Tuesday, March 17, 2009

Little Gypsy and Gas Marketing

I've been scratching a hole in my head over the past few weeks wondering about Entergy Corporation's proposal to convert its aging natural gas powered Little Gypsy power plant into a coal fired plant. Entergy is a major electric and gas utility for the LA/MS/AR region and Little Gypsy is located approximately 30 miles up the Mississippi River from New Orleans.

While I certainly encourage Entergy's investment in the plant, I can't help but wonder, WHY COAL? In a state with abundant natural gas resources, why in the hell would they want to build a coal plant? Entergy states that adding coal to the company's generating portfolio would be a hedge against rising gas prices. As an Entergy customer, I can look at my bill and realize that the price surcharges on my bill are their built-in hedges.

Coal? What are they thinking? The revised plan isn't even touting itself as that fictional "clean coal." It's just minimally less dirty coal. With the expected additional costs of mitigating the pollution from coal making the project economically infeasible, it doesn't look like Entergy will be able to convince the Public Service Commission to allow it to do the conversion.

The Little Gypsy conversion brings up another important issue. Why on earth would a power plant in easy reach of the Haynesville Shale (and Henry Hub, for that matter) want to switch to coal? Outside of Boone Pickens's Pickens Plan and Chesapeake Energy (and their various marketing campaigns, such as American Clean Skies Foundation and CNG Now), I don't hear enough PR and marketing about the pros of natural gas. As the price continues to sink to a point where drilling is no longer economically feasible, the industry should be out there marketing the living daylights out of its product. What's happening instead is the industry is idling drilling rigs, letting go of skilled workers (see interesting article) and opening itself up to be beaten to the punch by imported foreign LNG when prices and demand increase.

There has been much ink spilled about the decline in natural gas prices being a function of increased supply. But supply is an equal partner of demand. From what I read, demand has not actually tailed off more than about 5%. On top of that, with environmental restrictions on coal generating plants inevitable, the gas industry should be out loudly touting its product: it's the cleanest fuel around and its a domestic product. Hello! Is anyone listening? I see these weak-kneed campaigns featuring "the people of the oil and gas industry" (it's such a weak campaign that I can't find it on Google!). These ads beg for sympathy. That's the wrong approach. Play to your strengths, don't ask for handouts.

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