Winds of Change

Energy Firms Come to Terms With Climate Change

By Steven Mufson and Juliet Eilperin
Washington Post Staff Writers
Saturday, November 25, 2006; Page A01

While the political debate over global warming continues, top executives at many of the nation's largest energy companies have accepted the scientific consensus about climate change and see federal regulation to cut greenhouse gas emissions as inevitable.

The Democratic takeover of Congress makes it more likely that the federal government will attempt to regulate emissions. The companies have been hiring new lobbyists who they hope can help fashion a national approach that would avert a patchwork of state plans now in the works. They are also working to change some company practices in anticipation of the regulation.

"We have to deal with greenhouse gases," John Hofmeister, president of Shell Oil Co., said in a recent speech at the National Press Club. "From Shell's point of view, the debate is over. When 98 percent of scientists agree, who is Shell to say, 'Let's debate the science'?"

Hofmeister and other top energy company leaders, such as Duke Energy Corp.'s chief executive, James E. Rogers, back a proposal that would cap greenhouse gas emissions and allow firms to trade their quotas.

Paul M. Anderson, Duke Energy's chairman and a member of the president's Council of Advisors on Science and Technology, favors a tax on emissions of carbon dioxide, the most prevalent greenhouse gas. His firm is the nation's third-largest burner of coal.

Exxon Mobil Corp., the highest-profile corporate skeptic about global warming, said in September that it was considering ending its funding of a think tank that has sought to cast doubts on climate change. And on Nov. 2, the company announced that it will contribute more than $1.25 million to a European Union study on how to store carbon dioxide in natural gas fields in the Norwegian North Sea, Algeria and Germany.

These changes come as Democratic leaders prepare to take over key committees on Capitol Hill. Sen. Barbara Boxer (Calif.), who calls global warming "the greatest challenge of our generation," will take the place of Sen. James M. Inhofe (R-Okla.) as chairman of the Senate Environment and Public Works Committee. Inhofe refers to global warming as a "hoax."

Sen. Jeff Bingaman (D-N.M.), the incoming Energy and Natural Resources Committee chairman, said he hopes to "do something on global warming." Even though the Bush administration's expected opposition might make the enactment of legislation unlikely in the next two years, many companies cannot put off decisions about what sort of power plants to build.

Duke Energy, for example, has not added significant power generation in two decades, and customer demand is rising 1 to 2 percent a year. The company has included a price for the carbon emitted in its cost estimates for a new coal-fired generating plant proposed for Indiana.

"If we had our druthers, we'd already have carbon legislation passed," said John L. Stowell, Duke Energy's vice president for environmental policy. "Our viewpoint is that it's going to happen. There's scientific evidence of climate change. We'd like to know what legislation will be put together so that, when we figure out how to increase our load, we know exactly what to expect."

One reason companies are turning to Congress is to avert the multiplicity of regulations being drafted by various state governments. The Regional Greenhouse Gas Initiative, a group of seven Northeastern states, is moving ahead with a proposed system that would set a ceiling on greenhouse gas emissions, issue allowances to companies, and allow firms to trade those allowances to comply with regulations.

California is drawing up its program. Other states are also contemplating limits. Even the city of Boulder, Colo., has adopted its own plan -- a carbon tax based on electricity use.

"We cannot deal with 50 different policies," said Shell's Hofmeister. "We need a national approach to greenhouse gases."

Next week, the Supreme Court will hear arguments on whether the federal government is obligated to regulate carbon dioxide as a pollutant; its decision could force the government to come up with guidelines.

Though many energy firms had already voiced support in recent months for federal regulations limiting greenhouse gas emissions, the coming changeover in Congress has intensified the discussions.

"There have been many more folks wanting to engage on the detailed architecture of climate-change legislation," said Jason S. Grumet, executive director of the bipartisan National Commission on Energy Policy. "The tenor, tone and the detail of discussions has changed in the last couple of months. Nobody's going to want to be the last company to come before the Congress and say, 'I've been opposing you for five years, but now can I have my piece?' "

Some businesses are making new hires based on the assumption that legislative activity on global warming will increase in the coming months. Truman Semans, director of markets and business strategy for the Pew Center on Global Climate Change, said at least half a dozen of the companies that belong to the center's Business Environmental Leadership Council have recently hired staff members focused on global warming.

Not every energy company is planning to curb greenhouse gas emissions in the near future. TXU Corp. is planning to spend $10 billion to build 11 new coal-fired power plants, which would more than double the company's carbon dioxide emissions, from 55 million tons to 133 million tons a year. That increase in emissions is more than the total carbon dioxide pollution emitted in all of Maryland or by 10 million Cadillac Escalade sport-utility vehicles.

In an e-mail to The Washington Post, TXU spokeswoman Kimberly Morgan said that the company supports "a comprehensive, voluntary, technology-based approach to global climate change based on carbon intensity" that is both "flexible and cost effective."

"We are at a point in time where other states and businesses are starting to take global warming seriously," said Colin Rowan, spokesman for the advocacy group Environmental Defense. "California is heading toward the future, and TXU and Texas are sprinting full speed back to the 1950s."

The company's approach may pay off in the short term, but it may not last. "Over the next two years I don't think environmental policy is going to change radically," said Carl Pope, executive director of the advocacy group Sierra Club. But he added, "I think the environmental agenda and conversation will change radically."

Corporate America wants to be part of that conversation. Duke Energy's Stowell said: "Industry is coming together and saying, 'Okay, if we're going to do this, let's do this in a way that won't wreck the economy.' "

The American Supreme Court interpretation of the EPA's span of control next week might be one of the most important environmental considerations seen on this level since the 1970s. Maybe there is some hope that the corporations are going to listen to public sentiment and work with the federal governments' departments to illicit positive changes to policy, economic systems, and mindsets to address the concerns of unregulated CO2 emissions. The key for this to move forward globally has been to get the American corporate and political leaders to see the urgency in the issue. I can't see why this has taken so long, given the American dependency on foreign energy sources. As an issue of national security, you would think conversations on conservation and controls would have been on the table a long time ago. But then, consumption orgies tend to make people think and justify their behaviors in odd, irrational ways.

US and China a world apart on oil policy

As the world's top two oil guzzlers, the US and China should have lots in common when it comes to energy policy. But US experts see a difference in how the two countries view energy security, one that could undermine economic co-operation as the global titans vie for limited oil supplies in the future. To US politicians, including President George W. Bush, it means cutting US import dependence by promoting home-grown fuels such as ethanol, and reducing the risk of price shocks by relying on a variety of sources and suppliers. To Beijing, it means locking up secure supplies in multi-billion-dollar deals, such as the ones cut in recent years in Venezuela and Canada, US officials say. More recently, China has sought closer economic ties with Saudi Arabia, which has shared an oil-for-security relationship with Washington for decades. It has also actively sought long-term supply guarantees with Saudi Arabia and other Middle East producers as it seeks oil to fuel future economic growth. Karen Harbert, assistant secretary for policy and international affairs at the US Energy Department, said the US and China "still have a ways to go" in finding common ground. "It is certainly clear at this point in time that we define energy security differently," Harbert said. "We define it as having a supply of reliable, affordable energy, and they define it as having secure access and owning access to that product," she said. US officials have met frequently with Chinese counterparts to stress their belief in the importance of allowing the market to set global energy prices. And China's rising oil use will be centre-stage when US officials, including Energy Secretary Sam Bodman and Treasury Secretary Henry Paulson, visit Beijing in December, when they will seek a common energy market vision.
(National Post 061128)

I wonder which of the US and China is going to be the first to send off the ICBMs when the oil wars truly get traction? Do you notice how since conservation is a concept that is at odds with the unending growth model of free capitalism, it is never discussed as a part of the solution of relieving foreign dependence on oil? It is probably one of the easiest to implement (ie., a bit of education), however the one furthest from anyone's minds.

Kremlin grip on gas supply stokes unease

For the West, the threat from Moscow was supposed to end with the collapse of the Soviet Union 15 years ago. But Russia's growing energy clout is generating renewed cause for anxiety. The North Atlantic Treaty Organization, set up in the early days of the Cold War to keep Soviet-led forces in check, has begun speaking out about the potent new energy lever being wielded by the Kremlin in the international struggle for influence. NATO Secretary-General Jaap de Hoop Scheffer says energy security will be high on the agenda at its summit starting today in Riga, Latvia. He notes there was “added value to NATO discussing energy and security policies.” The main issue is natural gas. Russia is an oil giant, second only to the Saudis in exports, and Europe depends on it for a quarter of the crude it consumes. But oil supplies can be diversified because shipping is easy, while the most efficient way of distributing gas is through pipelines. With Russia as the world's largest gas exporter and Europe's neighbour, European dependency has grown to the point that the EU now counts on Moscow for nearly half of its gas needs. And Moscow's control of pipelines that deliver not only gas from Russia but from much of central Asia is stoking Western unease. “With gas, control over pipelines is crucial,” says energy expert Michael Klare. “Once you put oil on a tanker, you cannot control it, but gas is different; whoever controls the pipelines controls the flow.”

A study conducted earlier this year for the Swedish Defense Research Agency concludes that Russia uses its growing energy punch to “extend influence, avert geopolitical and macroeconomic threats and to reduce the risk of being blackmailed.” Moscow insists market forces are driving its price policy. But its allies, like Armenia, pay much less than its critics, like Georgia. The Swedish study notes more than 50 cases since 1991 where the Russian “energy lever has been used for putting political or economic pressure on Estonia, Latvia, Lithuania, Ukraine, Belarus, Moldova (and) Georgia.” Other surveys also draw worrying conclusions. A recently leaked confidential study by NATO economic experts warned that Russia may be seeking to build a gas cartel including Algeria, Qatar, Libya, the countries of central Asia and perhaps Iran and said that kind of OPEC-like near monopoly would strengthen Moscow's leverage over Europe. Russian Finance Minister Alexei Kudrin this month denied that Russia was planning on building a cartel, however.
(Globe and Mail 061128)

Ahh, the 1990s. The last time there was a capacity cushion in the world oil and gas supply, probably for ever. Be prepared for bigger and bigger fluctuations in what you pay for O & G in the coming years, as now exporters will have a lot more clout on price establishment, and with no cushion, any disruptions to O & G production or transmission will have a ripple effect on global prices. Strange times, indeed.