The Natural Gas Industry: Lessons for the Future of the Carbon Dioxide Capture and Storage Industry

By Schwartz, David | Stanford Law & Policy Review, Summer 2008 | Go to article overview

The Natural Gas Industry: Lessons for the Future of the Carbon Dioxide Capture and Storage Industry


Schwartz, David, Stanford Law & Policy Review


INTRODUCTION

The United States is one of the world's leading producers of two chemically simple but crucially important gases, carbon dioxide (C[O.sub.2]) and natural gas (C[H.sub.4]). (1) In terms of growth, the two industries are at opposite ends of the spectrum: the "industry" for capturing, sequestering, and storing C[O.sub.2] is incipient at best, whereas the natural gas industry is fully developed, having gone through almost a century of development, regulation, and restructuring. Natural gas is an integral part of the U.S. economy, accounting for almost a fifth of U.S. power generation, as well as being the major source of energy for residential heating purposes. (2) More impressively, the natural gas industry has an incredible infrastructure: over 420,000 natural gas wells in the United States alone (3) produce 18.5 trillion cubic feet of natural gas (4) that is transported through 285,000 miles of pipeline to its various users. (5) The United States also imports some 16% of its natural gas, nearly all of it from Canada via pipeline. (6) Somewhat ironically, it is the combustion of natural gas, along with all other fossil fuels, that has given rise to the infant industry of C[O.sub.2] capture and storage (CCS). CCS represents a major tool in the effort to reduce anthropogenic C[O.sub.2] emissions into the atmosphere, especially for the United States, which relies on fossil fuels for over 85% of its energy needs. (7) And while CCS is only one of a portfolio of measures being considered by policymakers, (8) because it can be used for any large point source of C[O.sub.2], ranging from coal-fired power plants (9) to cement production or the iron and steel industry, (10) CCS is '"the critical enabling technology" that can significantly reduce C[O.sub.2] emissions while still allowing the United States to rely on coal and other fossil fuels in the near future. (11) This is particularly salient for coal, given that the United States possesses the largest recoverable coal reserves on the planet. (12) Thus CCS presents what may be the most feasible and broadly applicable method for reducing C[O.sub.2] outputs that the United States currently possesses in the short- to medium-term.

Many authors and institutions have focused on analyzing CCS because nearly all of the industry's pieces currently exist or are technologically feasible; all that is left is for someone to put them together. (13) It is at this point, however, that difficult questions arise: what will the CCS "industry" look like? Who will own the C[O.sub.2]? How will it be economically feasible? And how will the industry be regulated? While the natural gas industry is not the only analog to CCS, (14) a close examination of the industry and its lessons for CCS has yet to occur. This paper seeks to do exactly that: Part I contains a detailed case study of the natural gas industry and its past and present regulation; Part II gives a brief description of the CCS industry's various moving parts; Part III draws lessons from the case study to the CCS industry; and Part V offers some conclusions.

I. THE NATURAL GAS INDUSTRY

A. Present Industry Structure

The natural gas industry is made up of a fairly straightforward structure, starting with natural gas production and processing. Though the discovery and processing of natural gas are deeply involved processes, they are outside the scope of the present analysis. (15) Thus the relevant analysis of the natural gas industry begins once the gas has been discovered, processed, pressurized, and ready for transport.

1. Pipelines

Pipelines transfer natural gas from the major production and processing regions of the United States to the major consumption areas. (16) Figure 1 demonstrates this principle as well as the extent of the natural gas pipeline infrastructure.

Pipeline costs vary widely: factors such as the area's congestion, terrain (e. …

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