Clean Energy Economy News | Online edition

July 28, 2008 | Vol. 1, No. 7

In this issue

• Natural gas prices to hit record highs this fall
• Communities join to pursue New Energy Communities grant
• Federal transit officials to tour RFTA system
• Snowmass Village launches sustainability plan
• Competing ballot questions would change severance tax spending
• Aspen pursues geothermal energy
• Training and Events
• Clean Energy Bits ‘n Bobs

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Natural gas prices to hit record highs this fall

Electricity rises in tandem, driven by rising generation costs
for gas-fired power plants

By the end of 2008, natural gas prices are forecast to be 50 percent higher than a year earlier, and electric rates will reflect recent increases of 20 percent, say utility experts.

The Intermountain West continues to enjoy lower natural gas and electricity prices than the rest of the country, largely because the region’s gas production is held back from the national market by limited pipeline capacity. The region’s prices fluctuate in parallel with the nation’s, but usually lag $2 to $3 per thousand cubic feet (MCF) below the national average.

As the price of natural gas climbs to record highs, the price spikes seen in the past two years will become the new low in the annual price fluctuation pattern, according to price forecasts. In the Intermountain West in 2006 and 2007, prices hovered between $10 and $12 per MCF, and spiked to nearly $15 in the third quarter of each of those years.

This year, residential natural gas prices have risen steadily each quarter, from $10.50 to $12.50 to a third quarter spike of $17.50 per MCF. The federal Energy Information Administration short-term forecast is for mountain region prices to slide down to $15.80 from by November, and hold that rate through June 2009, then climb back to $17.70 by this time next year.

“We’ve been getting a lower price in this area for gas compared to other areas that don’t have production,” said Len Mize, public information officer for SourceGas. “Some pipelines are being built now, allowing gas to go elsewhere and raising prices a little bit. But main reason for the increase is the Henry Hub price is going up.”

The Henry Hub in Louisiana is the nation’s natural gas supply center, and wholesale prices for gas there determine retail prices for most of the country. As more pipelines are built to carry Colorado and Wyoming gas to the Midwest, prices in the two producing states will rise to reflect higher nation-wide rates, said Kobi Platt, an economist specializing in natural gas for the U.S. Energy Information Administration (EIA).

Natural gas costs at the Henry Hub are rising for three main reasons, according to Platt:

• The nation’s gas consumers used more than expected over the last winter because of colder weather. While the U.S. entered the winter with record high gas storage of 3,500 billion cubic feet (BCF), the supply was depleted to 1,250 BCF by the end of March. In 2006 and 2007, U.S. storage was still at 1,600 to 1,700 BCF by the end of March. Now, suppliers want to put even more gas into storage in anticipation of the winter ahead.
  
  
• Global demand for liquid natural gas (LNG) is increasing, due to reasons as varied as an earthquake putting a nuclear power plant out of production in Japan and drought in Spain reducing hydroelectric production. U.S. buyers aren’t willing to pay the higher price LNG is now commanding in the competitive world market, and are instead turning to domestic natural gas.
  
  
• Record high oil prices set the trend for natural gas. In the Eastern states, many users can switch between heating oil and natural gas as prices fluctuate, pushing up the value of natural gas.

Natural gas customers will have already noticed higher summertime gas bills. SourceGas customers saw their natural gas commodity charge rise by 42 percent from January to June. The hit to the pocketbook will be bigger come winter, when use rises for heating. It will be a double whammy for many households and businesses, because higher natural gas prices have also driven up the cost of producing electricity.

“Electricity prices have been creeping up all year long. In our case, it’s all natural gas-driven,” said Del Worley, CEO for Holy Cross Energy. “We buy a majority of our power from Xcel, and they generate a fairly significant part of their power from natural gas. So as the market for natural gas goes up, electricity follows.”

While Holy Cross charges a base rate of 8 cents a kilowatt-hour (kWh), it adds a “power cost adjustment” factor onto customer bills as a means of passing along fluctuations in the cost of purchased power. That adjustment typically adds or subtracts less than half a cent per kWh. But starting in January, the monthly adjustment started an upward climb and hit 2 cents per kWh by June. That brought the unit cost of electricity from 8 cents a kWh to 10 cents for residential customers, and from 7 cents to 9 cents for commercial customers.

“That level of a power cost adjustment is unprecedented,” said Steve Casey, member services and marketing administrator for Holy Cross. “We expect the power cost adjustment to stay at this level for the remainder of the year.”

The EIA’s latest short-term energy forecast predicts that electric rates in the Mountain West will inch up by another half cent in 2009.

In the face of rising gas costs, the Colorado Public Utilities Commission encourages natural gas utilities to hedge against higher wintertime prices by purchasing supplies now, either for storage or on long-term contracts, said PUC spokesman Terry Bote.

“We encourage utilities to use whatever hedging programs they can to offset prices, and we monitor that to keep the utilities’ total cost as low as possible,” Bote said.

He noted that utilities such as SourceGas and Xcel don’t set the price for natural gas, nor can the PUC regulate rising costs. “It’s a dollar for dollar pass-through of the utility’s wholesale cost. There is no profit or markup on the commodity,” Bote said.

Meanwhile, Bote said the PUC is urging Colorado residents to make energy efficiency improvements in their homes and commercial structures this summer and fall to offset the rise in energy prices.

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Communities join to pursue
New Energy Communities Initiative grant

A team of communities and school districts from Parachute to Basalt, with support from Garfield County and Pitkin County, are working together to assemble a strong proposal for the Governor’s New Energy Communities Initiative.

The grant could bring as much as $2 million in funding to the region to encourage measurable energy savings, renewable energy and long term energy improvements.  The initiative focuses on greening downtowns, homes, and public facilities. The initiative also has a strong emphasis on encouraging regional collaboration and livability.

The team sent a letter of interest to the Colorado Department of Local Affairs (DOLA) and the Governor’s Energy Office on July 18, listing an initial draft of projects that could be pursued under the grant.

Signing the letter were the cities of Rifle and Glenwood Springs, the towns of Parachute, New Castle, Carbondale and Basalt, the Garfield Re-2 and Roaring Fork Re-1 school districts, the Glenwood Springs Chamber Resort Association, and Garfield County. Pitkin County sent a separate letter of interest referring to the Garfield-based effort.

The regional proposal is being convened and managed by Clean Energy Economy for the Region (CLEER), with support from the Community Office for Resource Efficiency (CORE). CLEER has posted an informational page on its website for the grant effort, with links to state and local documents.

Team representatives met on July 16 in Rifle to begin shaping the grant proposal. A follow-up meeting is set for Friday, Aug. 8, 9:30 to 11:30 a.m., at the Garfield Re-2 Administration Building, 839 Whiteriver Ave., Rifle.

The focus of efforts now is to develop a more focused and detailed work plan, with valuable projects for each community and the region as a whole. With a targeted list in hand, the CLEER staff plans to work with community representatives and technical advisors to develop a realistic budget for delivering the program and services.

The grant application is due Sept. 19.

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Federal transit officials to tour RFTA system

Visit intended to build case for $21 million federal grant for BRT

A group of top-level staff from the Federal Transit Administration’s Region VIII office in Denver will be visiting the Roaring Fork Valley on Friday. FTA regional director Terry Rosapep and two or three other FTA staffers will tour RFTA facilities from Glenwood Springs to Aspen and look at the improvements envisioned in the Bus Rapid Transit proposal.

“We’ll start in Glenwood Springs at our maintenance facility and then head up valley, stopping to look at the park and ride lots, then go to our Aspen facility and Rubey Park. We want to show them how much transit is in demand here, and that we need partners to help us improve the system,” said Dan Blankenship, CEO of the Roaring Fork Transportation Authority.

RFTA is proposing a $61.2 million Bus Rapid Transit plan to serve communities from Rifle to Aspen with a streamlined system of express buses that can make the trip in close to the same time as a car. RFTA will seek voter approval in communities from Aspen to New Castle for a 0.4 percent sales tax increase to fund $39.9 million of the plan, and is preparing a grant request to the FTA for the remaining $21.3 million.

“We are definitely on the FTA radar screen. We’ve been having regular conference calls with FTA headquarters in Washington, D.C., and they have been helping us to understand their requirements for the Small Starts grant program,” Blankenship said.

“With this visit, we want them to see what we are proposing and how great our need is,” he said. “Our goal is to get them to be more supportive and advocate for the project with FTA headquarters staff, who ultimately decide if a project meets all the requirements.”

The FTA contingent will meet with RFTA staff, board members and other elected officials and business leaders in the valley during the tour and over lunch in Aspen, he said.

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Snowmass Village launches sustainability plan

Sopris Foundation study raises concerns about energy use by vacant second homes

Residents of Snowmass Village started work in July on a community environmental sustainability plan. People gathered for workshops on July 1 and 15 to set environmental priorities for the community and list projects that will help accelerate the community's progress toward sustainability.

The sustainability plan will be woven into the town’s comprehensive plan in order to integrate social, economic, and environmental policies.

“This effort is intended to address shortcomings and identify opportunities for programs and practices that engender pride in the community’s environmental performance,” said Jason Haber, economic resource director for the Town of Snowmass Village.

So far, the sustainability plan work has yielded a list of environmental priorities for the town: energy conservation, locally-generated renewable energy, housing, land use regulations, water supply, recycling and solid waste, green building, mobility and transportation, climate change, Brush Creek water quality, air quality, wildlife and town government operations.

The collaborative effort between the town government and residents comes at the same time the Sopris Foundation released a report on the town’s high rate of second homes and their use of energy.

The Sopris study found that 32 to 39 percent of Snowmass Village residences are occupied by full time locals, while 61 to 68 percent of the town’s residential properties are vacation or investment real estate. The study excluded commercial condominiums from its count.

Initial data was compiled and assessed by Nate Heintzman of Charles Cuniffe Architects. Rick Heede of Climate Mitigation Services, who conducted the Sopris Foundation’s Aspen residency study in 2007, reviewed and finalized the Snowmass count. The study was completed this month with data gathered in early 2008.

Two key concerns raised in the study are the amount of energy used by vacant second homes and the number of workers who must commute from elsewhere in the valley to maintain and operate vacant homes.

“Sopris Foundation notes the large number of homes that sit empty — and heated — while thousands of locals commute many miles to their jobs,” says Sopris Foundation director Piper Foster.

“There are 600 homeowners associations and a well organized second home owners’ group in Snowmass. We present this data in hopes that such community stewards will evaluate what they can contribute to promoting responsible use of energy,” Foster said.

After issuing the report, the Snowmass Village Second Homeowners Advisory Board invited Foster to address the organization’s members at their next meeting in January 2009. “They were concerned and seemed willing to discuss solutions,” she said.

In the news

Aspen Times, July 12, 2008
Study: ‘Locals’ are rare in Snowmass
Sopris Foundation says high number of second homes means energy is being wasted
By Scott Condon

Aspen Times, July 16, 2008
Snowmass works on green plan
By Katie Redding

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Competing ballot questions would
change severance tax spending

Petitions due Aug. 4 for placing measures on the November ballot

Proponents of two state ballot initiatives that would shift severance tax spending to education or to highways have one more week to gather signatures and turn in petitions, which are due Aug. 4.

Initiative 113, the Colorado Promise Scholarship Fund, would end the 85 percent credit for property tax paid by oil and gas producers and apply a flat 5 percent severance tax to more producers. The changes would yield an estimated $304 million more in severance tax revenues in fiscal year 2009-10. The added funding would be used for college scholarships, wildlife habitat, clean energy, transportation and drinking water projects.

Initiative 120 places the current practice of the 50-50 split of severance tax revenues between state and local government into the state Constitution, and directs future increases in revenues to be spent improving Colorado highways, particularly Interstate 70.

To qualify for the Nov. 4 ballot, they must have at least 76,047 valid signatures.

State government has imposed a severance tax on mineral extraction since 1977, and the revenues have traditionally been divided between state and local governments. In the past five years, more than 90 percent of the state’s severance tax revenues have come from the gas industry. In fiscal year 2006-07, the gas industry paid $117 million in severance taxes, according to the Legislative Council.

The severance tax rate is 2 to 4 percent for small producers and 5 percent for producers with gross incomes of more than $300,000 a year. The state also allows producers to take a credit for their severance tax liability equal to 85 percent of the property tax paid to counties — a measure enacted to encourage the gas industry to develop more wells in Colorado.

Taking the property tax credit into account, Colorado’s severance tax is the lowest of the eight major gas-producing Western states. If the tax credit were eliminated, Colorado would have the third lowest tax rate in the West.

Initiative 113 campaign heats up

Gov. Bill Ritter and various supporters of higher education are backing Initiative 113 under a campaign organization called A Smarter Colorado. They say the gas industry no longer needs a tax credit, and that the state should use revenues from the current gas boom to educate young people for research and careers in a diversified economy based on clean energy. They say the changes sought in the initiative bring Colorado’s energy tax structure in line with other Western states, and aren’t likely to slow the industry down.

Opponents to Initiative 113, including leading gas producers such as Williams and EnCana, say ending the tax credit will slow energy production, and may result in lost energy field jobs and higher energy costs for consumers. They caution the state against funding important programs such as higher education from a single source that’s subject to boom and bust cycles. And they argue that the tax credit is justified because of the higher rate for property tax assessed on energy properties.

The opposition campaign organization, Coloradoans for a Stable Economy, had raised $3.6 million as of the latest reporting deadline, while A Smarter Colorado reported raising $450,800.

Initiative 120 would trump 113 if it passes

While Initiative 113 would amend state statutes, Initiative 120 is proposed as a constitutional amendment. If both measures pass, 120 would take precedence over any conflicting provisions in 113.

Initiative 120 is a citizens’ petition, but its backers are two state legislators: Sen. Josh Penry, R-Grand Junction and  Rep. Frank McNulty, R-Highlands Ranch.

At present, state severance tax revenues are split 50-50 between state programs and local governments. The state’s half funds water projects, mineral extraction programs, clean energy projects, low-income energy assistance and wildlife conservation. The local half is distributed to local governments through loans and grants to offset energy impacts.

Initiative 120 would change the spending formula for the state half of severance tax revenues. Funding for existing state programs would be capped at the prior year’s amount plus inflation, or the highest amount spent on state programs after this year, whichever is higher. As severance tax revenues grow, the remaining part of the state half “must be used to construct and maintain highways,” with an immediate priority given to relieving congestion on Interstate 70.

The Legislative Council estimates that Initiative 120 would divert $217 million over the next four years to highway spending.

Supporters of the measure say the recent growth in severance tax revenues exceeds the needs of the state programs it has traditionally funded, while funding for highways faces large shortfalls. This redirection of funds boosts highway spending without raising taxes. And by making this a constitutional amendment, this dedicated revenue source for transportation can’t be spent for other uses without another statewide vote.

Opponents say the initiative could lead to cuts in the state programs that have traditionally benefited from severance tax, and moves them to highway spending that is largely unrelated to energy impacts. The initiative also circumvents the statewide highway improvements planning process. In addition, it further constrains the state budgeting process, making future spending decisions, particularly during times of recession.

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Aspen pursues geothermal energy

Exploratory well could be 3,000 feet deep;
hot water could heat downtown businesses

The city of Aspen is making environmental news as the first entity in Colorado to pursue geothermal energy under new state regulations.

Although Colorado ranks sixth in the country for geothermal potential, it has only one geothermal heating district, in Pagosa Springs. This month, however, the Aspen City Council agreed to pursue the possibility of drilling an exploratory well for geothermal heating. The well could produce water temperatures sufficient to heat an estimated 1 million square feet of commercial space in downtown Aspen at a cost competitive with natural gas.

“We’ve already completed the preliminary feasibility studies, and we believe there are the right temperatures and geology to make geothermal a viable option,” said Public Works Director Phil Overeynder. He has identified five possible sites in Aspen to drill an exploratory well up to 3,000 feet deep.

“We’ve already filed for geothermal water rights with the state, making the Aspen the first to apply under the new Colorado Geothermal Act,” Overeynder said.

The proposed test well would verify the capabilities of the geothermal system below Aspen and provide the information needed to craft a business plan for the using the resource to heat commercial structures in an energy district.

Geothermal heating has been used since the Roman Empire to heat buildings using hot water and steam from below ground. The city of Aspen hopes to continue its commitment to the environment and reducing CO2 emissions by using clean geothermal energy.

— Sally Spaulding, City of Aspen

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Training

CSU offers green homebuilding certification course

Colorado State University is offering a Green Homes Certificate Program, with a 13-week class on sustainable residential buildings.

The course is on Monday evenings from 5:30 to 9 p.m., Sept. 15 through Dec. 15, on the CSU campus in Fort Collins. One Saturday site visit will also be included.

The class is co-sponsored by the Governor’s Energy Office.

For information, visit the CSU Institute for the Built Environment or call (970) 491-3260.

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Events

PUC climate change and carbon regulation meeting

Date: Thursday, July 31
Time: 9 a.m. to 4:30 p.m.
Place: Old Supreme Court Chambers, State Capitol Building, Denver

The Colorado Public Utilities Commission will host a one-day meeting on climate change and carbon regulation. Speakers will review the scientific data on human-caused climate change and discuss approaches proposed for adaptation and mitigation at both the state and federal level, including regulation of carbon emissions.

Oil Shale Symposium at School of Mines

The Colorado School of Mines and the Colorado Energy Research Institute will host the 28th Oil Shale Symposium Oct. 13-17.

Presenters will review development in oil shale resources worldwide, including research & development, impact analysis, regulatory framework, and the status of oil shale projects and programs. 

The symposium schedule includes an overview on Oct. 13 and technical sessions on Oct. 15 and 15, all at the Colorado School of Mines campus in Golden, followed by an optional field trip to Grand Junction on Oct. 16 and 17.

More information | Registration information

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Clean Energy Bits ‘n Bobs

Parachute Mayor Roy McClung was elected in June to the Colorado Municipal League executive committee — the only representative from an energy development-impacted community . . . Just a couple of weeks after CLEER staffer Heather McGregor gave a presentation about clean energy to the Glenwood Springs Unitarian Universalist congregation, members Jan and Pat Girardot used their federal economic stimulus check and a CORE rebate to buy a new Energy Star refrigerator . . . Kobi Platt, an economist specializing in natural gas markets for the U.S. Energy Information Administration in Washington, D.C., previously worked as a fishing guide in Basalt . . . The plastic bag challenge between Aspen and Telluride has been extended until Labor Day . . . Garfield Library District board member Marilee Rippy is on a tour of energy-efficient libraries in Colorado in preparation for the district’s library expansions in the county.

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