Governor Andrew Cuomo To Ban Fracking in New York State

Governor Andrew Cuomo's environmental commissioner, Joe Martens, and acting Health Commissioner, Howard Zucker have recommended a ban on fracking across the state  of New York, citing excessive environmental and health concerns.  Governor Cuomo is deferring to their recommendations in making a final decision. A ban would end the state's current six-month moratorium on fracking.

The process of fracking involves shooting a mix of pressurized water, sand and chemicals to split rock formations to release natural gas and so-called tight oil.  The widely used, deep-drilling process, combined with horizontal drilling, has resulted in a surge in domestic-energy production.

State and local governments are pushing for bans over the health and environmental concerns, including the potential for earthquakes and the contamination of natural water supplies.

New York sits atop the Marcellus shale formation, which stretches 600 miles along the Appalachian Basin and is rich in natural gas deposits.

The state’s Department of Environmental Conservation will put out a final impact study early next year that will suggest a ban on fracking.  Martens will follow the report with an order prohibiting the process.  (Fox News, 12/18/2014)

2015 Gasoline Expenditures To be Lowest in 11 Years

Source: U.S. Energy Information Administration, Short-Term Energy Outlook

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The average U.S. household is expected to spend about $550 less on gasoline in 2015 compared with 2014, as annual motor fuel expenditures are on track to fall to their lowest level in 11 years. Lower fuel expenditures are attributable to a combination of falling retail gasoline prices and more fuel-efficient cars and trucks that reduce the number of gallons used to travel a given distance.

Household gasoline costs are forecast to average $1,962 next year, assuming that EIA's price forecast, which is highly uncertain, is realized. Should the forecast be realized, motor fuel expenditures (gasoline and motor oil) in 2015 would be below $2,000 for the first time since 2009, according to EIA's December 2014 Short-Term Energy Outlook (STEO).

The price for U.S. regular gasoline has fallen 11 weeks in a row to $2.55 per gallon as of December 15, down $1.16 per gallon from its 2014 peak in late April and the lowest price since October 2009. Gasoline prices are forecast to go even lower in 2015. Gasoline prices are falling because of lower crude oil prices, which account for about two-thirds of the price U.S. drivers pay for a gallon of gasoline.

EIA's latest STEO forecasts that Brent crude oil prices will average $68 per barrel (bbl) in 2015, with prices up to $5/bbl below that annual average early in the year. The forecast for West Texas Intermediate (WTI) crude oil spot prices averages $63/bbl in 2015. However, the current values of futures and options contracts show high uncertainty regarding the price outlook. For example, WTI futures contracts for March 2015 delivery traded during the five-day period ending December 4 averaged $67/bbl. Implied volatility averaged 32%, establishing the lower and upper limits of the 95% confidence interval for the market's expectations of WTI prices at the expiration of the March 2015 contract at $51/bbl and $89/bbl, respectively. Last year at this time, WTI futures contracts for March 2014 delivery averaged $96/bbl and implied volatility averaged 19%, with only a $30/bbl spread between the corresponding lower and upper limits of the 95% confidence interval.

Increases in fuel economy are also contributing to lower motor fuel expenditures, as cars and trucks travel farther on a gallon of gasoline. According to the Environmental Protection Agency, the production-weighted fuel economy of cars has increased from 23.1 miles per gallon (mpg) for model-year (MY) 2005 cars to almost 28 mpg for MY2014, an increase of about 21%. Similarly, the fuel economy for trucks has increased 19%, from 16.9 mpg to 20.1 mpg in the same time frame.

In recent years, gasoline expenditures have accounted for about 5% of household expenditures. In the Bureau of Labor Statistics' (BLS) Consumer Price Index, gasoline accounted for 5.1% of consumer spending, as of October 2014. Reductions in the gasoline price ultimately impact the relative weight of gasoline compared to other expenditures (shelter, clothing, food, entertainment, and so on) in price indices compiled by BLS and the Bureau of Economic Analysis at the U.S. Department of Commerce.

The demand for gasoline is very price inelastic over short time periods, meaning changes in price have little impact on the number of gallons used. Falling gasoline prices allow households to spend their income on other goods and services, pay down debt, and/or increase savings.  (DOE-EIA)

Gasoline Prices Have Little Effect On Car Travel

The U.S. average retail price per gallon of regular motor gasoline has fallen 28% from its 2014 peak of $3.70 per gallon on June 23, to $2.68 per gallon on December 8. However, this price decline may not have much effect on automobile travel, and in turn, gasoline consumption. Gasoline is a relatively inelastic product, meaning changes in prices have little influence on demand.

Price elasticity measures the responsiveness of demand to changes in price. Almost all price elasticities are negative: an increase in price leads to lower demand, and vice versa. Air travel, especially for vacation, tends to be highly elastic: a 10% increase in the price of air travel leads to an even greater (more than 10%) decrease in the amount of air travel. Price changes have greater effects if the changes persist over time, as opposed to being temporary shocks.

Automobile travel in the United States is much less elastic, and its price elasticity has fallen in recent decades. The price elasticity of motor gasoline is currently estimated to be in the range of -0.02 to -0.04 in the short term, meaning it takes a 25% to 50% decrease in the price of gasoline to raise automobile travel 1%. In the mid 1990s, the price elasticity for gasoline was higher, around -0.08, meaning it only took a 12% decrease in the price of gasoline to raise automobile travel by 1%.  (DOE-EIA)

Federal Agencies Support State Water Trading Program

Federal Agencies Support Virginia’s Innovative Market-based Approach to Improving Water Quality in Chesapeake Bay

Virginia program to serve as model for similar programs across the country

U.S. Environmental Protection Agency (EPA) Administrator Gina McCarthy today joined U.S. Department of Agriculture Secretary (USDA) Tom Vilsack, Mike Boots of the White House Council on Environmental Quality (CEQ), Commonwealth of Virginia Governor Terry McAuliffe, a private investor and an Appomattox, Va. farmer to recognize an innovative, market-based nutrient trading program run by Virginia to improve the water quality of Chesapeake Bay. 

The cost-effective program has saved the Commonwealth more than $1 million, demonstrating an innovative means of meeting Clean Water Act stormwater requirements and Virginia state water quality goals for the bay. The program encourages economic investment while reducing phosphorus pollution to local waterways in order to meet water quality goals for the Chesapeake Bay.  It is expected similar programs will be established around the nation to provide new revenue sources for agricultural producers while reducing soil erosion and runoff.  

Virginia’s Department of Environmental Quality has created a demand and supply market for land conservation projects that are protective of water quality for future generations.  The agency’s stormwater program requires reductions of phosphorus runoff from certain types of road construction projects that can be achieved by purchasing phosphorus credits from state-certified credit banks. Credits purchased are generated by Virginia farmers in the Potomac and James River watersheds, whose farming practices have permanently reduced the amount of phosphorus flowing into those rivers and, ultimately, the Chesapeake Bay. 

The farm practices are certified by the state as “nutrient credit banks” and come solely from private investors, reducing reliance on public funds and generating a new revenue stream for participating farmers. These credits cost VDOT approximately 50 percent less than other, more traditional engineered pollution reduction practices, such as detention ponds, and underground filters. In addition, these banks advance other goals such as wildlife habitat, stream buffers and land preservation.‎

By advancing the goals of improving the health and regional economy of the Chesapeake Bay as laid out in President Obama’s 2009 Executive Order, nutrient trading is giving farmers additional income opportunities that help keep agricultural lands in production and stretch limited budgets by tapping private sector investments.

EPA and USDA are working together to implement and coordinate policies and programs that encourage water quality trading and will release a web-based water quality trading roadmap tool in early 2015. As part of a joint memorandum of understanding to support trading and environmental markets, the two agencies are centralizing information for buyers and sellers to utilize water quality trading. This resource library will be searchable and help users find information specific to their needs. Both agencies will sponsor a national conference in 2015 for stakeholders to share experiences and move forward with trading as a valuable tool for driving environmental improvement.  (EPA)

DOE Issues Final $12.5 Billion Nuclear Energy Loan Guarantee Solicitation

Today, the Department of Energy issued the Advanced Nuclear Energy Projects loan guarantee solicitation, which provides as much as $12.5 billion to support innovative nuclear energy projects as a part of the Administration’s all-of-the-above energy strategy. With the issuance of this solicitation today, the Department’s Loan Programs Office(LPO) now has open solicitations in four areas, also including the $8 billion Advanced Fossil Energy Projects Solicitation, the $4 billion Renewable Energy and Efficient Energy Projects Solicitation, and the $16 billion Advanced Technology Vehicle Manufacturing (ATVM) loan program.

Authorized by Title XVII of the Energy Policy Act of 2005, the Advanced Nuclear Energy Projects Solicitation would provide loan guarantees to support the construction of innovative nuclear energy and front-end nuclear projects in the U.S. that reduce, avoid, or sequester greenhouse gas emissions. While any project that meets the eligibility requirements may apply, the Department has identified four key technology areas of interest in the solicitation: advanced nuclear reactors, small modular reactors, uprates and upgrades at existing facilities, and front-end nuclear projects.

The full solicitation can be found online at energy.gov/lpo. The first deadline for Part I applications is March 18, 2015, followed by rolling deadlines approximately every six months.  

To date, LPO has supported a diverse portfolio of loans, loan guarantees, and commitments, supporting more than 30 projects nationwide. The projects that LPO has supported include the first nuclear power plant to begin construction in the U.S. in the last three decades, one of the world’s largest wind farms, several of the world’s largest solar generation and thermal energy storage systems, and more than a dozen new or retooled auto manufacturing plants across the country.  (DOE)

Subsequent License Renewal: Nuclear Plant 60 Years & Beyond

When nuclear power plants are built, the Nuclear Regulatory Commission (NRC) has the authority to issue initial operating licenses for a period of 40 years. Beyond that, the reactors need license renewals, and the NRC hasgranted 20-year license renewals to 74 of the 100 operating reactors in the United States. These reactors may now operate for a total period of 60 years. They represent a cumulative capacity of a little more than 69,000 megawatts (MW). The NRC is currently reviewing license renewal applications for an additional 17 reactors, and expects to receive seven more applications in the next few years.

With the bulk of the existing nuclear fleet licensed before 1990, nearly all existing reactors will be more than 60 years old by 2050. Unless a utility applies for and receives a Subsequent License Renewal (SLR) that could further extend the operating lives of their reactors up to 20 additional years, the reactors will not generate power beyond age 60. Although no applications for an SLR have been submitted, several utilities are evaluating whether to apply for one, including Dominion Resources for its Surry Power Station Units 1 and 2 in Virginia (current license expiration dates of 2032 and 2033) as well as Exelon for its Peach Bottom Atomic Power Station Units 2 and 3 in Pennsylvania (current license expiration dates of 2033 and 2034).

From a regulatory perspective, the NRC determined in August 2014 that existing license renewal regulations were sufficient to support the SLR process. The NRC's determination was supported by the May 2014 findings of the NRC's Advisory Committee on Reactor Safeguards, which stated that the current NRC license renewal framework would support SLR.

In making the decision to extend the operating lives of nuclear reactors beyond 60 years, the NRC will consider the long-term safety and security of continued reactor operation. In addition to the NRC, the U.S. Department of Energy, through its Light Water Reactor Sustainability Program, is one of several organizations studying the effects of aging on nuclear power plant systems, structures, and components. Other industry groups involved in studying SLR include the Electric Power Research Institute and the Nuclear Energy Institute. International groups, such as the International Atomic Energy Agency and the Organization for Economic Cooperation and Development's Nuclear Energy Agency, are also involved in addressing life extension issues in support of nuclear power plants around the world.

U.S. utilities already make significant investments in maintaining and upgrading the current fleet of U.S. nuclear power plants to ensure safe, secure, and reliable operation throughout their 40- or 60-year lifetimes. The Electric Utility Cost Group estimated that the industry invested $6.4 billion in capital projects to upgrade and maintain nuclear power plant systems during 2013.  (DOE-EIA)