Natural Gas for HHP Applications USA – Government Policy
With the Obama administration committed to reducing greenhouse gas emissions to 17% below 2005 levels by 2020, a key means of meeting this goal is to replace diesel fuel consumption with natural as across a number of transport sectors.
Indeed, the President’s Climate Action Plan, released in June 2013, outlined the need to encourage “fuel-switching from coal to gas for electricity production and [to] encourage the development of a global market for gas.”
Here, in the second of a series of three articles examining the state of play in natural gas for high horsepower (HHP) applications in the US, we look at the impact current or upcoming legislation is having on conversion rates and growth in the sector.
Stricter upcoming emissions regulations are already having a big impact on the drive towards adopting natural gas as a fuel source. The North American Emissions Control Area came into force in the US Caribbean in January 2014 and will take effect for the remainder of the US in 2015. On the railways, BNSF in March 2013 identified stricter emission standards and cost savings as a reason they were moving towards using LNG locomotives. Indeed, all HHP industries are considering alternative fuel blends or cleaner technology to comply with the emissions restrictions. Given its low price, LNG ranks highly among these.
However, home heating is often considered a greater priority than transportation use, and as such there are limited federal incentives for HHP industries to switch to natural gas engines. The marine market is also clamouring for a new, improved maritime policy - greater government involvement to stimulate demand is likely to be well received by the maritime industry.
At a state level however, it is possible to encourage natural gas market adoption through research studies, testing grants or even expediting approvals. Wyoming for example is funding a multi-industry study considering mining and rail. In 2013, the state commissioned a $150,000 study into future LNG supply sites and adoption by HHP equipment such as mine-haul trucks and locomotives. In contrast, Pennsylvania announced a research grant in November 2013 focusing on LNG for rail. The Pennsylvania Department of Environmental Protection is supporting GE’s Transportation project to develop natural-gas capable locomotives with a $1 million grant, which could have a far-reaching impact on the rail industry.
Given that the US administration will change in 2016, it is difficult to predict the impact of future policy. A tightening of emissions regulations and greater clarity can be expected, however, and regulators are working with natural gas pioneers in the HHP industry to develop best practice and regulatory guidance on an ongoing basis.
“It is important to develop policy to minimize uncertainty”, stresses Timothy Meyers, General Engineer, US Coast Guard, Office of Design and Engineering Standards. “Currently we are working with the international community, the IMO on safe vessel design, and ISO (International Organization for Standardization) on bunkering. Our involvement will help shape international standards as well as domestic policy.”
“Current regulations don’t specifically address natural gas as a fuel,” states Meyers. “We are currently working on an interim policy and will be releasing a policy letter on operational deployment of bunkering.” At present, regulatory bodies such as the US Coast Guard are proactively involved during design and production process.
Meanwhile, the Association of American Railroads’ (AAR) Natural Gas Fuel Tender Technical Advisory Group is tackling regulatory and safety issues. The Group, a joint effort of the AAR Locomotive, Tank Car and Equipment Engineering Committees, is working with the Federal Railroad Administration (FRA) to develop national standards for LNG.
The current scramble to build new natural gas export terminals will of course have a major impact on how the future for natural gas plays out on both a national and international scale. The EIA projects that production will continue to outpace demand, resulting in the US becoming a net exporter of natural gas by 2019. This is earlier than the EIA predicted in the AEO 2012, primarily due to higher shale gas volumes.
There are good cases to make for both increasing exports and encouraging its use domestically. America’s Energy Advantage (AEA), a coalition of manufacturers and consumers is working to reserve US natural gas to promote a US manufacturing renaissance. Conversely, increased exports are being championed as a means of strengthening international relationships. According to Congressman Michael Turner, R-Ohio: “Restraining US natural gas exports would only hurt our abilities to bolster strategic partnerships and create jobs right here at home.”
A series of research studies, including one commissioned by the DOE, concludes that exports will stimulate further production, increasing investment, jobs and contribute up to $22 billion to the US economy. However, this would push up the price of fuel for consumers however, raising the Henry Hub Spot Price to $5.03/million Btu from 2016 through 2035. Whether that would act as a brake on internal take-up for HHP industries remains to be seen.
In the next of our series on natural gas for high horsepower applications in the US, we’ll look into supply and infrastructure. With development in the Gulf of Mexico becoming a runaway hotspot for export infrastructure investment, we’ll look into whether it will be possible to replicate the advantages of natural gas supplies for HHP industries in Louisiana, Texas and the surrounding area throughout the rest of the nation.