My Top 10 Predictions for 2013, Part II

My earlier post graded my first five predictions for 2013. This post grades the remaining five posts and suggests my overall grade for 2013.   In past years, my best overall grade was a B+. I’m still hopeful I can better that score.

5. The EPA Fracks Gas. On the same day the Environmental Protection Agency (EPA) released New Source Performance Standards (NSPS) for the oil and natural gas industry (Aug. 16, 2012), a group of associations petitioned the EPA administrator for reconsideration of certain provisions (now pending). Also, the petitions of eight industry groups challenging the NSPS were combined and filed with the D.C. Circuit Court of Appeals on Oct. 15, 2012. The first hearing is set for Dec. 21, 2012. I predict that the EPA will make small adjustments in the rule to correct the most egregious errors, but the Court of Appeals will strike down the rule for many of the same reasons it did the Cross-State Air Pollution Rule. The petition for reconsideration of certain provisions of the Oil and Natural Gas Sector NSPS (40 CFR Part 60) were concluded with the release of several rule amendments by the EPA, the last of which was released on Sept. 23, 2013. The rule, among its many changes that impact production, storage, and transmission of natural gas, requires operators of wells using fracking technology to employ “reduced emission completion” technologies to reduce leakage of natural gas into the atmosphere by Jan. 1, 2015. On Nov. 22, 2013 five new petitions were filed and the EPA began addressing NSPS issues raised by the petitions that were expected to be completed in Dec. 2013 (so far, no word) with final action to come by Nov. 2014. In other words, the EPA is reconsidering its NSPS rules and will tell us its decision late in 2014. The EPA did make the small adjustments predicted but the EPA pushed off any review by the court by “volunteering” to review its rule (and fix the mistakes), so I have to settle for another “Incomplete.”

4. Demand Stays Flat. The Energy Information Administration’s (EIA’s) Annual Energy Outlook 2013 Early Release Overview (AEO2013 Overview) predicts that demand for electricity will rise at a rate of 0.9% for 2013. In my opinion, the prospects for an economic stall in early 2013 are very high, thereby quenching the hope of an increase in the GDP growth rate. Electricity demand will grow at the more pedestrian rate of 0.7%. The predicted economic stall occurred and according to the EIA Table 5.1, electricity sales (rolling 12 months ending in Oct for year-to-date data) are down 0.6%, continuing a decline that began in 2010. My prediction was more accurate than the EIA’s but still way off. I’m feeling generous and give myself a gentlemen’s “C” for that prediction.

3. Electricity Costs Rise. The average domestic cost of electricity will reach a new milestone of 12 cents/kWh in 2013, an increase of about 2%, according to the EIA. Year to date EIA data (Table 5.3) shows average national residential rates rose to 12.16 cents/kWh in 2013 (through Oct.), up 2.1%. The average was only 8.72 cents for 2003, a 39.5% rise over that period. I earn an “A” for this prediction.

2. LNG Stays Home. The EIA’s December 2012 release of its AEO2013 Overview predicts that a surplus of natural gas will be available for liquefied natural gas (LNG) export by 2016, and the volumes are double those predicted in last year’s report. With legislators calling on President Obama to declare a moratorium on gas exports and only a single new export terminal approved (Cheniere Energy’s facility in Sabine Pass, La.) to date, the infrastructure is unlikely to be in place by 2016 to export any significant additional quantities. Other than Cheniere Energy, don’t expect approvals for additional export terminals in 2013, which will make the EIA predictions moot. As of the end of Dec. 2013, only the Sabine export terminal has received FERC (in 2012) and DOE approval (in 2011) and is under construction. Another 13 terminals have been proposed to FERC (seven have filed certificate applications) and there are another 10 proposed in Canada. The DOE has accelerated its approval of export terminals of late (approving three in 2013) after sitting on many applications for up to two years (DOE approval is required when the purchaser is a non-Free Trade Agreement country). The $10 billion Sabine project began construction in 3rdQ 2012 and is expected to enter service the end of 2015. The three projects approved by DOE in 2013 still must received FERC approval and a myriad of other state and local permits. The Lake Charles LNG Terminal, for example, received DOE approval in August 2013 (the application was filed in Oct. 2011). The project is expected to enter service in 2019. FERC is likely to approve one or two new terminals in 2014 so any significant LNG exports aren’t likely until 2020 or so. I earn an “A” for this prediction.

1. The Carbon Tax Dies. Perhaps the most disturbing concept under discussion by our congressional representatives on both sides of the aisle is the political viability of a carbon tax. Spurring on that discussion was the September 2012 study by the Congressional Research Service that suggested the U.S. budget deficit could be reduced 50% in 10 years if a $20 per metric ton carbon tax were enacted. The tax is represented by some as a way to fight climate change, although many legislators are more interested in the tax as a new revenue sources and others wish to use the revenues to stem the flow of federal budget red ink. Expect plenty of talk but little action, because a tax by any other name is still a tax. In May, the National Association of Manufacturers took the offensive against a carbon tax with its release of their Feb 2013 “Economic Outcomes of a U.S. Carbon Tax”.  The American Enterprise Institute debunked the rationale for a carbon tax later in the year. And then there is the hard lesson now being learned by Australia following its carbon tax that was enacted in mid-2012—household electricity prices jumped 19% during the first year, carbon emissions spiked, and the country’s budget deficit worsened. If there was to be a push for a carbon tax by the administration in 2013, the fumbled rollout of Obamacare put it on the backburner. I earn another “A” for this prediction.

So, how did I do for the year?  My grade average works out to 3.53, which is barely equivalent to an A- this year, my highest score to date. Making the Honor Roll for 2013 was an excellent way to end the year.

—Dr. Robert Peltier, PE is POWER’s consulting editor