Introduction

In preparing the AEO2012 Reference case, the U.S. Energy Information Administration (EIA) evaluated a wide range of trends and issues that could have major implications for U.S. energy markets. This overview presents the AEO2012 Reference case and compares it with the AEO2011 Reference case released in April 2011 (see Table 1). Because of the uncertainties inherent in any energy market projection, the Reference case results should not be viewed in isolation. Readers are encouraged to review the alternative cases when the complete AEO2012 publication is released, in order to gain perspective on how variations in key assumptions can lead to different outlooks for energy markets.

To provide a basis against which alternative cases and policies can be compared, the AEO2012 Reference case generally assumes that current laws and regulations affecting the energy sector remain unchanged throughout the projection (including the implication that laws which include sunset dates do, in fact, become ineffective at the time of those sunset dates). This assumption helps increase the comparability of the Reference case with other analyses, clarifies the relationship of the Reference case to other AEO2012 cases, and enables policy analysis with less uncertainty arising from speculative legal or regulatory assumptions. Currently, there are many pieces of legislation and regulation that appear to have some probability of being enacted in the not-toodistant future, and some existing laws include sunset provisions that may be extended. However, it is difficult to discern the exact forms that the final provisions of pending legislation or regulations will take, and sunset provisions may or may not be extended. Even in situations where existing legislation contains provisions to allow revision of implementing regulations, those provisions may not be exercised consistently. In certain situations, however, where it is clear that a law or regulation will take effect shortly after the AEO Reference case is completed, it may be considered in the projection.

As in past editions of the AEO, the complete AEO2012 will include additional cases, many of which reflect the impacts of extending a variety of current energy programs beyond their current expiration dates and the permanent retention of a broad set of programs that currently are subject to sunset provisions. In addition to the alternative cases prepared for AEO2012, EIA has examined proposed policies at the request of Congress over the past few years. Reports describing the results of those analyses are available on EIA's website.¹

Key updates made for the AEO2012 Reference case include the following:

• Industrial cogeneration was updated with historical rather than assumed capacity factors for new units and with updated investment decision procedures that reflect regional acceptance rates for new cogeneration facilities.

• A new heavy-duty vehicle model was adopted in the transportation module, with greater detail on size classes and end-use vehicle types to enable modeling of fuel economy regulations covering the heavy-duty vehicle fleet.

• The light-duty fleet model in the transportation module was updated to include a new algorithm for consumer purchase choice that compares fuel savings against incremental vehicle cost for advanced technologies, new technology cost and performance assumptions, and representation of fuel efficiency standards already in effect.

• Shale gas resource estimates for four plays (Haynesville, Fayetteville, Eagle Ford, and Woodford) were updated using the mean value of resource assessments recently released by the U.S. Geological Survey (USGS). The shale gas resource estimate for the Marcellus play was updated using new geologic data from the USGS and recent production data. EIA's estimate of Marcellus resources is substantially below the estimate used for AEO2011 and falls within the 90-percent confidence range in the August 2011 USGS assessment, although it is higher than the USGS mean value.

• The tight oil resource estimate for the Bakken play was increased to include more of the Three Forks and Sanish zones.

• The handling of U.S. LNG exports of domestically sourced gas was updated, resulting in exports beginning in 2016.

• The electricity module was updated to incorporate the Cross-State Air Pollution Rule (CSAPR)² as finalized by the EPA in July 2011. CSAPR requires reductions in emissions from power plants that contribute to ozone and fine particle pollution in 28 States

• Assumptions regarding the potential for capacity uprates at existing nuclear plants and the timing for existing nuclear plant retirements were revised.

• Updates were made to reflect recent information pertaining to retirement dates for existing power plants and scheduled inservice dates for new power plants.

• California Assembly Bill 32 (AB 32), the Global Warming Solutions Act of 2006, was incorporated for electricity sector power plants serving California. As modeled, AB 32 imposes a limit on power sector CO2 emissions, beginning in 2012 and declining at a uniform annual rate through 2020

Footnotes

¹ See "Congressional Request," website www.eia.gov/analysis/reports.cfm?t=138.

²See U.S. Environmental Protection Agency, "Cross-State Air Pollution Rule (CSAPR)," website http://epa.gov/airtransport.