Natural Gas & Climate Change ForumOcto

May XX, 2006

American Gas Foundation

Natural Gas and Climate Change ForumOctober 4, 2007

One Source, Innovative Solutions

3Many Different Bills to Reduce GHG Emissions

One Source, Innovative Solutions

4Economy-Wide Proposals in 110th Congress

Bill Scope Emissions Cap2010-2012

Emissions Cap2020

Emissions Cap 2050 Allocation v. Auction Offsets

Bingaman-Specter (S. 1766) Com. on EPW, 7/11/07.

Economy-wide, upstream

2012 level in 2012. 2006 levels by 2020. 1990 levels by 2030. President may set long-term target >60% below 2006 levels by 2050.

Increasing auction. Some sector allocations.

5% set-aside for ag. Sequestration$12/ton safety valve starting 2012; increasing 5%/year.

Lieberman-Warner (Not introduced)Discussion principles, 8/2/07

Economy-wide“hybrid”Up: oil refineriesDown: electric utilities, large sources

2005 by 2011 10% < 2005 in 2020 30% <2005 in 203050% <2005 in 204070% <2005 in 2050

Increasing auction. Some sector allocations.

Borrowing up to 15%/company (on domestic and international credits and offsets)

Kerry-Snowe (S. 485)Finance Com., 2/1/07.

Economy-wide, downstream

1.5% <2009 in 2010 1.5%/yr reduction 2010-2019

2.5%/yr reduction 2020-20293.5%/yr reduction 2030-2050

Determined by the President

Potential for borrowing and/or increased int’l offsets.

McCain-Lieberman (S. 280)Hearings 7/24/07.

Economy-wide, “hybrid”Up: transportDown: electric utilities, large sources

2004 by 2012 1990 level in 2020 20% <1990 in 203060% <1990 in 2050

Administrator determines

30% limit on use of int’l credits and domestic reduction or CCS

Sanders-Boxer (S. 309)Intro Remarks, EPW, 6/13/06.

Economy-wide, downstream

N/A 1990 level in 2020 27% <1990 in 203053% <1990 in 204080% <1990 in 2050

Cap and trade not required

N/A

One Source, Innovative Solutions

5One Source, Innovative Solutions

Please contact us to discuss how SAIC’s energy and climate change teams can help you:

Steve MessnerPh: 858 220-6079Email: steven.d.messner@saic.com

Michael MondshinePh: 703 676-4835Email: michael.r.mondshine@saic.com

Jette FindsenPh: 202 488-6624Email: jette.findsen@saic.com

Contact Us

6

EPA Analysis of The Climate Stewardship and

Innovation Act of 2007 S. 280 in 110th Congress

Presentation for the Natural Gas & Climate Change ForumOctober 4, 2007

Allen A. Fawcett

The full analysis is available at:www.epa.gov/climatechange/economicanalyses.html

U.S. Environmental Protection Agency Office of Atmospheric Programs

7

Results: S. 280 Senate ScenarioSources of GHG Abatement (ADAGE)

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2020 2025 2030 2035 2040 2045 2050

MM

tCO 2e

Credits - International

Offsets - CH4 - Oil Sector

Offsets - CH4 - Natural Gas Sector

Offsets - CH4 - Landfills

Offsets - Agriculture and Forestry

SF6 - Energy-Int Man

SF6 - Electricity

PFC - Energy-Int Man

PFC - Other Manuf

HFC - Other Manuf

N2O - Petroleum

CH4 - Coal

CO2 - Agriculture

CO2 - Coal

CO2 - Natural Gas

CO2 - Services

CO2 - Crude Oil

CO2 - Petroleum

CO2 - Other Manuf

CO2 - Energy-Int Man

CO2 - Transport

CO2 - Residential - Autos

CO2 - Electricity

• S. 280 allows offsets and international credits to make up 30% of the total allowance submissions requirement.

• The quantity of offsets allowed decreases as allowance submissions decrease.

• Since the quantity of offsets allowed is decreasing over time and the quantity of abatement is increasing over time, offsets make up a large fraction of abatement in the early years of the policy, and there contribution to total abatement decreases over time.

% of Abatement from Offsets & International Credits2015 2030 2050

International Credits 45% 18% 3%Domestic Offsets 12% 21% 15%Total 56% 39% 19%

8

Results: S. 280 Senate ScenarioU.S. Electricity Generation, mid-term results (ADAGE)

Note: Other non-fossil includes hydro, geothermal, wind, solar, biomass and municipal solid waste.

S.280 Case

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Ele

ctr

icit

y G

en

era

tio

n (

bil

lio

n k

Wh

)

Traditional Fossil Advanced Fossil with CCS Nuclear Other Non-Fossil Reference

Reference

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Ele

ctr

icit

y G

en

era

tio

n (

bil

lio

n k

Wh

)

S. 280

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2015 2020 2025 2030 2035 2040 2045 2050

Ele

ctr

icit

y G

en

era

tio

n (

bil

lio

n k

Wh

)

9

Results: S. 280 Senate ScenarioGlobal CO2 Concentration (MiniCAM)

S. 280 Senate Scenario• USA adopts S. 280.• Group 1 countries (Kyoto group less Russia) follow an allowance path that is

falling gradually from the simulated Kyoto emissions levels in 2012 to 50% below 1990 in 2050.

• Group 2 countries (rest of world) adopt a policy beginning in 2025 that returns and holds them at year 2015 emissions levels through 2034, and then returns and maintains them at 2000 emissions levels from 2035 to 2050.

• After 2050, all countries hold emissions caps constant at 2050 levels.

CO2 Concentration Results• In the reference scenario, Global CO2 concentrations rise from historical levels

of 354 parts per million (ppm) in 1990 to 718 ppm in 2095• In the Senate scenario, CO2 concentrations are 481 ppm in 2095. While CO2

concentrations are significantly reduced in the Senate scenario, they are not on a stabilization trajectory.

Incremental Effect of S. 280• If the U.S. adopts S. 280 and no other countries adopt emissions caps, then CO2

concentrations in 2095 are 23 ppm lower than the reference scenario.• If the U.S. does not cap emissions, and all other countries take on the targets

from the Senate scenario, then CO2 concentrations in 2095 are 25 ppm higher than the Senate scenario.

• The larger incremental effect when the U.S. acts alone is, in part, due to the fact that the U.S. is able to achieve more of its carbon-equivalent emissions reductions through non-CO2 greenhouse gas abatement.

• This is counterbalanced by a smaller marginal effect on ocean uptake from the U.S. emissions reductions when the U.S. acts alone.

300

350

400

450

500

550

600

650

700

750

1990 2010 2030 2050 2070 2090

pp

m

Reference

S.280 w/o International Action

International Action w/o S.280

S. 280 Senate Scenario

Climate Change and Natural Gas:A View From EIA

forNatural Gas and Climate Change Forum

American Gas Foundation

October 4, 2007

11

Impact of a CO2 Value on Energy Prices

FuelCO2 content

per million Btu

Delivered Price (2005, all sectors, per million Btu)

Impact of $10 per ton CO2 value

Impact of $50 per ton CO2 value

$ percent $ percent

Coal 0.094 1.57 0.94 59.9 4.70 299

Oil 0.074 18.6 0.74 4 3.70 19.9

Nat. Gas 0.053 9.65 0.53 5.5 2.65 27.5

12

Energy-Related CO2 Emissions(million metric tons)

• The electric power sector dominates energy-related CO2 emission reductions.

• Although the S.280 GHG target for covered entity emissions in 2030 is 18 percent below the 1990 level (equivalent to 34 percent below the 2005 level), total energy-related CO2 emissions in the S.280 Core Case are only about 7% below the 2005 level in 2030 due to the use of offsets and banked allowances, partial coverage and greater reduction of other GHGs. If more (less) international offsets were available, projected 2030 energy-related emissions under S.280 would be higher (lower).

2,3752,811

2,133

3,334

1,217

1,953

2,288

2,246

2,612

2,495

1,020

1,114

1,078

1,250

1,122

368

395

389

393

383

230

270

271

298

303

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000Electric Power Transportation IndustrialResidential Commercial

2005 2020 2030

2005 Actual Reference S.280 Reference S.280

Total Levelized Costs -- New Plants in 2025 w/Carbon Value

0

20

40

60

80

100

120

140

160

0 10 20 30 40 50 60 70Carbon Value ($/ton CO2) in 2025; 5% annual growth after 2025

$ p

er

me

ga

wa

tt-h

ou

r

Pul CoalIGCC

CC - $8 gas

CC - $6 gas

Wind

Nuclear , Biomass

Fuel Cost For Current Coal and CC Gas w/ Carbon Value

0

20

40

60

80

100

0 10 20 30 40 50 60 70Carbon Value ($ / ton CO2)

$ p

er

meg

aw

att

-ho

ur

Existing CC w/ $8 gas

Existing CC w/ $6 gas

Existing Pulverized Coal

www.eia.doe.gov

Natural Gas & Climate Change ForumJoel BluesteinOctober 4, 2007

Natural Gas & Climate Change ForumJoel BluesteinOctober 4, 2007

GHG Legislation and Implications

for the Natural Gas Industry

16

Methane (Landfill, Ag, Mining, Gas)

8%

CO2 from Process and Non Energy Use

4%

CO2 from Residential Combustion

5%

CO2 from Commercial Combustion

3%

CO2 from Industrial Combustion

13%

Oil1%

Gas4%

HFC, PFC, SF62%

N2O (Soil Mgmt, Combustion)

5%

CO2 from Transportation

26%

CO2 from Electricity Generation

34%

Total 2004 GHG Emissions=7,075 MMTonnes

Coal29%

U.S. GHG Emissions – 2004Total = 7,074 MMTonnes

17

U.S. GHG Emissions by Fuel and Sector - 2004

0

500

1,000

1,500

2,000

2,500

Residential Commercial Agriculture Industrial Transportation Power

Sector

MM

T C

O2

eq

Reallocated Electricity

HFC, PFC, SF6

Methane

N2O

Non-Energy CO2

CO2 from Coal

CO2 from Oil

CO2 From Gas

Emissions related to electricity generation are shown twice in this chart: once in the "Power" sector and once as reallocated to the sector in which the electricity is used.

U.S. GHG Emissions by Fuel and Sector - 2004

18

S. 280 Cap Compared to BAU

Covered Other GHGs

Industrial

Transportation

Electric Power

Residential Commercial

Non-Covered Other GHG

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

MM

To

nn

es

CO

2

Capped Sectors

S. 280 Cap

Data source: EIA analysis of S. 280 – McCain/Lieberman BillData source: EIA analysis of S. 280 – McCain/Lieberman Bill

19

EIA Projection of S. 280 Response

20

EIA Projection of Offset Usage

-

200

400

600

800

1,000

1,200

2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

MM

To

nn

es

CO

2

International Offsets

Domestic Ag/Forestry Sequestration

Non-Covered Gases

21

CO2 Prices Shift New Technology Choices

EIA CaseEIA Case

22

Capital Costs Also Shift Technology Choices

Current “High Cost” CaseCurrent “High Cost” Case

$40

$50

$60

$70

$80

$90

$100

$110

$0 $20 $40 $60 $80 $100 $120

$/metric ton CO2

$/M

Wh

PC

IGCC

IGCC/CS

Gas CC

Nuclear

Wind

PC NuclearGas CC IGCC/CS

$2,400 $4,000 $835 $3,675

Capital Cost - $/kW

$1,900

Wind

23

NGC Modeling of Gas Consumption

20

22

24

26

28

30

32

34

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Qu

ad

s

EIA Ref 280

EIA S 280

EIA No New Nuke

NGC 30% Offsets

NGC 15% Offsets

24

Contact Information

Joel Bluestein

ICF International

jbluestein@icfi.com

703-528-1900

25

CH4

8%CO2

84%N2O6%

HFCs, PCs, & SF6

2%

Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990 – 2005, USEPA, April, 2007

U.S. Greenhouse Gas Emissions: The Importance of Methane

Oil & Natural Gas Systems

26%

Landfills24%

Other19%

Coal Mining

10%Enteric Fermentation

21%

Methane is potent greenhouse gas (GHG) with 100-year global warming potential of 23; atmospheric lifetime of ~12 years

The 2nd most important GHG accounting for ~18% of total climate forcing

A primary constituent of natural gas and a valuable, clean-burning energy source

26

Methane Emission Reduction Technologies & Practices

Gas Production & ProcessingReduced Emission Well CompletionsInstall Plunger Lifts on Gas WellsIdentify, Measure & Fix Leaks in Processing PlantsInstall Flash Tank Separators on Dehydrators

Gas DistributionIdentify, Measure & Fix Leaks in Pipelines & Surface FacilitiesUse Pipeline Pumpdown Techniques to Minimize Venting

Picture courtesy of American Gas Association

Oil ProductionInstall VRUs on Crude Oil Storage TanksRoute Casinghead Gas to VRU or Compressor for Recovery & Use or Sale

Gas TransmissionIdentify, Measure & Fix Leaks in Compressor Stations, Pipelines Use Pipeline PumpdownReplace High-Bleed Pneumatics

Producing Wells

Gathering LinesTransmission Lines

Processing Plant

CompressorStations

UndergroundStorage

Large Volume Customer

Regulator/Meter

City Gate(Regulators/Meters)

LNG or Propane/Air Plant

Residential Customers

CommercialCustomer

Distribution Mains (Lines)

27

5,000

6,000

7,000

8,0001990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005 100

150

200

Units in teragrams of CO2 equivalent (TgCO2E)

Inventory of U.S. Greenhouse Gas Emissions and Sinks 1990 – 2005, USEPA, April, 2007

Total U.S. greenhouse gas emissions (left axis)

U.S. oil & natural gas sector methaneEmissions (right axis)

Natural Gas STAR Partner Accomplishments (1990 – 2005)

U.S. Oil & Natural Gas sector methane emissions are 10% under the 1990 level emissions

28

Natural Gas – a Premium Fuel

Goal is to meet our expanding energy needs while preserving the environment

Natural gas is part of the solution– Use it wisely– Ensure adequate supplies

Over the long term, a bridge to a low carbon future….

29

Super Boiler – Breakthrough Technology

30

Revolutionary MelterHelps Glass Industry Compete

> 40 bcf/yr of natural gas demand

> Improved capital cost, efficiency, and productivity

> Supported by consortium of glass manufacturers: Corning, Johns Manville, Owens Corning, PPG, Schott

31

Gasification – Pathway to Secure, Clean Energy Supply

Gasification

Excellent Environmental Performance

Carbon Management Opportunity

Syngas Pipeline Quality Gas/ Chemical Feedstock

Liquefaction

Power Plant Fuel

Power Plant

Pipeline / Chemical Plant

TransportationFuels

32

Flex-Fuel Test Facility at GTI for Next Generation Fuels

33

Bio-Methane (Bio-gas)

Renewable methane from biomass, landfills, wastewater treatment

34

Congressman Peter Roskam Fuels a Hydrogen Vehicle

Engineering Responses to Climate Change

- Carbon Management -

Natural Gas & Climate Change ForumAh-Hyung Alissa Park

Earth and Environmental Engineering

Columbia University

October 4, 2007

Columbia University Earth Institute

Lenfest Center for Sustainable Energy

MIT MIT Energy Initiative

Stanford The Global Climate and Energy Project

Berkeley Berkeley Institute of the Environment

Research Clusters in Academia

Carbon Management

Separation Transportation Sequestration

CO2 Removal

US DOE target: $10 per ton of carbon avoided

Necessary Characteristics Capacity and price

Environmentally benign fate

Stability

Carbon Sequestration Technologies

Example: Statoil's Sleipner West gas reservoir in the North Sea: 106 ton/year CO2 are injected into a brine formation

[Source: “Demonstrating Carbon Sequestration” Geotimes, March 2003]

[Source: http://esd.lbl.gov/GEOSEQ]

Different Geological Sequestration Options

Sources: DOE

Carbon Sequestration Technologies

http://www.princeton.edu/~chm333/co_two/minerals/

Ocean sequestration Air capture

Mineral sequestration

Sources: DOE

Sources: DOE