Natural gas demand for U.S. electricity generation this winter is likely to look a lot like it did this past winter, 2.5-2.6 Tcf, U.S. Energy Information Administration (EIA) Deputy Administrator Howard Gruenspecht said at the LDC Gas Forum in Chicago. In addition, a lot of coal-fired generation will still be around, but how much capacity gets used will depend on natural gas prices. “We’re again expecting the power burn to run between 2.5 Tcf and 2.6 Tcf of gas for the period of December this year through March 2013…There is about 500 Bcf going to generation that could switch back to coal should natural gas prices start to rise above our expectations.” Gruenspecht said earlier this year the power burn was running more than 24 Bcf/d of gas to generate electricity. “We’re now expecting over the course of this year for the Henry Hub natural gas price to average about $2.65 and the average to move up to $3.34 next year. There is a lot of uncertainty about natural gas prices, in September we are looking at a future contract price ranges from $2.30/MMBtu to almost $4.70/MMBtu.”
CHS Inc., the nation’s largest farmer-owned cooperative, has launched a proposal to build a $1.1-1.4 billion nitrogen fertilizer manufacturing plant in North Dakota that would take advantage of natural gas feedstock to provide U.S. and Canadian farmers with enhanced supplies of crop nutrients. Preliminary plans call for a facility able to produce 2,200 tons of ammonia daily and consume an estimated 75-80 MMcf/d. The end product would be distributed as anhydrous ammonia, urea and liquid fertilizer to farm supply retailers and farmers in the Dakotas and parts of Minnesota, Montana and Canada. The proposed plant on 200 acres in Spiritwood, ND, could employ 100-150 people. The project would be the largest single private investment ever in North Dakota, according to Gov. Jack Dalrymple. The news comes on the heels of an announcement earlier this month that Orascom Construction Industries, Egypt’s largest company, had agreed to make the largest single investment ever in the state of Iowa — $1.4 billion — to build a nitrogen fertilizer plant that also would tap domestic natural gas supplies (see NGI, Sept. 10). CHS is investing $10 million in the first feasibility phase, and if a preliminary front-end engineering and design study proves successful, tentative start-up could be in the second half of 2016.
A combination of slackened demand and robust production will make natural gas supplies plentiful in the Pacific Northwest until at least 2029, Avista Utilities said in a natural gas integrated resource plan (IRP) for its utility operations in Idaho, Oregon and Washington. Access to untapped shale gas formations throughout North America “could provide long-term availability to low-priced natural gas.” Long-term gas demand forecasts have declined and shorter-term price declines have been even greater, according to Avista’s plan. It called flat demand “a key risk” that will have to be carefully monitored. Avista said it has filed with regulators in Idaho and Washington to suspend demand-side management (DSM) efforts and it is considering doing the same in Oregon. “The avoided costs from the 2012 IRP are considerably lower due to the drop in natural gas prices,” Avista’s plan said. “Current avoided costs have rendered gas DSM programs cost-ineffective.
The Federal Energy Regulatory Commission (FERC) has issued a favorable environmental assessment (EA) of Eastern Shore Natural Gas Co.’s (ESNG) proposal to expand its natural gas pipeline system to meet the needs of its customers in the Delmarva Peninsula market, which includes most of Delaware and portions of Maryland and Virginia. The Dover, DE-based pipeline proposes to build 11 miles of pipeline from the end of its existing 16-inch diameter line in Smyrna, in New Castle County, DE, south to a new connection with ESNG’s existing facilities in Dover, in Kent County, DE. In addition, the project calls for installing two mainline valves and one pressure regulating station, according to the company. ESNG has asked FERC to act on its application this fall so that the Greenspring Expansion Project can go into service in early 2013 [CP12-461]. ESNG told the Commission that it has agreements with two local distribution companies and an electric generation plant operator to transport a total of 15,040 Dth/d of natural gas over the expansion facilities.
Hurricane Isaac caused considerable disruption to natural gas processing infrastructure along the Gulf Coast, the Energy Information Administration (EIA) said. Isaac made landfall on Aug. 28 and ultimately disrupted gas processing operations for more than 10 Bcf/d of the 13.5 Bcf/d of total processing capacity in the affected area. EIA’s survey of the impact included plants in the region with capacities of more than 100 MMcf/d. Prior to Isaac’s landfall, there were 25 processing plants in the affected area that were not undergoing maintenance, accounting for 12.6 Bcf/d of available capacity. However, widespread power outages (affecting nearly 890,000 customers in Louisiana), reduced gas flows, and flooding threats reduced or curtailed operations at many of these plants, as shown by a map on EIA’s website. Plants most commonly attributed closures to a lack of upstream supply, although a few also cited damage to downstream infrastructure that would receive their dry gas or their natural gas liquids products.
Spectra Energy Corp. and BG Group plc are planning a new natural gas transportation system, 50% owned by each, from northeast British Columbia to serve BG’s potential liquefied natural gas (LNG) export facility in Prince Rupert. Spectra would be responsible for construction and operation; BG has agreed to contract for the proposed capacity. The proposed 525-mile, large-diameter system would be capable of transporting up to 4.2 Bcf/d. It would begin in northeast BC and end at the proposed Prince Rupert site; connections also are planned with the Spectra system at Station 2 southwest of Fort St. John.
A Quinnipiac University poll indicates public opinion of hydraulic fracturing among voters in New York State has shifted in favor of the practice. According to the poll published last Wednesday, respondents said, by a 45-41% margin, that the economic benefits of drilling for natural gas in the Marcellus Shale outweigh any environmental concerns. That’s a shift of several percentage points in favor of fracking since the last Quinnipiac poll on July 26, when New Yorkers said they opposed the practice, 44-43% (see NGI, Aug. 6). It’s also the first time since September 2011 that voters supported fracking. But despite the support, most voters (48-14%) still believe the practice will damage the environment. Support for a new tax on companies drilling for natural gas in the Marcellus Shale rebounded in the latest poll, with tax supporters outnumbering opponents, 51-34%. That’s an increase from the poll taken in July (47-39%) and last December (57-31%), but still several points lower than a poll taken on Aug. 11, 2011, when support for a tax registered 59-29% in favor (see NGI, Aug. 15, 2011).
A special state appeal panel has invalidated the selection by Maine’s Bureau of General Services (BGS) of a proposal by Maine Natural Gas (MNG) to build an 80-mile-long natural gas pipeline to the state capital, Augusta, and the surrounding Kennebec Valley. In its decision, the panel said Summit Natural Gas of Maine Inc., a competing bidder that had appealed the BGS decision, had established “that the awarding of the contract to provide natural gas service to the August/Gardiner area to MNG was in violation of law, contained irregularities that created a fundamental unfairness, and was arbitrary or capricious.” The panel found that the BGS’s request for proposals (RFP) “does not support the argument made by BGS and MNG that BGS was looking for proposals to serve only state facilities located in Augusta.” The panel also found that BGS erred in using unit cost rather than cost savings to score proposals, and inconsistently scored portions of proposals from the three bidders for the project — MNG, Summit and Self-Gen Inc. — in which the bidders used three different methods to estimate the number of jobs their projects would create. In June Maine officials selected MNG, a company affiliated with Central Maine Power Co. parent company Spain-based Iberdrola USA, to build the pipeline system in the Augusta area. The decision was promptly appealed by Colorado-based Summit, which is in the process of acquiring Kennebec Valley Gas.
The Pennsylvania Supreme Court has scheduled oral arguments on the constitutionality of Act 13, the state’s omnibus Marcellus Shale law, on Oct. 17 in Pittsburgh. Attorneys for the Commonwealth and several state agencies plan to argue that an appellate court erred on July 26 when it ruled 4-3 that Act 13’s zoning restrictions were unconstitutional on the grounds that they violate municipalities’ right to substantive due process (see NGI, July 30). Both sides in the case, Robinson Township et al v. Commonwealth et al (Docket No. 284-MD-2012), face a Tuesday (Sept. 18) deadline to file reply briefs to the initial briefs filed by the state and the industry on Sept. 4 (see NGI, Sept. 10).
The Pennsylvania Public Utility Commission (PUC) warned Pittsburgh officials that several portions of the city’s drilling ordinance are incompatible with Act 13, the omnibus Marcellus Shale law. In a letter to City Solicitor Daniel Regan, the PUC identified four sections that needed to be amended, chief among them the city’s outright ban on commercially extracting natural gas within the city limits (see NGI, Nov. 22, 2010). Pittsburgh City Council President Darlene Harris told NGI that she doesn’t intend to have the board revisit or reword the ordinance, citing the PUC’s position as being nonbinding and advisory in nature. “Their letter doesn’t mean much to me at all,” Harris said. “As far as I’m concerned, we have a legal ban.” An appellate court ruled July 26 that Act 13’s zoning restrictions were unconstitutional, but an appeal before the state Supreme Court is scheduled to be heard in October (see NGI, Sept. 10; July 30).
Mexico’s state-owned petroleum company, Petroleos Mexicanos (Pemex), will spend $200 million over the next three years exploring two shale formations in the country for natural gas, according to Guillermo Dominguez, a member of Mexico’s National Hydrocarbons Commission. He said Pemex intends to perform seismic testing in the Mexican portion of the Eagle Ford Shale, as well as in the Tampico-Misantla region on the Gulf Coast. Since 2000, dry natural gas production in Mexico has grown at an annualized trend-line growth rate of 3.8%, but that hasn’t been nearly enough to meet indigenous demand. Most of the shortfall has been met from pipeline imports from the United States, which have grown at an annualized trend-line growth rate of 9.6% since 2000. Pemex began producing its first natural gas from shale in February 2011 after drilling a test well, Emergente 1, into the Sabinas-Burro Picachos formation of the Eagle Ford (see NGI, March 28, 2011).
Gasfrac Energy Services Inc., which has been attempting to build market share in the U.S. hydraulic fracturing (fracking) market with its waterless technology, said CEO Zeke Zeringue and COO Steve Batchelor have left the company, and an operational review and management restructuring have begun. CFO Jim Hill is assuming the role of president and CEO until a replacement is found. The Calgary company, which expanded into the United States last year, markets a proprietary waterless fracking stimulation system that uses gelled liquefied propane gas (LPG), but it had operational issues in 2Q2012 (see NGI, Aug. 13; Nov. 14, 2011). The company “will be undertaking an operational review to ensure that its current infrastructure is appropriate to support operational efficiency while ensuring long term profitability, sustainably and the continued growth of the company’s proprietary LPG fracturing technology,” the company said.
Royal Dutch Shell plc last halted its initial drilling in Alaska’s Chukchi Sea just a day after it had begun as sea ice began moving toward a drillship. The Noble Discoverer, one of the two drillships leased by Shell for its historic Alaska drilling campaign, had begun digging a top hole of the Burger prospect about 4:30 a.m. Sept. 9. The Burger prospect is about 70 miles off the northwest Alaska coast. However, officials began monitoring a piece of ice that day, which had been about 105 miles away that measured 30 miles by 12 miles, and after the wind shifted, management made a decision to halt drilling. Once the ice “moves on,” Shell planned to reconnect the Noble Discoverer to anchors and continue drilling.
A bill offered by Sen. Mark Warner (D-VA) and Republicans’ Susan Collins and Rob Portman — SB 3468 — could undermine the authority of independent agencies, such as the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), to implement many of the regulations under Title VII of the Dodd-Frank Wall Street Reform Act. The senators claimed that requirements to scrutinize the costs and benefits of major new regulations have always exempted independent agencies, such as the CFTC, SEC, the National Labor Relations Board and the Federal Communications Commission, among others, and their legislation would bring independent agencies into the same analysis-and-review process that governs other regulators.
Transocean Ltd., which owned the Deepwater Horizon drilling rig, has offered to pay about $1.5 billion to settle U.S. claims for the April 2010 deepwater disaster, according to a Securities and Exchange Commission (SEC) filing. The SEC filing did not indicate that a deal was close, and the Department of Justice (DOJ) declined to comment on the status of any settlement talks. The Swiss company, the world’s largest offshore drilling contractor, said it has a $2 billion reserve for any Deepwater Horizon-related claims and it does not expect any additional incremental charges to earnings related to the settlement. The DOJ in a recent court filing objected to BP plc‘s $7.8 billion preliminary settlement with the plaintiff’s steering committee (PSC) to resolve court claims following the Macondo well blowout; BP was the majority owner of Macondo and operated the project (see NGI, Sept. 10).
Teams from the University of Rochester in New York and Texas A&M University have discovered that in the five months following the April 2010 Macondo well blowout, naturally occurring bacteria that exist in the Gulf of Mexico consumed and removed at least 200,000 tons of oil and natural gas that spewed into the deepwater from the ruptured wellhead. “A significant amount of the oil and gas that was released was retained within the ocean water more than one-half mile below the sea surface,” said the University of Rochester’s John Kessler, who co-authored a paper published in Environmental Science and Technology. “It appears that the hydrocarbon-eating bacteria did a good job of removing the majority of the material that was retained in these layers.”
Energy & Exploration Partners Inc. said in a filing with U.S. regulators that it intends to raise up to $275 million through an initial public offering (IPO) of its common stock. In conjunction with the filing, the producer said it had agreed to buy acreage in the Eaglebine formation of Texas from Chesapeake Energy Corp. for $125 million (see related story). The Fort Worth, TX-based producer said in a preliminary prospectus that it had agreed to acquire 57,275 acres from subsidiaries of Chesapeake. Proceeds raised through the IPO would be used for the acquisition-related expenses and capital expenditures. Once the IPO is completed, the company’s common stock would be listed on the New York Stock Exchange under the symbol “ENXP.” The filing did not indicate how many shares are to be sold or their expected price.
A coalition of environmental groups called on West Virginia Gov. Earl Ray Tomblin to enact a moratorium on natural gas drilling until the industry and regulators with the state Department of Environmental Protection (DEP) meet several conditions. The groups’ two main demands are that the DEP hire additional inspectors and that the inspection of every natural gas well become mandatory. Tomblin signed the landmark Marcellus Shale regulatory reform bill in December (see NGI, Dec. 19, 2011). The bill’s permitting fees on natural gas operators were expected to produce $2.4 million annually for the DEP, which the agency said it would use to hire additional inspectors and permit reviewers.
Texas retail electricity customers of Direct Energy now can opt to buy electricity generated solely from natural gas-fueled power plants. Direct Energy said it is the first retail energy provider in the country to offer customers such an option, what it is calling its “blue energy” product. The “True Blue Texas Plan” will offer power generated by gas sourced from Texas’ famous King Ranch. Texas is the nation’s leading natural gas-producing state, and natural gas is integral to the state’s economy, Direct Energy noted. “The abundant energy source supports about 12% of Texas jobs and contributes nearly $100 billion annually in state revenue.
Enterprise Products Partners LP has started operation of the second 300 MMcf/d train at its Yoakum cryogenic gas processing plant in Lavaca County, TX, to handle production from the Eagle Ford Shale. With the additional train, nameplate capacity of the plant has increased to 600 MMcf/d. The facility is capable of extracting 74,000 b/d of natural gas liquids (NGL). Enterprise is also on schedule to bring the third train at Yoakum into service in the first quarter of 2013, at which time total capacity at the complex would increase to 900 MMcf/d and 111,000 b/d of NGLs.
The California Energy Commission has approved $582,000 to develop two compressed natural gas (CNG) fueling facilities and to subsidize a vehicle dealer’s purchase of alternative fuel vehicles. Southern California Gas Co. would receive $216,000 for the design, construction and operation of a CNG fueling facility in Lancaster, CA, to fuel the utility’s 37 CNG vehicles operated in the area. Another $300,000 would be granted to CR&R Inc. in the Inland Empire to build and operate a slow-fill CNG fueling station at its material recovery and transfer facility in Perris, CA, in Riverside County. About $66,000 will go to Galpin Motors Inc., an auto dealer in Los Angeles County to subsidize the cost of purchasing 11 propane gas vehicles.
The 300 MW Pio Pico Energy Center in San Diego County, CA, has been approved by the California Energy Commission. The $300 million simple-cycle peaking project, which is expected to be in operation in mid-2014, is sponsored by privately held Apex Power Group LLC. The facility is to be sited adjacent to Calpine Corp.‘s Otay Mesa gas-fired combined-cycle plant. Both the Otay Mesa plant and the Pio Pico plant hold long-term contracts to supply power to San Diego Gas and Electric Co.
Maryland state Delegate Heather Mizeur (D-Montgomery), a longtime foe of fracking, plans to introduce a bill next year that would impose a moratorium on hydraulic fracturing in the Marcellus Shale until a comprehensive scientific study is completed. Both chambers of the state General Assembly are scheduled to begin their 90-day legislative session for 2013 on Jan. 9. Last year the state delegate led a failed attempt to freeze permitting in the Marcellus until 2013 while state agencies reviewed various studies on the play’s development and fracking, including one being performed by the U.S. Environmental Protection Agency (see NGI, March 28, 2011).
Government officials in Japan have announced a proposal to phase out nuclear power by the late 2030s, which would ensure the country would need to rely on more imported energy, including liquefied natural gas. According to reports, a government panel is proposing to reduce the country’s reliance on nuclear power for 50% by 2030. The change was sparked by the March 2011 meltdown at the Fukushima Daiichi nuclear power plant (see NGI, March 21, 2011).
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