The Golden Age of Gas, Possibly: Interview with the IEA

The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA)—the “global energy authority”–believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.

In an exclusive interview with Oilprice.com, IEA Executive Director Maria van der Hoeven, discusses:

  • The potential for a golden age of gas
  • What will the “age” means for renewables
  • What it means for humanity
  • The challenges of renewable investment and technology
  • How the US shale boom is reshaping the global economy
  • Nuclear’s contribution to energy security
  • What is holding back Europe’s energy markets
  • The next big shale venues beyond 2020
  • The reality behind “fire ice”
  • Condensate and the crude export ban
  • The most critical energy issue facing the world today

Interview by. James Stafford of Oilprice.com

Oilprice.com: In 2011, the IEA predicted what it called “the golden age of gas,” with gas production rising 50% over the next 25 years. What does this “golden age” mean for coal, oil and nuclear energy—and for renewables? What does it mean for humanity in terms of carbon emissions? Is the natural gas boom lessening the sense of urgency to work towards renewable energy solutions?

IEA: We didn’t predict a golden age of gas in 2011, we merely asked a pertinent question: namely, are we entering a golden age of gas? And we found that the potential for such a golden age certainly exists, especially given the scale of unconventional gas resources and the advances in technology that allow their extraction. But the potential for a golden age of gas hinges on a big “if,” and we elaborated on this in 2012 in a report called “ Golden Rules for a Golden Age of Gas”. Exploiting the world’s vast resources of unconventional natural gas holds the key to golden age of gas, we said, but for that to happen, governments, industry and other stakeholders must work together to address legitimate public concerns about the associated environmental and social impacts. Fortunately, we believe that unconventional gas can be produced in an environmentally acceptable way.

Under the central scenario of the World Energy Outlook-2013, natural gas production rises to 4.98 trillion cubic metres (tcm) in 2035, up nearly 50 percent from 3.38 tcm in 2011. But we have always said that a golden age of gas does not necessarily imply a golden age for humanity, or for our climate. An expansion of gas use alone is no panacea for climate change. While natural gas is the cleanest fossil fuel, it is still a fossil fuel. As we have seen in the United States, the drastic increase in shale gas production has caused coal’s share of electricity generation to slide. Of course, there is also the possibility that increased use of gas could muscle out low-carbon fuels, such as renewables and nuclear, from the energy mix.

OP: When will we see “the golden age of renewables”?

IEA: Although we have not yet predicted a “golden age” of renewables, the current, rapid growth of renewable power is a bright spot in an otherwise bleak picture of global progress towards a cleaner and more diversified energy mix. Still, the investment case for capital-intensive, low carbon power technologies carries challenges. We need to distinguish between two situations:

  • In emerging economies, renewable power often provides a cost-competitive alternative to new fossil based generation and are perceived as part of the solution to questions of energy supply, diversification, and economic development. In China, for example, efforts to reduce local pollution are stimulating major investments in cleaner energy.
  • By contrast, in stable systems with sluggish demand, no technology is competitive with marginal electricity prices, due to overcapacity. Governments are nervous about increasing investment in low-carbon options which impact on consumer prices, and this is causing policy uncertainty. But long term energy security and environmental goals need to be kept in mind.

The overall outlook for renewable electricity remains positive, even as the outlook can vary strongly by market and region. However, the electricity sector comprises less than 20% of total final energy consumption. The growth of renewables in other sectors such as transport and heat has been more sluggish. For a golden age of renewables to materialise, greater progress is needed in these areas, for example, with the development of advanced biofuels and more policy frameworks for renewable heat.

OP: How is the shale boom reshaping the global financial and economic system? Who are the winners and losers in this emerging scenario?

IEA: One of the key messages of our World Energy Outlook-2013 is that lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden.

Natural gas prices have fallen sharply in the United States – mainly as a result of the shale gas boom – and today they are about three times lower than in Europe and five times lower than in Japan. Electricity price differentials are also large, with Japanese and European industrial consumers paying on average more than twice as much for electricity as their counterparts in the United States, and even Chinese industry paying almost double the US level.

Looking to the future, the WEO found that the United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline – a combined loss of around one-third of their current share.

OP: The IEA has noted that the US is no longer so dependent on Canadian oil and gas. What could this mean for pending approval of TransCanada’s Keystone XL pipeline? How important is Keystone XL to the US as opposed to its importance for Canada?

IEA: The decision on the Keystone matter is one that must be taken by the United States Government. I am afraid it is not for the IEA to comment.

OP: With the nuclear issue taking center stage in Japan’s election atmosphere, is Japan ready to pull the plug entirely on nuclear, or is it too soon for that?

IEA: This year’s World Energy Outlook, which we will release in November 2014, will carry a special focus on nuclear energy, so please stay tuned. While I won’t discuss what Japan should do, I will say that every country has a sovereign right to decide on the role of nuclear power in its energy mix. Nevertheless, nuclear is one of the world’s largest sources of low-carbon energy, and as such, it has made and should continue to make an important contribution to energy security and sustainability.

A country’s decision to cut the share of nuclear in its energy mix could open up new opportunities for renewables, particularly as some phase-out plans envision the replacement of nuclear capacity largely with renewable energy sources. However, such a decision would also likely lead to higher demand for gas and coal, higher electricity prices, increased import dependency on fossil fuels and electricity, and a more difficult path towards decarbonisation. Such a scenario would therefore make it much more difficult for the world to meet the 2°C climate stabilisation goal, and have potentially negative impacts on energy security.

OP: What is the key factor holding back European energy markets?

IEA: Europe has quite a few advantages but also many hurdles to overcome. If I had to pick one key factor that is holding back European energy markets, I would say it is the lack of cross-border interconnections. Let me explain what I mean. As we showed in WEO 2013, Europe’s competitiveness is under pressure, as energy price differences grow between Europe and its major trading partners – the US, China and Russia. High oil and gas import prices combined with low gas and electricity demand, following the recession, are impacting European economies.

Europe should accelerate the use of its indigenous potential and reap the social and economic benefits from energy efficiency, renewable energies and unconventional oil and gas. In open economies, there are significant advantages to be gained from free trade and a large energy market. One example: Today, we cannot make use of competitive electricity prices across the EU, as physical trade barriers exist and markets remain national. Europe is failing to achieve its potential. The electricity grid and system integration is very low, which also serves as a barrier to the full and efficient exploitation of renewable energy potentials. This is why addressing the issue of cross-border interconnections is so important.

OP: Where do you foresee the next “shale boom”?

IEA: According to WEO projections, there will be little non-North American shale development before 2020 due to the much earlier stage of exploration and the time needed to build up the oil field service value chain. Beyond 2020, we project large-scale shale gas production in China, Argentina, Australia as well as significant light tight oil production in Russia. The current reform proposals in Mexico have the potential to put Mexico on the top of that list as well, but they need to be properly implemented.

OP: What is the realistic future of methane hydrates, or “fire ice”?

IEA: Methane hydrates may offer a means of further increasing the supply of natural gas. However, producing gas from methane hydrates poses huge technological challenges, and the relevant extraction technology is in its infancy. Both in Canada and Japan the first test drillings have taken place, and the Japanese government is aiming to achieve commercial production in 10 to 15 years.

One thing I always mention when I am asked about methane hydrates is this: It may seem far off and uncertain, but keep in mind that shale gas was in the same position 10 to 15 years ago. So we cannot rule out that new energy revolutions may take place through technological developments and price incentives.

OP: Have we hit the “crude wall” in the US, the point at which oil production growth may end up slowing due to infrastructure and regulatory constraints?

IEA: In January 2013, the IEA’s Oil Market Report examined the possibility that as surging production continues to move the US closer to becoming a net oil exporter, there may come a time when various regulations, particularly the US ban on exports of crude oil to countries other than Canada, could have an adverse impact on continued investment in LTO – and thus continued growth in production. We called this point the “crude wall”.

A year later, in our January 2014 Oil Market Report, we noted that with US crude oil production exceeding even the boldest of expectations in 2013 by a wide margin, the crude wall now seems to be looming larger than ever. Having said that, challenges to US production growth are not imminent. Potential US growth in 2014 seems a given, even against the backdrop of resurgent non-OPEC supply growth outside North America.

OP: How is this shaping the crude export debate and where do you foresee this debate leading by the end of this year?

IEA: You are better off asking my friends and colleagues in Washington! This is obviously a sensitive topic. Different people feel differently about it, often very strongly. Oil policy always is the product of multiple, sometimes-competing considerations.

OP: What would lifting the ban on crude exports mean for US refiners, and for the US economy?

IEA: Many refiners and other major oil consumers have said they support keeping the ban amid worries that allowing exports would result in higher feedstock costs and erode their competitive advantage, or shift value-added industry abroad. On the other hand, oil producers have in general come out in favour of lifting the ban, arguing that the “crude wall” may become so large that it cannot be overcome; they see the possibility of a glut causing prices to slump and thereby choking off production. We have not produced any detailed analysis on the economic impact of lifting the ban, so I cannot comment on that part of your question.

OP: Are there any other ways around the “crude wall” aside from lifting the export ban?

IEA: As we wrote in our January 2014 Oil Market Report, much of the LTO is produced in the form of lease condensate, which is most optimally processed in a condensate splitter. There is currently only one such facility in the United States, although at least five others are in various stages of planning and construction.

I mention this issue because one could imagine a scenario under which lease condensate is excluded from the crude export restriction. The US Department of Commerce, which enforces the export ban, includes lease condensates in the definition of crude oil. However, this definition could be changed, or the Commerce Department could simply issue lease condensate export licenses at the behest of the President.

OP: How will the six-month agreement to ease sanctions on Iran affect Iranian oil production? And if international sanctions are indeed lifted after this “trial period”, how long will it take Iran to affect a real increase in production?

IEA: The deal between P5+1 and Iran doesn’t change the oil sanctions themselves. The oil sanctions remain fully in place though the P5+1 agreed not to tighten them further. Relaxing insurance sanctions doesn’t mean more oil in the market.

As for the second part of your question, I am afraid I can’t answer hypotheticals and what-ifs.

OP: What is the single most critical energy issue in the US this year?

IEA: I think that if you take the view that the energy-policy decisions you make now have ramifications for many decades to come, and if you believe what scientists tell us about the climate consequences of our energy consumption, then the single most critical energy issue in the US is the same issue for every country: what are you going to do with your energy policy to mitigate the risk of climate change? Energy is responsible for two-thirds of greenhouse-gas emissions, and right now these emissions are on track to cause global temperatures to rise between 3.6 degrees C and 5.3 degrees C. If we stay on our present emissions pathway, we are not going to come close to achieving the globally agreed target of limiting the rise in temperatures to 2 degrees C; we are instead going to have a catastrophe. So energy clearly has to be part of the climate solution – both in the short- and long-term.

OP: What is the IEA’s role in shaping critical energy issues globally and how can its influence be described, politically and intellectually?

IEA: Founded in response to the 1973/4 oil crisis, the IEA was initially meant to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets.

While this continues to be a key aspect of our work, the IEA has evolved and expanded over the last 40 years. I like to think of the IEA today as the global energy authority. We are at the heart of global dialogue on energy, providing authoritative statistics, analysis and recommendations. This applies both to our member countries as well as to the key emerging economies that are driving most of the growth in energy demand – and with whom we cooperate on an increasingly active basis.

Source: http://oilprice.com/Interviews/The-Golden-Age-of-Gas-Possibly-Interview-with-the-IEA.html

Interview by James Stafford of Oilprice.com


Not a Smidgen of Corruption at the IRS?

By: Roger Aronoff
Accuracy in Media

One of President Obama’s statements to Bill O’Reilly in the pre-Super Bowl interview, was that when it came to the IRS controversy, that was another Fox News phony scandal, and there wasn’t even a “smidgen of corruption” in his administration. But we have shown in numerous articles how this has, in reality, been a serious abuse of power. After all, using the IRS to go after its political enemies nearly got Richard Nixon impeached, and would have if he hadn’t resigned first.

We have shown how the President’s narrative, and that of his spokesmen, has “evolved.” Originally the story went that it was rogue agents in the Cincinnati office of the IRS that had begun the persecution of conservative groups back in 2010, but that Obama had only learned about it in the media in May 2013, when everyone else heard about it.

Then it turned out that not only had Lois Lerner, the director of the tax exempt division of the IRS, known about it, but so did two White House officials a month prior to the May announcement: White House Chief of Staff Denis McDonough and White House Chief Counsel Kathryn Ruemmler. These two implausibly argued that they did not warn the President. But still, the controversy was contained as much as possible in the Cincinnati office—until once again we learned that Washington, D.C. staffer Holly Paz reviewed 20 to 30 applications from non-profit applicants who were caught in this quagmire. She testified before Congress that the Tea Party label was “like calling soda ‘Coke’ or, you know, tissue ‘Kleenex.’” It was “Just sort of a shorthand reference,” she said. Are you sensing a pattern yet?

Yet throughout this saga, no one was held accountable for lying to the President. Lerner pled the Fifth Amendment, was placed on administrative leave, and then retired. She collected $42,000 in bonuses since 2009. As AIM reported earlier, an American Center for Law and Justice complaint cites Lerner—and her comrades Douglas Shulman, Sarah Hall Ingram, Nikole Flax and Judith Kindell—for “repeatedly us[ing] nonofficial, unsecure, personal email accounts to conduct official IRS business, including sending tax return information and official classified documents to non-agency email addresses, and that Defendant Lerner alone accumulated more than 1,600 pages of emails and documents related to official IRS business in a nonofficial, unsecure, personal email account, including almost 30 pages of confidential taxpayer information.”

In addition, Sarah Hall Ingram “made 155 visits to the White House to meet with a top Obama White House official with whom she exchanged confidential taxpayer information over email,” according to a report in The Daily Caller. Ingram headed up the IRS office that oversaw tax-exempt organizations, between 2009 and 2012, when she left to take over the IRS office in charge of implementing Obamacare.

And Douglas Shulman, the former IRS Commissioner who stepped down in November 2012 from that position, told a Senate panel in May of 2013 that he was “dismayed” and “saddened” after learning from the IRS inspector general’s report that, according to Politico, “concluded agency employees wrongly targeted conservative groups seeking a tax exemption.” Shulman told the Senate Finance Committee that “The actions outlined in that report have justifiably led to questions about the fairness of the approach taken here.”

The narrative changed over and over, and the media, particularly Lawrence O’Donnell and others on MSNBC—the network devoted to protecting and defending President Obama and the Democratic National Committee (DNC)—said that the IRS was right in turning down or dragging out these applications for 501(c)4s, since they were really engaged in politics, and not social welfare, as the original language of the law called for. The original language of the law called for 501c(4)s to be engaged “exclusively” in social welfare, not “primarily,” O’Donnell argued. But that change was made back in 1959. It is more likely that the political targeting was influenced by the January 2010 Citizens United ruling, which preceded the IRS’s actions by just a couple months.

Could it be the President didn’t punish anyone because they didn’t lie to him, and he knew all along?

Also, Obama’s defenders argued, progressive groups were also flagged, not just conservative groups. But that was false too, because what conservative groups went through was nothing like what the liberal groups went through. Conservative groups were asked to print out and deliver every text, tweet and Facebook page, along with explanations of their political views, donor lists, and even religious beliefs. Progressive groups were sometimes flagged, but received far less comprehensive treatment. This was clearly a tactic designed to neutralize the Tea Party movement in the middle of a presidential election.

Yet, despite the evidence, the liberal media have remained unconvinced. Politico, for example, reported on February 5 that “No White House involvement or political motivation has been discovered. And Democrats have released documents suggesting progressive groups were subject to some targeting as well.”

Much of the media are unimpressed by Rep. Dave Camp’s (R-MI) recent revelations, as well. As chairman of the House Committee on Ways and Means, he has come into the possession of a 2012 email that reveals that Lois Lerner and four other senior IRS officials were discussing the 501(c)4 regulations in June 2012 in the run-up to the 2012 elections. They specifically refer to “potentially addressing” these organizations “off-plan” in 2013. Off-plan, Rep. Camp explained in his press release, means “not to be published on the public schedule.”

Not only did Lerner and her compatriots discuss IRS business in their off-the-books email accounts, her comrades Ruth Madrigal, Victoria A Judson, Janine Cook, and Nancy J. Marks were apparently planning regulation discussions outside the public eye as well, this email demonstrates. Yet we are supposed to believe that these attempts, along with the other missteps, were shear “boneheaded decisions,” to quote the President on O’Reilly, instead of purposeful actions.

The 2010 emails also released by Rep. Camp show that IRS officials were focusing on the “media attention” received by these cases, and factoring that into their treatment of political groups. “Cindy: Please let ‘Washington’ know about this potentially politically embarrassing case involving a ‘Tea Party’ organization,” starts one email on February 25, 2010 from Sharon L. Camarillo. “Recent media attention to this type of organization indicates to me that this is a ‘high profile case.’” So not only was Washington looped in early on, it was for political considerations—and free speech was damaged as a result. “From then on applications were routed through the offices of Mrs. Lerner and Obama-appointed IRS chief counsel William Wilkins, and long approval delays ensued,” reports The Wall Street Journal. “Extensive interviews and emails show that neither the initial Cincinnati interest, nor the subsequent Washington delay, was in any way driven by ‘confusion.’”

“Democrats accused Republicans of trying to get blood out of a stone by continuing to push a story line of White House involvement,” reported Politico regarding this revelation. Of course MSNBC dismissed this news; Steven Benen wrote for MSNBC that “In other words, there’s still nothing interesting to see here. …Congressional Republicans keep digging in the hopes of making the Obama administration look bad, but as the desperation becomes farcical, GOP officials are more likely to make themselves look bad than anyone else.”

How much “boneheadedness” are the American people supposed to accept?

Add to this that the President has assigned a Department of Justice official, Barbara Bosserman, to look into these issues—a woman who has given the DNC and his campaigns a combined total of $6,750, according to The Washington Post. “The Justice Department contends that there was nothing improper about naming Bosserman to lead the investigation and that taking her political leanings into account would have been inappropriate,” reported the Post. But clearly that is exactly what they did—they took her political leanings into account—just like they did with the targeted groups. How ironic. And it is paying off.

As Rep. Trey Gowdy (R-SC) pointed out last week, none of the 41 clients represented by The American Center for Law and Justice that are suing the IRS over its actions “had been interviewed by any of the 13 Justice Department investigators during the six months of the investigation.”

If this was innocent—or just incompetent—what about the concept of avoiding at least the appearance of a conflict of interest?

Abuse of power and lying to the American people are forms of corruption. And now the President has stepped in and perhaps prejudiced an ongoing investigation—a sham investigation at that—by saying there isn’t even “a smidgen of corruption” in this case. Even if there is no controlling legal authority to prosecute and punish people for these acts, and the media refuse to call it what it is, this ongoing IRS corruption and cover-up is a serious Obama administration scandal.

Roger Aronoff is the Editor of Accuracy in Media, and can be contacted at [email protected]. View the complete archives from Roger Aronoff.