal

Slack demand for electricity across the U.S. is leading to some of the sharpest reductions in power prices in recent years, offering a break for consumers and businesses who just a year ago were getting crunched by massive electricity bills.

On Friday, the nation’s largest wholesale power market serving parts of 13 states east of the Rockies is expected to report that electricity demand fell 4.4% in the first half of the year. That helped to push down spot market prices by 40% during the first half of this year.

Wholesale electricity — power furnished to utilities and other big energy users — cost an average of $40 a megawatt hour in the region, down from $66.40 a year earlier. The price declines in this market, which extends from Delaware to Michigan, come on top of a 2.7% drop in energy use in 2008 over 2007.

The falloff in demand represents a reversal of what has been one of the steadiest trends in business. For decades, the utility sector could rely on a gradual increase in electricity demand. In 45 of the past 58 years, year-over-year growth exceeded 2%. In fact, there only have been five years since 1950 in which electricity demand has dropped in absolute terms.

But this year is shaping up to have the sharpest falloff in more than half a century, and coming on top of declines in 2008, could be the first period of consecutive annual declines since at least 1950.

Dramatic price reductions don’t immediately mean lower power bills for all consumers. That’s because many customers pay prices based on long-term contracts. But lower prices will have a softening effect over time.

In California and Texas, a combination of cheap natural gas and lower industrial demand is putting pressure on prices.

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“ Good timing for the U.S. to move away from its carbon obesity era. ”

—Barrie Harrop

In the Houston pricing zone, which has many power-gobbling refineries and chemical plants, the spot market price was $61.82 in June, versus $129.48 a megawatt hour a year earlier. Power demand in Texas is down 3.2% so far this year due to business contraction and reductions in employment which are causing many households to economize.

Just a year ago, many businesses and residential customers were reeling from electricity prices on the spot market that had spiked to historic highs, driven by high fuel prices and hot summer weather. Some businesses curtailed their operations because electricity and natural gas were too pricey.

But the flagging economy has resulted in a slump in demand that has jolted some energy markets. American Electric Power Co. and Southern Co., for example, both reported double-digit drops in industrial electricity use for the past quarter.

Meanwhile, natural gas, which strongly influences electricity prices, has fallen below $4 per million BTUs, or British thermal units. That’s down from $12 at last year’s peak.

For many businesses, the cost of electricity represents one of the few bright spots in a dismal economy. Andy Morgan, president of Pickard China Inc. in Antioch, Ill., which makes fine china, figures his electricity cost is down 30% to 40%.

Last year, when everything was spiking, he looked at different options — including negotiating a fixed-price contract for energy with a supplier. He says he held off and now he’s happy he did.

“We’ve definitely reaped savings,” says Mr. Morgan, adding that “especially in a down economy, you’ll take whatever you can get. That’s one of the few blessings during this storm.”

Slowdowns at major industrial companies such as Alcoa Inc. help account for the decline in electricity usage this year. The recession and drop in consumer demand for products that contain aluminum has caused the company to idle 20% of its smelting capacity world-wide this year.

In the U.S. the company has cut production at smelters, which are traditionally big energy users, in New York, Tennessee and Texas. Kevin Lowery, a company spokesman, said he did not believe that Alcoa has saved much money thus far because the company primarily purchases electricity through 25- to 35-year contracts.

Steel Dynamics Inc. is benefiting from lower pricing. The company operates five steel mills, with four purchasing electricity at spot market prices in Indiana, Virginia and West Virginia. The benefit, though, is smaller than it might be because the steelmaker is producing less steel this year.

“We’re producing fewer tons, but every ton we produce we seek to minimize the costs and electricity is one of those,” said Fred Warner, a company spokesman. Its mills are running at 50% capacity this year, down from 85% capacity last year.

Some wonder whether the deregulated markets of the Eastern U.S., Midwest, Texas and California will be especially hard hit if demand comes roaring back. That’s because utilities in these markets no longer are required to build new resources. It’s left up to the power generators to determine when the market conditions are ripe.

“There’s more supply than demand and prices are really low so it doesn’t make sense to build anything,” says John Shelk, president of the Electric Power Supply Association in Washington, D.C., a group that represents power generators.

Many electricity markets throughout the country have implemented demand reduction programs that give consumers a further incentive to reduce power use. The 13-state PJM Interconnection market has been one of the most aggressive — and has seen one of the steepest price drops.

A new report from the region’s official market monitor found a strong correlation between falling prices and an increase in demand-reduction programs. In the PJM market, energy users can collect money through an auction process for pledging to cut energy use in future periods.

In May, PJM conducted an auction to ensure it will have the resources it believes it will need in 2012-13. About 6% of the winning bids came from those who pledged to cut energy use by a total of 8,000 megawatts in that future period.

Our Perspective:

For those companies faced ith rising utility prices over the past 4 years, there is finally relief in the deregulated market. Prices have fallen due to the decrease in demand.

If you look at you electric bill over the past 12 months you will see that your price to compare for electric supply was most likely over .12 cents per kWh. Current market rates will allow you to lock you supply price in the dregulated market somewhere in the .10+ cent per kWh area. This could provide a 11/2 to 2 cents per kwh savings over the next year or two.

Our clients are finding substantial savings which fall to the bottomline.

Would you like to know more? Give us a call 856-857-1230 or email george@hbsadvantage.com . Contact us for a free evaluation You will be surprised by the savings it will provide.

—Timothy Aeppel, Sharon Terlep and Kris Maher contributed to this article.

Deregulated Savings in NJ

In 1998, The Department of Energy implemented deregulation of utilities to encourage competition.  It has proven to be an avenue for increased earning for many of our clients.

By analyzing data and shopping your account, we can provide significant savings.  Many of our clients have enjoyed a 10% to 40% savings in both the gas and electric market. 

You may be a candidate for increased profitability, too!

 Gas / Electric

Gas and electric are traded commodities and their prices are very sensitive. Hutchinson Business Solutions (HBS) will take the necessary steps to position your company properly to take advantage of this opportunity. 

Currently, your local provider buys gas and electric on the open market wholesale and then sells it to you retail. We are able to put you in the wholesale position! 

 We will complete a full analysis, outlining your current rates. We will provide you with a timely proposal that offers significant savings only available by locking-in your utility supply cost. 

The savings falls to the bottom line!

Let us add your name to our success story!

 Email george@hbsadvantage.com or call 856-857-1230

Natural Gas and Electric Savings in New Jersey

Do you feel you are being held captive each month when you pay your natural gas and electric bill? 

Have you looked at the current savings opportunity in the New Jersey Commercial and Industrial deregulated market?

Our clients are saving from 10% upto 40%, depending on the size of the account.

Just last week we signed a contract to save a local commercial real estate manager over $300,000 on their electric supply cost over the next year.

Needless to say, they were very excited.

Last month we signed gas and electric contracts with a local restaurant chain. Combined saving will be over $100,000.

 How many meals would you have to sell to add that to the bottom line?

Also last month, we signed gas and electric  contract with a multi location non profit school for the disabled. Annual saving was over $90,000.

So I ask again, Do you feel you are being held captive?

 The opportunity to save is now available.

Let us add your company to the list of success stories.

Would you like to know more? email george@hbsadvantage.com or call 856-857-1230

Stimulus Spending Fails to Follow Unemployment, Poverty

August 6, 2009

Written by Michael Grabell and Jennifer La Fleur as reported in ProPublica

Since the economic stimulus bill passed nearly six months ago, the Obama administration has repeatedly pledged that the money would reach middle America, seeping into the communities hardest hit by the recession.

But analysis of the most comprehensive list of stimulus spending to date found no relationship between where the money is going and unemployment and poverty.

Stimulus spending is literally all over the map, according to ProPublica’s analysis, which examined nearly all the contracts, grants and loans the government has reported awarding. Some battered counties are hauling in large amounts, while others that are just as hard hit have received little.

Take Trigg County, Ky. [2], where unemployment was 15.8 percent in June after the auto industry crisis rippled among suppliers. The stimulus has chipped in $1 million toward a biofuels facility and $30 million for a road project. According to the data, the county has been awarded $2,419 per resident.

But LaGrange County, Ind. [3], hasn’t fared so well. Despite having the identical unemployment rate, it has received only $33 a person. The community is still trying to recover after recreational vehicle plants shuttered last fall. Yet the stimulus has provided little more than the education and rural housing money that every county is scheduled to receive.

For months now, Democrats and Republicans have debated whether the stimulus is trickling down to communities that need it most. Much of the available evidence has been anecdotal, however, or based on studies that examined only transportation spending or a smaller list of projects.

The debate accelerates today as President Obama and Vice President Joe Biden visit Elkhart, Ind., and Detroit for a progress report on the economy that will again highlight the stimulus. What the available data show is that spending is uneven and sometimes runs contrary to measures of need.

Elizabeth Oxhorn, the White House stimulus spokeswoman, said much of the money thus far has moved through existing grant formulas that don’t take into account regional economic swings. But as some newer stimulus programs kick in — such as economic development grants and money to hire police officers — there will be more discretion in where to send dollars, she said.

“Where we do have opportunities to target assistance and programs that are meant to help hard-hit areas, we have done that, particularly in the hard-hit auto communities,” Oxhorn said.

First Look at County-Level Spending

Overall, the stimulus program will pump $787 billion into the economy, including tax cuts.

To assess what has happened so far, ProPublica combined all the data on the federal stimulus Web site, Recovery.gov, with reports from other government sources into a list totaling $120 billion worth of stimulus spending. Of that, ProPublica examined $55 billion that could be traced to the county level.

Getting a complete accounting of the stimulus is nearly impossible because some of its largest elements — tax cuts for individuals, increases in Medicaid and unemployment — aren’t being tracked to the local level or have yet to be distributed by the states.

While those programs clearly benefit individuals hurt by the recession, they aren’t intended to create or sustain many jobs, as with dollars aimed at infrastructure or schools. The 7 percent of overall stimulus funding in ProPublica’s analysis is the broadest, most complete snapshot of spending to date.

The largest categories are highway projects, Pell Grants for low-income college students and funding to school districts for disadvantaged students. The data also include airport grants, small business loans, housing assistance, nuclear cleanup and military construction contracts.

ProPublica tested the relationship between spending per person and several socioeconomic and demographic factors across more than 3,100 counties and equivalent areas, such as Louisiana parishes, to see if there was a statistically significant pattern in the way money has been allocated.

Nationwide, the results showed no significant relationship across counties when spending was compared against unemployment, poverty, race and income. Looking within state boundaries, spending did have a relationship to unemployment in a few cases — but not always in the same direction.

In New Jersey [4], for example, counties with high unemployment were more likely to get more stimulus money per person. The opposite proved true in Michigan [5], which has the nation’s highest jobless rate at 15.2 percent. A searchable list of county stimulus projects and demographics is here. [6]

Nuclear Cleanups Boost Rural Counties

The biggest winner so far — at nearly $12,000 per resident — is Thomas County [7], an area of 583 people in the Nebraska Sandhills. Unemployment there is 4.8 percent, about half the national rate.

Judy Taylor, chairwoman of the Village Board in Thedford, said the majority of residents consider the main stimulus project, a $7 million viaduct over the railroad tracks, a waste of money.

“Out here, there seems to be plenty of work for people,” said Janice Hodges, whose family owns a gas station nearby. “It probably could have been better used somewhere else.”

Overall, the counties faring the best in the stimulus program are sparse communities with a giant road project — such as Brooks County [8], Texas, or Hocking County [9], Ohio — as one expensive project to a county with few people can skew per-capita figures.

Other counties doing well are home to Cold War weapons plants. The stimulus includes $6 billion to clean up and dispose of waste in 12 states, and those were among the first contracts awarded.

Thanks to the massive cleanup of the Hanford Nuclear Reservation, Benton County, Wash. [10], has received more than $1.5 billion — second only to Los Angeles County’s [11] $2 billion in total funding so far. Benton County’s per capita spending: $9,300.

In metro areas, per-capita spending varies. LA County’s funding equates to $215 per person. New York County [12], which covers Manhattan, is receiving $610; its neighbor, the Bronx, is getting $185. Palm Beach County, Fla., is receiving $57, and Wayne County, Mich., epicenter of the auto industry meltdown, has received $183 per resident — about the national average for spending that could be tracked to the county level.

Some well-off counties are benefiting greatly.

Summit County, Utah [13], home to Park City and several upscale ski resorts, is one of the wealthiest counties in the country with a median household income of $83,000. Under the stimulus so far, it’s received $659 per person.

The money includes a $15 million interstate paving project, a $5 million bridge replacement, $1 million for sewers and sidewalks on Main Street in Coalville, and a $570,000 small-business loan to a Park City oral surgeon.

John Hanrahan, chairman of the Summit County Council, said the highway and bridge projects are in the rural part of the county and are mainly used by long-haul truckers rather than residents.

“It doesn’t necessarily help a farmer a lot for hay or gas,” he said. “It doesn’t affect the ski industry. We still have a significant portion of the population who are struggling with this recession.”

Hanrahan’s point underscores one of the basic uncertainties when determining who benefits from stimulus dollars. Money spent on a project doesn’t necessarily stay in the community. Construction workers often drive through several counties to job sites.

“People will live in one area and work in another,” said Mark Zandi, chief economist for Moody’s Economy.com. “Some county in a region could be getting more money but it could have a beneficial impact on other counties in the region.”

Obama’s Pledge: Help Is on the Way

When Obama launched the stimulus package in February, he visited Elkhart, a city that had seen its jobless rate skyrocket from a 5.8 percent in October 2007 to 20.8 percent this March.

The next day, he visited Fort Myers, Fla., which had been pummeled by the foreclosure crisis. Since then, administration officials have repeatedly visited auto industry towns to promise help.

Trigg County is one struggling area that has seen a flood of stimulus money. The county, on the Kentucky-Tennessee border, northwest of Nashville, has about 13,000 residents but received $32.5 million.

The county’s largest manufacturer, Johnson Controls, made car seat frames until it closed in March, leaving 560 people out of work. But right on the heels of that shutdown came $30 million in federal money for an ongoing project to widen U.S. Highway 68.

That stimulus money freed state funds already pledged to the $55 million expansion, protecting the contractor’s current workforce. State officials said it might have stalled without the stimulus.

The U.S. Forest Service awarded $2 million in contracts to clean up the Land Between the Lakes recreation area, which had been devastated by an ice storm. The agency also gave the county a grant for a facility that will convert wood to fuel to power a local hospital.

“When you tally it up and see the dollars that will come into our area through the stimulus, it is working,” said Stan Humphries, Trigg County judge-executive. “It doesn’t move as fast as we would like or reach as many families as we would hope for. But we feel that we are getting our share of the funds.”

Big Pots of Money Hard to Track

Edmund Phelps, a Nobel laureate who is director of Columbia University’s Center on Capitalism and Society, said it’s no surprise that spending so far doesn’t relate to characteristics like employment or poverty. To get money out quickly, the government relied on funding formulas that aren’t designed for an economic downturn. “It’s kaleidoscopic,” he said of the stimulus. “And it was all done very quickly.”

Some of the largest pots of money — tax cuts, food stamps and Medicaid assistance — go to more than 100 million individuals, and government auditors are struggling to estimate the local impact.

“Can you send a man to Jupiter? In theory you can,” said J. Russell George, the Treasury inspector general for tax administration. “We could in theory track every dollar, but you have to consider the expense and the time it would take to do that.”

For other types of spending programs — such as the $54 billion to stabilize state budgets and help local schools, or $6 billion to build water and sewage treatment plants — the money trail stops at the state governments, which are still deciding how to divvy up the funds. Only a fraction of the stabilization money has been sent to the states from Washington.

Other programs, such as transit grants, mask where the jobs are created. When the Akron, Ohio, transit authority bought 19 buses, for example, it created work at local rubber suppliers — but also at the plants that made the buses in Kansas, North Dakota and California.

“It’s difficult to take into account all of the different dimensions,” said Steve Murdock, a former Census Bureau director who is a professor of sociology at Rice University. “You have populations with various kinds of needs and local economies that reflect different kinds of conditions.”

Elkhart’s Poor Cousin Next Door

As Obama returns to Elkhart, he might want to consider LaGrange County just to the east.

While Elkhart County has been awarded about $169 per resident — a little less than the national average — LaGrange has received just $33 a person, according to the data.

Both counties saw their economies crater last year when high gas prices and tight credit made it difficult to sell recreational vehicles, a primary industry there. Dozens of factories, dealerships and suppliers shut down while thousands lost their jobs.

LaGrange County has several needed transportation and infrastructure projects, said Keith Gillenwater, the county’s economic development director. But so far, it has been shut out of any of the federal highway funding doled out by the state government.

“It’s frustrating,” he said. “To me there’s a lot of disparity that should be re-examined and taken into consideration.”

 

ProPublica is America’s largest investigative newsroom.

King Coal

Written by Robert F. Kennedy Jr

Over the past decade, nearly one hundred coal burning power plants have died in the proposal stage trumped by the legitimate objections of local communities fearful of a dirty deadly fuel that is neither cheap nor clean. Ozone and particulates from coal plants kill tens of thousands of Americans each year and cause widespread illnesses and disease. Acid rain emissions have destroyed the forests over the length of the Appalachian and sterilized one in five Adirondack lakes. Neurotoxic mercury raining from these plants has contaminated fish in every state–including every waterway in nineteen states–and poisons over a million American women and children annually. Coal industry strip mines have already destroyed 500 mountains in Appalachia, buried 2,000 miles of rivers and streams and will soon have flattened an area the size of Delaware. Finally, coal, which supplies 46% of our electric power, is the most important source of America’s greenhouse gases.

Beating our deadly and expensive coal addiction will be lucrative. America’s cornucopia of renewable energy resources and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our future energy needs with clean, cheap, abundant renewables. Bright Source, a solar thermal provider, has just signed contracts to provide California with 2.6 gigawatts of power annually from desert mirror farms. Construction costs are about the same per gigawatt as a coal plant and half the cost of a nuke plant. Once built, the energy is free forever. In contrast, once you build a coal plant, your biggest costs–fuel extraction and transportation and the harm from emissions–are just the beginning.

In the short term, a revolution in natural gas production over the past two years, has left America awash in natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight–and without the expense of building new power plants.

How? Well it’s pretty easy. Around 900 of America’s coal plants–78% of the total–are small (generating less than half a gigawatt), antiquated, and horrendously inefficient. Their average age is 45 years, with many limping past 75. These ancient plants burn 20% more coal per megawatt hour than modern large coal units and are 60-75% less fuel efficient than high-efficiency gas plants. These small units account for less than 42% of the actual capacity for coal fired power but almost one half the total emission of the entire energy sector! The costs of operation, maintenance, capital improvements and repair costs of these antiquated worm-eaten facilities, if properly assessed, would make them far more expensive to run than natural gas plants. However, energy sector pricing structures make it possible for many plant operators to pass those costs to the public and make choices based on fuel costs, which in the case of coal, appears deceptively cheap because of massive subsidies.

Mothballing or throttling back these plants would mean huge cost savings to the public and eliminate the need for more than 350 million tons of coal, including all 30 million tons harvested through mountain top removal. Their closure would reduce U.S. mercury emissions by 20-25%, dramatically cut deadly particulate matter and the pollutants that cause acid rain, and slash America’s CO2 from power plants by 20%–an amount greater than the entire reduction mandated in the first years of the pending Climate Change Legislation–at a fraction of the cost.

These decrepit generators can be eliminated very quickly–in many instances literally overnight by substituting power from America’s existing and underutilized natural gas generation, which is abundant, cleaner and more affordable and accessible today than dirty coal.

Since 2007, the discovery of vast supplies of deep shale gas in the United States, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently required to meet national energy demand, 336 are coal fired, many of which are utilized far more heavily than for cleaner gas generation units. Surprisingly, America actually has more gas generation capacity–450 gigawatts–than coal. But most of the costs for coal-fired units are ignored in deciding when to operate these units. Public regulators traditionally require utilities to dispatch coal first. For that reason, high efficiency gas generators, which can replace a large percentage of U.S. coal, are used only 36% of the time. By simply changing the dispatch rule nationally, we could quickly reduce power generated by existing coal-fired plants and achieve massive emissions reductions. The new rule would change the order in which gas and coal fired plants are utilized by requiring that whenever coal and gas plants are competing head-to-head, the gas generation must be dispatched first.

To quickly gain further economic and environmental advantages, the larger, newer coal plants that remain in operation should be required to co-fire with natural gas. Many of these plants are already connected to gas pipelines and can easily be adapted to burn gas as 15 to 20% of their fuel. Experience shows using gas to partially fuel these plants dramatically reduces forced outages and maintenance costs and can be the most cost effective way to reduce CO2 emissions. This change can immediately achieve an additional 10 to 20% reduction in coal use and immediately reduce dangerous coal emissions.

Natural gas comes with its own set of environmental caveats. It is a carbon-based fuel and is extraction from shale, the most significant new source, if not managed carefully, can cause serious water, land use, and wildlife impacts, especially in the hands of irresponsible producers and lax regulators. But those impacts are dwarfed by the disastrous holocaust of coal and can be mitigated by careful regulation.

The giant advantage of a quick conversion from coal to gas is the quickest route for jumpstarting our economy and saving our planet.

Global Clean Energy Economy Won’t Wait for U.S. to Catch Up

Written by Rob Perks

The clean energy economy is upon us — but will the U.S. heed the call?

That’s the gist of today’s Washington Post story with this stark headline: Asian Nations Could Outpace U.S. in Developing Clean Energy.

 

Excerpt:

President Obama has often described his push to fund “clean” energy technology as key to America’s drive for international competitiveness as well as a way to combat climate change.

“There’s no longer a question about whether the jobs and the industries of the 21st century will be centered around clean, renewable energy,” he said on June 25. “The only question is: Which country will create these jobs and these industries? And I want that answer to be the United States of America.”

But the leaders of India, South Korea, China and Japan may have different answers. Those Asian nations are pouring money into renewable energy industries, funding research and development and setting ambitious targets for renewable energy use. These plans could outpace the programs in Obama’s economic stimulus package or in the House climate bill sponsored by  Reps. Henry A. Waxman (D-Calif.) and  Edward J. Markey (D-Mass.).

In due time fossil fuels will be gone – no one can dispute that.  So why is it that so many people — including an alarmingly high number of those serving in Congress — would rather waste time and energy denying the clear and present danger of climate change and resisting the solutions promised by a clean energy future?

[UPDATE: This just in...A new Harvard study finds that wind energy potential is considerably higher than previous estimates by both wind industry groups and government agencies.]

In my mind I can see a television commercial with just an hour glass on screen and this narration:

“Oil is running out.”

“Coal is running out.”

“Whether we like it or not, fossil fuels are going the way of the dinosaurs.”

“But we know that the wind and the sun will never run out.  And we can generate power from these natural, safe and limitless sources.”

“It’s time to move beyond the dirty energy of the past and embrace reliable clean power for the 21st century.”

“As a nation, we need to do this…before time runs out.”

Let’s all remember that America is a nation built on the foundation of freedom, independence and self-sufficiency — and those values must be at the heart of our strategy for energy policy.  We shouldn’t be losing ground in the world economy, buidling up massive trade deficits to pay for foreign oil.  It’s time we commit ourselves as a nation to develop clean, safe energy from the sun, wind and other natural sources that will create millions of jobs and rebuild our manufacturing base.

It just so happens that the best way to bring jobs and prosperity back to this country is also the way to end our dangerous dependence on foreign oil and protect the Earth we leave our children.  Let’s get back to building things again, starting with wind turbines, solar panels, and energy-efficient products that say ‘Made in America.’  After all, we have led every technological revolution of the last two centuries — electricity, railroads, the telephone, automobiles, the television, computers — and there’s no reason we can’t lead this one.

I have to question the logic (and patriotism!) of those politicians who would do the bidding of polluting industries — Big Oil, Big Coal, Nukes — when those dirty and unsafe technologies offer only short-term energy generation benefits at an extremely high cost to our heath, air and water, and climate.  The sun, the wind, and the geothermal energy at the core of the Earth provide a limitless supply of clean energy – our scientists can harness them and our workers can build them.  Our leaders should harness — not hamper — the greatest source of power we have in this country: American ingenuity.

The fact is, we already have wind and solar technologies that can dramatically cut our reliance on dirty coal plants that create most of the pollution that is poisoning our lungs and damaging our atmosphere.  What we need now are leaders who can build on this progress by partnering with business to develop and deploy innovative energy technologies that will recharge our economy and create jobs. 

As Thomas Friedman wrote in his book “Hot, Flat and Crowded”:  “[T]he ability to develop clean power and energy efficient technologies is going to become the defining measure of a country’s economic standing, environmental health, energy security, and national security over the next 50 years.”

The story in the Washington Post today is yet another wake-up call.  We shouldn’t need countries in Asia or Europe or South America to show us how to compete in the emerging markets for efficient appliances and alternative fuels.  We need leaders with vision and courage who will invest in technological breakthroughs that will once and for all end our reliance on oil and spur manufacturing jobs that can’t be outsourced.  That way, America can start exporting clean energy instead of jobs.

As a nation, we have a choice to make.  Fortunately, we don’t have to choose between clean, new energy sources and economic prosperity.  The choice is between accepting the status quo by holding tight to the dirty energy of the past or boldy embarking on the path to safe, reliable clean energy — an investment which promises both immediate and long-term gains. 

At this important juncture in our history, what choice will our elected leaders make?  It’s up to each and every one of us to help them make the right decision.

This post originally appeared on NRDC’s Switchboard blog.

Swings in Price of Oil Hobble Forecasting

By JAD MOUAWAD

Published: July 5, 2009

The extreme volatility that has gripped oil markets for the last 18 months has shown no signs of slowing down, with oil prices more than doubling since the beginning of the year despite an exceptionally weak economy.

The instability of oil and gas prices is puzzling government officials and policy analysts, who fear it could jeopardize a global recovery. It is also hobbling businesses and consumers, who are already facing the effects of a stinging recession, as they try in vain to guess where prices will be a year from now — or even next month.

A wild run on the oil markets has occurred in the last 12 months. Last summer, prices surged to a record high above $145 a barrel, driving up gasoline prices to well over $4 a gallon. As the global economy faltered, oil tumbled to $33 a barrel in December. But oil has risen 55 percent since the beginning of the year, to $70 a barrel, pushing gas prices up again to $2.60 a gallon, according to AAA, the automobile club.

“To call this extreme volatility might be an understatement,” said Laura Wright, the chief financial officer at Southwest Airlines, a company that has sought to insure itself against volatile prices by buying long-term oil contracts. “Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.”

Volatility in the oil markets in the last year has reached levels not recorded since the energy shocks of the late 1970s and early 1980s, according to Costanza Jacazio, an energy analyst at Barclays Capital in New York.

At the close of last week’s trading, oil futures fell $2.58, to $66.73 a barrel, after rising above $72 a barrel last month.

These gyrations have rippled across the economy. The automakers General Motors and Chrysler have been forced into bankruptcy as customers shun their gas guzzlers. Airlines are on pace for another year of deep losses because of rising jet fuel costs.

And households, already crimped by falling home prices, mounting job losses and credit pressures, are once more forced to monitor their discretionary spending as energy prices rise.

While the movements in the oil markets have been similar to swings in most asset classes, including stocks and other commodities, the recent rise in oil prices is reprising the debate from last year over the role of investors — or speculators — in the commodity markets.

Government officials around the world have become concerned about a possible replay of last year’s surge. Energy officials from the European Union and OPEC, meeting in Vienna last month, said that “the speculation issue had not been resolved yet and that the 2008 bubble could be repeated” without more oversight.

Many factors that pushed oil prices up last year have returned. Supply fears are creeping back into the market, with a new round of violence in Nigeria’s oil-rich Niger Delta crimping production. And there are increasing fears that the political instability in Iran could spill over onto the oil market, potentially hampering the country’s exports.

The OPEC cartel has also been remarkably successful in reining in production in recent months to keep prices from falling. Even as prices recovered, members of the Organization of the Petroleum Exporting Countries have been unwilling to open their taps.

Top officials said that OPEC’s goal was to achieve $75 a barrel oil by the end of the year, a target that has been endorsed by Saudi Arabia, the group’s kingpin.

“Neither the organization, nor its key members, has any real interest in halting the rise in oil prices,” said a report by the Center for Global Energy Studies, a consulting group in

London founded by Sheik Ahmed Zaki Yamani, a former Saudi oil minister.

But unlike most of 2007, when the economy was still not in recession and demand for commodities was strong, the world today is mired in its worst slump in over half a century. The World Bank warned the recession would be deeper than previously thought and said any recovery next year would be subdued.

The International Energy Agency held out the prospect that energy demand was unlikely to recover before 2014. Yet the indicators that would traditionally signal lower prices — like high oil inventories or OPEC’s large spare production capacity — do not seem to hold much weight today, analysts said.

“Crude oil prices appear to have been divorced from the underlying fundamentals of weak demand, ample supply and high inventories,” Deutsche Bank analysts said in a recent report.

Investors are betting that the worst of the economic slump may be coming to an end, and are bidding up what they perceive will become scare resources once demand kicks back again, analysts said. This uncertainty is making it difficult for companies to plan ahead, they said.

“People do not like that kind of volatility, they want to know what their costs are going to be,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group.

For the global airline industry, the latest price surge is certain to translate into more losses this year, according to the industry’s trade group, I.A.T.A. Airlines are expected to post losses of $9 billion this year, following last year’s losses of $10.4 billion. “Airlines have not yet felt the full impact of this oil price rise,” according to I.A.T.A.’s latest report.

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At Southwest Airlines, for example, fuel accounts for about a third of the company’s costs, according to Ms. Wright, the chief financial officer. The experience of the past year, she said, “has convinced us we cannot afford to not be hedged.”

The company has currently hedged part of its fuel use for the second half of the year at $71 a barrel, and for 2010 at $77 a barrel. Hedging acts as an insurance policy if prices rise above these levels.

But last year, Southwest reported two consecutive quarters of losses, as prices spiked and collapsed — all within a few months. “Prices were falling faster than we could de-hedge,” Ms. Wright said.

To survive the slump, many airlines have cut routes and raised both fares and fees, like charging for luggage, while some of the industry’s top players have merged. For example, Delta Air Lines bought Northwest Airlines last year, and in Europe, Lufthansa of Germany bought Austrian Airlines and Air France-KLM acquired Alitalia of Italy.

Likewise, automobile showrooms emptied out as gasoline prices rose, forcing General Motors and Chrysler to cut production sharply as they wade through bankruptcy. Meanwhile, they are under pressure from Washington to improve their fuel ratings.

“Do not believe for an instant that sport utilities are making a comeback,” George Pipas, Ford’s chief sales analyst, told reporters last week.

But to Jeroen van der Veer, who retired as chief executive officer of Royal Dutch Shell last week, prices are increasingly dictated by long-term assessments of supply and demand, rather than current market fundamentals. He advised taking a long-term view of the market.

“Oil has never been very stable,” Mr. van der Veer said. “If you look at history, you have to expect more volatility.”

Let us know your thoughts? You may leave a comment or email george@hbsadvantage.com

Just Do It

By THOMAS L. FRIEDMAN

Published: June 30, 2009

There is much in the House cap-and-trade energy bill that just passed that I absolutely hate. It is too weak in key areas and way too complicated in others. A simple, straightforward carbon tax would have made much more sense than this Rube Goldberg contraption. It is pathetic that we couldn’t do better. It is appalling that so much had to be given away to polluters. It stinks. It’s a mess. I detest it.

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Fred R. Conrad/The New York Times

Thomas L. Friedman

Now let’s get it passed in the Senate and make it law.

Why? Because, for all its flaws, this bill is the first comprehensive attempt by America to mitigate climate change by putting a price on carbon emissions. Rejecting this bill would have been read in the world as America voting against the reality and urgency of climate change and would have undermined clean energy initiatives everywhere.

More important, my gut tells me that if the U.S. government puts a price on carbon, even a weak one, it will usher in a new mind-set among consumers, investors, farmers, innovators and entrepreneurs that in time will make a big difference — much like the first warnings that cigarettes could cause cancer. The morning after that warning no one ever looked at smoking the same again.

Ditto if this bill passes. Henceforth, every investment decision made in America — about how homes are built, products manufactured or electricity generated — will look for the least-cost low-carbon option. And weaving carbon emissions into every business decision will drive innovation and deployment of clean technologies to a whole new level and make energy efficiency much more affordable. That ain’t beanbag.

Now that the bill is heading for the Senate, though, we must, ideally, try to improve it, but, at a minimum, guard against diluting it any further. To do that we need the help of the three parties most responsible for how weak the bill already is: the Republican Party, President Barack Obama and We the People.

This bill is not weak because its framers, Representatives Henry Waxman and Ed Markey, wanted it this way. “They had to make the compromises they did,” said Dan Becker, director of the Safe Climate Campaign, “because almost every House Republican voted against the bill and did nothing to try to improve it. So to get it passed, they needed every coal-state Democrat, and that meant they had to water it down to bring them on board.”

What are Republicans thinking? It is not as if they put forward a different strategy, like a carbon tax. Does the G.O.P. want to be the party of sex scandals and polluters or does it want to be a partner in helping America dominate the next great global industry: E.T. — energy technology? How could Republicans become so anti-environment, just when the country is going green?

Historically speaking, “Republicans can claim as much credit for America’s environmental leadership as Democrats,” noted Glenn Prickett, senior vice president at Conservation International. “The two greatest environmental presidents in American history were Teddy Roosevelt, who created our national park system, and Richard Nixon, whose administration gave us the Clean Air Act and the Environmental Protection Agency.” George Bush Sr. signed the 1993 Rio Treaty, to preserve biodiversity.

Yes, this bill’s goal of reducing U.S. carbon emissions to 17 percent below 2005 levels by 2020 is nowhere near what science tells us we need to mitigate climate change. But it also contains significant provisions to prevent new buildings from becoming energy hogs, to make our appliances the most energy efficient in the world and to help preserve forests in places like the Amazon.

We need Republicans who believe in fiscal conservatism and conservation joining this legislation in the Senate. We want a bill that transforms the whole country not one that just threads a political needle. I hope they start listening to green Republicans like Dick Lugar, George Shultz and Arnold Schwarzenegger.

I also hope we will hear more from President Obama. Something feels very calculating in how he has approached this bill, as if he doesn’t quite want to get his hands dirty, as if he is ready to twist arms in private, but not so much that if the bill goes down he will get tarnished. That is no way to fight this war. He is going to have to mobilize the whole country to pressure the Senate — by educating Americans, with speech after speech, about the opportunities and necessities of a serious climate/energy bill. If he is not ready to risk failure by going all out, failure will be the most likely result.

And then there is We the People. Attention all young Americans: your climate future is being decided right now in the cloakrooms of the Capitol, where the coal lobby holds huge sway. You want to make a difference? Then get out of Facebook and into somebody’s face. Get a million people on the Washington Mall calling for a price on carbon. That will get the Senate’s attention. Play hardball or don’t play at all.

Our Perspective:

Finally the Congress is recognizing there is an issue with emissions. For years, many have denied there is any correlation between emissions and climate change.

Leave it to the politicians to throw pork into an important issue.

Why would they recognize an issue, claim it and take responsibility for fixing it. They do not want to be held accountable for they have to run for reelection.

We can’t afford to push the rock any further.

Our ignorance has caused this problem.

But now that we acknowledge there is a problem, our arrogance can not let it continue.

We are only here for a short time. 

Everyday is a gift.

It is our responsibility to hand it over to the next generation, a world; that is in better condition than what we received.

This bill is flawed and we have to make our voices heard.

Have them pull the pork and make a real statement.

We can choose to lead by example! Just do it!

Let us know your thoughts? You may leave a comment or email george@hbsadvantage.com

Energy Bill Advances In Senate: Offshore Drilling, Renewables Nearer

Written by H. Josef Hebert   AP 6/17/09

WASHINGTON — Legislation that would require greater use of renewable energy, make it easier to build power lines and allow oil and gas drilling near the Florida coastline advanced Wednesday in the Senate.

The Energy and Natural Resources Committee approved the bill by a 15-8 bipartisan vote. But both Democrats and Republicans expressed concerns about the bill and hoped to make major changes when it reaches the Senate floor, probably in the fall.

The measure’s primary thrust is to expand the use of renewable sources of energy such as wind, solar and geothermal sources as well as deal with growing worries about the inadequacies of the nation’s high-voltage power grid.

But the bill also would remove the last congressional barrier to offshore oil and gas development, lifting a ban on drilling across a vast area in the eastern Gulf of Mexico that Congress put off limits three years ago. Drilling would be allowed within 45 miles of most of Florida’s coast and as close as 10 miles off the state’s Panhandle area.

The Senate bill for the first time would establish a national requirement for utilities to produce 15 percent of their electricity from renewable sources, a contentious issue that is likely to attract heated debate.

Twenty-eight states currently have some renewable energy requirement for utilities, but supporters of the measure argue a national mandate is needed to spur such energy development.

The legislation also would give much wider authority to federal regulators over the nation’s electricity grid.

The Federal Energy Regulatory Commission would be given authority to approve the siting of high voltage power lines if states fail to act and would be given additional powers over cyber security on the grid.

Senate Majority Leader Harry Reid, D-Nev., has said he hopes to take up energy legislation after the August recess, although it’s uncertain whether it will be merged with separate legislation addressing climate change. The House is working on a climate bill that includes many of the same energy issues addressed by the Senate bill.

While the bill was approved by a safe margin in the committee its prospects in the full Senate are anything but certain. Several senators called it too weak in its support of renewable energy development, while others said it ignored nuclear energy and greater domestic oil and gas production.

“None of us got all we wanted,” said Sen. Jeff Bingaman, D-N.M., the committee’s chairman, who was forced to agree to a variety of compromises to give the bill a chance of advancing. Nevertheless, he said the bill would help shift to cleaner, more secure sources of energy.

Bingaman and many of the panel’s other Democrats had wanted at least a 20 percent renewable energy requirement. The bill requires 15 percent renewable use by 2021, but also would allow utilities to avoid a fourth of that mandate by showing improvements in efficiency. Renewable energy use could be cut further for utilities that increase their use of nuclear energy either from a new reactor or increased reactor output.

“This is an extraordinary weak bill,” said Sen. Bernie Sanders, I-Vt.

But Sanders voted to advance the bill, as did Sen. Bob Corker, R-Tenn. Both senators said they hoped the bill will be strengthened.

“I suspect their definition of strengthening might be somewhat different,” quipped Sen. Evan Bayh, D-Ind., whose own support of the bill came despite strong opposition to the federal renewable energy requirements on utilities.

Sanders wants the renewable energy requirement to be much higher, at 25 percent. Corker said the bill needs more to promote nuclear energy and domestic oil and gas production.

“We simply must do more to increase our domestic (oil and gas) production and use of nuclear energy,” said Sen. Lisa Murkowski of Alaska, the committee’s ranking Republican. Still, she voted for the bill which includes a commitment to increase loan guarantees for a natural gas pipeline in her state from $18 billion to $30 billion.

The bill also calls for establishing a new office to steer grants and loan guarantees to clean energy projects, including nuclear and those using technology to capture carbon dioxide; creating an oil products reserve to be used if there are supply problems; and creating federal standards for efficiency standards for new building.

The Chamber of Commerce said the bill shows progress toward crafting a comprehensive energy policy, but some environmentalists said it falls short of shifting the country away from fossil fuels. With its new offshore drilling, support for coal and nuclear energy “this bill fails to live up to the vision of a clean energy future,” complained Brent Blackwelder, president of Friends of the Earth.