Less than one month before he assumes the one-year chairmanship at the American Gas Association (AGA), Ralph LaRossa said the public is looking to the natural gas industry to be a part of the solution to climate change, and that despite some challenges the industry faces a bright future.
During a media event last Friday in Washington, DC, LaRossa, who serves as president and COO for the Public Service Electric and Gas Co. (PSE&G), added that the natural gas industry should be proud of its safety record, as it goes forward to try and find new employees to join its ranks.
"From a safety standpoint, I don't think the industry has ever been safer than it is in delivering the product," LaRossa said. "If you look at the infrastructure improvements that go back to when Secretary Ray LaHood stepped in [at the Department of Transportation] and had a call for action for us to all recommit our safety efforts, as an industry we have done that.
"That's resulted in a lot of investment in the system. I think that as a result the infrastructure is stronger and more resilient than it ever has been in the past."
LaRossa said that even though there are conversations around the world about cleaner energy alternatives and the multitude of jobs it will bring, such alternatives "have to be built on the backbone of core infrastructure.
"There is an opportunity to reach out, to attract more and more people to this sector," McCurdy said. "It is exciting, and quite frankly if you want to make a difference, this is an area to make a difference on a number of fronts."
Steady, good paying Jobs
"There's no doubt in my mind that for the next generation's career timeline, natural gas is going to be part of the solution. Those jobs are good paying jobs. They may not be the sexiest jobs that are out there, [but] we need to show the value of some of these core infrastructure jobs and how they can also be viewed as a positive place to work."
McCurdy said the natural gas industry has been bracing for "a wave of retirees" for decades, but so have other industries. But he agreed that such a wave will occur sometime in the future.
McCurdy conceded that while natural gas infrastructure is usually "out of sight and perhaps out of mind, and not as glamorous in some areas," the transportation sector is not susceptible to the same ups and downs as those currently impacting the upstream.
"[The transportation sector] is steady, consistent, stable, resilient and less volatile because of the shale supply," McCurdy said. "Fifteen years ago, you saw more price volatility. We do not have price volatility now. If anything we have an almost unsustainable low price, but the market will correct for that, and gradually we will see that.
"The nice thing is that because of this price environment, unlike the upstream challenges with production, now is the time that public utility commissions, governments and consumer advocates should be working with our industry to make the investment to upgrade and expand the system to provide natural gas to more consumers. We don't have those dramatic challenges that some sectors do."
LaRossa added that PSE&G, the state's largest utility, was a "little bit unique" in New Jersey.
"Everyone is looking to see what they can do to lock in some of the prices, and there are different regulatory mechanisms around the country for that," he said. "We have pipeline capacity contracts that were set many years ago. As a result, we've been able to pass on those savings to the consumers every year, and we have that set up for many years in the future."
LaRossa said the proposed 118-mile, 36-inch diameter PennEast Pipeline Project was important to New Jersey (see Shale Daily, Nov. 20), and that PSE&G "wanted to be part of that to help our customers, just like the other companies that are involved." PSEG Power LLC, a subsidiary of PSE&G, holds a 12% interest in the project. The other partners are AGL Resources, NJR Pipeline Co., SJI Midstream, Spectra Energy Partners and UGI Energy Services.
Opposition to the project by environmental groups "is no different than what we have faced in some of our electric projects," LaRossa said. "It took eight years to build a transmission line from Pennsylvania into New Jersey.
"[The opponents have] very similar social media campaigns to try to stop development of transportation, whether it be electric or gas. We're seeing exactly the same thing here. They have very similar behaviors and challenges, and the negotiations [over the pipeline's route] have been similar. You try to meet the needs of the folks that are going to be impacted, while at the same time try to make sure that you're delivering the lowest-cost product that you can."
Position on Clean Power Plan
Although New Jersey in October joined several states in a lawsuit opposing the Environmental Protection Agency's (EPA) Clean Power Plan (CPP), LaRossa said PSE&G supports the CPP in general.
"We do not like to front run policymakers," LaRossa said. "That's not a company practice. When the dust settles, we will follow the rules and build our business to meet them."
But LaRossa added that stakeholders in New Jersey should step up and take credit for the good work that has been done in the state so far. He pointed out that PSE&G retrofitted a coal plant 10 years ago to run on natural gas, and all of the company's new generation also runs on gas.
"We've done a lot in the state I think we should be proud of," LaRossa said. "We think at some point [carbon trading] is going to come into play. The question is how does it come into play and how is that counted? We'll let the policymakers argue that out."
AGA CEO Dave McCurdy said the association has met with EPA officials several times to discuss the CPP, and indicated that the meetings were constructive. "We wanted to make sure that when they proposed the rule that there was sufficient flexibility at the state [level], so they could actually make the adjustments and look at areas where there were opportunities for natural gas," McCurdy said.
"We haven't taken a position [on CPP]. We're certainly not opposed to it. Our position was to go out and for the industry, the regulators and the states, to make sure that they understand the opportunities to meet those targets, wherever they are, by natural gas. And we think that's consistent with what's going to happen in Paris, and globally, when we address climate change."
Last month, the International Energy Agency (IEA) reported in its World Energy Outlook 2015 (WEO) that parties interested in planning long-term investments in new capital-intensive projects are finding the climate difficult with low natural gas prices (see Daily GPI, Nov. 10). But LaRossa said reports of a decline in residential natural gas consumption is "not necessarily bad news."
"We talk a lot about the role of energy efficiency," LaRossa said. "Every person who upgrades their furnace, water heater or oven is installing one that's more efficient. That's OK, but the consumer still needs us even more.
"As you get to the point where prices stay low you attract other industries. If you look at what's going on mostly in the Pennsylvania area, with the Marcellus Shale, there are now people that are manufacturing -- especially in the plastics commodity field -- that would have never been there before. You will attract more jobs and you'll bring some of those back that maybe weren't in that region or maybe even in the country before."
Support for HR 8, but future uncertain
LaRossa and McCurdy said they support HR 8, also known as the North American Energy Security and Infrastructure Act, but indicated that the bill faces a dim future, despite passage in the House of Representatives last week (see Daily GPI, Dec. 3). The bill calls for, among other things, the lifting of a ban on crude oil exports, changes to federal policies governing hydroelectric power, grid reliability and energy efficiency, and empowering FERC to set deadlines for other agencies that play a role in reviewing projects under the Natural Gas Act.
HR 8 also calls for requiring the Federal Energy Regulatory Commission to conclude the federal authorization process within 90 days of completing its final environmental document. Despite some bipartisan support, the Obama administration has threatened to veto the bill.
"Anything that could expedite the process is welcome," LaRossa said, adding that he was unsure of the bill's chances. "There are challenges with any of these interstate projects, electric or gas. There is a process that could work. It is helpful from a construction standpoint [to have an expedited process]; it creates certainty for the construction firms, keeps prices lower and they know what the schedules are. It is absolutely the right thing to do, but whether it will pass..."
McCurdy added that HR 8 started out as a more bipartisan effort, but foundered a bit along the way. "There are provisions in there that we support," he said. "Natural gas exports are going to be a reality. It's good economically for this country and for the industry.
"Geopolitically it makes a heck of a lot of sense and has a tremendous impact because it sends the signal that has helped reduce the price of natural gas around the globe and provide the potential for more competition. We also don't think that the level of exports will have an adverse impact on price."