While producers, local distribution companies (LDC) and processors in the Southwest may have believed they were prepared to meet natural gas demand during extreme cold weather events, their weatherization programs were woefully inadequate, a task force report said (see Daily GPI, Feb. 7).

“The Texas and New Mexico production basins experienced unusually sharp declines due to the prolonged freezing weather of early February 2011. Although these areas typically experience occasional freeze-offs during periods of sub-freezing weather, and although natural gas producers and processors in those regions employ some winterization techniques, to a significant degree those measures were inadequate to meet consumer demand” during the subpar temperatures that occurred in early February, concluded the Federal Energy Regulatory Commission (FERC) and the North American Electric Reliability Corp. (NERC) in a 357-page report released Tuesday.

“Because the Commission does not have jurisdictional authority over this sector of the natural gas industry for these purposes, we recommend that state lawmakers and regulators in Texas and New Mexico investigate whether minimum standards for the winterization of gas production and processing facilities should be adopted, by way of legislation, regulation or the adoption of voluntary industry practices, and whether such standards would be likely to effectively and reliably improve supply during extreme weather events,” the FERC/NERC report noted. FERC and NERC combined their inquiries of the outages in May (see Daily GPI, May 11).

The report also called on the gas and electric sectors to work together with state regulators to determine whether critical natural gas facilities can be exempted from rolling blackouts. “The natural gas industry depends in many instances on electric utilities for the power that helps move gas from the production fields to end-users…Temporary loss of electric power can put a gas production, processing, compression or storage facility out of service for long periods of time, especially where weather conditions delay access to those facilities. The resulting gas outages can contribute to electricity shortages by cutting off or reducing fuel supply to gas-fired generating plants.”

The report further recommended that state utility commissions should work with LDCs to ensure that voluntary curtailment plans can reduce demand on the system as quickly and efficiently as possible when gas supplies are disrupted.

More storage in the Southwest could have mitigated the situation in February, according to FERC and NERC. “Additional gas storage capacity in Arizona and New Mexico could have prevented many of the outages that occurred by making additional supply available during the periods of peak demand…Storage can help LDCs maintain adequate supply during periods of heavy demand by supplementing pipeline capacity, and can serve as backup supply in case of interruptions in wellhead production.

“Additional gas storage capacity in the downstream market areas closer to demand centers in Arizona and New Mexico could have prevented most of the outages that occurred by making additional supply available in a more timely manner during peak demand periods,” the report said.

While an estimated 4.4 million electric customers lost power during the first few days of February, natural gas customers experienced “extensive curtailments” that “were longer in duration than the electric outages because relighting customers’ equipment [had] to be accomplished manually at each customer’s location,” the FERC/NERC report said.

LDCs interrupted gas service to more than 50,000 gas customers in New Mexico, Arizona and Texas, with New Mexico suffering the biggest hit with more than 30,000 outages, the task force report said. “Problems on the natural gas side largely resulted from production declines in the five basins serving the Southwest. For the period [of] Feb. 1 through Feb. 5, an estimated 14.8 Bcf of production was lost,” which ultimately led to the interruptions in LDC service.

‘The production losses stemmed principally from three things: freeze-offs, icy roads and rolling electric blackouts or customer curtailments. Freeze-offs occurred when the small amount of water produced alongside the natural gas crystallized or froze, completely blocking off the gas flow and shutting down the well…Icy roads prevented maintenance personnel and equipment from reaching the wells and hauling off produced water which, if left in holding tanks at the wellhead, causes the wells to shut down automatically.

“The ERCOT [Electric Reliability Council of Texas Inc.] blackouts or customer curtailments affected primarily the Permian and Fort Worth basins and caused or contributed to 29% (Permian) and 27% (Fort Worth) of the production outages, principally as a result of shutting down electric pumping units or compressors on gathering lines,” the task force report said.

The task force report noted that :”low delivery pressures from El Paso Natural Gas interstate pipeline, caused by supply shortages, contributed to gas outages in Arizona and southern New Mexico.” However, it added that “no evidence was found that interstate or intrastate pipeline design constraints, system limitations or equipment failures contributed significantly to the gas outages. The pipeline network, both interstate and intrastate, showed good flexibility in adjusting flows to meet demand and compensate for supply shortfalls.”

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