POLITICS:

Ohio governor prepares energy and environment plans for his newly gas-rich state

The nation's fourth-largest carbon dioxide-emitting state is about to get a new energy policy that its governor says could be a model for the entire country.

This week, industry representatives, state officials, academics and environmentalists are gathering in Ohio to craft a new energy plan for the state that will culminate in a major energy proposal from Gov. John Kasich (R) by next spring.

The package from Kasich, a former congressman, will determine whether the state burns less coal, extracts more natural gas and invests more in renewable power. It also could determine the energy discussion in 2012 during the presidential campaign in a state that often makes or breaks national elections.

The summit comes as energy companies are spending millions for the right to drill in the Utica Shale, a rock formation stretching across three-fourths of Ohio that could have more natural gas than other large plays like the nearby Marcellus Shale.

In an interview with ClimateWire, Kasich said he sees the summit as a way to put everything on the table, including the state's renewable standards mandating that 12.5 percent of the state's power come from alternative sources like wind and solar by 2025. An additional 12.5 percent is supposed to come from "advanced" energy sources like nuclear and fuel cells.

He said the state "has no energy policy." The governor will be giving the closing address at the summit in one of his first major speeches on energy as governor.

"This is not just about tax credits. We're looking at everything. We're looking at generation. We're looking at coal," he said. "Ohio is in a really good position to create a model that might be useful for the entire rest of the country."

On the issue of climate change, Kasich said, "there isn't any question that the activities of humans have an impact. As to what the extent of it is, I don't know."

Environmentalists are concerned

As he has said in the past, Kasich said he does not want to get rid of the state's renewable mandates, which were signed into law by former Gov. Ted Strickland (D).

The question has been in the open since a state lawmaker introduced a bill in the Republican-controlled Legislature this month that would repeal the standard altogether.

At the same time, Kasich indicated he would not equivocally rule out rolling the mandates back or adding new fuels into their mix.

"I'm not going to promise anything," Kasich said, when asked whether he would guarantee to keep the wind and solar incentives intact.

In particular, he said, cogeneration -- which involves capturing waste heat from industrial facilities -- should be considered as a potential renewable. He also left open the possibility of natural gas as a renewable, saying, "I'm not prepared to say," when asked whether the fuel should be counted as one.

Those comments prompted some environmentalists to express concerns about the summit and its legislative aftermath.

In their view, the state's renewable standard is working well at a modest cost and creating jobs in the process. Considering that roughly 85 percent of the state's electricity comes from coal, there needs to be a movement toward cleaner energy, they say.

Part of the concern is that the state has limited funds amid a budget crisis, leaving the existing renewable and efficiency standards as one of the main tools left to change the current path of policy, said Julian Boggs, a program associate at Environment Ohio.

Additionally, influential industries have been arguing against the existing renewable mandates. Ohio Coal Association President Mike Carey said yesterday that a change in the standards would be a priority of his industry at the summit, and in the months ahead.

Waste heat recovery is a good thing, but should not be a replacement for wind or solar in the standard, said Trish Lanahan of the Ohio Environmental Council. If cogeneration or another fuel were added to official state mandates, it would be harder for existing renewables to gain traction, she said.

"Without an increase of the overall standard, you would be in fact the diluting the whole thing," she said.

A looming gas 'gold rush'

But Kasich said he had not made up his mind about any policy. The whole point of the summit is to determine what will make it into a final package, which could include recommendations for legislation, executive orders and regulatory changes.

"We also don't want to be in a position where we kind of knee-jerk what we are going to do," he said. "We're going to appoint a group [within the administration after the summit] that's going to grind out policy. "

What is certain is that the vast oil and gas deposits of the Utica Shale will be a focus.

"We're sort of experiencing a gold rush," Kasich said about the shale. The Utica is important for an economic revival in the eastern part of the state, he said.

The oil and gas formation is not as developed as other regions like the Marcellus Shale, leaving much uncertainty about its fuel potential.

So far, 40 permits have been issued and nine wells drilled, so it's impossible to know how large it is, said Thomas Stewart, executive vice president of the Ohio Oil and Gas Association. Some geologists indicate it is bigger than other large U.S. gas shale formations such as the Marcellus Shale, he said.

And major gas companies are grabbing up drilling rights.

In July, gas giant Chesapeake Energy announced that its 1.25-million-acre lease in the Utica could be worth as much as $20 billion. The company said it would increase the number of drilling rigs in the area from five this year to as many as 20 by the end of 2012.

The energy summit starting this week will have a large share of gas supporters, including representatives from Chesapeake, America's Natural Gas Alliance, the Ohio Oil and Gas Association and Anadarko Petroleum. Battelle, a research organization that manages national labs, is coordinating the event.

As it has in other states, the gas rush is spurring a lobbying campaign on both sides.

Yesterday, the American Chemistry Council released talking points in advance of the summit saying that new supplies of natural gas is a game changer for the industry, which uses the fuel as a feedstock.

Boon for the chemical industry

Ohio is the seventh-largest chemical-producing state, and the council says a reasonable increase in shale gas production would result in 400,000 new jobs nationwide in the chemical industry. Shale investments could help move the industry into fifth place nationally among chemical producers, the council said.

Many Ohio environmentalists, on the other hand, are starting to protest about the process to extract shale gas, known as hydraulic fracturing, or fracking. It is a relatively new process for the gas industry that involves blasting sand, water and chemicals underground to crack open deep rock.

Governors like Republican Chris Christie of New Jersey and Democrat Martin O'Malley of Maryland signed moratoriums on fracking this summer. There have been concerns raised by federal officials and academics about the impact of the practice on groundwater and the possibility of methane leaks in the production process. Methane is a potent heat-trapping gas.

Natalie Fox of the Ohio Sierra Club said about 100 environmentalists would be holding a rally outside the summit, largely to spotlight their worries about fracking. Other green groups said they thought the summit had a definite bias in favor of industry, even though the Natural Resources Defense Council is one of the official co-sponsors.

"Companies engaging in fracking very seldom hire local workers, further disadvantaging communities impacted by horizontal fracturing. This is not a model that aligns with the economics and job creation that Ohio citizens want and deserve," said Fox.

But Kasich said that he wants Ohioans only to fill new jobs in the Utica. He also said it was important to have environmentalists at the conference, to hear all sides.

'No problem with fracking'

"There's no problem with fracking. I dismiss that," Kasich said. The state has learned enough from Pennsylvania and New York to engage in the practice safety and effectively, he said.

A bigger question could be how much Kasich can incentivize the gas industry at this point. Stewart of the Ohio Oil and Gas Association said that most of the industry rules -- including requirements for companies to disclose chemicals injected underground in the fracking process -- were completed in a state bill that passed in 2010.

A chief thing the government could do at this point is support training programs, since there need to be more Ohio-based skilled workers if the governor's request for Ohio-only workers is met, he said. He said he "wasn't sure" where the money would come from for that, although the work would be coordinated through a state agency and JobsOhio, a private economic development organization established by Kasich to spur job creation in the state.

Kasich also can make a big difference by educating the public about natural gas development, said Stewart. Otherwise, "we're not asking for incentives," he said.

The governor said he did not see promotion of gas as a slap at the state's coal industry, a sentiment echoed by the Ohio Coal Association's Carey. Coal will continue to be a very important part of the state's fuel mix, he said.

The governor also said he doesn't see the eventual Ohio plan as part of a larger strategy to help Republicans win the White House in 2012.

"I don't think about that," he said. "I don't approach issues like a Republican. I think like an Ohioan."

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