Oil Dealers To Malloy: Faulty Natural Gas Price Assumptions Threaten Jobs

Heating oil dealers are crowding into hearings on Gov. Dannel P. Malloy’s energy plan, arguing that a multi-billion-dollar investment in the natural gas infrastructure might be a bad bet.
Malloy’s energy plan calls for a sharply increased reliance on natural gas in part because prices will remain far lower than home heating oil for the foreseeable future. That’s based largely on supplies and new technology that lets us get at the gas in the ground in nearby Pennsylvania and New York.
The oil dealers are attacking that assumption at a hearing in New Haven Monday evening, and at hearings in Hartford at the Department of Energy and Environmental protection offices beginning at 9 a.m. Tuesday and at 6 p.m. Tuesday in Storrs.
Energy prices are notoriously volatile and hard to predict, they point out. And they highlighted the state’s new fiscal crisis — which arose suddenly last week with new estimates — as an illustration of the folly of forecasting.
“If it is this difficult to predict a state budget deficit over three weeks, imagine how impossible it is to project energy price over 5, 6 or 7 years,” said Gene Guilford, president of the Independent Connecticut Petroleum Association, which represents oil dealers.
Worse, said the engineer and energy consultant who prepared a report for the association, for 24 of the last 31 years, oil prices were lower than gas for home heating, and we just might revert back to that pattern.
“Extrapolating future prices for the next 25 years based on a four year price difference does not produce reliable price values and can severely overestimate projected cost saving by switching from oil to natural gas,” said John E. Batey of Energy Research Center Inc., in Easton. “This is a serious deficiency in the draft Comprehensive Energy Plan.”
Batey added, “When biodiesel fuels are blended with home heating oil at a ratio of only 15% to 20%, home heating oil has a lower global warming potential than natural gas. Biofuel use in homes is increasing, and it can be an important option for meeting Connecticut’s renewable resource goals.”
The energy plan includes incentives for conservation and more electricity generation from renewable sources. On natural gas, the plan asserts, “America’s energy situation has been dramatically transformed by the increased availability of domestic shale gas at prices that are significantly lower than oil. “Only 31 percent of Connecticut homes heat with gas today, compared with 47 percent in Massachusetts and 48 percent in Rhode Island.”
The plan calls for 900 miles of new gas main lines, mostly financed by the industry but with relaxed rules. Much of that would be built with or without a state policy, as the two major gas companies see the same opportunity that Malloy and DEEP Commissioner Dan Esty sees.
Malloy, in his trademark fashion, is already moving ahead with parts of the policy. On Monday, he touted a new natural gas line to Amity Regional High School in Woodbridge.

The hearings continue Tuesday at 6 p.m. in Room 106, at UCONN – Center for Environmental Sciences and Engineering, 3107 Horsebarn Hill Road, Building 4 Annex, U-4210, Storrs; and this coming Monday at 6 p.m., in City Hall Auditorium, 140 Main Street – 2nd floor, Torrington.