The Journal’s Russell Gold reports:

Energy demand is down. The global economy is sputtering. Meanwhile, U.S. natural gas production is up. Add it together and the prospects for importing gas — in liquefied form — should be dismal.

But some analysts predict that imports into the U.S. of liquefied natural gas, known as LNG, could rise in coming years. The result could be a lot more of the fuel, and lower prices. Relatively abundant and relatively clean energy: That’s good news for Steven Chu and the new crew on Independence Avenue at the Department of Energy. Its effect on the environment could be mixed, though, since cheap natural gas would almost certainly continue to crowd out the development of renewable energy sources.

Wood Mackenzie, the Scotland-based energy consultant, predicts in a new report that LNG imports into North America should more than double to 4.2 billion cubic feet a day from an estimated 1.7 bcf daily in 2009.

If WoodMac is right, the implications aren’t good for domestic gas or coal producers. Extra natural gas into North America would push down prices and hurt domestic producers already reeling from overextending themselves while credit was easy. If gas is cheap and plentiful, it could become a bigger direct competition with coal for base-load electricity generation.

Not everyone agrees. The Energy Information Administration doesn’t foresee a surge in imports. Its view is that domestic production will grow, keeping imports away.

WoodMac says North American markets will function as a “global sink for LNG.” What they mean is that North America will become the region were excess LNG is poured. Asia can only take so much extra LNG and producers do not want to overload European markets. “Due to its size, liquidity and significant regas and storage capacity the US can easily accept large volumes of unallocated LNG as and when required,” the report states.

All else being equal, the gas would go to Europe, which typically pays higher prices than North America. Traditionally, LNG prices in Europe have been indexed to oil prices (unlike in North America.) LNG producers worry that if they send too much gas into Europe, not only would it depress prices, it could hasten the end of this longstanding – and quite profitable – way of pricing LNG. Unwilling to risk this, WoodMac thinks they will prefer sending extra shipments of LNG across the Atlantic to North America.

What does the U.S. Army’s planned acquisition of 4,000 golf-cart-looking electric vehicles have to do with America’s clean-energy future?

A lot, potentially. It’s the latest sign that the Pentagon, reeling from high fuel costs and an even higher cost in human life from long and vulnerable fuel-supply lines, is finally starting to take energy efficiency seriously, seven years after first flagging the issue. And when the Pentagon throws its weight and considerable budget behind something, from aviation to the Internet, the innovations inevitably tend to trickle down to the rest of the national fabric.

Humble beginnings, big promise (US Army)

For now, the Army’s transformation involves baby steps—a few bases using more solar power, some turning to geothermal. The electric-car order is designed to replace non-combat vehicles on select military bases, and will save 11.5 million gallons of fuel. Eventually, the Army could order up to 28,000 electric cars for use on bases.

But the real fuel-efficiency action could be found in the Army’s combat fleet, including the heavy vehicles in mechanized and armored divisions. There’s no shortage of reasons. The Pentagon pays a lot more for fuel than list prices; peacetime fuel costs for all services total $13 a gallon. In war zones that require long supply convoys or air-lifted fuel, that can skyrocket to as much as $400 a gallon, the Pentagon says. Multiply that by the 600,000 gallons an armored division uses every day (the Abrams tank gets half a mile to the gallon), and the economics alone are overwhelming.

But for the Defense Department, operational reasons still trump economics. Greater fuel efficiency by combat vehicles will give commanders more flexibility. Most importantly, as the Iraq war has shown, severing the “fuel tether” can save lives. About 70% of supply convoys carry fuel, often just diesel for generators. Convoys are the main target of deadly insurgent attacks.

That’s the main reason that Marine Maj. Gen. Richard Zilmer, based in the conflictive Anbar province in western Iraq, sent his bosses a “priority one” request for more renewable energy in the summer of 2006 (which was promptly denied). More solar panels at forward bases would have meant fewer vulnerable supply convoys.

The idea was enshrined in a now-famous 2001 Pentagon study that recommended making fuel efficiency a cornerstone of the future army. Its recommendations—including making fuel-efficiency a pre-condition for Pentagon vehicle procurement–weren’t acted on. Earlier this year, the Pentagon revisited the subject in the “More Fight-Less Fuel” report with the explicit goal of adding more “teeth” to combat forces while trimming their logistical “tail.”

The most likely beneficiary? Engineers are working on future combat systems, like a hybrid-electric tank engine, but that could be a decade away. Closer to fruition is the replacement for the 25-year old, much-maligned Humvee tactical vehicle. A spate of defense contractors are currently building the new Joint Light Tactical Vehicle, which should be in production by 2012. In addition to all the other obvious improvements, like armor protection, the JLTV will include a hybrid version to make sure fuel-efficiency makes the transition from Pentagon memos to the front lines.

Being in the middle of the road means you take fire from all sides, apparently. That’s what the U.S. Climate Action Partnership is learning after unveiling its blueprint for government action to curb greenhouse-gas emissions.

No satisfaction (AP)

Pretty much everybody has something nasty to say about the proposals, the fruit of two years of work at the group which encompasses big companies as well as environmental groups. Many environmentalists attacked the plan for being too weak; plenty of politicians think the group is going too far.

House Republicans tore into proposals presented by the group. Illinois Republican John Shimkus railed against cap-and-trade “shell games” that he says hide the cost of environmental regulations from consumers.

Other Republicans, like Tennessee Senator Bob Corker, ripped into US CAP’s “self-serving” proposals because of the way they’re structured. He zeroed in on the group’s advocacy of free emissions permits and its insistence that companies be allowed to meet emissions-reduction targets by using carbon-offset schemes:

“I’m totally bewildered that in this anti-earmark atmosphere, USCAP would promote what is basically just another request from special interest groups to take money out of taxpayer pockets. The notion that this bill will give significant allowances—with real monetary value—away for free is outrageous. I am also opposed to the inclusion of international and domestic offsets, which will compromise the strength of the market system and call into question the integrity of emission reductions.”

UPDATE: Keith Trent, Duke Energy’s chief policy architect, responds that USCAP’s call for a portion of free allocations is meant to cushion the transition for consumers. Since USCAP’s plan would channel those emission permits through local, regulated entities, “not a penny” of the value of the emissions permits would end up in shareholder hands, he said, and there would be no “windfall” profits for power companies. The National Association of Utility Regulators backs that idea as well.

Still, those two issues, as well as lowball intermediate emissions targets, drew the ire of environmentalists. The Union of Concerned Scientists said the blueprint needs “strengthening.” Environmental group Friends of the Earth focused on the same issues and called the blueprint “deeply flawed.” Environmental coalition 1Sky lambasted the plan’s “loopholes.” Business for Innovative Climate and Energy Policy, or BICEP, which includes Nike, Starbucks, Levi Strauss, and Sun Microsystems, took aim at the plan’s emissions-reductions targets and dearth of renewable-energy goals.

To be sure, USCAP’s promoters were well aware they were bringing a compromise vision for climate action to Congress. Duke Energy chief executive and USCAP honcho Jim Rogers quoted the Rolling Stones in Thursday testimony before Congress: “You can’t always get what you want, but if you try sometime, you might find, you get what you need.”

For all the talk of how plunging oil prices threaten the clean energy sector, it’s really the separate-but-related fall in natural gas prices that matters. And natural gas is now at a two-year low.

Henry Hub gas futures in New York are trading around $4.90 per million British Thermal Units, the first time gas contracts have been trading under $5 since September, 2006, and gas prices are now 64% off their summertime high.

Why has gas fallen so much? For pretty much the same reasons oil has fallen. Natural gas supplies are plentiful, for starters. The dismal economy is tamping down demand, especially among industrial users. More specifically, big stockpiles of natural-gas substitutes like heating oil are building, putting more pressure on gas prices even in the middle of winter.

Granted, natural gas still isn’t cheap by historical standards; it spent most of the 1990s between $2 and $3. And if past is prologue, it can rebound suddenly—natural gas prices doubled in the month following that 2006 trough.

But cheaper natural gas does put pressure on the economics of clean energy, especially wind power, which is already struggling with the fallout of the credit crunch.

If today’s lowish natural gas prices continue—it’s currently below the U.S. government’s official 2009 forecast—that will put an even greater onus on government policy to support clean energy. Most important will be the shape that government support takes, given Washington’s mixed track record of boosting renewable energy. More on that to come.

There’s a brand-new buzzword in the ever-evolving debate over America’s energy policy: Blue jobs. Those are jobs associated with the oil and natural gas industries, named for the azure hue of the burning gas flame, and part of the gas industry’s latest push to keep old energy relevant in Washington.

A new contestant in the jobs debate (AP)

The Natural Gas Supply Association is trying to make sure policy makers keep it in mind as they craft a slew of new energy and environmental policies, including programs to create so-called green jobs, or employment in environmentally-friendly areas like renewable energy and energy efficiency. The gas lobby wants Congress to “make more natural gas available.”

The natural gas lobby says blue jobs total 5.8 million nationwide. Of course, that includes both the direct employment in the oil and natural gas industries—1.8 million—and another 4 million indirect jobs the lobby says depend on natural-gas related activities. Some of those jobs are really, really indirect:

“One-third of America’s natural gas is used by American manufacturers to create everything from trash bags and pantyhose to antifreeze and detergent. Those manufacturing jobs are all natural gas related,” NGSA president R. Skip Horvath said.
“We fully support the creation of more green jobs, but we’ll be wearing our ‘Blue Jobs’ buttons when we meet with political leaders in Washington this year. We want them to better understand how vital our industry is.”

It’s all part of wider push to mesh energy policy and job creation in the middle of the slowdown. The idea of “green-collar” jobs enthralls President-elect Barack Obama, his transition advisers, Labor Secretary designate Hilda Solis, and even Secretary of State nominee Hillary Clinton.

But the jury is still out on the true job-creation potential of the green sector. A new study out by the conservative Institute for Energy Research parses four of the most widely-quoted green jobs studies. It concluded that they all suffer from the same, over-optimistic flaws. Namely, green jobs programs won’t create the millions of jobs proponents claim, the jobs won’t be sustainable in the long run, and since some green jobs will attract existing workers, rather than drawing just from the ranks of the unemployed, won’t mean that many net new jobs.

Whether it’s green jobs or blue jobs, the overall state of the economy matters, too (just ask states that can no longer afford to subsidize solar power). With natural gas prices at a two-year low and potentially headed lower, even blue jobs could be at risk. More on that later.

Stephen Power reports:

The Waxman era begins: The first congressional hearing of 2009 on climate change got off to an acrimonious start Thursday, as House Republicans blasted a group of corporate CEOs and environmental groups for staging a press conference instead of appearing before the House Ènergy and Commerce Committee to answer lawmakers’ questions about their ideas for reducing greenhouse gas emissions.

The Republicans also vowed to hold members of the US Climate Action Partnership accountable for their own use of fossil fuels, by demanding they explain to the committee whether they traveled to Washington by corporate aircraft and how much fuel they used.

“Be prepared for a battle,” Illinois Republican John Shimkus said at the start of the hearing by the House Energy and Commerce Committee. Mr. Shimkus vowed to “hold accountable” any Democrats from coal-abundant and petroleum-producing states who vote in favor of legislation to cap greenhouse gas emissions and set up an emissions trading system in which companies would have to buy permits allowing them to pollute.

Mr. Shimkus and other Republicans called such legislation, which is favored by President-elect Barack Obama, “a shell game designed to hide” the true costs of regulation from consumers.

The comments came at the first hearing on climate change chaired by California’s Henry Waxman after he defeated Michigan’s John Dingell last year for the chairmanship of the House Energy and Commerce Committee. The rhetorical war suggests the road to passing climate-change legislation will be rocky, at least in the House.

The committee is scheduled to hear testimony later this morning from from the CEOs of General Electric, Duke Energy and other corporations that belong to the US Climate Action Partnership. The group is in Washington to unveil its proposed “blueprint” for climate-change legislation. Republicans on the panel said they had been given an hour and a half to view the group’s written recommendations; had been denied a chance to seat a witness on the same dais as the CEOs; and that the CEOs would be available for questions from the panel for only two hours - a time frame Republicans said was inadequate.

In response, Mr. Waxman said lawmakers would have a chance to quiz other representatives of the companies and that “this is not the last hearing” he plans to hold on the matter.

UPDATE: Mr. Waxman will suffer no delays in tackling climate change, whatever his House colleagues may think. He said he intends to pass climate-change legislation out of committee by Memorial Day.

Crude oil futures inched upward to $38 in early trading Thursday on the hopes a European rate cut might help the economy, Bloomberg reports. But the market’s fundamental weakness is underscored by OPEC’s somersaults to reduce production, notes the WSJ (sub reqd.). Just this year, oil markets have swung wildly, increasing uncertainty for big producers and consumers alike, in the NYT. The oil market contango has now put 35 supertankers on floating storage duty, at Lloyd’s List.

Hugo Chavez is worried about lower oil prices, but also about falling production in Venezuela, explaining why he’s quietly courting Western oil companies he recently attacked–and they’re so desperate to gain access to oil they may be willing to play ball, in the NYT. Refiners at least are having a field day, as cheaper crude pushes up their margins, in the WSJ (sub reqd.).

Don’t forget natural gas: U.S. prices are now below $5, at two-year lows, in the WSJ (sub reqd.). The Russia-Ukraine natural-gas dispute highlights two big flaws in Europe: The EU has no energy policy and no foreign policy either, also in the WSJ (sub reqd.).

Is fighting climate change worth the cost? The Scientific American covers an interesting debate with Bjorn Lomborg and others—and the jury is still out. U.S. corporates believe cap-and-trade is the best way to tackle climate change, but the idea of a carbon tax just won’t go away, in the WaPo. However it’s done, a pricetag on carbon is the key element needed to juice the new-energy revolution, on the WaPo edit page.

New faces in Washington will help juice the revolution as well. White House climate “czarina” Carol Browner explains how she’ll steer a different tack from the Bush administration, in the WaPo. EPA nominee Lisa Jackson vows science, not politics, will rule the environmental agency, while Nancy Sutley promises to bring an environmental voice to the White House, both in Grist.

Keep an eye on Agriculture as well, as incoming Ag Secretary Tom Vilsack tries to balance support for ethanol with fears he’s a farm-state booster, in the NYT. Meanwhile, Big Coal tries to dig itself out of a hole in Washington, but is encouraged by Team Obama’s tepid support for some old energy, in the WSJ (sub reqd.).

The U.S. will ink a nuclear cooperation deal with the UAE, potentially making the Emirates the first nuclear-energy power in the region, in the WSJ (sub reqd.). Abu Dhabi wants to get as much as 25% of its juice from nuclear power, in Business Week. Britain’s nuclear revival will definitely be foreign-built, as a pair of German companies announce plans to build three new reactors, in The Guardian.

Clean tech investment is going to be “subdued” for at least the first half of the year as the sector grapples with the credit crunch and economic slowdown, at Earth2Tech. An illustration of the tensions between greenbacks and green: Deficit-ridden states are struggling to fund ambitious solar-power subsidy programs, at Greentech Media.

Even if the U.S. Congress is unsure just when it will get around to tackling climate change, U.S. corporations are sure legislation is coming—and are desperate to make sure they have a big say in what shape climate-change legislation eventually takes.

The U.S. Climate Action Partnership, a group of big companies and environmental groups, will present its “blueprint” for U.S. climate action on Thursday. The bottom line is that political horse-trading needed to get dozens of big companies on the same page is a precursor to the kind of compromises that will likely mark congressional debate on the matter—the more effort that’s made to make climate legislation politically palatable, the lower its environmental ambitions, and impact.

The group includes such companies as General Electric Co., Duke Energy Corp., Dow Chemical Co. and Alcoa Inc. A copy of USCAP’s blueprint reviewed by The Wall Street Journal provides some telling details. (A USCAP spokesman declined to comment.)

First, the U.S. shouldn’t wait for China or other big developing countries. Climate action “should not be contingent on simultaneous action by other countries,” USCAP says, though it later says that securing global cooperation to curb greenhouse-gas emissions should be a “priority” for the U.S.

Second, talk of a price ceiling has given way to talk of a price floor to make sure there’s an economic incentive to invest in new, cleaner energy technologies. USCAP proposes a floor price of $10 a ton of carbon to send the market a signal it needs to clean up.

But to avoid any economic shocks to the sytem, USCAP wants a “significant” portion of emissions permits given away for free to big polluters. That’s pretty similar to most climate bills that have bounced around Congress in recent years, with early giveaways giving way to auctions of the valuable emissions permits in later years.

Finally, the kind of cap-and-trade system that is politically achievable will do little to actually tackle two of the biggest challenges facing the U.S.—energy generation and transportation. That means the government will have to come up with a raft of other mandates, subsidies, and sundry other policies to speed development of things like clean coal and to make the transportation sector more environmentally-friendly.

Specifically, through at least 2025, the market price for carbon emissions will be too low to spur investment in so-called clean-coal technology, which is a lot more expensive than traditional coal. But since coal makes up half the U.S. electricity mix, clean coal needs to developed as soon as possible to start curbing greenhouse-gas emissions, USCAP says, lest the country “lock-in” dirty old generation technology.

So the government needs to step in and fund the development of at least 5 gigawatts of clean-coal demonstration plants by 2015, the group says, in addition to tightening emission standards for new power plants. The government should also directly subsidize underground storage of carbon emissions for the next 20 years, or until the country has 72 gigawatts of zero-emissions clean coal plants in operations; currently it has none, and the Bush administration pulled the plug a year ago on its biggest clean-coal demonstration plant.

If the oil market is a tug-of-war, the supply-side guys are being pulled face down into the mud.

Crude oil futures made a tepid run up toward $40 a barel on Wednesday as OPEC continued to talk about cutting production. But crude quickly sank below $37 when U.S. crude inventory numbers revealed an especially gloomy picture for oil demand. Crude stocks rose to 326 million barrels, and even stocks of refined products like heating oil rose sharply—in the middle of January, not a normal time to hoard heating oil, Bloomberg noted:

“When you get a 6 million-barrel build in distillate during the dead of winter, you are looking at a grim demand picture,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York.

OPEC’s frantic efforts to curtail oil supply underscore how quickly global demand has evaporated. Venezuelan president Hugo Chavez said OPEC is “willing” to cut another 2 to 4 million barrels to shore up falling prices. To put that in perspective, OPEC’s total cuts since oil prices went south in late summer amount to 4.2 million barrels.

Saudi Arabia, OPEC’s biggest producer, isn’t even waiting for a new decision by the oil cartel. It said it would unilaterally reduce February oil production below its official quota of 8 million barrels per day, after already slashing production heavily to comply with a pair of OPEC cuts. That’s a sign that Saudi Arabia feels the need to take the lead in making big cuts in oil production, but it also exposes the country to backsliding by other OPEC members who historically have fudged their official output targets.

Oil bulls have maintained for months that the cuts OPEC has already made are enough to bring oil markets back into balance, likely in the second half of the year. If OPEC keeps cutting—and cutting massively—in a bid to turn around bear-minded oil markets, the first glimpse of global economic recovery might bring a quick and equally massive crude-price rebound.

Just when it seemed the Russia-Ukraine natural-gas dispute was solved, tempers flared again Wednesday. Europe is still the big loser, as Russian gas still isn’t flowing across Ukraine and to the West. The big winner? Nuclear power.

After two weeks of tension and shuttle diplomacy, Wednesday’s dustup finally galvanized European officials into action—sort of. European Commission president Jose Manuel Barroso said EU countries should sue Russia and Ukraine for toying with their energy supplies.

Not everybody’s chuffed about new nukes (AP)

But in their quest to bolster energy security, many European countries aren’t waiting for lawyers or Brussels to act—or are openly flouting the European Union altogether.

Eastern countries like Slovakia and Bulgaria have been among the hardest hit by the crisis, because they are nearly totally dependent on Russian gas. Both have restarted Soviet-era nuclear reactors they mothballed as a condition to join the European economic bloc. Slovakia’s president openly said that, faced with a “cold and dark” winter or a wrist slap from Brussels, he’s prepared to power up the nuclear reactors and deal with the consequences later. Poland, which isn’t in the EU, just said that nuclear power will be a cornerstone of its new energy policy.

Even Western European countries long leery of nuclear power are rethinking it. Italy’s large gas reserves kept it insulated from the latest crisis, but it still sparked government officials into a call for more nuclear power to boost Italy’s energy security.

Even in Germany, where Green Party politicians hold a nuclear moratorium sacred, the debate is getting fresh legs. Power sector executives said today they are pretty confident that the double whammy of climate change and the need for more energy security will force Germany to reconsider its current nuclear policy.

The European hand-wringing holds lessons for the U.S. as well. Secretary of State nominee Hillary Clinton told the Senate yesterday that energy security has to be a vital part of U.S. foreign policy, both to reduce dependence on foreign oil and to fight climate change. She called for more nuclear power in the mix.

Which could explain why one hyperactive European country has been largely quiet throughout the two-week gas crisis: France. It went nuclear decades ago to ensure domestic energy supplies, and gets about 80% of its power from nuclear plants.