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GasMart 2011: FERC: Traditional Flow Routes 'No Longer the Norm'

Natural gas transmission companies have been keeping FERC busy with project paperwork, as the industry segment tries to adjust to a marketplace being altered by shale gas.

"Shale gas has really caused an increase in our workload at FERC [the Federal Energy Regulatory Commission]," Berne Mosley, FERC's deputy director for energy projects, told an audience at GasMart 2011 in Chicago on Wednesday. "[The pipelines] are having to respond in some way to the fact that traditional flow patterns are no longer the norm. They're having to figure out ways to still stay in business, stay competitive and capture the market that they're trying to serve, yet not lose revenue on historic flow patterns from the Gulf [of Mexico]."

Mosley said many pipelines that traditionally have transported natural gas from the Gulf through Southern and Midwestern states to markets in the North and Northeast are running very low operating profiles and throughput is down. Despite this, he predicted that demand for gas would remain strong, with a growing niche market for natural gas vehicles and new baseload power generation. He added that most states now have renewable portfolio standards.

"Those renewables need to be firmed up," Mosley said. "You have solar and wind, but they're not good baseload sources [of energy]. You're going to have backup generation typically fired by natural gas. Coal plants are no longer in vogue; everyone is looking to replace them as they retire with natural gas."

Mosley also predicted that supply would continue to grow as well, thanks to technological advances and lower production costs. He added that shale gas from the Rockies was easily being transported to markets in the Northeast and Northwest U.S. through the Rockies Express and Ruby pipelines, respectively.

According to Mosley, pipelines have several remedies available to them to adjust to the shifting marketplace, including constructing new facilities, abandoning underutilized ones or making modifications to existing infrastructure, such as bi-directional pipelines and performing backhauls. He added that it was rare for pipelines to enter into rate proceedings, but said a few found that move necessary. He said two companies -- Tennessee Gas Pipeline and the Columbia Gulf Transmission Co. -- were currently before FERC for rate proceedings.

"[The pipelines] typically just like what they have," Mosley said. "They like going about their business. They like the amount of money they're recovering and they don't want it to be questioned or challenged. However, because of a change in flow patterns, we are actually seeing pipelines having to come in to make adjustments to the way they do their business to reflect the fact that their pipelines are being utilized differently. They're getting away from mileage-based rates because they're not being competitive."

Tennessee received regulatory approval from FERC in March to export Marcellus Shale gas through its facilities at the U.S.-Canada border (see Shale Daily, March 10). Mosley said natural gas exports to Canada, a country that traditionally had exported to the U.S., was yet another example of how flow routes have changed.

"This Marcellus is just perfectly situated to serve so many markets in the Northeast," Mosley said.

Another project, which Mosley described in a positive light as a "wild plan," is the proposed Marcellus Ethane Pipeline System (MEPS), designed to transport up to 60,000 b/d of ethane from fractionation plants in the Marcellus region to third-party ethane pipelines and storage facilities in the Gulf Coast area (see Shale Daily, Oct. 26, 2010). An El Paso Corp. subsidiary and Spectra Energy Corp. plan to jointly develop the project.

"That's a real outside-of-the-box approach to getting that liquid-rich shale gas to market," Mosley said of the MEPS project. "We're seeing great changes in the industry associated with the development of shale. It is an exciting time and we're going to see it for a long time."

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