The 5th meeting of the Special Subcommittee on Energy was held on Friday, October 24, 2008, at 10:00 AM, in Lexington, Kentucky. Senator Brandon Smith, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Brandon Smith, Co-Chair; Representative Rick G. Nelson, Co-Chair; Senators Charlie Borders, Tom Buford, Denise Harper Angel, Ernie Harris, and Johnny Ray Turner; Representatives Royce W. Adams, Rocky Adkins, Eddie Ballard, Leslie Combs, Tim Couch, Jim Gooch Jr., Sannie Overly, Tom Riner, and Brent Yonts.
Guests: Representative Robin Webb; Fitz Steel, newly elected member to the House of Representatives; Steve Byers, Legislative Liaison, University of Kentucky; Dennis Rohrer, General Partner of Interstate Gas Company; Judith Casalino, President, American Clean Air Partners; Jim Tracy, University of Kentucky Vice President for Research; Anthony Robertson, student, UK College of Engineering; Robert Daniel Ampleford, Chemical Engineering Co-op Student, Center for Applied Energy Research; Ying Shu, Chemistry, Center for Applied Energy Research; John Dosker, General Counsel, Stand Energy Corporation and Mark Ward, Vice President of Regulatory, Stand Energy Corporation.
LRC Staff: D. Todd Littlefield, Committee Staff Administrator, Taylor Moore, and Susan Spoonamore, Committee Assistant.
The September 19, 2008 minutes were approved, without objection, by voice vote, upon motion made by Representative Rick Nelson and seconded by Representative Royce Adams.
Steve Byers, Legislative Liaison, University of Kentucky, welcomed members to the E.S. Good Barn, University of Kentucky.
Dennis Rohrer, Interstate Gas Company and Judith Casalino, President, American Clean Air Partners discussed the role of natural gas in meeting the critical issue of our state and nation’s domestic energy crisis.
Mr. Rohrer explained that natural gas is a vital component of the world’s supply of energy and is one of the cleanest, safest, and most useful of all energy sources. He said that natural gas, in the form of compressed natural gas (CNG), has been used as a transportation fuel in vehicles for more than 100 years around the world. The clean burning properties, abundant supply and relatively low cost have made it a popular and environmentally sensitive fuel choice for drivers in Europe, Russia, South American, Australia and New Zealand, the United States and Canada. There are over 8 million natural gas vehicles (NGVs) on the road worldwide with thousands of public, fast-fill refueling stations to support them. Canada has approximately 120 refueling stations that serve 20,000 NGVs.
He said that vehicle applications for NGVs include:
· Transit buses;
· Taxi cabs;
· heavy duty trucks
· Commuters;
· Small and large commercial fleets;
· Light duty trucks and vans;
· Forklifts, and
· Ice resurfacers.
Mr. Rohrer stated that energy from natural gas accounts for 24 percent of total energy consumed in the United States. Deregulation and the move toward cleaner burning fuels have created an enormous market for natural gas across the county. New technology is continually being developed allowing Americans to use natural gas in new and exciting ways.
Judith Casalino explained that the American Clean Air Partners, LLC, is a Kentucky corporation formed to promote and establish alternative fuels with a focus on natural gas for vehicles. She stated that high gasoline prices have had and will continue to have a devastating effect on the economy.
The issue of oil is becoming more critical with each passing year. The wealth of OPEC nations is growing at an alarming rate. Between 2000 and 2007 the oil revenues for OPEC went from $243 billion to $688 billion, not including the price spikes in November and December of 2007, or the revenues from 2008.
The United States ranks 11th in oil reserves with 39.9 billion barrels. Saudi Arabia, Iran, Iraq, Kuwait, and the United Arab Emirates have a total of 716 billion barrels. The U.S. ranks #1 in the world for oil consumption, buying an estimated 82% of its oil from these countries.
She said that historically, until February 17, 2008, oil had been traded in U.S. dollars. Iran opened its own trading exchange in which oil is brokered in Euros instead of dollars, further threatening the U.S. dollar and economy.
Natural gas for vehicles is available, but for unexplained reasons, the U.S. has not maximized its vast natural gas resources to fuel its vehicles. Even at increased natural gas prices, natural gas for vehicles is about half the price of gasoline. Compared to diesel it is even cheaper. It is the cleanest burning alternative fuel today.
Mr. Rohrer stated that natural gas can and should be the driving force to free our country from the grip of high oil prices. To convert just 10% of American cars to CNG would take less than 8 years and would only require an increase in the U.S. natural gas consumption by slightly over 1% per year. There is plenty of natural gas to make electricity, heat our homes and to make chemicals and plastics, and there is plenty of natural gas to convert our transportation fleet from dirty expensive imported oil to clean burning, affordable, abundant, available, American natural gas. Other states are developing infrastructure, but Kentucky has no CNG facilities. Kentucky should be leading this effort because of our abundant resources.
Included in the presentation of Mr. Rohrer and Ms. Casalino there were sixteen initiatives to help promote Compressed Natural Gas (CNG) for vehicles, a copy of which can be found in the LRC Library file.
Sen. Smith asked if the Honda Accord offered a CNG fuel vehicle.
Ms. Casalino stated that it does and there is six month waiting period.
Mr. Rohrer stated that Toyota is in the process of making a CNG vehicle but it will only be offered in California.
Sen. Borders asked if there was some safety from rising prices of natural gas.
Mr. Rohrer and Ms. Casalino stated that there were no assurances for heating costs, but hopefully long-term contracts for the price would help stabilize prices.
Sen. Borders asked how much storage space the CNG fuel cell takes up in a vehicle.
Mr. Rohrer stated that the cells do take up more additional space.
Sen. Borders asked if it would be worth putting our efforts and money into developing the needed infrastructure for CNG vehicles.
Ms. Casalino stated that because supplies are limited, it would take a long time to convert vehicles to CNG.
Rep. Riner asked if CNG would be dangerous in a vehicular accident.
Mr. Rohrer stated that natural gas is the safest fuel available.
Sen. Buford asked how much natural gas was imported.
Mr. Rohrer stated that 1.5% of the natural gas consumed in the U.S. is imported from outside North America.
Sen. Buford asked if the United States would be able to keep up with the demand of natural gas without importing.
Mr. Rohrer and Ms Casaloni stated that most of the natural gas comes from the western part of the U.S., but due to the absence of infrastructure, we are not able to keep up with the demand. Data shows that there are enough natural gas reserves to keep up with demand, but the biggest problem is transporting natural gas. However, natural gas still costs less than oil on a per-btu basis.
Rep. Gooch stated that 1% of the gas comes from Mexico and Canada and asked about LNG.
Mr. Rohrer stated that he did not know how much imported LNG is used in the U.S., but added that LNG is not lucrative in the U.S. due to the price and demand.
Rep. Gooch stated that he agreed we have a good natural gas industry and that we should become independent of foreign oil, but assurances would be needed that electricity demand would not be met with natural gas. That shot prices up and we can’t have enough gas for all those uses without price volatility.
Ms. Casalino stated that natural gas reserves are up, productivity is up and tremendous quantities will be available. Electric generation plants can store LNG for peak periods. American Clean Air Partners is working with utilities and others to get LNG for the transport sector.
Rep. Smith asked how much a fuel station would cost to build.
Mr. Rohrer stated that orders for such stations were 36 weeks out in the future in Wisconsin, but most are going to foreign countries. Conversion stations and equipment are not here because of low demand.
Ms. Casalino stated that it would cost $2.1 million to convert a fueling station to CNG, which would include 6 fast-fueling pumps, on a turnkey basis, except for the cost of putting gas lines in. Conversion technology for new vehicles – $12,000 for a car up to $25,000 for large fleet vehicles – are eligible for a $4,000 federal tax credit for conversions for cars, or a $32,000 credit for large trucks.
Rep. Adkins stated that Casalino’s and Rohrer’s testimony shows Kentucky has vast resources. HB 1 includes language to encourage the conversion of 50% of the state’s fleet vehicles to alternative fuels, but with specificity on fuel type.
Mr. Rohrer stated that natural gas continues to be cheaper than petroleum and the investment stays in the United States.
Mr. Jim Tracy, University of Kentucky Vice President for Research stated that energy research is a core mission at UK coming from a variety of sources. He generally described the different types of energy research being performed.
Anthony Robertson, a student at the UK College of Engineering stated that he is the mechanical project manager for the solar car team. Since 1999, the mission has been to finance, design, build and race solar-powered cars. He described the vehicle’s history including the mechanical and electrical systems.
He said that the UK Solar Car Team raced in the North American Solar Car Challenge earlier this year traveling 2400 miles from Dallas, Texas to Calgary, Alberta, Canada. The only power source used was the sun. Twenty-four teams from the USA, Canada and Europe entered the race, but only 15 completed the race. He said that the University of Michigan had a budget of $2.4 million and placed 1st; Kentucky placed 11th with a budget of $120,000.
Rep. Smith asked how the solar powered car worked in cloudy weather.
Mr. Robertson stated that it drives slower. But energy is stored in a battery pack.
Rep. Adkins asked about the storage of solar power.
Mr. Robertson stated that silicon cells used for houses are 20% efficient. New cells are approximately 29% efficient and NASA gallium arsenide cells are 35% efficient. Solar storage in Kentucky is not good because the Commonwealth does not have enough sunny days.
Rep. Adkins asked if we could have a project to tie into the grid.
Mr. Robertson stated that we could, especially with net metering and combined with another generation source like wind. Another area is energy farms and expanded research and development at the university standpoint.
Rep. Smith noted the potential impact of renewable energy sources on the use of coal.
Daniel Ampleford from the Center for Applied Energy Research discussed post combustion CO2 capture – impact and future impact.
Ying Shu presented results of her research on high-value carbon materials for energy generation and efficiency, including their potential use as conductors and energy storage devices.
Mark Ward, Vice President of Regulatory Affairs, Stand Energy Corporation, and John Dosker, General Counsel, Stand Energy Corporation, discussed proposed changes to the tariffs of Kentucky’s major natural gas utilities that would allow Kentucky’s smaller commercial and industrial companies, including school systems and government facilities, the choice to purchase natural gas supplies through an open, competitive market.
Mr. Ward and Mr. Dosker asked that the Kentucky Public Service Commission review and remove the current volumetric thresholds required in order to transport gas, daily or annually, or economic barriers such as high administration fees, meter fees or mandatory capacity assignments. These barriers preclude small customers from using gas transportation services. Removing these barriers would open up the market to other competitors giving consumers a choice.
Rep. Smith stated that he would ask the Public Service Commission to address the issues as requested by Stand Energy. He also asked that the PSC respond, in writing, to Stand Energy and the Special Subcommittee on Energy.
Stephanie Bell, a representative from the Kentucky Public Service Commission stated that she would ask the appropriate colleagues at the PSC to develop a response and perhaps address the committee at a future meeting.
Rep. Robin Webb stated that she has asked Energy staff to request a cost savings analysis for schools and agencies, based on today’s testimony.
Meeting adjourned at 12:00 p.m.