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HomeMy WebLinkAboutCC 10 UTILITY PWRPLANTS 4-20-81NO. 10 4-20-81 1 2 3 6 ? 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 29 30 31 32 A RESOLUTIflN OF ~ CIIY COQ/qCIL OF I~E CIRY OF ~73STIN IN ~3PPORI' OF LEGISLATiCf9 REN~OVING ~ RESTtcIC~i'IONS AND PROHIBt~iONS ON THE USE OF NA_TUIiAL GAS IN UTILITY POWERPLaiNTS. WHEREAS, it lS in the national security arm national economic interest to promote the policy of the goverr~ent of t~e Onltea States to reduce the nation's depenaence on in~3orted oil; an~ WHE~, Section 301 of t3qe Powerpiant a~d Inaustrial Fuel Use Act contains prohibitions ar~J restrictions on the usa o~ natural gas as a utility powerplant fuel; ~ ~IqEREAS, the complete oevelopment o~ alternate tueis tec~oiogies are subject to technical, financial, envirormtental, site a~'m social constraints an~ as a result fuels from these projects may not be available ~n a co~a~rcial basis for several years; ana WHEREAS, aomestic natural gas reserves are estimate~ to be sufficient to last tor at least several oecaaes at the current rate constm~otion; and WI4EREAS, implementation of Section 301 will impose a host o~ new costs ufyon electric utility customers; ana WHEREAS, natural gas is a cheaper, cleaner fuel than fuel oil; W/d~, ~t~e United States neeas to utilize ~1 availaD£e resources in oraer to achieve energy inaependence at the earliest poss~ole time; therefore NC~%~, THEREFORE, BE IT RESOLVED, that t/~e City Council of r~e City of Tustin strongly supports feaeral legislation whicn w~il repeal Section 301 of the Powerplant and Industrial Fuel Use Act, r_hereSy pet]~itting the usa of natural gas as a transitional utility powerplant fuel untii such tin~_ as alternate or renewable sources are availaole rot r2,e con~terc~al generation cf e!ectric energy. PASSED ANI3 ADOPTED at a regular meeting of the City Council o~ t~e City of Tustin c~ this__ Gay of , 1981. jA~iES B. SHARP, Mayor A%~T EST: I.~RY WYNN, City Clerk CALIFORNIA URGES THE REPEAL OF SECTION 301 OF THE FUA O~er the past several months, a task force consisting of representatives of the executive branch of the State of California, various interested State regulatory agencies, and public and private gas and electric utilities in California have been analyzing the impact of Section 301 of the Powerplant and Industrial Fuel Use Act of 1978 ("FUA") upon California. 1/ TASK FORCE POSITION The task force has concluded that repeal of Section 301 of the FUA is essential. Natural gas must be utilized as a transition fuel as California and the nation move toward alternate and renewable energy resources. Failure to repeal Section 301 prohibitions and re- strictions will: (i) obligate electric utilities to burn increased quantities of oil in lieu of gas, thereby continuing the dependency on expensive and uncertain foreign oil supplies; (ii) divert capital resources from other productive applications; (iii) unnecessarily in- crease consumer utility rates; and (iv) frustrate efforts to improve air quality. Althcugh the task force exclusively addresses the repeal of Section 301 in this document, it is our position that other amend- ments to FUA addressing unduly restrictive limitations on the develop- ment of important fuel efficient energy options such as cogeneration should also be pursued. 1/ The task force consists of representatives from the Governor's Office of Planning and Research, Air Resources Board, Public Utilities Commission, Energy Resources Conservation and Develop- ment Commission, Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas and Electric Company, Southern California Gas Company, Los Angeles Department of Water and Power~ City of Burbank, City of Glendale and City of Pasadena. BACKGROUND In 1978 the Congress enacted FUA for several purposes including the need to conserve domestic natural gas supplies which appeared to be declining. Section 301 of the Act: (i) restricts the burning of natural gas in existing powerplants prior to 1990 and prohibits the burning of natural gas in such powerplants beginning in 1990; (ii) provides authority for the Economic Regulatory Adminis- tration ("ERA") to order conversion of an existing powerplant from oil or gas to coal whenever such a powerplant is found to be "coal cap- able"; and (iii) provides authority for the ERA to order an existing powerplant to use a mixture of gas and coal or a mixture of oil and coal. However wel~ intentioned the purposes of Section 301 were in 1978, such purposes are no longer valid and, continuation of the mandates of that Section will be detrimental to national security, balance of payments and national economic and environmental interests. The balance of this paper discusses the basis for the task force's position that Section 301 must be repealed. BASIS FOR POSITION Repeal of Section 301 Will Reduce Dependence on Foreign. Oil and Increase the Use of Domestic Resources 1. Most of California's fossil-fueled electric powerplants are limited by their design to the use of gas and low sulfur residual fuel oil which, in large part, is produced from foreign crude oil. The continued use of natural gas in powerplants will reduce the volumes of oil which would otherwise be required and thus, will reduce the nation's dependence on foreign petroleum. 2. It has been estimated that California powerplants can save over -2- 700 million barrels of oil over the period 1990 through 2000 by utilizing the projected available supplies of natural gas. The major portion of California's natural gas supply is from domestic sources. National security and national economic interests are most favorably improved by a reduction in dependence on foreign oil supplies and a greater use of indigenous resources. Natural Gas Supplies are Projected to be Adequate to Fulfill All Other Customer Requirements 1. Recent studies, including a long-term gas supply report prepared by the task force, indicate that, with continued exploration and expanded conservation efforts, and planned projects coming to fruition, California will have adequate natural gas supplies to serve some of its electric powerplant requirements to the end of the century. Current gas exploration efforts have yielded new gas supplies. Independent forecasts now project that gas supplies in the year 2000 should at least equal and, are likely to exceed, present levels. 2. Under present federal and state gas curtailment plans and policies, use of natural gas for electric generating boilers receives the lowest priority. All other classes of gas customers are fully served before natural gas is available for boiler fuel use. Therefore, supplies to resident%al and commercial customers are protected. Repeal of Section 301 Will Avoid Unnecessary Costs to Consumers Enforcement of Section 301 could impose a host of new costs upon utility consumers -- costs which could be avoided if existing powerplants were allowed to continue burning natural gas. A few examples are: -3- 1. Substantial capital expenditures could be required to retrofit existing powerplants with air emission control devices to accommo- modate the increased burning of oil. Moreover, it is unlikely such retrofit abatement systems would limit emissions of all pollutants to the same levels achievable through the burning of natural gas. 2. Electric utilities serve an important load balancing function. Although assigned to the lowest priority, electric powerplants provide the cushion for balancing continually fluctuating gas demands of higher priority residential and commercial customers. Section 301 restrictions on gas use will eliminate electric powerplants as a gas customer class and, thus, adversely impact all other classes of gas customers. It will mean either, resi- dential, commercial, and industrial gas customers will face the possibility of service interruptions or, expensive gas system additions possibly including new underground storage will be re- quired. Conversion to Coal is Not Financially Feasible The poten%ial use of coal in existing facilities for gener- ation of electricity is extremely limited in California. Most of the California's fossil-fueled powerplants were designed to burn only natural gas and oil. As a result, these powerplants do not contain design configurations that would accommodate the utilization of coal without substantial modifications, nor are there adequate coal transpor- tation systems available to these powerplants. Modification of exist- ing facilities would cost California utility customers billions of dollars. Use of funds for conversion would of necessity compete with those required fo£ necessary system additions including alternate -4- and/or renewable energy sources such as wind, geothermal, solar, and hydroelectric and would reduce the funds available for cogeneration, conservation and load management programs currently contemplated. The utilities and their customers are not financially capable of under- taking the huge capital expenditure of the conversions alone, much less a combination of both conversion and investment in conservation and renewable energy sources. The Continued Use of Natural Gas is Environmentally Preferable The increased use of oil required by enforcement of Section 301 will result in substantially increased emissions. These increased emissions cannot be justified in regions which are deemed environmental- ly sensitive when they could be avoided by the continued use of natural gas. Thus, air quality regulatory agencies advocate the use of natural gas in preference to oil. The California Air Resources Board has calculated by sub- stituting natural gas for residual oil in California utility boilers, average emission reduction would result on the order of 95% for par- ticulate matter, 50% for oxides of nitrogen and 99.8% for oxides of sulfur. The Department of Energy also recognizes the preferences of natural gas over oil from an environmental and national security standpoint and has reiterated this position in several publications. Natural gas rather than oil can serve as the transitional fuel while utilities expand their generation mix including the develop- ment of environmentally acceptable alternate resources while con- tinuing to emphasize cogeneration, conservation and load management. -5- The Process for Obtaining Permanent Exemptions to Burn Natural Gas is Impracticable 1. Electric utilities must make immediate long-range decisions rela- tive to the types and amounts of fuels to be utilized if they are to meet their service obligations during the remainder of this century. The uncertainties and unworkability of the FUA exemtion process presents a serious obstacle to that goal. 2. While the FUA provides for permanent exemptions, such exemptions will be granted by the ERA only when economic, environmental, or technical factors indicate that an extreme circumstance exists. Even when it is possible to demonstrate that such an extreme circumstance exists, in a recently promulgated final rule, the ERA stated "... for natural gas-fired facilities, therefore, ERA suggests that permanent exemptions under Section 312(a) of FUA, lack of alternate fuel supply, site limitations, or environ- mental requirements, not be applied for at this time.''2/ Thus, while it is theoretically possible to obtain permanent ex- emptions, it appears highly uncertain that they will be granted to use available natural gas in existing powerplants. 2/ "Calculation for the Cost of Using Alternate Fuels Under FUA." 45 Fed.Reg. 84971 (1980). -6-