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Energy Law 5 – Natural Gas

Energy Law 5 – Natural Gas. Fall 2013 October 1, 2013 Alan Palmiter Brian Bowman. Topic roadmap. 1. Natural gas in the energy mix Compared to other energy sources History of natural gas Natural gas production / transport US natural gas production

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Energy Law 5 – Natural Gas

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  1. Energy Law 5 – Natural Gas Fall 2013 October 1, 2013 Alan Palmiter Brian Bowman Not for distribution- for study purposes only

  2. Topic roadmap 1. Natural gas in the energy mix • Compared to other energy sources • History of natural gas • Natural gas production / transport • US natural gas production • Transport from extraction to consumption 3. Regulation of natural gas • Regulation of production • Regulation of transport • Natural gas markets • Future of natural gas • Unconventional extraction – fracking • Liquid natural gas exports

  3. 1. Natural gas in the energy mix 5 Energy Flow, 2011 (Quadrillion Btu) EIA, Annual Energy Review (2011)

  4. Energy Sources  Uses http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm

  5. Source: EIA, MANUFACTURING ENERGY CONSUMPTION SURVEY (MECS)

  6. (Click for video - 11.58)

  7. True or false? Natural gas is the only energy input that has decreased in price during the period 1998 - 2010. Which is false – Most natural gas is extracted on its own without and not in combination with crude oil. The predominant hydrocarbon in natural gas is propane. Natural gas is not sold in global marketplace. Most natural gas consumed in the United States is produced in the United States. Which is false -- Natural gas is simply organic matter that was subject to millions of yearsworth of heat and pressure. The first use of natural gas as a fuel source was in cooking stoves. Originally, natural gas was considered a bi-product of oil production. When Edwin Drake struck oil in Pennsylvania, it was in conjunction with natural gas. 4. True or false? The process of hydraulic fracturing was invented in the 1940s? Pop Quiz Natural gas and the energy mix Answers: 1-T / 2-b / 3-b / 4-T

  8. 2. Natural gas production / transport Production by state EIA: Natural gas production by state

  9. Source, BP Petroleum (2012)

  10. Source: Petroleum Geology, Shale Gas and Hydraulic Fracturing

  11. Source: EIA, Analysis and Projections – Shale Oil Study (2013)

  12. Source: EIA, Analysis and Projections – Shale Oil Study (2013)

  13. (Click for video - 5:04)

  14. Source: EIA, About US Natural Gas Pipelines

  15. Natural gas Pros: • Abundant domestic energy source • Burns cleaner than coal or oil • Cheaper than other fossil fuels • Utilized in a variety of sectors across economy • Generates natural gas related jobs Cons: • Still fossil fuel (non-renewable) • May lead to over-dependence and be dis-incentive for innovation • Fugitive methane contributes to GHG • Safety considerations – highly explosive and potentially dangerous

  16. 3. Natural gas regulation • Production • Rule of capture (once again!) • Split estates (once again!) • Permitting & operations – oversight falls to states (unless federal lands) • Federal environmental statutes • Transport • Rates and practices – FERC • Safety and standards – DOT • Intrastate – state level • Markets • Spot (Henry Hub) • Futures • Well head

  17. Natural gas- timeline PUC of R.I. v. Attleboro Steam & Elec. Co. (US 1927) Pipeline improvement, expansion (1940s – 1950s) Bunson Burner – NG for lamps and stoves (~1900) Edwin Drake well in PA (1859) Natural Gas Act(1938) Fracking (2005) Natural Gas Policy Act (1978) Missouri v. Kansas Gas Co. (US 1924) Pennsylvania v. West Virginia (US 1923) FERC Order 436 (1985) FERC Order 636 (1992) DOI Fracking Regs. (2013) 1900 1930 1960 1990 2020

  18. True or false? The Rule of Capture applies to fracking operations just like traditional gas extraction operations. Which is false – FERC ensures the safe operation of interstate natural gas pipelines. The Department of Transportation plays a role in overseeing interstate pipeline transport. The horizontal portion of fracking operations can extend for miles away from the well head. States have primary jurisdiction over natural gas extraction, except if it is taking place on federal lands. Which is false -- Drillers are required by law to disclose the chemicals used in fracking fluid. The Natural Gas Policy Act of 1978 sought to de-regulate prices for natural gas. Natural gas is regulated like a utility. FERC licenses and regulates onshore LNG terminals. 4. True or false? The EIA estimates that the cost of producing natural gas will decrease in coming years? Pop Quiz Natural gas – production, transport & regulation Answers: 1-T / 2-A / 3-A / 4-F

  19. 4. Future of natural gas

  20. Source: EIA, Natural Gas

  21. Source: EIA, Today in Energy – Project sponsors seeking Federal approval to export (April 24, 2012 )

  22. Class Hypo In October 2011, Carib Energy (USA) LLC filed an application to operate an LNG export terminal to export LNG to non-FTA countries (application is here). That application is still pending. The DOE must decide whether or not to approve the application. Please come up with a list comments to submit reflecting your group’s position: Group 1: Abundant American Energy Association Group 2: Natural Gas Producers Association Group 3: Environmental NGO Section 3 of the Natural Gas Act of 1938 (as amended) requires approval by DOE for the import and export of natural gas. DOE is statutorily required by the NGA to approve natural gas exports to countries with which the U.S. has a Free Trade Agreement (FTA). However, DOE may restrict or limit exports to non-FTA countries if it finds the exports are not consistent with the “public interest”. DOE may make such a determination only after holding a public hearing.

  23. The end

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