Completing the Alaskan natural gas pipeline is key to increasing domestic gas supply, FERC Chairman Pat Wood told a Houston audience on Wednesday. He also predicted that the United States will have at least eight new liquefied natural gas (LNG) facilities by 2008 -- but without a new Alaskan pipe and more LNG, "the numbers do not add up" for future U.S. gas demands.
"I think it's much more likely today than ever" that the Alaskan natural gas pipeline will be built, said Wood, the keynote speaker at Cambridge Energy Research Associates' CERAWeek 2005 conference. "The economics today make that much more likely."
Wood said the most positive indication that the pipe will become a reality is last year's mandate from Congress, which required FERC to issue a notice of proposed rulemaking on standards to create an open-season process for available capacity on the proposed North Slope pipe (see NGI, Nov. 22, 2004).
With Congressional backing, "we hope the gas project can come on line. We need it... It will be required to have dependable, affordable supplies." The pipeline may not be ready before 2012 "at the earliest," but "this is the most important thing our country can do today."
The "second most important thing" involves siting and building more LNG regasification facilities. "I think we'll see eight more [facilities] around the country. I do think that [target] will be hit by the end of the decade. But we'll give out more permits than the number of facilities that are needed. We'll let the market determine whether they get built."
Wood reminded the audience that he grew up in nearby Port Arthur, TX, and said he was "proud to support" several proposed LNG plants that would be located along the Texas Gulf Coast. "LNG has a great track record," he said. "It's remarkably safe." Because the Gulf Coast area -- including Mexico -- has stronger public support for LNG, Wood said that is where most of the new facilities likely will be built.
FERC also is working to ensure adequate infrastructure in the Rocky Mountains. "I think it will overtake the Gulf in production in the next couple of years," Wood said of the Rockies. FERC is doing what it can to fast track permitting for new infrastructure, and he noted that the Cheyenne Plains approval was "probably the fastest application approval ever. We got it done pretty quick" (see NGI, Dec. 27, 2004).
Because of the growing use of natural gas, Wood said FERC spends a lot of time working on gas supply and demand issues. However, the FERC chief said, "our agency's job is not just to look ahead, but also to look at what's happening now with prices." Because of the higher gas prices, Wood said he thinks more power plant investment money may be put into coal plants. If that happens, "there will be a call for an interconnected grid network," that could eventually involve gas, coal and even wind power. "We need new transmission capacity to ensure not only commerce but also reliability. The coal aspect is a pretty important one to take some of the pressure off of natural gas."
Wood also touched on FERC's role in monitoring the gas markets. Through all of the turmoil of the past four years, he said that in the end the Commission's "role is...to make sure the rules are clean. Our strategy is to ensure adequate infrastructure to give confidence to our customers. Now there are more market cops. Our job is shifting to referee. We are getting away from false price reporting...[and] wash trades.
"The chaos is coming to an end," Wood continued. "The disorderliness of that era is over. Everybody is playing by the rules, and the industry has been very helpful. But there is room for improvement. If we see problems, we'll take them out to the woodshed and take care of them."
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