Energy Policy Update - 2006-01

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Energy Policy Update
Energy and Environmental News
January 2006
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This newsletter is published by the Arizona Department of Commerce Energy Office and is provided free of charge to
the public. It contains verbatim excerpts from international and domestic energy and environment-related
publications reviewed by the Education and Community Outreach personnel. For inquiries, call (602) 771-1148 or toll
free (800) 352-5499.
Compiled and edited by Mark Hope, Energy Research Coordinator.
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For additional program information, access: http://www.azcommerce.com/newenergy/publications.html.
FOR YOUR CONVENIENCE, ARIZONA-RELATED TITLES ARE HIGHLIGHTED IN GRAY
Austin Becomes First City to Accept Energy Freedom Challenge
[Union of Concerned Scientists web site, Dec. 1] Austin, TX – [On Nov. 30], Mayor Will Wynn
announced that Austin will be the first city to enter a nationwide contest that challenges cities to
obtain more than half of their electricity from clean renewable energy resources such as wind,
solar, and bioenergy. “As your Mayor, I will accept the challenge that Austin remain the Number One city,
the Number One utility in the country for renewable sales and that we in fact become the first city in the
country to reach the 50 percent renewable goal,” he said…. The Energy Freedom Challenge: America's
Race to Independence Through Renewable Energy is a national competition aimed at reducing our
reliance on unstable, polluting energy sources. Launched in November 2005, the challenge will help
accelerate homegrown clean energy technologies at the municipal level. “The Energy Freedom Challenge
will inspire U.S. cities to hasten their transition from fossil fuel based power to clean, renewable energy,”
said Jane Pulaski, co-chair of Solar Austin…. The Union of Concerned Scientists (UCS) will provide
technical support by establishing a system to track each city's commitment….
California Regulators Unveil Solar Power Plan
[Environmental News Network web site, Dec. 15] San Francisco - State energy regulators on [Dec. 13]
unveiled one of the nation's most ambitious programs to expand the market for solar power,
proposing to offer more than $3 billion in consumer rebates over the next decade. Environmentalists
said the California Solar Initiative would help reduce the cost of solar energy, create jobs and reduce
emissions of greenhouse gases blamed for global warming…. “From this, we're going to see cleaner air,
affordable solar energy and California regaining its world leadership in solar power.” The plan aims to
install panels to produce 3,000 megawatts of solar energy on one million homes, businesses and public
buildings over 11 years. The five-member Public Utilities Commission was expected to vote on it [January
2006] after a 30-day public comment period. The proposal revives an essential component of Gov. Arnold
Schwarzenegger's bid to expand use of renewable energy in California…. The initiative would offer rebates
to homes, businesses, farms, schools and other public buildings that install rooftop solar panels. Large
public utilities such as Pacific Gas & Electric Co. would not be eligible for the program. The utilities
Alternative Energy & Efficiency
Janet Napolitano, Governor
Gilbert Jimenez, Director, Arizona Department of Commerce
Ken Clark, Director, Arizona Department of Commerce Energy Office
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 2
commission currently offers $400 million in solar rebates through programs funded by a surcharge on
consumer utility bills. The new initiative would expand that amount to $3.2 billion using an additional
surcharge over 11 years starting in 2006. In the 1970s, California was the global leader in solar energy,
but the state has been overtaken by Japan and Germany, the world's two largest solar markets. Currently,
about 15,000 California homes and businesses have solar panels, Del Chiaro said….
Cities Question Cost of Hybrid Cars
[Associated Press, Dec. 9] By gradually adding hybrids to this city's vehicle fleet, James Muller
knows he's helping to save the environment. What he doesn't know is whether switching to the more
expensive “green” vehicles will save taxpayers money. The city just bought 20 new hybrid Ford Escapes to
add to the six Toyota Priuses already in its 6,000-vehicle fleet. Muller, Philadelphia's fleet manager, said
officials are doing it to improve air quality, but that the upfront costs definitely take a bigger hit on city
coffers. “That's what we're finding with the initial cost ... it doesn't wash out,” he said. “You're actually
paying more money.” … More than 173,000 had been sold in 2005 through October, more than doubling
the total for all of 2004, according to the Electric Drive Transportation Association. Officials in many cities,
however, are hesitant, even though municipal governments have been part of the vanguard for bringing
technologies such as electric cars and natural-gas-powered buses to the nation's roads. It's only been a
year or two since many cities started adding hybrids to their fleets, but officials say the initial costs can be
tough to bear. And they simply don't know whether they'll save money over gasoline-only or diesel vehicles
[in] the long run. Officials in various cities estimate that choosing a hybrid vehicle costs an extra $3,000 to
$8,000, depending on the model and which gasoline-only model would have been bought in its place.
Officials in Ann Arbor, Mich., decided not to add hybrids to their fleet after determining the costs would
outweigh the benefits. Ann Arbor has other types of alternate-fuel vehicles, but found that hybrids just
weren't cost-effective, said David Konkle, the city's energy coordinator. Konkle estimated the hybrids
would save $300 to $500 a year each in gas, making it impossible to make up the difference in purchase
price, which he said was $8,000….
CARB Extends Clean Air Regs Offshore
[Calstart web site, Dec. 9] California's air quality agency decided on [Dec. 8] to require ships within
24 miles of the coast to use cleaner fuel to reduce health threats from diesel emissions in seaport
communities, reports The Los Angeles Times. Extending the agency's reach this far offshore for the
first time, a new regulation adopted unanimously by the California Air Resources Board (CARB) would
force both foreign and domestic cargo and cruise ships to switch from heavy diesel to lighter, cleaner fuel
whenever they are using auxiliary engines near or in port. Air board officials noted that the new fuel
requirement, as well as a second rule passed [on Dec. 8] to curb emissions from cargo-handling
equipment, are the first of their type in the nation…. State officials say air pollution from maritime activity is
a growing threat to the health of people who live near ports, including Los Angeles and Long Beach,
because diesel-powered vehicles and engines emit soot and other pollutants…. The agency said the rules
– effective Jan. 1, 2007 – would affect about 80 percent of the 1,900 vessels that visit California ports each
year but would not have a significant effect on shipping industry revenue or cruise ship fares.
EPA Would Ease Pollution Reporting Rules
[Associated Press, Dec. 15] Washington, D.C. - If the Bush Administration has its way, some
factories won't have to report all the pollution spewed from their smokestacks, making it harder for
government scientists to calculate the health risks of the air Americans breathe. The Environmental
Protection Agency [EPA], responding to an [Associated Press] AP analysis that found broad inequities in
the racial and economic status of those who breathe the nation's most unhealthy air, says total annual
emissions of 188 regulated air toxins have declined 36 percent in the past 15 years. But the EPA wants to
ease some of the Clean Air Act regulations that have contributed to those results and proposes to exempt
some companies from having to tell the government about what it considers to be small releases of toxic
pollutants. The EPA also plans to ask Congress for permission to require the accounting every other year
instead of annually. The agency said in September it wants to reduce its “regulatory burden” on companies
by allowing some to use a “short form” when they report their pollution to the EPA's Toxics Release
Inventory. The inventory program began under a 1986 community right-to-know law. If Congress agrees,
the first year the changes could be possible would be 2008. Those changes would exempt companies
Legislation & Regulation
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 3
from disclosing their toxic pollution if they claim to release fewer than 5,000 pounds of a specific chemical
– the current limit is 500 pounds – or if they store it onsite but claim to release “zero” amounts of the worst
pollutants. Those include mercury, DDT [dichlorodiphenyltrichloroethane], PCBs [Polychlorinated
Biphenyls] and other chemicals that persist in the environment and work up the food chain. However,
companies must report any storage of dioxin or dioxin-like compounds, even if none are released. EPA
officials say communities will still know about the types of toxic releases, but not some of the details about
how each chemical was managed or released. Critics say it will reduce the information the public has on
more than 600 chemicals put in the air, water and land, making it harder for officials, communities and
interest groups to help protect public health.
Price-Gouging Law Pursued
[Arizona Republic web site, Dec. 1] The nation's attorneys general are putting finishing touches on a
proposal to create a nationwide price-gouging law. Meeting in Phoenix, the top law enforcement
officials from across the country spent part of [Nov. 30] discussing the finer points of how to define “price
gouging” and debating which circumstances should trigger it. But there appeared to be little debate about
whether there should be a federal law…. That means individual states need to be free to pursue their own
remedies against price gouging. Twenty-eight states have price-gouging laws. Goddard has pursued a
similar law in the Arizona Legislature, but the bill has not made it out of committee. He promises to be back
in 2006 with another attempt. Although more than half the states already have such laws, New Jersey
Attorney General Peter Harvey said Hurricane Katrina provided a textbook case for why a nationwide law
is needed. That's because most state price-gouging laws are triggered when an emergency is declared in
the state, or within a region of the state. After Katrina hit in late summer, gasoline prices jumped all across
the United States, not just in the battered Gulf Coast states. Yet many prosecutors were unable to pursue
price-gouging complaints because there was no emergency declaration in their state. This was the case in
New Jersey. “We found retailers raising their prices five or six times a day,” Harvey said. “This had nothing
to do with supply. This was New Jersey.” Unable to use the state's price-gouging law, Harvey reached
back to a 1938 motor-fuels act to file suit against three gas companies and various independent station
operators. [On Nov. 23], the state reached a $373,000 settlement with Amerada Hess Corp. Some of that
money will be used to offset fuel-oil costs for low-income state residents, Harvey said. Goddard said the
attorneys still need to refine their ideas on what would trigger an instance of price gouging. Options include
a certain percentage increase above a commodity's normal price, or perhaps a definition of
“unconscionable” or “grossly excessive” price increases. Although gas prices get the most attention in
current discussion about price gouging, such a law would extend to any “essential services” during an
emergency…. A price-gouging law would be triggered during an emergency or some kind of abnormal
market disruption. The attorneys acknowledged that the market should be left to operate freely, but argued
that normal market forces don't work in emergencies…. Goddard and Louisiana Attorney General Charles
Foti said a price-gouging law would not prevent retailers and wholesalers from raising prices. “Price
increases per se are not reason for price gouging,” Goddard said. Foti said even the possibility of being
prosecuted under a price-gouging law can keep abuses at bay. For example, in Louisiana, state officials
warned one gas-station operator about his rapidly rising prices and he lowered them. Gerard Lockwood, a
senior financial investigator for Florida Attorney General Charlie Crist, echoed that. In 2004, Florida fielded
about 3,500 price-gouging complaints after the season's first hurricane hit. By the time the last hurricane
struck, complaints had dropped to 600. Lockwood credited the decline to the belief that retailers and
wholesalers were aware their pricing moves were being monitored by savvy consumers as well as law
enforcement. The attorneys general will send their suggestions on a common definition of price gouging to
Sen. Ted Stevens, R-Alaska and chairman of the Senate's Commerce, Science and Transportation
Committee. Stevens wants comments by mid-December for possible inclusion in legislation next year.
Senate Says No to Arctic Oil Drilling
[Calstart web site Dec. 22] Washington, D.C. - The Los Angeles Times reports that supporters of the
Arctic National Wildlife Refuge (ANWR) drilling proposal fell a few votes short of overcoming a
Democratic-led filibuster. The Arctic measure drew opposition on environmental grounds and because
Sen. Ted Stevens (R-Alaska) had attached it to a $453-billion military spending bill, considered “must-pass”
legislation. Critics said Stevens' attempt violated Senate rules. Opening a portion of the refuge to
energy exploration has long been among the nation's most intensely fought environmental proposals.
Drilling proponents suggest the oil is critical to national security and economic growth, while
environmentalists have contended that drilling would threaten one of the nation's great wilderness areas
yet make a negligible dent in oil imports. Stevens and his allies needed 60 votes in the 100-seat Senate to
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 4
end the filibuster of the energy initiative; they ended up with 57. The final tally was 56 to 44 in favor of
closing debate, because at the last moment Senate Majority Leader Bill Frist (R-Tenn.) cast a “no” vote, a
procedural move that gives the [Grand Ole Party] GOP the option of reconsidering the matter. However,
the party appeared unlikely to do so.
Nine High-Pollution Advisory Days and Counting
[Arizona Republic web site, Dec. 1] Could the brown cloud be getting worse? The ninth high-pollution
advisory of the cool season was declared for [Dec. 1]. That's a warning that dust and other particulates are
high. Another hint is the brown layer that hangs over the city skyline. Although advisories do not mean the
Valley has exceeded federal standards for particulates, it does raise concerns that this winter could be a
tough one for people with respiratory problems like asthma. Earlier this year, we did have 10 days when
we exceeded the standards, a big increase over recent years. “We're in a dusty environment, and we're
growing exponentially every month, adding cars, industry, lawn equipment. It's going to create a pollution
problem,” said Holly Ward of the Maricopa County Air Quality Department. “This is an alert to all of us that
we really need to pay attention.” Federal law requires every city in the nation to remain below the standard
or risk road-building funds. The lack of rain and wind since Oct. 1, when the brown-cloud season officially
starts, has allowed the smoggy layer of air to hang around…. As temperatures get colder, the air inversion
also helps trap particulates near the ground. So that coughing and sneezing may not be a cold or flu but
instead a reaction to pollution.
California Forges Ahead in Fight Against Pollution
[Calstart web site, Dec. 7] Montreal - The United Nations' Montreal conference on climate change –
the largest gathering of its kind since most of the world's nations adopted the Kyoto Protocol to
reduce greenhouse gases in 1997 – is attracting state and local officials eager to share the
message that some parts of the U.S. have begun to address global warming, reports The Los
Angeles Times. As reported in News Notes [on Dec. 1], California is unveiling a new set of initiatives to
control greenhouse gases that would put it in the forefront of efforts by state and local officials to attack the
root causes of climate change through regulation. Diplomats from 189 nations will hear California's action
plan – which includes proposals to cap greenhouse gases and force industries to report emissions of
carbon dioxide. This sharply contradicts the official position of the Bush Administration, which has
dispatched its own delegation to Montreal to reiterate that the United States opposes mandatory limits on
greenhouse gases because of feared economic impacts…. Earlier this year, Gov. Arnold Schwarzenegger
pledged to slash California's greenhouse gas emissions by 80 percent by 2050….
California Might Start Charging Builders for Pollution
[Los Angeles Times web site, Dec. 15] Convinced that sprawl begets smog, California Central Valley
air quality officials are expected [on Dec. 15] to become the first regulators in the nation to force
builders to pay air pollution fees for new development. Builders would pay less if their new homes,
shopping centers and office complexes are designed in ways that limit automobile use: by locating banks
and dry cleaners closer to houses, for example, or linking bicycle and walking paths to schools and work
centers…. The idea is to prod developers to cut down on traffic in an area where huge growth, and the
cars that come with it, have combined with factory farming to create some of America's dirtiest air. The
proposal is being closely watched by regulators around the country. It pits the building industry, which
loathes the idea and fears it may spread, against farm groups, the valley's other major industry. Builders
and some advocates for low-cost housing say the fees will raise prices. Agriculture industry leaders fear
that if developers are not required to help clean the air, farmers will bear the entire burden. The San
Joaquin Valley has the highest asthma rates in California and rivals Los Angeles for the nation's worst air
quality, according to the Environmental Protection Agency.
New Process to Quicken Approval for Wind Energy
[Associated Press, Dec. 16] Washington, D.C. - Interior Secretary Gale Norton on [Dec. 15] announced
a new review process for proposed wind farms that she said could result in a six-fold increase in
Arizona & Western Power
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 5
wind energy production on Western public lands. The move sets broad guidelines for the Bureau of
Land Management's wind energy development program and should decrease the time to get approval for
a wind energy project from two or more years to less than one year, Norton said. The interest in clean,
renewable energy sources has increased as oil prices have risen. President Bush and Congress have
recommended increasing the development of renewable energy on public lands. As a part of the process
announced [on Dec. 15], the [Bureau of Land Management] BLM is amending 52 land-use plans in nine
Western states, which Norton said will generate 3,200 megawatts of wind energy – enough to provide
electricity for about one million homes. Arizona does not have any BLM wind energy sites, but there has
been interest in constructing a wind farm in northern Arizona, where mapping has shown the most promise
for consistent windy conditions. The BLM now has 22 wind energy development sites that produce about
500 megawatt hours of power. “Public lands offer enormous opportunities for environmentally sound
renewable energy production,” Norton said. “We expect to see many new wind energy sites in coming
years.”
Price of Gas May Fall; Pipeline Ordered to Cut Rates
[Arizona Republic web site, Dec. 20] Federal regulators have ordered pipeline operator Kinder
Morgan Energy Partners to reduce its rates for shipping gasoline to Arizona and to make refunds
to shippers it overcharged. The ruling, ordered [on Dec. 16] by the Federal Energy Regulatory
Commission [FERC], could impact gasoline prices in Arizona, because shipping expenses contribute to
the wholesale price of gasoline. [American Automobile Association] AAA Arizona estimates that shipping
costs add about 1.5 cents per gallon to the price of gasoline. The FERC sets the rates Kinder Morgan is
allowed to charge customers to move petroleum products over its interstate pipelines. There are no
refineries in Arizona so all of its gasoline, diesel and jet fuel must be shipped in via two Kinder Morgan
pipelines, one from southern California and the other from western Texas. Because only two pipelines
serve the state, supply interruptions due to breaks and weather can affect prices. The FERC concluded
that rates on Kinder Morgan's western pipeline should no longer be grandfathered under the Energy Policy
Act of 1992 and that it was not eligible to recover certain costs through rates on both its east and west
pipelines. Kinder Morgan spokesman Rick Rainey was unable to put an exact figure on the refunds, but
noted they are expected to reduce the company's 2006 payout to shareholders by about $7.5 million, or
five cents per partnership unit. The company estimates its 2006 dividend, not including the refunds, to be
about $3.28 per unit. Rainey noted that the recent decision reflected an appeal of a 2004 administrative
law judge's order that would have cost the company three times as much. “Although (Kinder Morgan) is
continuing to review the commission's decision and its impact, it appears that it has reversed a number of
adverse findings of the administrative law judge,” Kinder Morgan's Chairman and Chief Executive Officer
Richard Kinder said in a statement.
Proposed Yuma Refinery Reports Agreement with Mexico
[Arizona Capital Times, Nov. 29] The first oil refinery scheduled to [be] built in the United States in
nearly 30 years took a crucial step toward completion with an agreement with the Mexican
government to build a pipeline in that country to transport crude oil to the refinery’s planned site
east of Yuma. Arizona Clean Fuels Yuma Vice President David Treanor, who led the negotiations in
Mexico, said it was “an enormously important decision.” The company announced Nov. 22 it had reached
an agreement with the Secretariat of Energy of Mexico (SENER) confirming that the company may carry
out the construction, operation and maintenance, and ownership of a pipeline. The company has plans to
build a $3 billion, 150,000-barrel-a-day refinery near Wellton, about 30 miles east of Yuma that would
process crude oil into gasoline, diesel and jet fuel. The refinery would be the first built in the United States
since 1976, due largely to regulatory barriers, low profit margins and a not-in-my-backyard mentality of
communities across the country, industry experts say. As a result, nearly half of all U.S. refining capacity is
located near the Gulf of Mexico, where the bulk of American oil is pumped. Hurricanes Katrina and Rita
have exposed that clustering as a vulnerability of the country’s energy supply system. In August of 2003,
Arizona faced a gasoline shortage after a pipeline shuttling fuel to Phoenix from Tucson burst. Mr. Treanor
says it is “crucial” for the state’s supply of fuel that the refinery is built. “It’s going to bring on a reliable
supply route now, in-state, where we’re not going to have to worry about antiquated pipelines… and it can
displace imports and create a fuel supply within our own boundaries of high-quality fuel,” he said. The
Wellton refinery would produce about 85,000 barrels of gasoline, 35,000 barrels of diesel and 30,000
barrels of jet fuel per day. The bulk of the product would be shipped to Phoenix via the existing fuel
pipeline that runs from California to Arizona, though approximately 25 percent of the gasoline and diesel
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 6
would be returned to the Mexican state of Sonora…. Construction is expected to begin in 2006 or 2007,
once negotiations with Pemex are completed and the final construction permits have been obtained. The
first phase of the refinery is expected to take about three years to complete. Arizona Clean Fuels has been
trying to build a refinery in Arizona since 1989, when plans initially called for the site to be in Mobile, about
20 miles southwest of the Valley. The project died in the mid-1990s amid neighborhood and environmental
opposition but was revived in 1999. In 2003, company officials opted to move the site to Wellton after a
revision to the federal ozone non-attainment zone for the Valley was expanded to include Mobile.
Earth is Rapidly Warming, Three Studies Indicate
[Arizona Republic web site, Dec. 16] Washington, D.C. – [2005] has been one of the hottest on record,
scientists in the United States and Britain reported [on Dec. 15], a finding that puts eight of the past
10 years at the top of the charts in terms of warm temperatures. Three studies released [on Dec. 15]
differ slightly, but they all indicate the Earth is rapidly warming. [National Aeronautics and Space
Administration] NASA's Goddard Institute for Space Studies has concluded 2005 is the warmest year in
recorded history, while the National Oceanic and Atmospheric Administration [NOAA] and the [United
Kingdom] U.K. Meteorological Office call it the second hottest after 1998. All three groups agree that 2005
is the hottest year on record for the Northern Hemisphere, at roughly 1.3 degrees Fahrenheit above the
historical average. Jay Lawrimore, who heads NOAA's Climate Monitoring Branch in its National Climatic
Data Center in Asheville, N.C., called the new data “one of the indicators that the climate is changing.” …
The three teams used the same set of ocean and land temperature records, but they analyzed the data
differently and compensated for gaps in the climatic record in alternate ways. As a result, NASA scientists
estimate 2005 average global land and sea temperatures were 1.04 degrees Fahrenheit above average,
just beating out 1998's one-degree elevation. NOAA researchers, by contrast, say this year's global
average is 1.06 degrees Fahrenheit above average, compared with 1.1 degrees in 1998. The analyses
were based on data through the end of November and projections of December temperatures. Scientists
said [on Dec. 15] that these differences should not detract from their common conclusion that the world is
experiencing serious climate change, driven in part by human activity. Researchers recently found by
drilling ice cores that there is a higher concentration of carbon dioxide in the atmosphere now than at any
time in the past 650,000 years, which reflects that humans are burning an increased amount of fossil fuels.
The Earth has warmed 1.4 degrees Fahrenheit in the past century, with one degree of this increase
occurring in the past 30 years. This climate change has brought unusually prolonged droughts in some
regions and heavy precipitation in others, while the Arctic's sea ice has shrunk to its lowest level since
observers started using satellite records in 1979. Some global-warming skeptics questioned the
significance of [the Dec. 15] findings…. But Climate Policy Center Chairman Rafe Pomerance, whose
bipartisan group backs mandatory carbon dioxide limits, disagreed. “The temperature trend is a wake-up
call for the Congress and the president to craft a response that will begin to dramatically reduce the
buildup of greenhouse gases in the atmosphere,” he said.
European Union Says Will Fulfill Kyoto Target by 2010
[Reuters, Dec. 1] The European Union [EU] will meet its Kyoto Protocol obligations to cut
greenhouse gas emissions by 2010, two years before the global environment treaty's final
deadline, a report by the EU executive showed on [Dec. 1]. The European Commission said
projections indicated the 15 “old” EU member states would lower their combined emissions of gases that
scientists say cause global warming to 9.3 percent below 1990 levels by 2010. “This clearly fulfils the eight
percent reduction target from 1990 levels that the protocol requires the EU-15 to achieve during 2008-
2012,” the Commission said in a statement. Kyoto has a binding agreement that requires the EU-15 to
lower emissions as a whole. The 10 newest EU members were not a part of the bloc at the time the
agreement was thrashed out. Of those countries, only Malta and Cyprus do not have required reduction
targets. Emissions from the full 25-nation bloc would be cut by more than 11 percent from the 1990 level in
2010, the report said. EU Environment Commissioner Stavros Dimas warned states to keep working.
Seventeen EU countries were projected to meet their emissions targets, while the others were “in the
process of identifying further actions,” the Commission said. “We have already reduced our emissions
despite healthy economic growth. But that does not mean we can be complacent,” Dimas said in a
statement. Officials from the European Union, considered a leader in the fight against climate change, are
Energy-Related Environment
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 7
meeting other nations in Montreal to discuss ways to battle global warming after 2012, when the first
period covered by Kyoto ends. The EU's landmark emissions trading system is the centerpiece of its
strategy to cut greenhouse gases. It puts limits on the amount of carbon dioxide (CO2) big polluters, like
power plants, can emit. The Commission said the report's projections were based on measures to fight
climate change already in place, some that were still in the works, and credits provided in Kyoto for
investment in countries outside of the EU. Under Kyoto, about 40 industrial states are trying to cut
emissions by 5.2 percent below 1990 levels by 2008-12 to curb warming that may lead to rising sea levels,
melting icecaps, and more powerful storms.
United Nations Talks Adopt Kyoto Rules on Global Warming
[Reuters, Dec. 1] Montreal - Countries meeting at [the] [United Nations] U.N. environmental
conference adopted [on Nov. 30] the rules for limiting emissions of greenhouse gases under the
U.N.'s Kyoto Protocol, but Saudi Arabia held up a key section on policing the accord. "This is [a]
historic step," Canadian Environment Minister Stephane Dion, host of the Nov. 28-Dec. 9 talks by about
190 nations, said of the decision by government officials…. Kyoto obliges about 40 rich nations to curb
their emissions of heat-trapping gases, mainly from burning fossil fuels in factories, cars and power plants,
by 2012. The voluminous rules include details of accounting for greenhouse gases, how to encourage
investments in developing countries, rules for trade in greenhouse gas emissions and reams of other
operational details. The Montreal meeting agreed to all but one of the 22 sections of the rules but Saudi
Arabia, the world's biggest oil exporter, said it wanted rules on compliance to be approved by an
amendment to be ratified by all nations, a process that could take years. Saudi delegates argue that an
amendment would give the deal more legal teeth. But environmentalists accused Riyadh of trying to bog
down Kyoto, driven by dislike of a scheme likely to force a shift away from oil toward cleaner energies.
Jennifer Morgan, climate policy expert at the [World Wildlife Fund] WWF environmental group, said Saudi
Arabia was an ally of the United States, which is not a member of Kyoto, in opposing any discussion of
what to do after 2012. “They're trying to stop any discussion of what to do after 2012,” she said.
Developing nations have no targets for emissions under Kyoto's first period lasting until 2012. Kyoto is a
tiny step toward braking a warming trend that most scientists say could cause more floods, storms, drive
up sea levels, spread diseases and push thousands of species to extinction. The Kyoto rule book was
originally agreed at a conference in Marrakesh, Morocco, in 2001 but needed formal approval at the
Montreal meeting to gain legal force. Delegates predicted they would overcome the Saudi objections by
the end of the conference…. “I'm absolutely confident that we'll have agreements on the compliance
system,” said Richard Kinley, acting head of the secretariat of the U.N. Framework Convention on Climate
Change which oversees Kyoto. And Kyoto backers celebrated despite the Saudi objections. “This gives
the Kyoto Protocol the most innovative rule book we have in multilateral environmental agreements,” said
Artur Runge-Metzger, head of the European Commission delegation. Kyoto obliges about 40 developed
nations to cut their emissions by 5.2 percent below 1990 levels by 2008-12. The United States pulled out
in 2001, saying that it would cost U.S. jobs and wrongly excluded developing nations. Under the
compliance system, any country that overshoots its targets will have to make up the shortfall, and an extra
30 percent penalty, in the next period. It can also lose a right for trading emissions of greenhouse gases.
U.S. Resists More Talks on Climate
[Associated Press, Dec. 8] Montreal - The United States on [Dec. 7] rejected a Canadian bid to draw
Washington into future global talks on climate change, a new round that would extend mandatory
cutbacks in carbon emissions. “It is our belief that progress cannot be made through these formalized
discussions,” U.S. delegation head Paula Dobriansky told reporters as a two-week [United Nations] U.N.
climate conference, involving more than 180 nations, entered its final days. Arctic natives, meanwhile,
announced they had filed an international human rights complaint against the United States, to try to
pressure Washington to cap the “greenhouse gases” they blame for the accelerated warming that is
melting their icy homelands. Bangladesh Ambassador Rafiq Ahmed Khan, whose low-lying land faces
future flooding from seas rising with global warming, spoke on behalf of the poorest nations. “Only strong
political will can show the way,” he told delegates. “These impacts are felt mostly by the people who are
poor and most vulnerable.” It was the first U.N. climate conference since the Kyoto Protocol took effect last
February, requiring 35 industrialized countries to curb emissions of carbon dioxide and five other gases
that act like a greenhouse, trapping heat in the atmosphere. Among major developed nations, only the
United States and Australia reject that agreement, worked out in 1997 in Kyoto, Japan, and designed to
produce an average five percent reduction of emissions below 1990 levels by 2012.
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 8
Valley Approaches Sixth-Longest Dry Spell on Record
[Arizona Republic web site, Dec. 8] At times last winter, Phoenix got so much rain that washes
flooded, reservoirs filled and fears of a long-term drought dried up. But nine mostly parched months
later, the Phoenix area has fallen behind the year-to-date average. It hasn't rained in the Valley for more
than seven weeks, and no storms are on the horizon before Christmas or the end of the year. The last
measurable rainfall took place on Oct. 17, when 0.17 of an inch fell at the official monitoring station at
Phoenix Sky Harbor International Airport. The year began with such promise. Almost five inches of rain fell
in January and February. It looked like 2005 was on track to exceed the yearly average of slightly more
than eight inches. But in the next nine months, only August, with a monsoon-driven 1.21 inches, surpassed
the norm. Not everything is bad news. Plenty of rain in other parts of the state, which has filled the Verde
and Salt rivers regularly, has kept the Salt River reservoirs relatively full, limiting the impact of drought on
the Phoenix area. And early snowfall in Colorado and Wyoming holds promise for filling up Lakes Mead
and Powell. Both are about half-full now. Southeast and central Arizona are currently the only parts of the
state at risk for drought. The National Weather Service lists those areas as “likely” for drought
development…. If Phoenix reaches the end of the year without rain, it will be the sixth-longest dry spell in
recorded history, according to data from Randy Cerveny, an Arizona State University climatologist. Go
three days into next year without rain, and the dry spell will reach the top five, with 78 straight days of no
rain. The all-time record dry spell ran for 91 days, from Jan. 6 to April 5, 1984….
Energy/General
Gulf Coast Oil Production Recovery Will Take Six More Months
[Associated Press, Dec. 8] Washington, D.C. - Oil and natural gas production in the Gulf Coast area
probably won't recover from this year's hurricanes until next summer, Energy Secretary Sam
Bodman said [on Dec. 8], urging conservation as cost of heating homes is expected to soar this
winter. “The infrastructure of our country took a real blow with Hurricanes Rita and Katrina,” Bodman told
reporters outside the White House. “Even to this day, we have about a third of the natural gas and a third
of the oil that is produced in the Gulf of Mexico still shut-in due to the damage that was done,” he said.
“That's not going to be back up and online, my guess is, until summertime.” Short supplies will contribute
to high energy prices this heating season, said Bodman, who urged Americans to step up conservation.
The Energy Department's Energy Information Administration recently predicted that households heating
primarily with natural gas can expect to spend about 50 percent more this winter. Advocates for the poor
have argued that as much as $5.1 billion in federal energy assistance is needed to keep up with the high
fuel oil and natural gas prices people will face this winter. Energy legislation enacted earlier this year
authorizes that much money, but Congress has refused to appropriate it. The Low Income Energy
Assistance Program (LIHEAP) has been funded at about $2 billion a year for several years. Congress, as
part of a spending bill now being crafted, is proposing $2.2 billion for this fiscal year and an additional
$1 billion in one-time emergency funds. State agencies that regulate electric utilities, the natural gas utility
industry and advocates for the poor all in recent weeks have urged the White House and Congress to
increase LIHEAP funding to the full $5.1 billion authorization….
Huge Natural Gas Field ‘Discovered’ in Texas
[World Net Daily web site, Nov. 30] Though it's been in production for nearly 25 years, a huge natural
gas field in Texas is now drawing the attention of major energy companies – but only after
independent operations proved its worth. Fort Worth, Texas, is built on top the Barnett Shale natural
gas field, a field so vast that the U.S. Geological Service estimates it contains some 26 trillion cubic feet of
yet-to-be-discovered natural gas. Estimates are that as much as 160 billion cubic feet of natural gas are in
place per square mile in the Barnett Shale formation. The Barnett Shale field is the largest gas-producing
field in Texas, covering some 15 counties in the northern part of the state. The core area comprises about
120,000 net acres that stretch north from Fort Worth to the western outskirts of Denton. The field was
undiscovered until 1981 when independent Mitchell Energy drilled the first well. The largest operator in the
Barnett Shale field is Devon Energy Corporation, one of America's largest and most successful
independent oil and natural gas companies, headquartered in Oklahoma City. In January 2002, Devon
completed the acquisition of the field's pioneer, Mitchell Energy. Today, Devon operates more than 1,700
wells into the Barnett Shale core area, wells that today produce more than 550 million cubic feet of natural
gas per day. According to Brian Engel, manager of public affairs for Devon, the company's success in
large part derives from developing a light sand, water fracturing technology that permits efficient natural
gas exploration from the field. “The Barnett Shale formation,” says Mr. Engel, “has rightfully emerged as
the largest natural gas field in Texas and one of the most important natural gas fields in the nation.” Now
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 9
that the independents have proven Barnett Shale to be hugely productive, major companies including
ExxonMobil, ChevronTexaco, ConocoPhillips, [British Petroleum] BP and Shell have moved in to buy up
production rights. “It makes sense,” explained Tom Biracree, senior financial editor with John S. Herold
Inc., an energy research and investment valuation firm based in Norwalk, Conn. “The industry is seeing a
decided trend moving toward the development of on-shore natural gas resources in the continental U.S.”
Why? “It's an economic market play,” explained Biracree. “With the price of natural gas at $10 per
thousand cubic feet, not $2, it becomes very attractive for the major industry players to focus more
attention on exploring for natural gas right here at home.” Biracree noted that the industry is learning today
how to explore deeper and extract more natural gas profitably from what, in years past, were considered
riskier enterprises. “We have growing expertise in the technologies which make extraction of natural gas
from shale profitable,” said Biracree….
Liquid Natural Gas Poised to Impact United States Energy Market
[Calstart web site, Dec. 13] Houston, TX - With oil and natural gas prices spiking over the past two
years, liquefied natural gas (LNG) has garnered a lot of industry attention. Writing in The Houston
Business Journal, Lanny Waguespack – vice president of LNG engineering services with INTEC
Engineering Inc. – notes that newly approved terminals by the Federal Energy Regulatory Commission
and the U.S. Coast Guard are a positive step for the industry, but that they have also raised some
concerns regarding possible overcapacity. Waguespack contends that one thing seems clear: the U.S.
energy industry is entering an era of increasing LNG imports. Long-term forecasts show that by 2012, LNG
demand is expected to increase by more than 300 percent from a 2005 level of two billion standard cubic
feet (Bcf) per day of natural gas to eight Bcf. Assuming all the approved terminal projects are built, this
dramatic increase in demand is exceeded by an even more dramatic increase in capacity. The combined
capacity of existing terminals plus all the approved projects could reach 16 Bcf of natural gas from LNG by
2012. Waguespack believes the LNG imports versus capacity issue will tend to balance out over the
following seven years for a number of reasons. Competition will drive LNG to other markets, while delayed
project timing in terms of financing, permitting and commercial impacts will potentially govern growth.
Competition from Canada and Mexico may also factor into the market equation. Numerous terminal
projects also will continue to move toward approval status and, ultimately, increase import capacity.
Regional needs – particularly along the U.S. East and West Coasts – may ultimately drive capacity
requirements as well. Over the next decade, these impacts may actually serve to boost market confidence
for LNG development and the reliability of LNG supply. In general, however, LNG imports offer potential
tools for stabilizing markets and addressing demand, which can benefit consumers and the industry.
Oil Prices Projected to Remain Above $50 a Barrel for Decades
[Arizona Republic web site, Dec. 13] Oil prices are projected to remain well above $50 a barrel for
years to come, resulting in a greater shift to more fuel efficient cars and alternative energy
sources, according to an analysis released [on Dec. 12] by the Energy Department. The analysis
reflected a sharp change from the department's projections [from 2004] when it predicted oil prices in
constant dollars, not counting normal inflation, would decline to $31 a barrel by 2025. The report by the
department's Energy Information Administration now projects oil will cost an average $54 a barrel in 2025
and $57 a barrel in 2030 before inflation. Crude oil prices have been hovering around $60 a barrel, briefly
soaring as high as $70 earlier this year.
Report: Global Energy Use to Soar
[CBS News web site, Dec. 13] Houston - Global energy consumption will soar 60 percent over the
next 25 years, Exxon Mobil Corp. forecast [on Dec. 13] in its annual energy outlook. Energy demand
will grow to 334 million barrels of oil equivalent a day in 2030, up from 205 million in 2000, Jaime
Spellings, head of Irving, Texas-based Exxon Mobil's corporate planning, said during a Web cast of the
outlook's presentation. Oil consumption will grow 1.4 percent annually, and gas will grow 1.8 percent per
year. Oil and gas will account for 60 percent of the world's energy needs, the same share they hold today,
Spellings said. Most of the growth will occur in developing countries, he said. The Organization of
Petroleum Exporting Countries [OPEC] will have a progressively larger share of the world's oil production
as non-OPEC output growth flattens around 2010, Spellings said. To satisfy growing crude oil thirst, OPEC
will have to produce more than 47 million barrels a day by 2030, a 40 percent increase over current levels,
Spellings said. “We're very confident that that growth will happen,” he said. The planet's remaining crude-oil
resource base, approximately 2.2 trillion barrels, excluding non-conventional oil, can support that
growth, Spellings said. The Middle East and Russia hold most of remaining reserves, he said. North
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 10
American natural-gas demand will grow 0.5 percent per year to 90 billion cubic feet a day, with domestic
production expected to decline by 2030 to slightly above 60 billion cubic feet a day from close to 80 billion
cubic feet a day. Liquefied natural-gas imports will account for the difference. Asian demand will triple from
around 30 billion cubic feet a day to 90 billion cubic feet a day, on par with North America, Spellings said.
Technology and efficiency improvements, expected to dampen demand, are already factored in the Exxon
Mobil outlook, Spellings said.
Department of Energy Sets Tougher Standards for Clothes Washers
[U.S. Dept. of Energy web site, Dec. 19] Washington, D.C. – The U.S. Department of Energy (DOE) [on
Dec. 19] announced tougher standards for clothes washers to qualify for the ENERGY STAR®
label, which lets American families identify which clothes washers save the most energy and use
the least water. The new standards take effect January 1, 2007, and will increase the efficiency of new
clothes washers up to 37 percent. The more energy-efficient clothes washers will have the potential to
save up to $70 million in energy bills and 8.9 billion gallons of water each year.
U.S. Greenhouse Gases Rose Two Percent in 2004
[Associated Press, Dec. 20] Washington, D.C. - Emissions of gases blamed for warming the
atmosphere grew by two percent in the United States last year, the Energy Department reported
[on Dec. 19]. The report came just nine days after a [United Nations] U.N. conference where the United
States and China refused to join any talks for imposing binding limits on emissions. The so-called
greenhouse gases, led by carbon dioxide, methane and nitrous oxide, rose to 7.12 million metric tons, up
from 6.98 million metric tons in 2003, the Energy Department's Energy Information Administration said.
That's 16 percent higher than in 1990, and an average annual increase of 1.1 percent. About 80 percent of
U.S. greenhouse gases last year was carbon dioxide from burning fossil fuels – coal, petroleum and
natural gas – for electricity, transportation, manufacturing and other industrial processes.
Honda Says to Mass-Produce Solar Cells from 2007
[Reuters, Dec. 19] Honda Motor Co. said on [Dec. 19] it plans to start mass-producing solar cells in
2007, eyeing growing demand for environmentally friendly energy sources. Japan's third-biggest
automaker said in a statement it would build a new factory for solar cells on the site of a car plant in
Kumamoto prefecture, on the southwestern Japanese island of Kyushu. The company aims to generate
annual sales of … ($40 million to $70 million) from solar cells once the factory's output reaches full annual
capacity of 27.5 megawatts, enough to power about 8,000 households. Honda will be competing with
major solar cell manufacturers such as Kyocera Corp. A Honda spokeswoman did not say when the
factory would hit full capacity and declined to disclose the size of the investment, which the Nihon Keizai
business daily estimated would be just short of [$85 million]. Honda said its solar cells would be composed
of non-silicon compound materials, consuming half as much energy and generating 50 percent less carbon
dioxide during production when compared with conventional solar cells made from silicon. The company
aims to sell the solar cells for both residential and industrial use. It will initially target the Japanese market.
Prior to mass production, Honda plans to manufacture and sell solar cells in a limited area in Japan from
late 2006.
Pact Signed for Prototype of Coal Plant
[New York Times web site, Dec. 7] Montreal - Under pressure from other industrialized countries at
talks here on global warming, the Bush Administration announced on [Dec. 6] that it had signed an
agreement with a coalition of energy companies to build a prototype coal-burning power plant with
no emissions. The project, called FutureGen, has been in planning stages since 2003. But the Energy
Department said here that a formal agreement had been signed under which companies would contribute
$250 million of a cost estimated at $1 billion. Environmental advocates at the talks criticized the
announcement, saying it was intended to distract from continuing efforts by the American delegation to
block discussion of new international commitments to cut emissions of carbon dioxide and other heat-trapping
gases that scientists link to global warming. “You are watching 163 nations do an elaborate dance
to try to make progress when the United States is sitting in the middle of the road trying to obstruct,” said
Alden Meyer, a representative of the Union of Concerned Scientists, a group that has long criticized the
Industries & Technologies
Arizona Department of Commerce Energy Office, Energy Policy Update January 2006 11
Bush Administration's climate approach…. “Every time, at the last minute, the U.S. pulls it away.” The talks
here are just one chapter in an international effort to rein in heat-trapping smokestack and tailpipe gases
that began in Toronto in 1988 at a conference on the changing atmosphere. Ever since then, climate
scientists, with widening consensus, have linked a global warming trend to increasing levels of those
gases in the atmosphere. The linkage led to the United Nations Framework Convention on Climate
Change in 1992, but that treaty had no binding limits on emissions. And while parties pledged to avoid
“dangerous” human influence with the climate, they sidestepped defining “dangerous.” The Kyoto Protocol,
which took effect this year, is an addendum to that pact with binding targets but limited participation. While
more than 150 countries have ratified the protocol, only about three dozen industrialized ones are subject
to the binding terms. The world's biggest emitter, the United States, has not ratified it. And the fast-growing
giants of the developing world, China and India, continue to insist that they will not accept cuts in
emissions. Also circulating at the talks were copies of a letter sent to President Bush on [Dec. 5] by two
dozen senators, including two Republicans, urging the administration to change its tactics. “The United
States should, at a minimum, refrain from blocking or obstructing such discussions amongst parties to the
convention, since that would be inconsistent with its ongoing treaty obligations,” said the letter, signed by
Senators Jeff Bingaman, Democrat of New Mexico; Olympia J. Snowe, Republican of Maine; Lincoln
Chafee, Republican of Rhode Island; and 21 colleagues. Administration officials here declined to respond
directly, instead referring reporters to a statement made at the talks on Dec. 2 by Harlan L. Watson, the
lead climate negotiator for the United States. Mr. Watson said the United States opposed any new
negotiations under the 1992 treaty. “We believe that it is best to address this complex issue through a
range of programs and technology initiatives,” he said.
U.S. Students Develop Cleaner Two-Stroke Engine
[Calstart web site, Dec. 5] Ft. Collins, CO - A couple of Colorado State University [CSU] graduate
students started tinkering with a snowmobile engine, and the technology they developed may help
clean up the filthy exhaust of 50 million mopeds and scooters in Asia, reports The Denver Post.
The students, Tim Bauer and Nathan Lorenz, are vice presidents of the nonprofit Envirofit International
Ltd., which is beginning its commercial sales with up to 3,000 engine retrofits for moped taxis in Vigan,
Philippines. Envirofit founders Bauer and Lorenz were mechanical-engineering students when they
developed a cleaner snowmobile engine with direct fuel injection. Injecting fuel directly into the two-stroke
engine's cylinder instead of the carburetor enables the engine to burn more fuel, instead of sending it out
the exhaust pipe. The snowmobile work was one of the first small-engine projects at CSU's Engines and
Energy Conversion Lab, a former Fort Collins power plant where students and professors build cleaner
engines for buses and natural-gas pipelines, among other things. The snowmobile project generated
international attention, including an e-mail from the Philippines asking if the students were selling retrofit
kits that would work on mopeds, said Brock Silvers, who is now Envirofit's chief executive. The company's
first big commitment is from the city of Vigan, which is requiring taxi drivers to buy a new engine or one of
Envirofit's $250 kits. The business challenge is selling technology to some of the poorest people on the
planet. Without the city regulation, it's unlikely Envirofit would sell many kits to Filipino taxi drivers, who
make about $10 a day, Silvers said. The company wants to retrofit two million engines by 2011, reducing
annual emissions by two million tons of carbon dioxide….
Toyota Working on Fuel-Cell Power Systems for Homes
[Hydrogen and Fuel Cell Investor web site, Dec. 8] Nagoya (Kyodo) - Toyota Motor Corp. is developing
fuel cells to generate electricity in the home, following its successful development of
environmentally friendly fuel-cell cars, in a bid to emphasize its clean technology in both its
vehicle and housing divisions, company officials said [Dec. 7]. The country's largest automaker has
tied up with automotive parts maker Aisin Seiki Co. to market fuel cells for home use within several years,
they said. It has already been cooperating with Toho Gas Co. to test fuel-cell cogeneration systems in
homes in central Japan, Toyota officials said. The fuel-cell system makes hydrogen gas from natural gas,
petroleum gas or kerosene and uses a hydrogen-oxygen chemical reaction to generate electricity and
provide hot water. Toyota is also planning to take part in government-subsidized fuel-cell demonstration
tests, in which many gas utilities and fuel-cell makers will participate, they said. Tokyo Gas Co. teamed up
with Matsushita Electric Industrial Co. to create a fuel-cell system leasing program last February in a bid to
sell thousands of generators annually in and after fiscal 2008. Other major machinery makers, including
Toshiba Corp., have also been racing to develop cheaper fuel-cell systems. If home fuel-cell systems are
to take off, the price will have to fall to around 500,000 yen [over $4,000], with improved durability, Toyota
officials said. Currently available systems cost more than 10 times that figure.