While uncertainty and volatility may lurk just around the corner, for short-term natural gas supplies, demand and prices should remain stable in the water-dominated Pacific Northwest, stakeholders told the Oregon Public Utility Commission (PUC) on Wednesday.
While questions were raised about shale gas and its impact given concerns about the use of hydraulic fracturing (fracking) and its potential effect on groundwater supplies, the consensus was that in time this will likely be resolved. Two unknowns are whether some of the lost industrial gas load will return in the region as a fuller recovery from the recession takes hold and how much additional gas-fired generation will be developed.
In regard to the latter, it is not a matter of whether there will be growth in the generation sector, but when and how much, the stakeholders said.
This was the essence of the Oregon PUC annual natural gas price outlook meeting, at which the major participants — the Northwest Gas Association (NWGA) and the three private-sector gas distribution utilities operating in the state — all seemed to want to talk about everything except where future prices are going. The utilities will be filing revised rates based on wholesale gas prices in the past 12 months by Sept. 1 for an Oct. 1 effective date.
On a second quarter earnings call Wednesday, NW Natural senior officials indicated that they most likely will be asking for a slight decrease in retail gas rates for the third consecutive year. At the PUC meeting this translated into about a 2% decrease, according to Randy Friedman, the utility’s gas supply director.
Representatives from Spokane, WA-based Avista Utilities and MDU Resources Group’s Washington state-based Cascade Natural Gas indicated that their rates in Oregon should remain unchanged.
“Demand for gas is soft due to the weak economy while there is an abundance of natural gas to buy,” said Ken Zimmerman, the PUC’s gas analyst, who along with the utilities, surprisingly did not mention the abundant hydroelectric supplies this year, which are dampening both gas demand and price.
In response to concerns raised by PUC Commissioner Susan Ackerman regarding misuse of fracking in the shale gas production process, Dan Kirschner, NWGA executive director, said the industry is putting forth a full-scale effort to address criticisms and concerns. Ackerman said her understanding was that no major groundwater contamination had occurred as a result of fracking, but there was concern about inadvertent leaks of methane into water supplies.
“There is an industry effort through an industry-created website (www.frackfocus.org) that is a place where industry players voluntarily disclose the ‘cocktails’ [chemicals] they use for fracking,” Kirschner said. “The industry is coming together, and from our perspective [at NWGA] representing utilities, it may have been a little slower than we would have liked, but they are trying to figure out how to grapple with this and be responsive to the concerns being raised.
“Virtually all of the concerns are engineering problems, and there are efforts through coalitions to development industry standards and best practices. I think there is a recognition in the industry that its reputation is only as good as its worst player.”
Ackerman said natural gas is entering “a good cycle, and I would hate to see it blown off course by a couple of rogue operators out there.”
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