The New England Fuel Institute (NEFI) Government Affairs Committee (GAC) recently received a comprehensive report from NEFI staff about important policy issues facing the heating oil industry. The following is a thumbnail look at some of the key issues, as reported to the Committee by Michael C. Trunzo, Advisor for Public Policy and Industry Relations; Mark S. Morgan, Regulatory Counsel; and Jim Collura, Director of Legislative Affairs.
ISO New England Winter Reliability Program: For the past three years, NEFI has been working with the Independent System Operator of New England (ISO-NE) on the Winter Reliability Program (WRP), a program to ensure adequate supply of backup fuel for power producers in the instance of natural gas interruptible service. The Federal Energy Regulatory Commission (FERC) has approved a three-year proposal for a 10-day reimbursement incentive program. The 2015-16 WRP proposal includes both heating oil and LNG as backup fuels. There are 81 units participating with a total need of approximately 4.2 million barrels of backup heating oil; however, the program has a cap, so only 2.9 million barrels are eligible for the incentive. The WRP is geared to be fuel neutral and will also include LNG, hydro, nuclear, biomass as backup fuels as some power producers have used them as well, with estimate of another 2.7 million barrels’ equivalent volume.
Low Carbon Emissions/Biodiesel Discussion With ISO-NE: NEFI has begun a conversation with the ISO-NE about carbon reduction and using biodiesel-blended heating oil for power generation, noting the Massachusetts Renewable Energy Credit (REC) program being discussed for REC trading for power production using biodiesel blended heating oil. The notion that power producers could burn a less carbon intensive fuel for power generation was not lost on the ISO-NE, and NEFI will continue that discussion. The ISO-NE has suggested NEFI speak with the New England Power Generators Association (NEPGA), as well as the state siting and environmental officials.
Natural Gas Pipeline Expansion: NEFI continues to monitor the region’s natural gas pipeline expansion projects. The governors of all six New England states have generally supported the position of expanding the supply of natural gas in New England to help bolster electric power generation. This position has been advocated by the ISO-NE as a way to bring security to power production fuel supply.
There are two main pipeline expansion projects in the region. The Kinder Morgan Tennessee Pipeline expansion known as Northeast Direct, and the Spectra Energy, Northeast Utilities and National Grid project known as Access Northeast. The Northeast Direct project brings Marcellus Shale gas from Pennsylvania through New York, Massachusetts and New Hampshire. The Access Northeast project expands the Algonquin and Maritime pipelines using existing right-of-ways cutting through Connecticut and into Massachusetts. Both projects ultimately end with pipeline connections into Maine.
The states would split the costs based on their electric use. Approximate percentages have Massachusetts at 50 percent and Connecticut at 30 percent, with Rhode Island, Vermont, New Hampshire and Maine splitting the balance each at approximately 5 percent. Connecticut and Maine have passed laws that would allow the use of taxpayer funds to help expand the pipeline infrastructure. Rhode Island has given its commitment to help fund the projects. Vermont has allowed its utility to keep rates artificially high and “bank” the funds for pipeline expansion. New Hampshire has not taken a public position.
Massachusetts has also not taken an official position, however, while the Governor continues to study all options, the state’s Attorney General has publicly opposed the pipeline expansion as unnecessary and a poor use of taxpayer dollars.
NEFI Meets with Conservation Law Foundation: NEFI is working with the Conservation Law Foundation (CLF) to see how the two groups might coordinate our messages in opposition to the natural gas pipeline expansion projects. It should be noted that while both NEFI and CLF oppose the expansion projects, it is for very different reasons. CLF opposes the continued use of fossil fuels, thus natural gas and even heating oil. However, on this particular issue, they tolerate the use of a small amount of heating oil versus the regional build-out of a natural gas pipelines.
NEFI and CLF have both met with the Massachusetts Attorney General, and CLF is a stakeholder in the AG’s workgroup. The CLF has also filed suit against the Massachusetts Department of Public Utilities (DPU) upon the Governor’s indication that the DPU has the authority to move the project forward. CLF was interested in NEFI’s position on the benefits of biodiesel blended heating oil in reducing greenhouse gas emissions in home heating and electric power production. CLF would like to have further discussions on this topic, as they like the fact that the home heating industry is promoting an environmentally friendlier fuel that displaces traditional No. 2 oil.
At a meeting on December 15, Ray Albrecht, a technical advisor from the National Biodiesel Board helped educate CLF on the attributes of biodiesel and to answer questions relative to the fuel use. The meeting offered a great dialogue on the use of biodiesel and its positive emission gains for the environment. There was a discussion on the use of biodiesel for home heating and for power generation. CLF was quite interested in that application and suggested that we explore a possible demonstration project for power production with B100. The CLF would like NEFI to become more involved in commenting on industry impact and issues for consumers.
DOE Residential Boiler Standard: The DOE recently issued a final rule that adopted new minimum AFUE levels of 84 for gas-fired hot water boilers and 86 for oil-fired hot water boilers (up from 82 and 84, respectively.) NEFI and the Oilheat Manufacturers Association (OMA) are concerned that the final standards are not technically feasible for natural draft oil-fired boiler systems and may require costly new venting systems and chimney linings that could create an economic disincentive for installation of new oil heat equipment. NEFI, OMA and NORA are studying the final rule to fully evaluate its full impact. The DOE also issued a final rule on new test procedures to determine whether equipment meets federal efficiency standards. NEFI, OMA and NORA are also evaluating this rule to determine whether the new test procedures tolerances for condensation will allow natural draft equipment to meet the 86 AFUE standard.
Biodiesel/Bioheat® Blenders’ Tax Credit: Congress retroactively renewed the $1 per gallon biodiesel tax credit for two years, effective through December 31, 2016. While NEFI was successful convincing Congress to leave the credit at the blender level, Congress is likely to revisit the debate again. The biodiesel industry is likely to continue their push for a producer-only tax credit this year. NEFI will continue to communicate concerns on the potential impact of moving to a producer-only tax credit issue with its long-time partners at the National Biodiesel Board (NBB), the region’s biodiesel producers, regional biodiesel and heating fuel wholesalers and suppliers, and members of Congress. All parties are committed to a robust and competitive Bioheat® industry in the Northeast and we are confident this shared vision will ultimately result in smart public policy.
Congressional Bioheat® Caucus: Late last year the NEFI Government Affairs and Executive Committees decided to solicit interest on Capitol Hill for the formation of a Congressional Bioheat Caucus. Like scores of industry-related caucuses on Capitol Hill, its purpose would be to educate other lawmakers, administration officials and the public on the benefits of biodiesel-blended heating oil and promote federal policies that would ensure affordable, safe, efficient and renewable liquid heating fuels.
Renewable Fuels Standard: The American Petroleum Institute (API) and the American Fuel & Petrochemical Manufacturers Association (AFPM), which represent petroleum producers and refiners, respectively, have both said that modification or repeal of the U.S Environmental Protection Agency’s (EPA’s) Renewable Fuels Standard (RFS) will be a priority in 2016. API is particularly emboldened by its victory on lifting the ban on crude oil exports, and plans on redirecting resources to the effort on the RFS. This issue is important to NEFI members because major reform or repeal of the program, which sets annual volumetric blending requirements for transportation fuels, could impact supplies for biodiesel. The EPA allows the creation of Renewable Identification Numbers (RINs) credits for the creation of biodiesel-blended gallons of heating oil. As a result, the RFS as a policy is important for the continued growth of Bioheat® as a heating fuel.
Natural Gas Exports: The Senate will soon consider a comprehensive energy bill would clear the backlog of natural gas export applications by requiring the U.S. Department of Energy to decide on pending applications within 45 days of enactment of the bill. The bill would further require that future applications be decided within 45 days of completion of an environmental review. Many experts have concluded that exposing the U.S. natural gas market to higher overseas prices will increase costs for American consumers. This issue has strong bipartisan support and considerable momentum following the repeal of the ban on crude oil exports.
Expedited Permitting for Natural Gas Pipelines: The comprehensive energy bill in the Senate would also streamline the permitting process for natural gas pipelines. This legislation requires greater collaboration between authorities at the local, state and federal levels and designate FERC as the lead agency in this process. The bill requires the FERC to set 90 day-deadlines on all federal agencies responsible for siting, permitting, and approving natural gas pipelines. Fortunately, Congress dropped NEFI-opposed language included in earlier versions that would have automatically issued these authorizations if the deadlines were not met. The new bill would simply require the agency to explain its failure to Congress and FERC and to develop a plan for completing the permitting process.
Modification or Repeal of Dodd-Frank: Wall Street lobbyists continue to actively push legislation to stall, weaken or repeal key reforms. Legislation to reauthorize the Commodity Futures Trading Commission (CFTC), the principle federal agency that oversees the commodity markets, is seen as viable legislation for their effort. In June, the House of Representatives approved CFTC Reauthorization but with provisions that could interfere with the implementation and enforcement of vital new rules and customer protections. This includes the already long-delayed rules to impose limits on commodity speculation and to protect small hedgers from a repeat of the MF Global crisis. The bill would have also halt vital negotiations between the U.S. and foreign regulators on ways to prevent offshore trading loopholes.