Citing the extensive Gulf of Mexico production shut-ins following Hurricanes Katrina and Rita, Duke Energy's Texas Eastern Transmission pipeline signaled last Wednesday that it plans to be more aggressive this winter than in the past in monitoring its system to ensure shippers don't withdraw more natural gas than they put into the system.
"This environment of high prices and potentially tight supply will cause [Duke's] Texas Eastern to be very proactive in monitoring and managing its system imbalances throughout this winter to prevent the loss of line pack in order to ensure that we can maintain market deliveries," said Martha Wyrsch, president and CEO of Duke Energy Gas Transmission, at FERC's fourth annual "State of the Natural Gas Infrastructure Conference."
"To maintain this balance, Texas Eastern will issue operational flow orders [OFOs] as necessary. However, our current OFO penalty is capped at a $25...At a high price of $14 [for gas] and tight demand, we do not believe that that will be a deterrent" this winter heating season, she said. "As a consequence, we will be seeking a change in our penalty tariff provisions."
Addressing the issue of supply, Steve Harvey of FERC's Office of Market Oversight and Investigations signaled that there could be supply disruptions in certain regions, particularly the Northeast and New England, if the upcoming winter weather is severe. Potentially aggravating the situation this winter are reports that many large generators in the New England region have not taken firm transportation contracts for the heating season, said David Manning of KeySpan Energy.
Skip Horvath, president of the Natural Gas Supply Association, said his group projects that 2-2.5 Bcf/d of Gulf production will remain offline during the winter season, which he said is 1.5 Bcf/d more than what was out of commission following Hurricane Ivan last year. However, Horvath expects consumers' conservation efforts this winter to cut gas demand by 3.5 Bcf/d, more than offsetting the Gulf production loss.
To help in the restoration and recovery of gas facilities along the Gulf Coast, Duke Energy's Wyrsch called on the Federal Energy Regulatory Commission to continue to relax its regulations with respect to posting information on pipelines' electronic bulletin boards (EBBs). "From our perspective, this is not the time for us to be conducting our business on the electronic bulletin board. Now is the time for person-to-person communications. FERC's easing of the posting requirements during the height of the emergency was very helpful," she said.
"We are mindful and respectful of the need to ensure that information that is shared with one party be shared with all. But in times like these, it would be helpful for critical conversations to occur between producers, pipelines, processors and customers [at] a level of detail that is needed to ensure that we can meet the quick recovery without people worrying about whether or not each piece of information needs to be reported on the EBB."
Order 2004, which spelled out standards of conduct restricting communications between regulated pipelines and their affiliates, "has caused the industry at times to be paralyzed," Wyrsch said.
FERC Commissioner Suedeen Kelly said the Commission would entertain a petition from Texas Eastern seeking a waiver of standards of conduct regulations. While reviewing such petitions, the agency would need to assure itself that no manipulative behavior would occur, she noted. The Commission said similar requests by other pipes should be filed quickly.
Wyrsch applauded FERC for quickly granting Discovery Gas Transmission an emergency exemption and waivers to expedite the transportation of up to 300 MMcf/d of offshore gas production that was shut in as a result of damage to Dynegy Inc.'s gas processing plant in Venice, LA. The Commission action clears the way for Discovery Gas to use Discovery Producer Service's gathering line to take unprocessed gas offshore to an alternative processing plant in Larose, LA. Discovery proposes to offer the service for up to a year or until the Venice processing plant resumes operation (see related story).
Wyrsch said FERC's quick response "enables us to move gas that would normally flow through the Venice plant," process it and flow it onto Texas Eastern Transmission.
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