KeySpan Energy Corpor:ation - NESCAUM



KeySpan Energy Corporation

Case Study: Greenhouse Gas Emission Reduction

Project:

Fueling of New Compressed Natural Gas Powered Vehicles

Background

KeySpan is the parent company of KeySpan Energy Delivery, the nation's 4th largest natural gas distribution company, serving more than 1.5 million customers in New York City and on Long Island. KeySpan owns and operates more than 6,000 MW of electric power generation on Long Island and in New York City and provides management of the electric transmission and distribution system, and customer services, to the Long Island Power Authority's 1.1 million customers. Other KeySpan companies market energy and provide energy facility design, construction, financing and management, and energy equipment installation and repair. Through its subsidiaries and investments, KeySpan has additional domestic and international interests in natural gas exploration, production, processing, transportation and storage.

Key Span and its predecessor companies all have a coordinated approach to environmental issues involving land, water and air pollution. KeySpan has a strong record of compliance with environmental regulation and often proactively addresses environmental improvement in advance of regulation. KeySpan also sees environmental goals as a business opportunity that generates demand for its high quality products and services. The development and deployment of new energy technologies that reduce ambient air pollution is the cornerstone of such efforts. Reduction in air pollution from the use of automobiles, (cars, trucks and buses) is one major component of these efforts.

In 1988 the Energy Policy Act was enacted and the Clean Air Act Amendments in 1990. Both of the gas local distribution companies (LDC)’s now called KeySpan Energy Delivery(KED),complied and went beyond,taking proactive steps to develop Compressed Natural Gas (CNG) as an safe and clean option for its own fleets as well as a potential solution to increased demand for domestic alternatives to petroleum derived fuels.

I) Creation Strategy Summary

This case study quantifies the net reduction of greenhouse gas emissions resulting from the replacement and fueling of a variety of conventional automobiles with the new vehicles, fueled with CNG. On the basis of the lower carbon content for the same energy in methane compared to complex hydrocarbons such as gasoline or distillate oil their displacement by natural gas results in reductions of C02 emissions of almost 28%[1]. A small, but declining, amount of this reduction is offset by increased emissions of methane from older engine technologies but the equivalent reduction still exceeds 12%.

Source Identification /Location and Contact Name

As this protect involves operation of more than 5,300 new motor vehicles owned by more than two hundred entities, a single source location can not be identified.

Contact:

KeySpan Energy Corporation KeySpan Corporation

Mr. Paul Lynch Mr. Christopher A. Cavanagh, PE

44 5 Broadhollow Road One MetroTech Center

Melville, NY 11766 Brooklyn, 11201

Demonstration of Surplus

Emissions reductions resulting from this program follow from the direct replacement of petroleum derived fuels. It is a reasonable assumption that had KeySpan not built CNG fueling stations, that virtually all of those vehicles currently operating on CNG would be operating on gasoline or diesel, since no other alternative fuel source is available in significant supply in the NYC metropolitan area. Furthermore, emissions reductions are truly surplus since the use of CNG was not mandated by any federal, state or local law prior to the development of the fueling infrastructure as described below. Hence, each time a conventional vehicles is replaced with a CNG capable vehicle older less fuel-efficient vehicles are permanently removed from service and replaced by more modern fuel-efficient CNG vehicles. However, the value of the surplus must be determined relative to a new conventional vehicle. In general, it is assumed that the travel requirements of commercial vehicles are unchanged following replacement. Therefore, the reduction in C02 emissions can be accurately determined by comparing the quantity of CNG known to be delivered into motor vehicle tanks during a given year to the equivalent quantity of gasoline or diesel fuel required to satisfy the same duty-cycle.

Alternative Fuel Mandates

As an operator of a large fleet and as a local gas distribution operation, KeySpan Energy Delivery is subject to two relevant pieces of federal legislation; the Clean Air Act Amendments (CAAA) of 1990 and the Energy Policy Act (EPAct) of 1992. However, KED has the option to comply with the relevant regulations, without the acquisition of Natural Gas vehicles (NGV)s but does so voluntarily.

Clean Air Act Amendments

All fleets of ten or more vehicles capable of being centrally fueled are subject to the requirements of the Clean Fuel Fleet program. This program requires that affected fleets acquire increasing portions of their fleets as alternative fuel vehicles. The term alternative fuel in the CAAA refers to listed fuels when used in specific vehicles that meets certain specified tailpipe emissions. That list of fuels includes Reformulated Gasoline (RFG). RFG is now commonly available throughout the northeastern United States. In addition, several light-duty cars and trucks have been certified to the Low Emissions Vehicle level, which makes them barely eligible for the Clean Fuel Fleet program. Hence, the use of Compressed Natural Gas is not required under the CAAA. Since the use of RFG in automobiles does not offer significant reductions in greenhouse gas potential, the decision to acquire and operate a natural gas vehicle (NGV) is truly an environmental benefit.

Energy Policy Act

The goal of EPAct is to increase the use of domestically produced fuels. One portion of EPAct requires that the US Department of Energy issue separate rules that require the Federal government, state governments, fuel provides, local and private fleets to acquire vehicles that are operable on substantially non-petroleum fuels. As a local gas distribution company operating a large fleet, KED is classified as a fuel provider. To date, rule-makings have been issued for Federal, state and fuel-provider fleets but not for local governments or private fleets. Some local governments, such as the City of New York have adopted their own internal mandates. Again, EPAct allows for any a vehicle that can operate on any substantially non-petroleum fuel to be acquired and does not require the actual use of any fuel, including natural gas. The only exception to this rule is the recent recognition of B-20, a blend of 20% methyl-esters and diesel fuel, as an alternative fuel, provided, a specified amount of the fuel is actually used. Furthermore, EPAct allows for fleets that are mandated under the law that exceed their requirements to be able to generate credits for sale to other companies that decide not to acquire the minimum target number of alternative fuel vehicles. Current rule makings have been issued under EPAct to the Federal fleet, state fleets and fuel-provider fleets. The current target is that 90% of light-duty vehicles (under 8,500 lbs GVW) acquired in any year that are capable of being centrally fueled, be alternatively fueled. Fleets that purchase a number of alternatively fueled vehicles that exceeds 90% of that year’s purchases or purchase non-mandated vehicles (i.e. large vehicles) as alternatively-fueled generate credits for sale to others that opt not to add alternative fuel vehicles to their own fleet. Since there is an viable option to avoid actual vehicle purchases, affected fleets are not required to take actions that will necessarily reduce greenhouse gas emissions and the decision to acquire and operate NGVs is truly an environmental benefit.

IV) Demonstration of Real

Actual experience has shown, over the last decade, that the acquisition of any type of alternative fuel vehicle does not necessarily mean that the vehicle will actually use the alternative fuel since several vehicles have multi-fuel capability. In fact, the acquisition of a vehicle does not even mean that it will be used at all in some large fleets due to breakdowns, or frequent operational changes. Hence, the only reliable determining factor for the reality of the emissions reduction from automobiles is the actual fuel dispensed into operating vehicles. With a wide variety of vehicle sizes, propulsion systems, maintenance practices and duty-cycles it is necessary to develop conservative emission factors that can be broadly applied to all fuel used or to a few large categories.

V) Baseline Emissions Determination/Base Period Used.

The subject period selected for purposes of this Demonstration Project is the period from 1991 through 1999. Data is available to support any base period, back-to and including 1991. Since emission reductions will ultimately be indexed to the natural gas dispensed into customer vehicles, record keeping is just a matter of tracking the number of gallons equivalent dispensed in each year which is done for billing purposes.

VI) Quantification of Emission Reductions

The combined fleet of vehicles that use CNG fuel dispensed by KeySpan is a diverse set of more than 5,300 vehicles. Emissions from motor vehicles are determined by taking vehicles operating in normal service out of service and performing extensive emissions tests on them in emission testing facilities with USEPA certification. The following facilities developed the data that this analysis is based on:

• NYC Department of Environmental Protection, Frost Street, Brooklyn

• West Virginia University Mobile Emissions Testing Laboratory (USDOE)

• South Coast Air Quality Management District Clean Fleet Program (Batelle)

The test vehicle is operated on a chassis dynamometer over a specified track of speed and time. Tailpipe emissions are collected and analyzed and converted to emissions factors per mile traveled. There are several standard vehicle duty-cycles used to evaluate vehicle emissions. For this analysis, all light-duty vehicles are evaluated using the Federal FTP-75 cycle. All heavy-duty classes are evaluated using the federal Central Business District (CBD) cycle. These cycles are generally considered less rigorous in terms of starts and stops than actual driving in the downstate New York area and are thus, for purposes of this analysis, a conservative indicator of actual vehicular emissions. There is a driving cycle derived specifically for buses in New York City, but it designed to specifically simulate transit bus traffic in Manhattan for which none of the credit being considered is included in this summary.

In order to determine an emissions reduction factor or set of factors that can be applied to measured fuel use, the entire fleet of vehicles in the region is assumed to be divided into five general categories that typically have both similar vehicle weights and duty-cycles. The categories considered and their corresponding Federal vehicle weight designations considered are as follows:

1. Fleet Sedan (Compact) Under 6,000 lbs GVW

2. Taxicab (Full Size) Under 6,000 lbs GVW

3. Light-Duty(Fleet Service Van) Under 8,500 lbs GVW

4. Heavy-truck Over 26,000 lbs GVW

5. Transit Bus Approximately 40,000 lbs GVW

The federal medium-duty category (6,001 to 26,000 lbs GVW) is not included, as there are very few vehicles in this size range operating on natural gas in this region.

Available test results for the following models operating on conventional fuels and CNG where tabulated and averaged. The actual test results are listed in Attachment 1.

• Fleet Sedan Converted Ford Taurus (with GFI throttle body-injection)

• Taxi Cab Converted Chevy Caprice or Ford Crown Victoria (with IMPCo)

• Fleet Van OEM Dodge RAM or Ford Econoline

• Heavy-truck Crane Carrier Refuse Packer with Cummins L10 or DDC Series 50

• Transit Bus Nova Transit Bus with Cummins L10 or DDC Series 50

The summary of the greenhouse gas results for these vehicles appear in Table 1. Average measurements of the sum of carbon dioxide and the amount of methane measured, expressed as equivalent carbon dioxide, and are shown for each vehicle category. CNG is more than 96% methane and hence methane emissions are existent in the exhaust of conventional CNG vehicles from unburned fuel which, while existent, is not usually a major factor in liquid fuel vehicle exhaust. Methane is a significant greenhouse gas. Methane is assumed to be equivalent to 24.5 times the greenhouse gas potential of carbon dioxide[2] on a mass basis.

The goal of this analysis is to mathematically establish emissions benefits in terms of the measured quantity, which is natural gas expressed in units of gallons equivalent of gasoline. Ideally, this would simply be the product of the measured emissions per mile, and the fuel economy of the vehicle. The fuel economy is established using the same duty-cycles as emissions factors and is reported along with emissions results. However, it is necessary to consider that vehicles exhibit different fuel economy measurements when operated on different fuels. In general, dedicated (natural gas only) vehicles have a slightly higher fuel economy than their liquid fuel counterparts while dual-fuel (with fuel switching capability) have a lower fuel-economy on natural gas than their liquid-only fuel counterparts. To compensate for the disparity in fuel economy results, the difference in emissions factors, expressed in grams per mile, is multiplied by the fuel economy when running on the measured fuel, natural gas in this case. The table of results is shown below and is totally derived from the measurements recorded in Attachment 1 and the equations summarized as follows:

Conventional Fuel: grams per mile = grams CO2 + 24.5 x grams CH4

grams per gallon = grams per mile x fuel economy (liquid fuel)

Natural Gas: grams per mile = grams CO2 + 24.5 x grams CH4

grams per gallon = grams per mile x fuel economy (natural gas)

Difference grams per mile (liquid fuel) – grams per mile (natural gas)

Grams per gallon = grams per mile x fuel economy (natural gas)

Table (1) Greenhouse Gas Comparison Between Conventional Motor Fuels and Natural Gas

The results indicate that past greenhouse gas reduction per GGE is approximately 12%. In order to establish a single emissions benefit factor that can be applied to a broad category of duty-cycles and fuels the benefit per GGE is calculated and assumed to be adequately represented by the average provided that the result for each class of vehicles is approximately within one standard deviation. The standard deviation comes out to 172.5 grams per GGE or +/- 13.1% of the average. In this case, four of the five vehicle categories meet this criterion. The fleet sedan category is slightly outside the range but is included for simplicity and conservatism. However, as expected, the greenhouse gas benefit from transit buses is significantly different from the rest and is not as great per unit of CNG fuel as for the other vehicle classes. This is believed to be due to the control systems used in these early generation engines that often included automotive style after-treatment to reduce NOx but also often utilized open-loop controls[3]. Newer transit buses include electronic air-fuel ratio controls. Hence the greenhouse gas benefit of CNG vehicles can be conservatively determined by applying average reduction of greenhouse gases per unit of CNG fuel used in transit buses and then to the remainder of the CNG fuel used by all other classes of CNG vehicles combined.

Emissions calculations are based on the mass of CNG delivered to customer vehicle fueling tanks. As such, the use of natural gas is measured by calibrated mass-flow meters utilizing methodologies mandated and approved by the NYS Public Service commission (PSC) as detailed in KeySpan Energy Delivery Rate Classifications SC-14 for New York City and SC-10 on Long Island. Motor fuel equivalence is determined on a lower heating value comparison in accordance with established automotive industry practice[4].

The natural gas distributed by KeySpan Energy is provided exclusively from pipeline sources. There is no use of manufactured gas (except diminimus amounts from the Staten Island landfill) and there is no longer use of propane-air peak-shaving. This gas usually comprises 96% methane and has a specific volume of 22.5 standard cubic feet per pound[5] and a higher heating value of 1,030 Btu/scf. Based on this composition, the following conversions can be applied again based on a lower-heating value comparison:

123.1 standard cubic feet – 1 gallon of regular gasoline (87 octane)

1. standard cubic feet = 1 gallon of 1-D automotive diesel.

A small percentage of the diesel vehicles replaced had the ability to operate on fuels of varying content. For purpose of this analysis, it is assumed that all diesel-fueled vehicles operate using 1-D diesel. Certain heavy trucks operate on 2-D diesel and NYC Transit buses are often fueled with low-sulfur, ASTM-K2 kerosene also know as JP4 or Jet–A. Furthermore, the implementation of reformulated gasoline is assumed to have a minimal effect on greenhouse gas emissions. However, much, but not all of the emissions testing reported used reformulated gasoline depending on the time-frame the testing was done.

In order to determine the actual greenhouse gas benefit of NGVs, the emissions factors derived in table 1 for transit buses and all remaining vehicles are simply multiplied by the CNG fuel dispensed at fueling stations owned and operated by KeySpan. The total GGE is recorded in detail for the last nine calendar years and the bus fuel is an estimate from customer profiles. The results of this analysis appear below:

Table (2) Greenhouse Gas Reduction from Estimated Use of CNG Fuel Dispensed from CNG Fueling Stations Owned and Operated by KeySpan Energy

Each year since 1990, the base year for the Kyoto Accords, the number of customers vehicles operating on natural gas, and the resulting increase in gas distributed, has been determined based on customer records which were also maintained to monitor the safety of vehicles visiting KeySpan’s fueling stations. The two pre-merger companies, Brooklyn Union Gas and the Long Island Lighting Company, maintained separate records during the period being evaluated (1991 through 1999) but both used the similar EJ Ward card-lock systems that allow for tracking of the motor fuel used by customer and vehicle type. Table 2 represents the combination of these records

VII) Data Integrity and Uncertainty

There are two basic components to the data presented; 1) fuel dispensed and 2) emissions factors. The fuel dispensed is metered for billing purposes with meters routinely calibrated by the company and witnessed by the NY Public Service Commission. This portion of the data is considered reliable. The emissions factors have a considerably higher uncertainty due to variation of test protocols with reality and the wide variety of engine technologies actually in service. This analysis consistently includes data that is conservative, meaning that the greenhouse gas benefits of CNG are minimized.

Driving Cycles

The greatest uncertainty relates to the validity of the driving cycles used when compared to actual driving patterns. Although as a practical matter, this can never be truly determined, the current driving cycles generally advantage conventional fuels. For example, certain emissions tests do not include evaporative emissions during fueling. In fact, such emissions are substantial in liquid fueled vehicles and insignificant for gaseous fueled vehicles as the their fuel systems are totally sealed because of the on-board high storage pressures required. In addition, standard vehicle tests generally do not consider the effects of cold engines and hard starts, the lack of which again favors conventional vehicles. For example, some testing of light-duty vehicles under wide-open throttle conditions has shows that gasoline vehicles can emit more methane than CNG vehicles[6].

Engine Technologies and Methane Emissions

Another level of uncertainty relates to the engine technology used. Greenhouse gas emissions are a function of two factors; the fuel used and the efficiency of the engine. Efficiency is a function of the fuel actually consumed as well as any unburned fuel that gets through the engine, methane in the case of CNG vehicles, or complex hydrocarbons in the case of liquid fuels. Modern electronic fuel-injected, closed-loop controls with multiple exhaust oxygen sensors and exhaust gas recirculation all improve engine efficiency. For the period studied, these techniques were introduced to light-duty vehicles and are only now being introduced in heavy-duty vehicles. For example, the testing referenced shows that methane can represent as much as 0.5% of the measured total mass of greenhouse gases emitted from a CNG vehicle. However, state-of-the CNG vehicles, that are only represented in the sedan categories, have methane emissions of below 0.2% by mass. This analysis also includes data from some after-market conversion systems. Such systems made up the bulk of CNG vehicle additions in the nineties but few were optimized for emissions performance. However, such conversions were exempt from USEPA anti-tampering regulations by virtue of USEPA Memorandum 1A. This regulation has since been revised to re-affirm the exemption from anti-tampering regulations provided but also added a requirement that near full emissions certification of each engine family to be converted is performed. The cost to perform such testing has essentially eliminated the after-market conversion as an alternative for vehicles with emissions control systems. Hence, virtually all new CNG vehicles can be expected to be designed, manufactured and maintained under the authority or direction of major original equipment manufacturers. Heavy-duty conversions are still viable but an ample supply of engines from major manufacturers makes conversion unlikely. Future CNG vehicles will also use advanced engine concepts and be used in hybrid vehicles with engines or fuels cells. Emissions results of testing a hybrid mini-bus using an open-loop CNG engine in a bus outfitted with a hybrid electric drive system again resulted in methane emissions of just 0.2% of total emissions by mass[7]. In the case of a CNG or hybrid electric CNG vehicle with an external combustion engine, such as a micro-turbine or a kinematic Stirling methane emissions are nearly totally eliminated[8]. Furthermore, natural gas is easily reformed and is hence currently the most widely used source of hydrogen for use in most variants of fuel cells. Neither the operation of the reformer or the fuel cell stack itself should provide any methane emissions if operating properly. Based on the developing trend toward increased sophistication in vehicle and engine designs and controls for CNG vehicles, future CNG vehicles can be expected to realize better environmental benefits that those reflected in this analysis. As such, the results contained here should be considered minimum greenhouse gas benefits

VIII) Emission Reduction Credits Created (Annual & Future Projection)

Cumulative emission reductions from 1991 through 1997 total 11,310 tons even though alternative fuels are still a fledgling business in New York State. Although CNG is the fastest growing alternative vehicle fuel, it represents less than one Trillion Btu’s of energy out of total energy use in transportation of 1,091 Trillion Btu’s in New York State in 1998[9]. Emission reductions for KeySpan Energy in the year 2000 are expected to reduce greenhouse gas emissions by an additional equivalent of 2,500 tons of CO2. Emissions reductions will continue to accrue for the foreseeable future at an accelerated rate with average annual increases of at least 10% at existing CNG stations. In addition, KeySpan Energy expects to increase its CNG fueling capacity by more than 15% over the next three years. This does not include any fuel dispensed at customer owned stations in the KeySpan Energy service area, including five major CNG transit bus facilities, that combined will use nearly three times the fuel dispensed by KeySpan. This estimate is based on the assumption that conventional fuel prices and incentive levels stay the same as they are now. In actual fact, it is highly likely that the fuel price advantage for CNG will grow and that the level of state and federal government incentives will be maintained or substantially increased. Current national predictions are that use of natural gas in automobiles will increase nationally by more than 22 times over the next fifteen years[10]. If KeySpan Energy maintains a growth rate in the fuel it alone dispenses equal to that predicted for the nation, the equivalent avoided greenhouse gases avoided will exceed 55,000 tons per year without any technological improvements to the vehicles.

Ownership

The ownership of emissions credits for motor vehicles is a complicated issue for which a universal approach can not be determined. Four or more separate entities could make a claim on such credits including; the vehicle owner or operator, the fueling station owner or operator, the vehicle manufacturer or any government agency that may have funded the incremental costs. One potential solution is to recognize one of these parties as a surrogate for the other parties and leave the actual claims to be settled between the various parties. In this case, the CNG fuel provider, KeySpan, is proposed as that party.

KeySpan Energy’s local distribution companies have owned and operated a total of 17 Compressed Natural Gas Fueling Stations over the last decade. These stations are located either on KeySpan fueling station property or on property owned by fleet customers. As such, KeySpan can be the surrogate owner of emissions reduction credits developed because; 1) it is the entity that chooses to create the alternative fuel that directly results in emission avoidance, 2) it does not have access to public funding and 3) it is the entity that contracts for the use of CNG and records the dispensing of the fuel.

Fueling stations directly owned by KeySpan Energy serve approximately 5,300 compressed natural gas vehicles in five downstate New York counties. For the year 2000, KeySpan Energy is projected to dispense approximately 2.0 million gallons equivalent into the following vehicles at Company owned fueling stations. The represents a 10% increase over 1999. Projections of the total number of CNG vehicles operated by major customers in the year 2000 and the amount of fuel that will be dispensed to them from fueling stations owned by KeySpan Energy is as follows:

.

Monthly KED

Units Fuel(GGE)

City of New York – Municipal Agencies (light-duty) 2,300 18,800

KeySpan Energy (all classes) 1,055 47,500

Consolidated Edison of NY (primarily light-duty) 475 700

US General Services Administration (light-duty) 314 0

NYC Medallion Taxis 300 17,000

State of New York & Port Authority (light-duty) 200 5,400

US Postal Service (light-duty) 120 1,300

City of New York - Triboro Coach ( Transit Buses) 96 64,000

City of New York – Dep’t of Sanit.–Garbage Trucks & Sweepers 20 1,700

Miscellaneous Private Fleets 420 12,000

In addition, there are 443 transit buses operated out of four large transit bus fueling facilities owned by the transit agency in KeySpan Energy’s utility service area. No emissions benefits are included for these fleets. The order of magnitude of emissions benefits from these fleets is at least as large as that of the fuel dispensed by KeySpan Energy.

If the goal of the recognizing ownership of an emissions credit is it to award the benefit to the parties that make the enabling financial investment, the determination of ownership can be extremely complicated as there are many cost components to using an alternative fuel and many applicable funding sources. The incremental cost of CNG vehicles is generally about 20-25% of the base vehicle cost. With the exception of KeySpan vehicles, the incremental cost of nearly all of these vehicles have been provided by substantial federal funds. Transit buses are typically funded at 80% from the Federal Transit Administration and the remainder is fundable from the New York State Environmental Bond Act. Similarly, funds available from the federal Congestion Mitigation Air Quality program (now Transportation Equity Act, TEA-21) have paid for 80% of the New York City and Port Authority fleets. The New York State Environmental Bond Act has paid for the entire NY State Clean Fleet program. In the case of the City of New York, the acquisition of CNG vehicles is required by Local Law 6 of 1990 since CNG is the was deemed the only viable fuel in reports to the NY City Council. KeySpan has also provided substantial direct cash contributions to many of the public and non-public CNG fleets. The only fleets served by KeySpan that had no access to dedicated public funding are private vehicles such as KeySpan’s own vehicles.

KeySpan also has not had access to public funding in order to develop the existing fueling infrastructure. The infrastructure is the enabling element of any alternative fuel system. Pipeline natural gas is not immediately suitable for use as an alternative fuel because of the small energy density at normal distribution pressures. That gas must be filtered dried and compressed in accordance with industry standard practices[11]. Their capital and ongoing operating costs are significant, with small retail stations costing up to $5,000 per standard cubic-feet-per-minutes of capacity. Operating costs in fully utilized CNG stations can reach $0.25 per gasoline gallon equivalent. It is also the party that compresses the fuel that is responsible for collecting Federal and NY State motor fuel taxes. All but one of KeySpan’s fueling stations were constructed prior to the existence of NY State alternative fuel tax credits. Furthermore, the existence, of federal tax deductions has proven to be economically insignificant to most companies over the life of the equipment. These fueling stations were all also built prior to the rate agreements of 1997 that essentially ended rate-base treatment of capital expenditures by KeySpan’s gas distribution companies. Hence, these fueling stations were partially funded with ratepayer funds according to relevant orders of the NY Public Service Commission[12],[13]. In the regulated environment, the PSC has required that all funds coming into a regulated Company be included in determining return on investments. In the case of emissions credits, whether they are for NOx, S02 or potentially C02, any funds gained through sales, trading or use of the credits is utilized to offset customer costs. As the utility industry continues to be deregulated, funding will be justified, at least in part, on the, value of emissions credits resulting from infrastructure development projects. In combination with additional earnings resulting from increased natural gas sales, future incentives for both vehicle and fueling station costs are likely to be continued by KeySpan Energy. Consequently, early reduction credits can reasonably be assigned as the property of the company responsible for bringing gas to the point-of-use and creating the motor fuel. This could be a conventional gas delivery and supply utility, a delivery only utility or non-utility entity that compresses natural gas for sale or use as an automotive use. Final determination of the owner of emissions reduction credits during future actions will be determined either by contracts between the various parties or by state regulatory commissions if contested ownership issues arise.

X) Other Environmental Impacts

The use of compressed natural gas offers substantial other pollution benefits, including major reductions in acid rain and ozone forming pollutants such as NOx and non-reactive hydrocarbons as well as particulate matter, air-toxics, aldehydes, and carbon monoxide[14]. Furthermore, the use of CNG eliminates the need for overland or ocean transportation as well as underground storage of petroleum, which has become a major issue regarding soil and water pollution. In addition, the processing and transportation of natural gas causes the release of lower emissions for the energy used than either electricity [15] or petroleum.

Registration Statement and Signature

________________________ ________________________

Mr. Paul Lynch Mr. Christopher A. Cavanagh, PE

KeySpan Energy Corporation KeySpan Corporation

445 Broadhollow Road One MetroTech Center

Melville, NY 11766 Brooklyn, NY 11201

October 19, 2000

Attachment 1 – Vehicular Emissions Test Results

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[1] “An Alternative Energy Future”, Alliance to Save Energy, F 81000, Washington 1992.

[2] “Natural Gas Vehicles and Global Climate Change Issues”, Gas Research Institute, GRI-97-0415, Chicago, Ill, January 1998.

[3] “The Cleaner Choice – Natural Gas as a Substitute for Diesel”, Gas Research Institute, GRI-99-0261, Chicago, Ill December 1999

[4] Blazek, et.al, “Compressed Natural Gas Measurement Issues”, Institute of Gas Technology, Chicago Ill, May, 1993

[5] Standard measurement conditions for natural gas are 70oF and 14.73 psia per the “Metric Unit Application Guide”, X50980, American Gas Association, Arlington VA, 1908

[6] “Comparison of Off-Cycle and Cold Start Emissions from Dedicated NGVs and Gasoline Vehicles”, GRI-96-0217, Gas Research Institute, Chicago, Ill February 1997

[7] NYC DEP Emissions Test of an Orion II mini-bus with an Optima Environmental Hybrid Electric Drive system with a fumigated Chevrolet gasoline engine converted to natural gas, DEP & NYSERDA, 1997

[8] “Stirling Engine Emission Test Results”, Report 92P10, Mechanical Technology Inc. Latham NY, 1992

[9] “Patterns and Trends – New York State Energy Profiles: 1984-1998”, New York State Energy Research and Development Authority, Albany, NY December 1999.

[10] “1999 Policy Implications of the GRI Baseline Projection of U.S. Energy Supply and Demand to 2015”, GRI-99-0002, Gas Research Institute, Chicago, Ill., March 1999

[11] “Fuel Composition Requirements for Natural Gas Vehicles” Society of Automotive Engineers St’d J1616

[12] “Proceedings of the Commission to Investigate the Development of Natural Gas and Electric (NGV and EV) Industries in New York”, Case 92-M-0451, NY Public Service Commission, Albany, NY May 21, 1993

[13] NY Public Service Commission, Brooklyn Union Opinion 94-22, Albany, NY November 1994

[14] “The Cleaner Choice – Natural Gas as a Substitute for Diesel”, Gas Research Institute, GRI-99-0261, Chicago, Ill December 1999

[15] “Full Cycle Emissions Analysis for Alternative Fuel Low/Zero Emission Vehicles in New York City”, Energy International, B8009015A, Bellvue Washington, January 1999

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