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Natural Gas Council: Study Finds Lieberman-Warner Legislation Will Drive Up Demand for Natural Gas

(Washington, DC) A new study by the Natural Gas Council concludes that legislation to
be debated in the U.S. Senate this week is likely to increase natural gas demand without
addressing the need for increased supply.
 
David Parker, president and CEO of the American Gas Association, was one of several
council members to respond to the study’s findings.  “We take global climate change
seriously and believe that natural gas will be a key part of any effective climate change
initiative,” Parker said.  “Our analysis suggests that achieving the carbon reductions
required under S. 3036 requires a mix of technologies and energy sources.  Our study
also found that demand for natural gas could increase by more than 30 percent by 2030.”
 
The study also noted that “offsets” in the legislation would allow a regulated source, such
as a power plant, to meet some of its compliance obligations by reducing an equal
amount of carbon emissions from sources that have not been capped.  
 
 “The importance of offsets really jumped out at us,” said council member Skip Horvath,
president and CEO of the Natural Gas Supply Association speaking of the study’s results.  
“Congress needs to carefully think through the role of domestic and international offsets
because this mechanism significantly affects the United States’ ability to achieve the
legislation’s carbon reduction targets.  The global market for offsets is going to be
competitive as foreign nations move to meet their own carbon reductions.”
 
Under S. 3036, the Lieberman-Warner Climate Security Act, a company could meet up to
15 percent of its compliance obligations with specified domestic offsets, while another 15
percent could come from Europe and other parts of the world.

In addition to driving up demand for natural gas, the study found that the legislation
would increase electricity production from nuclear power plants, wind and solar power-
units.  The bill also includes incentives to carbon sequestration technology, now under
research and development, which would remove carbon from emissions and sequester it
underground.        
 
“Given the uncertainties surrounding new energy technologies and implementation of the
cap and trade program, we suggest that Congress incorporate a strong natural gas supply
and infrastructure portfolio that will allow us to achieve the goals of a climate-change
bill,” said council member Don Santa, president of the Interstate Natural Gas Association
of America.  
 
The Natural Gas Council’s study echoes previous studies by the federal government and
other groups — studies that also indicate the demand for, and cost of, natural gas could
increase substantially if the legislation becomes law.  
 
“What concerns us is that while some studies show natural gas use going up, perhaps
dramatically under S. 3036, other studies found that the same legislation would cause the
supply of natural gas to decline.  That’s a collision course for consumers,” said council
member Barry Russell, president and CEO of the Independent Petroleum Association of
America.  “If Congress does not hamper existing production and allows more
exploration, our industry could ensure a more robust supply of natural gas which would
reduce price pressure.  That supply increase would provide an economic relief valve if
there are problems with sequestration or offsets.” 
 
The analysis was conducted by Science Applications International Corporation (SAIC)
using the National Energy Model System (referred to as NEMS-NGC version).  NEMS-
NGC used alternative input assumptions provided by the Council.
 
The Natural Gas Council includes the American Gas Association, the Independent
Petroleum Association of America, the Interstate Natural Gas Association of America,
and the Natural Gas Supply Association.   

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IPAA is the national trade association representing oil and natural gas producers that drill 90 percent of the nation's oil and natural gas wells. These companies account for 68 percent of America's oil production and 82 percent of its natural gas production.