Aug 8: On the first anniversary of Energy Policy Act of 2005 (EPAct), Department of Energy Secretary Samuel Bodman announced that the Department has published the National Electric Transmission Congestion Study. The report identifies three groups of congestion areas that merit further federal attention. The most severely congested areas are called “Critical Congestion Areas.” These areas are Southern California, and the Atlantic coastal area from the New York City area to northern Virginia. A second group, “Congestion Areas of Concern,” consists of four areas that appear to require close observation and further study to determine the magnitude of their existing or emerging congestion problems. These are: New England, the Phoenix-Tucson area, the Seattle-Portland area, and the San Francisco Bay area. The third group, “Conditional Congestion Areas,” consists of areas where congestion is not acute at present, but it would become so if large amounts of new electric generation were to be built without associated transmission capacity including Montana-Wyoming, the Dakotas-Minnesota, Kansas-Oklahoma, Illinois, Indiana, Upper Appalachia and the Southeast.
With the release of the study, DOE will now be seeking comments until October 10, from interested parties on the possible designation of National Interest Electric Transmission corridors in relation to all three groups of congestion areas. If appropriate, the DOE Secretary will designate certain areas as National Corridors in accordance with the law. The study, and comments on it from stakeholders, will be used in future decisions by the Department concerning the designation of National Corridors. Section 1221(a) of the Energy Policy Act of 2005 updates Section 216 of the Federal Power Act and requires DOE to issue a national transmission congestion study for comment by August 2006 and every three years thereafter. Based on the study and public comments, DOE may designate selected geographic areas as "National Interest Electric Transmission Corridors." Applicants for projects proposed within designated corridors that are not acted upon by state siting authorities within one year may request FERC to exercise federal "backstop" siting authority.
Bodman also released a report prepared by the Department that details other programs that have been undertaken since the passage of EPAct. The report, On the Road to Energy Security: Implementing a Comprehensive Energy Strategy, is designed to be an easy-to-read document that explains many of the highlights of EPAct, and provides a progress summary on achieving the Act’s goals of greater energy security. Additionally, Bodman provide an overview briefing on issues surrounding the Prudhoe Bay, Alaska oil field shutdown.
Access a lengthy release (click here). Access links to the complete Congestion study, an executive summary, comment procedures, and extensive background information (click here). Access the EPAct accomplishments summary (click here). [*Energy]
Wednesday, August 09, 2006
Tuesday, August 08, 2006
How Federal Policies Affect The Allocation of Water
Aug 7: The Congressional Budget Office (CBO) has issued a report entitled, How Federal Policies Affect the Allocation of Water. According to the report, the drought conditions of recent years have focused attention on the nation’s use of freshwater resources. This CBO paper examines the mechanisms that govern water allocation, how they affect the benefits that accrue to society from its use of water resources, how those effects might change over time, and what influence federal policies could have on such considerations. The paper was prepared in response to a request from the Ranking Member of the Subcommittee on Water and Power of the House Committee on Resources, Raul Grijalva (R-AZ). CBO notes that in keeping with its mandate to provide objective, impartial analysis, the paper makes no recommendations.
To examine how society uses its water resources, the CBO analysis addresses several major questions: What are this country’s water sources, and how is the water used?; What determines the underlying allocation, and does that allocation maximize water’s potential benefits to society as a whole?; and What policies might the federal government consider toward that end? The report indicates that the state laws governing property rights and the pricing mechanisms that conceal opportunity costs make the current allocation of water relatively inflexible. That inflexibility might become increasingly costly in the future, as it exacerbates pressures on federal spending and reduces the potential gains to the economy from the use of water resources. Four developments in particular augment demand pressures: the settlement of Indian tribes’ claims on water rights currently held by others; environmental laws that require greater amounts of water be retained in natural courses; growing populations in arid states; and the recurring impacts of droughts, which may increase in frequency and intensity as a result of shifts in precipitation patterns.
Under policy options, the report says that broader use of markets in deciding how scarce water resources are allocated could improve on the current system of administrative allocation that has emerged under state law. Because markets offer flexibility in balancing supply and demand -- by providing incentives to reallocate water among users, to use less water, and to provide more water -- they could mitigate society’s costs of adjusting to changing conditions. The report notes that, "The federal government could facilitate market transfers of water by clarifying the potential for broader water marketing using its jurisdiction under the commerce clause of the Constitution and federally reserved water rights. The commerce clause gives the Congress the authority to allocate interstate waters to serve the national interest -- even if doing so means overriding state law."
Access the complete 32-page report (click here). [*Water]
To examine how society uses its water resources, the CBO analysis addresses several major questions: What are this country’s water sources, and how is the water used?; What determines the underlying allocation, and does that allocation maximize water’s potential benefits to society as a whole?; and What policies might the federal government consider toward that end? The report indicates that the state laws governing property rights and the pricing mechanisms that conceal opportunity costs make the current allocation of water relatively inflexible. That inflexibility might become increasingly costly in the future, as it exacerbates pressures on federal spending and reduces the potential gains to the economy from the use of water resources. Four developments in particular augment demand pressures: the settlement of Indian tribes’ claims on water rights currently held by others; environmental laws that require greater amounts of water be retained in natural courses; growing populations in arid states; and the recurring impacts of droughts, which may increase in frequency and intensity as a result of shifts in precipitation patterns.
Under policy options, the report says that broader use of markets in deciding how scarce water resources are allocated could improve on the current system of administrative allocation that has emerged under state law. Because markets offer flexibility in balancing supply and demand -- by providing incentives to reallocate water among users, to use less water, and to provide more water -- they could mitigate society’s costs of adjusting to changing conditions. The report notes that, "The federal government could facilitate market transfers of water by clarifying the potential for broader water marketing using its jurisdiction under the commerce clause of the Constitution and federally reserved water rights. The commerce clause gives the Congress the authority to allocate interstate waters to serve the national interest -- even if doing so means overriding state law."
Access the complete 32-page report (click here). [*Water]
Monday, August 07, 2006
Prudhoe Bay Oil Field Shutdown; Iran Plays The Oil Card
Aug 7: BP Exploration Alaska, Inc. announced that it has begun an orderly and phased shutdown of the Prudhoe Bay oil field following the discovery of unexpectedly severe corrosion and a small spill from a Prudhoe Bay oil transit line. Shutting down the field will take days to complete. Over time, these actions will reduce Alaska North Slope oil production by an estimated 400,000 barrels per day, reportedly 8 percent of U.S. domestic crude oil production. The decision follows the receipt on Friday, August 4 of data from a "smart pig run" completed in late July. Analysis of the data revealed 16 anomalies in 12 locations in an oil transit line on the eastern side of the oil field.
BP America Chairman and President Bob Malone said, “We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause. However, the discovery of this leak and the unexpected results of this most recent smart pig run have called into question the condition of the oil transit lines at Prudhoe Bay. We will not resume operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment.” BP indicated it is identifying and mobilizing additional resources from across Alaska and North America in order to speed inspection of remaining Prudhoe Bay oil transit lines. BP operates 22 miles of oil transit pipeline at Prudhoe Bay. Smart pigging inspection has been completed over about 40 percent of that length. BP previously announced plans to replace a three-mile segment of pipeline following inspections conducted after a large spill discovered on March 2, 2006.
Meanwhile, various media reports indicate that Iran's Deputy Oil Minister Mohammad Hadi Nejad-Hosseinian, in India for two days of talks on a proposed $7 billion gas pipeline, said that global crude oil prices could reach $100 a barrel on geopolitical tension and soaring winter demand. Other Iranian statements have warned of oil prices of $200 if international sanctions were imposed on the country in its nuclear dispute with the U.S.
An August 7, 2006, Standard & Poor's article entitled, The Effect Of A Major Oil-Supply Disruption On U.S. And Global Economies, analyzes a range of options that indicate oil prices could reach $250 oil barrel, under a worse case scenario where Iran would close the Strait of Hormuz, a shipping route for oil tankers from Kuwait, Saudi Arabia and the United Arab Emirates. The most likely scenario according to S&P is based on a limited Middle East conflict with oil prices around $75 a barrel and falling even lower by year's end.
Access a release from BP (click here). Access the BP Alaska corrosion Response website for continued updates and information (click here). Access an extensive Reuters financial analysis (click here). Access links to various media coverage on the Iranian oil issue (click here). Access the S&P for links to the article and an audio playback of a telephone conference call held on July 27, 2006 to discuss S&P's view on the economic impact of increased oil prices (click here, registration required). [*Energy]
BP America Chairman and President Bob Malone said, “We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause. However, the discovery of this leak and the unexpected results of this most recent smart pig run have called into question the condition of the oil transit lines at Prudhoe Bay. We will not resume operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment.” BP indicated it is identifying and mobilizing additional resources from across Alaska and North America in order to speed inspection of remaining Prudhoe Bay oil transit lines. BP operates 22 miles of oil transit pipeline at Prudhoe Bay. Smart pigging inspection has been completed over about 40 percent of that length. BP previously announced plans to replace a three-mile segment of pipeline following inspections conducted after a large spill discovered on March 2, 2006.
Meanwhile, various media reports indicate that Iran's Deputy Oil Minister Mohammad Hadi Nejad-Hosseinian, in India for two days of talks on a proposed $7 billion gas pipeline, said that global crude oil prices could reach $100 a barrel on geopolitical tension and soaring winter demand. Other Iranian statements have warned of oil prices of $200 if international sanctions were imposed on the country in its nuclear dispute with the U.S.
An August 7, 2006, Standard & Poor's article entitled, The Effect Of A Major Oil-Supply Disruption On U.S. And Global Economies, analyzes a range of options that indicate oil prices could reach $250 oil barrel, under a worse case scenario where Iran would close the Strait of Hormuz, a shipping route for oil tankers from Kuwait, Saudi Arabia and the United Arab Emirates. The most likely scenario according to S&P is based on a limited Middle East conflict with oil prices around $75 a barrel and falling even lower by year's end.
Access a release from BP (click here). Access the BP Alaska corrosion Response website for continued updates and information (click here). Access an extensive Reuters financial analysis (click here). Access links to various media coverage on the Iranian oil issue (click here). Access the S&P for links to the article and an audio playback of a telephone conference call held on July 27, 2006 to discuss S&P's view on the economic impact of increased oil prices (click here, registration required). [*Energy]
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