June 15, 2011 / 8:54 PM / in 6 years

Duke sees danger if US hooked on natgas

HOUSTON/WASHINGTON (Reuters) - The rush to natural gas in the United States could lead the country to become too dependent on a single fuel source for its power and risk making it dependent on foreign suppliers in the coming decades, Duke Energy (DUK.N) chief Jim Rogers warned on Wednesday.

That shift to natural gas threatens to undermine the diversity in the electricity industry’s fuel supplies that has been developed over the past 40 years, Rogers, Duke’s chief executive and chairman, told the Reuters Global Energy and Climate Summit in Washington.

“It would be a mistake -- even though it looks cheap today and looks like there’s a lot of it -- to say we’re going to be all gas all the time,” Rogers said.

Rogers is seeking regulatory approval to buy peer Progress Energy PGN.N and create the nation’s largest electric utility, a process he said was “on track” to be completed by the end of the year.

The energy industry has said vast fields of shale gas could supply the United States for a century, and companies are scrambling to drill wells and lay pipelines to get the fuel into the market.

That is changing the balance of the energy markets in the United States as its fleet of nuclear plants grows older and more stringent environmental regulations hinder construction of new coal-fired power plants.

Coal remains the largest fuel source for U.S. power generation at about 45 percent of the market so far this year, according to data from the Department of Energy. That is down from the more than 50 percent share it has typically held.

Natural gas power generation is slightly more than 20 percent, nearly even with nuclear power, with hydropower and other renewable sources contributing more than 13 percent.

Duke plans to build two new coal-fired power plants, two gas-fired plants, and hopes to add new nuclear power, in addition to investments in wind and solar.

Any of those fuel sources could see technology breakthroughs that improve their cost or environmental profile, Rogers said.

“All these technologies that we build are evolving, and I would hate to take any one of them off the table,” he said.

Natural gas prices can be extremely volatile, Rogers said, and if power generation tilts too heavily toward the fuel, the United States could find itself competing in the global market for liquefied natural gas shipments.

That would be a return to the 1970s, when the industry suffered during the OPEC oil embargoes that prompted the U.S. government to get power producers off petroleum products that at the time were a major fuel for running generating plants.

“If we become very dependent on natural gas and we go back to LNG, we basically have gone back to where we were in the 1970s and tied our grid to foreign sources of energy,” Rogers said.

MERGER ON TRACK

Rogers said Duke’s planned $13.7 billion purchase of Progress Energy PGN.N should clear all the state and federal regulatory hurdles before 2012.

“We’re on track to get approvals from all the various agencies by year-end,” he said.

The combined company expects to save as much as $800 million over the first five years through lower fuel costs and by operating the most efficient plants in the Carolinas.

To finalize the deal, the companies need approval from state regulators in North Carolina and Kentucky, and must pass reviews at the Federal Energy Regulatory Commission, the Federal Communications Commission and the Nuclear Regulatory Commission and other agencies.

South Carolina regulators must approve a joint dispatch plan for operations in that state. In addition, the South Carolina Office of Regulatory Staff took the unusual step to become an intervenor in the merger review at the North Carolina Utilities Commission.

Rogers said South Carolina’s interest in reviewing the merger process stems from long-running competition between those states.

“There is a lot of competition between the two states. They are working hard to stay on the same page in terms of how they address this.”

Reporting by Tom Doggett and Ayesha Rascoe in Washington, Eileen O'Grady, Matt Daily and Ernest Scheyder in Houston, writing by Matt Daily, editing by Matthew Lewis and Dale Hudson

Our Standards:The Thomson Reuters Trust Principles.
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