Proposed legislation could bolster natural gas penetration in U.S. markets, but will concerns over hydraulic fracturing and pipeline safety curb growth? During today's OnPoint, Dave McCurdy, president and CEO of the American Gas Association, discusses the House's newly proposed "NAT GAS Act" and talks about the prospects for a clean energy standard.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Dave McCurdy, president and CEO of the American Gas Association. Dave, it's great to have you back on the show in your new capacity.
Dave McCurdy: Thank you, Monica, good to be with you.
Monica Trauzzi: Dave, Congressman Larson recently introduced the New Alternative Transportation to Give America Solutions Act, NATGAS Act. This is a bill revival. The original died in Congress two years ago. How is the political climate different now for this type of bill and what makes you think that we're going to cross the finish line with this, this year?
Dave McCurdy: Well, the NATGAS Act is a bill that they did introduce last year, but this is a bit of a scaled-back version and I think it's in response to the growing demand and concerns globally and here in America for some alternative sources of energy. And looking at the revival of natural gas is the foundation fuel to build on. The president recently, March 30, made a speech where he called upon the use of efficient natural gas. He also made a subsequent visit to some sites to look at trucks and heavy-duty vehicles that are now operating on natural gas, the fleet vehicles, and sees this as a major opportunity. When you look at what's happened in the Middle East and North Africa, that tremendous turmoil has put upward pressure on crude oil prices. And the big game change in America today is a delinking of those prices. Historically, crude oil and natural gas prices kind of flowed together, but with the advent of technology to expand shale production, shale gas production, you now see a divergence going the other way. And so we have, with this abundant supply, a multi-decade, the president himself and others have said nearly over 100 years, of supply, which provides for stable, affordable, low-cost natural gas.
Monica Trauzzi: So with this bill we're talking about tax credits for vehicles, infrastructure. How do we ensure though that the bill doesn't pick winners and losers and that we don't put other technologies at a disadvantage?
Dave McCurdy: Actually, there are other technologies that have the tax credits and been using tax credits and this is an opportunity to really kind of level the playing field. And the market will certainly move in that direction as well. But with any technology where there's upfront cost there is advantages to having some credits for the consumers to understand the technology, to acquire the technology. When you look at four dollar gasoline, which is on the horizon, and you look at the net cost of natural gas equivalent, which is $1.39, and the fuel efficiency is comparable, but the greenhouse gas emissions is so much lower with natural gas, this is a clean, affordable fuel that I think creates a whole new opportunity. And we in the natural gas community believe that you need the full mix of fuels. We need alternative fuels, wind, solar, nuclear, but natural gas can be a foundation because of this abundant American source of energy.
Monica Trauzzi: OK, so $1.39 for natural gas, how do you ensure that that price doesn't go up to levels that we're seeing for gas for example, for gasoline?
Dave McCurdy: When we had Hurricane Katrina and Rita we saw a spike in natural gas prices, but that was before the Marcellus Shale development, before the Barnett Shale was really moving. So you now have supplies and they continue, we're using about 22 trillion cubic feet a day, in this country, of natural gas. We're now talking about 2500 trillion cubic feet of natural gas available in the United States. That's more than a 100 year supply, so that economic and market equation has changed and it's changing not only electricity generation. You see more conversion to natural gas from coal and other sources and now with the potential, and I think a real one, to move in the natural gas vehicles, you'll see us moving from that 11 million barrels a day that we import of petroleum to reducing that. By going to heavy duty vehicles first, I think you'll see, with major trucks and urban transit, 22% of all urban transit buses that are being ordered today are being ordered for natural gas because they're cleaner and this is an abundant fuel and it's very affordable and stable prices. We just released a study from the Bipartisan Policy Center looking at how you can use long-term contracting and other measures to not only provide long-term, but very stable within a boundary, so you don't have these spikes.
Monica Trauzzi: So, with all the talk of a clean energy standard, is the NATGAS Act a competing bill or do you see them working together? Is it one or the other?
Dave McCurdy: Well, the clean energy standard that the president proposed is a way to use alternative fuels for electricity generation. You know, it's going to be a challenge to see it go all the way through a Congress I believe. We're not supportive of the mandate, but we think that the president should be commended for expanding the definition of clean. I think there's a certain pragmatism that's finally coming to the table today, on all sides, in looking at realistic options. And we have to have realistic options that consider the economic reality on the ground. So, again, in the clean energy you look at wind, solar, nuclear, clean coal, other forms that are out there, but by expanding to natural gas, which is so much cleaner, it's the cleanest of all fossil fuels, I think you create some opportunities there.
Monica Trauzzi: So, you say you're not in favor of a mandate. Does that mean you would not support a clean energy standard?
Dave McCurdy: If the standard, if it looks like the mandate or a standard is coming forward and it gets through the congressional process, I think Congress wants to have a diversity of fuels. I think that's important. But what's important, as we said before, you don't want to see government picking winners and losers. And you shouldn't underestimate the role of natural gas. We really need to take it into consideration and I think if it looks like that is going to be a measure, we want to make sure that that definition doesn't put natural gas at a disadvantage, which is often some of the concern.
Monica Trauzzi: OK, so walk me through the timeline for the NATGAS Act, when you think it's going to make its way through the committee.
Dave McCurdy: Yeah.
Monica Trauzzi: And eventually to the floor.
Dave McCurdy: Well, in the House, Congressman John Larson, who's on the Ways and Means Committee, part of the Democratic leadership, Kevin Brady, also a member of the Ways and Means Committee, a Republican, as well as David, Dan Boren, served with his dad, so I said David, but Dan Boren from Oklahoma, my former colleague, and Tim Murphy from Pennsylvania, so it's a bipartisan approach. But this is primarily, there are measures, John Sullivan from Oklahoma is on the Energy and Commerce Committee, that there will be possible multiple jurisdictions, so Energy and Commerce might have a say, but I think it's principally a Finance and Ways and Means bill. Even when I was chairman of the Intelligence Committee, I always thought that the Ways and Means and Finance process was a little special and unique. So it's hard to predict how it will go through, but at the end of the year there's going to be these tax extenders that expire and I think at that point that will be one of those deadlines, you have to get something through. So, I would say there's a really good chance. Senators Reid, Menendez, and Hatch in the Senate, I think, are going to be the proponents there. So in presidential support I think this is the year that we'll see something.
Monica Trauzzi: Natural gas expansion all sounds wonderful, but you guys have some key hurdles to overcome, the debate over hydraulic fracturing, pipeline safety. How do you see those two issues, how do you see yourselves working through those two issues this year and resolving them?
Dave McCurdy: Right, pipeline safety is our number one priority as utilities. And since we're invested in the communities and close to those communities, we have a real interest in making sure that there's safe, reliable and affordable delivery of gas. We're working closely with the Senate. I think Senator Lautenberg has a bill that is a good starting point for this discussion, the reauthorization or movement of reauthorization. We've appreciated the open approach that he's taken to this. The House, I think Congressman Shuster and I know that Chairman Upton are looking at the legislation. You'll see a bill this year and you'll see one that the industry will be supporting I believe. We're all part of the value chain of delivering gas, whether it's at the utilities in the community or at the producers on the ground, so from wellhead to burner tip, we're interested. And I think that we can make sure that we have affordable access to this gas by using best practices, working with the communities, engaging stakeholders at all levels. It needs to be open and transparent with a real conversation about what the impact of this industrial process is. But keeping in mind, in Pennsylvania for example, $8.5 billion of economic revenue coming in, 100,000 jobs last year, again, with an economy that they've seen. So the states, I think, the local regulators have a responsibility and we need to help them be resourced so that they can develop the right rules and regulations to make it done environmentally sound. I think we can do that.
Monica Trauzzi: OK, we'll end it right there on that note. Thank you for coming on the show. Nice to see you.
Dave McCurdy: Thank you, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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