According to the most recent Form 10-K that Xcel Energy, Colorado’s largest investor owned utility (IOU), filed with the Security and Exchange Commission dated December 31, 2011, electricity generation from natural gas was more than double the price of electricity generated from coal in Colorado.
A table on page 18 of the report shows that in 2011, Xcel produced 76 percent of its electricity from coal at a cost of $1.77 per MMBtu while natural gas cost $4.98 per MMBtu while providing 24 percent of Xcel’s electricity.
As more and more of Xcel’s electricity is mandated to come from natural gas thanks to HB 1365, the fuel switching bill and the cornerstone of what former Governor Bill Ritter coined the “new energy economy,” along with additional regulations and out right bans on hydraulic fracturing, Xcel ratepayers should get used to spending more and more on their electricity bills.
Energy Policy Center Director Amy Oliver Cooke has fun talking energy, especially when wearing a hot pink “Mothers In Love with Fracking” t-shirt. Thanks to Tom Barry of The Villager for this photograph and his article on the American For Prosperity (AFP) event that featured Dick Morris. AFP invited Amy to be the warm up act to discuss Obama’s energy policy.
The disgraced former EPA regional official forced out after Senator James Inhoff (R-Oklahoma) posted a video of his enforcement philosophy for fossil fuel companies has found a home with the Sierra Club and its anti-coal campaign.
Al Armendariz will take over leadership of the group’s “Beyond Coal” campaign office for Austin, Texas, on July 15.
He’ll coordinate efforts to move the Lone Star State away from coal-fired electric generation and toward wind, solar and other low-carbon alternatives, said Beyond Coal director Bruce Nilles in an interview.
Armendariz, former administrator of EPA Region 6, resigned last spring after a video surfaced revealing his “enforcement philosophy” for oil and gas developers to be analogous to the Roman crucifixion of the “first five villagers” in a conquered territory.
Just two years ago, the Rocky Mountain Chapter of the Sierra Club was instrumental in getting the Colorado General Assembly to pass HB10-1365 mandatory fuel switching away from coal to natural gas. That love affair ended abruptly last month when the national headquarters announced that it no longer supported natural gas as a “bridge fuel” for electricity generation.
Senator Inhoff told EENews that Armendariz’s new position was no surprise to him, “At least at the Sierra Club, he won’t get into so much trouble for telling the truth that their agenda is to kill oil, gas and coal.”
Sound energy policy must be rooted in fact rather than fiction and reason rather than emotion. Recently, the Institute for Energy Research released a well-researched, extensively-cited, easy-to-read primer on energy. We encourage you to read all 68 pages of Hard Facts: An Energy Primer. For those who want a cliff notes version, a few key facts are provided below.
- In 2011, the United States produced 23.0 trillion cubic feet of natural gas, making it the world’s largest natural gas producer.
- In 2011, the United States produced 5.67 million barrels of oil per day, making it the world’s third largest oil producer.
- Proved conventional oil reserves worldwide more than doubled from 642 billion barrels in 1980 to more than 1.3 trillion barrels in 2009.
- The United States is home to the richest oil shale deposits in the world—estimates are there are about 1 trillion barrels of recoverable oil in U.S. oil shale deposits, nearly four times that of Saudi Arabia’s proved oil reserves.
- The United States has 261 billion tons of coal in its proved coal reserves. These are the world’s largest coal reserves and over 27 percent of the world’s proved coal reserves.
- The United States produces nearly 1.1 billion short tons of coal a year, making it the world’s second largest coal producer.
- China produces over 3.5 billion short tons a year.
- The United States has 486 billion tons of coal in its demonstrated reserve base, enough domestic coal to use for the next 485 years at current rates of consumption. These estimates do not include Alaska’s coal resources, which according to government estimates, are larger than those in the lower 48 states.
- The federal government leases less than 3 percent of federal lands for oil and natural gas production—2.2 percent of federal offshore areas and less than 5.4 percent of federal onshore lands.
- The world could hold more than 700 quadrillion (700,000 trillion) cubic feet of methane hydrates—more energy than all other fossil fuels combined.
Renewables and Nuclear:
- In 2011, wind power produced 1.2 percent of the energy used in the United States.
- In 2011, solar power produced 0.1 percent of the energy used in the United States.
- Total federal subsidies in fiscal year 2007 were $24.34 per megawatt hour for solar-generated electricity and $23.37 per megawatt hour for wind, compared with $1.59 for nuclear, $0.67 for hydroelectric power, $0.44 for conventional coal, and $0.25 for natural gas and petroleum liquids.
- In fiscal year 2010, the subsidies were even higher. For solar power, they were $775.64 per megawatt hour, for wind $56.29, for nuclear $3.14, for hydroelectric power $0.82, for coal $0.64 and for natural gas and petroleum liquids $0.64.
- In 2011, hydroelectric power contributed 3.3 percent of the energy used in the United States and 7.9 percent of the electricity.
- Today, there are 104 nuclear reactors in the United States and construction began for all of these reactors prior to 1974.
- Since 1970, the six so-called “criteria pollutants” have declined by 63 percent, even though the generation of electricity from coal-fired plants has increased by over 180 percent, gross domestic product has increased by 204 percent, energy consumption has increased by 40 percent, and vehicle miles traveled have increased by 168 percent.
- Energy use per person in the United States fell 12 percent between 1979 and 2010 from 359 million BTUs to 317 million BTUs per person.
- Energy intensity—energy consumption per dollar of GDP—fell by 52 percent between 1973 and 2011.
- In 2010, China was responsible for 24 percent of global carbon dioxide (CO2) emissions. In comparison, the United States, the second largest emitter of carbon dioxide, emitted 17 percent of the global total.
- China’s CO2 emissions increased by 167 percent between 1999 and 2009, while CO2 emissions from the United States decreased by 4.4 percent over the same 10-year period.
- Renewable energy subsidies were 49 times greater than fossil fuel subsidies when comparing the amount of energy produced per dollar of subsidy.
- In 2009, renewables received a 77 percent share of total federal energy incentives while fossil fuels received a 13 percent share but produced 7 times the energy.
We are agnostic on energy resources. It is our strong belief that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups. Subsidies only encourage lawmakers to pick winners and losers in the energy industry that distort the market and end up costing consumers more.
This post will be the first in series on hydraulic fracturing (”fracking”), in which Independence Institute research associate, Donovan Schafer, will take on specific issues related to fracking. In this post he focuses on the claim that fracking will deplete Colorado’s water resources. Enjoy!
Two recent articles—one in the Denver Post and another in the Huffington Post—present the issue of water depletion as it is commonly presented by those who oppose fracking. Wendell G. Bradley, in the Denver Post, urges lawmakers to “cut off fracking’s unconscionable amounts of water use,” while Gary Wockner, in the Huffington Post, warns that fracking would use up the “last drop in the bucket of Colorado’s rivers.”
These views simply do not reflect reality. In January, the Colorado Division of Water Resources, the Colorado Water Conservation Board, and the Colorado Oil and Gas Conservation Commission issued a joint report estimating that fracking would account for just eight-hundredths of a percent (0.08%) of Colorado’s annual water usage—far less than what we use for recreational purposes (5.64%) and slightly more than what we use to make fake snow (0.03%).
But fracking is different—these authors claim—because the water is left in “deep subterranean cavities,” and thus fracking “permanently remove[s] billions of gallons of water from the hydrologic cycle.” This statement gives the false impression that fracking can significantly affect the hydrologic cycle. It cannot. The hydrologic cycle is not a fixed supply of freshwater, but rather a constantly recharging system that begins with the nearly infinite expanse of the oceans.
Just for fun, let’s accept the Intergovernmental Panel on Climate Change prediction that sea levels will rise by one foot during the next century. A few simple calculations show that it would take one hundred million (100,000,000) frack-jobs, each using 5 million gallons of water, to counteract the predicted one-foot rise in sea level. In other words, the oceans which serve as the starting point for the hydrologic cycle cannot possibly be affected by hydraulic fracturing in any significant way—and even if they could be affected, the general effect would be to counteract the threat of rising sea levels, which we are constantly warned about.
Some of the fracking nay-sayers, seem to concede these points, but then they go on to assert that there is still a problem. They warn that even a small additional use of water will be enough to completely dry up the system. Consider Gary Wockner’s line of reasoning:
It is true that the state of Colorado contains millions of acre feet of water, and that fracking may only need a small percentage of it. But more importantly and to the point, it is also true that fracking is a brand new use of water . . . . Fracking would certainly contribute to being the last drop in the bucket of Colorado’s rivers.
But this, too, is misleading. Every drop of water withdrawn requires, by law, approval from water permitting authorities. Furthermore, these permitting authorities cannot simply give away the proverbial “last drop.” Currently, by law, all new water uses must be balanced against current water uses. To quote the CDWR Report, “water cannot be simply diverted from a stream/reservoir or pumped out of the ground for hydraulic fracturing without reconciling that diversion with the prior appropriation system.” Claims that fracking will gobble up the last drop are just plain nonsense.
In the face of claims like those presented in this post, remember these three points:
- Fracking would present a mere 0.08% of Colorado’s annual water usage;
- Even though some water is left underground, the amounts of water involved cannot possibly have an appreciable effect on the hydrologic cycle, because that cycle is fueled by our massive oceans;
- And, lastly, the added water uses from fracking will not suck the system dry, because current laws require that new uses be reconciled and balanced with current appropriations.
Stay tuned for more coverage of the specific fracking issues that you need to know about.
On energy policy, Governor-elect John Hickenlooper is perhaps the most masterful politician I’ve ever encountered.
Coal, climate change, costs…these matters engender passions. They get people riled up. So it’s an awesome political trick that Hickenlooper has been elected mayor of this country’s finest city, and then governor of this country’s finest state, without revealing what he thinks on energy policy.
Hick’s record is maddeningly equivocal. He’s a geologist, who used to work in the hydrocarbon business, so you know he has the experience to be serious. Yet his energy legacy as Denver mayor is a silly, toothless Climate Action Plan, designed primarily for grandstanding.
A Quick Review of HB 1365…
HB 1365, the Clean Air Clean Jobs Act, mandates that Xcel file a plan by August 15 2010 that would:
- be implemented by December 31, 2017;
- meet “reasonably foreseeable” state and federal air quality regulations;
- achieve at least 70% reductions in nitrogen oxides emissions from at least 900 megawatts of coal fired power plants
The Public Utilities Commission (“PUC”) must approve, deny, or modify Xcel’s proposed plan by December 15, 2010, but only after the Department of Public Health and Environment (“CDPHE”) determines that the plan would meet “reasonably foreseeable” air quality regulations.
The legislation gives Xcel the right to withdraw its plan (i.e., the right to walk away) if it “disagrees with the [PUC’s] modifications.”
A Very Brief History of HB 1365 Implementation Plans
- August 13: Xcel chose “preferred” Plan 6.1E for achieving HB 1365, from nine possible scenarios. Click here for a 1-page summary of the nine scenarios.
- October 21: The PUC disqualified Xcel’s “preferred” Plan 6.1E because it included actions that would have occurred after a 2017 deadline.
- October 25: Xcel chose a new “recommended” plan from the nine possible scenarios that were set forth in August (Plan 5B), and it concomitantly proposed three new versions of its original, “preferred” plan (Plans 6.2J, 6E FS, and 6.1E FS). Click here for a detailed review of the new plans.
- November 3: Xcel, which is accorded veto power over all of the plans before the PUC for consideration, disqualified a number of possible plans. To see a 1-page summary of plans that are “in play,” click here.
PUC Denies Peabody Motion to Dismiss Proceedings
Before yesterday’s hearing started, the PUC made a determination on Peabody’s motion to dismiss the proceedings. I discussed the motion here. In a nutshell, Peabody argues that HB 1365 established an August 15 2010 deadline for the submission of implementation plans, and that Xcel violated this deadline by introducing implementation Plans 6.2J, 6E FS, and 6.1E FS on October 25.
Review of November 3 PUC Hearing on HB 1365
Primer on the Many Implementation Plans that the PUC Is Considering
Primer on HB 1365
Timeline of Implementation Plans
Study on the Dubious Foundations of HB 1365
Archive of HB 1365 Posts
Oped Last Week in Denver Daily News: Ritter’s Phantom Carbon Tax
Xcel Identifies Which Plans It Would Accept
As I noted this morning, HB 1365 gives Xcel the power to veto any of the twelve implementation plans being considered by the PUC. This afternoon, Xcel Vice President of Rates and Regulatory Affairs Karen Hyde identified those plans that are “off the table.”
Here are the plans that have been dropped.
- Plans 2A & 4C: Ms. Hyde said that Xcel would not consider these two plans because they both would install top of the line nitrogen oxides pollution controls on the 152 megawatt Cherokee 3 coal fired power plant northwest of Denver, instead of closing the plant down. According to Xcel, the pollution controls are less cost-effective than shuttering the plant. This is malarkey. The real reason that Xcel rejected Plans 2A and 4 C is that they only allow for 314 megawatts of replacement electricity generation powered by natural gas. The utility wants to build at least 650 megawatts of replacement generation, so that it can increase its share of the wholesale electricity market, at the expense of independent power producers.
- Benchmark Plan 1: This is the plan endorsed by coal interests. It would install pollution controls at eight coal fired power plants. Xcel has long indicated that it finds Benchmark Plan 1 unacceptable.
- Benchmark Plan 1.1: This is a version of Benchmark 1. It would install pollution controls at five coal fired power plants.
- Plan 6H: This is Western Resource Advocates’ plan. I discussed this plan in Saturday’s update. Like Benchmark Plan 1, Xcel has long indicated that it would reject WRA’s plan, due to reliability concerns.
There are at least twelve HB 1365 plans being considered by the PUC, and it can get very confusing trying to follow them all. But don’t fret—I’ve done the work for you! Here’s a handy primer on the plans now in play.
HB 1365 Requires a Plan, Not Action
HB 1365, the Clean Air Clean Jobs Act, requires Xcel to propose a plan by August 15 2010 that would:
- Meet “reasonably foreseeable” state and federal air quality regulations.
- Achieve at least 70% reductions in nitrogen oxides emissions from at least 900 megawatts of coal fired power plants.
- Be implemented by December 31, 2017
The PUC must approve, deny, or modify Xcel’s proposed plan by December 15, 2010, but only after the Department of Public Health and Environment (“CDPHE”) determines that the plan would meet “reasonably foreseeable” air quality regulations.
The legislation gives Xcel the right to withdraw its plan if it “disagrees with the [PUC’s] modifications.”
Xcel’s Preferred Plan
During the spring and summer months, Xcel formulated nine possible scenarios to comply with HB 1365. On August 13, after performing an economic analysis of the nine potential plans, the utility chose one—Plan 6.1E—as its preferred strategy. For a review of Plan 6.1 E, click here.
[1:05 PM Update] November 1 PUC Hearing on HB 1365: PUC Rebuffs Peabody’s Request for Shortened Response; CDPHE Determination Not Expected till 5 PM
[N.B. The PUC quickly addressed the items I noted in this morning’s preview]
As I noted this morning, Peabody Energy last Friday filed a motion to dismiss the proceeding. The coal company requested that the PUC require parties to respond to the motion by tomorrow (November 2), in order to expedite a final decision, but the PUC this morning set November 15 as the response deadline. Chairman Ron Binz promised to “do all I can to have a decision [on the motion] by the resumption of hearings” on November 18.
Three Plans Remain in Limbo
Also this morning, Chairman Binz indicated that the Colorado Department of Public Health and Environment will wait until 5 PM to file its determination on whether Xcel’s two new fuel switching plans [Plan 6E FS and Plan 6.1E FS—see the “Crash Course” below] comply with all “reasonably foreseeable” air quality regulations. If the CDPHE finds that the plans do not meet reasonably foreseeable air quality regulations, they will be discarded.
Finally, Chairman Binz said that the PUC will not take up the admissibility of Plan 6.2 J [this is an accelerated version of its preferred plan—see “Crash Course” below] until the PUC receives the CDPHE’s determination on the two fuel switching plans. Last week, the PUC agreed to “tentatively” consider Plan 6.2 J, even though the PUC Staff said that it wouldn’t have enough time to review the plan, and therefore recommended that it be removed from consideration.