Annual Energy Outlook 2006 with Projections to 2030 - Usinfo.org

NEMS Overview and Brief Description of Casesin the model were kept at the reference case values,including technology parameters for othermodules, parameters affecting foreign oil supply,and assumptions about imports and exports ofLNG and natural gas trade between the UnitedStates and Mexico. Specific detail by region andfuel category is presented in Assumptions to theAnnual Energy Outlook 2006, available at website www. eia.doe.gov/oiaf/aeo/assumption/.• In the slow technology case, the parameters representingthe effects of technological progress onfinding rates, drilling, lease equipment and operatingcosts, and success rates for conventional oiland natural gas drilling in the AEO2006 referencecase were reduced by 50 percent. A number of keyexploration and production technologies forunconventional natural gas were also reduced by50 percent in the slow technology case. Key Canadiansupply parameters were also modified to simulatethe assumed impacts of slow oil and naturalgas technology penetration on Canadian supplypotential. All other parameters in the model werekept at the reference case values.• The high LNG case exogenously specifies LNGimports at levels 30 percent higher than projectedin the low price case. The intent is to project thepotential impact on domestic markets if LNGimports turn out to be higher than projected inthe reference case.• The low LNG case exogenously specifies LNGimports at levels 30 percent lower than projectedin the high price case. The intent is to project thepotential impact on domestic markets if LNGimports turn out to be lower than projected in thereference case.• The ANWR case assumes that the U.S. Congresswill approve leasing in the 1002 Area Federallands in the Arctic National Wildlife Refuge for oiland natural gas exploration and production.Petroleum Market CasesIn addition to the AEO2006 reference case, a case thatis part of the integrated high renewable case evaluatesthe impact of more optimistic assumptions aboutbiomass supplies on the production and use of cellulosicethanol.• The high renewables case uses more optimisticassumptions about the availability of renewableenergy sources. The supply curve for cellulosicethanol is shifted in each projection year relativeto the reference case, making larger quantitiesavailable at any given price earlier than in the referencecase. More rapid improvement in cellulosicethanol production technology is also assumed,resulting in lower cost for cellulose ethanol at anylevel of output than in the reference case.Coal Market CasesTwo alternative coal cost cases examine the impactson U.S. coal supply, demand, distribution, and pricesthat result from alternative assumptions about miningproductivity, labor costs, and mine equipmentcosts on the production side, and railroad productivityand rail equipment costs on the transportationside. For the coal cost cases, adjustments to the referencecase assumptions for coal mining and railroadproductivity were based on variations in growth ratesobserved in the data for these industries since 1980.The low and high coal cost cases represent fully integratedNEMS runs, with feedback from the macroeconomicactivity, international, supply, conversion, andend-use demand modules.• In the low coal cost case, average annual productivitygrowth rates for coal mining and railroadproductivity are 2.5 percent and 2.6 percenthigher, respectively, than in the AEO2006 referencecase. On the mining side, adjustments to referencecase productivity are applied at the supplycurve level, while adjustments to railroad productivityare made at the regional level. Coal miningwages and mine equipment costs, which remainconstant in real dollars in the reference case, areassumed to decline by 1.0 percent per year in realterms in the low coal cost case. Railroad equipmentcosts, which are projected to increase by 2.1percent per year in constant dollars in the referencecase, are assumed to increase at a slower rateof 1.1 percent per year.• In the high coal cost case, average annual productivitygrowth rates for coal mining and railroadproductivity are 2.5 percent and 2.6 percentlower, respectively, than in the AEO2006 referencecase. Coal mining wages and mine equipmentcosts are assumed to increase by 1.0 percentper year in real terms. Railroad equipment costsare assumed to increase by 3.1 percent per year.Additional details about the productivity, wage, andequipment cost assumptions for the reference andalternative coal cost cases are provided in AppendixD.210 Energy Information Administration / Annual Energy Outlook 2006