A day after the Super Bowl, the natural gas industry, its customers, regulators and state lawmakers were Monday morning quarterbacking what caused the recent gas supply shortfalls in Texas and neighboring states — and consequent shortages of power generating capacity — as exceptionally cold weather gripped the region.

“The cold temperatures affected wellhead gas production in both the Rockies and the Texas/Oklahoma producing regions, cutting into gas supplies available to respond to the surge in power demand,” analysts with Barclays Capital said in summarizing the crisis in a research note. “Bentek [Energy] reported that supply was reduced by as much as 5 Bcf/d on Wednesday [Feb. 2]. In addition, the power outages cut electricity to pipeline compressor stations, further hobbling fuel to power plants [see NGI, Feb. 7].”

In New Mexico — which bore the brunt of the gas deliverability failure with tens of thousands of consumers cut off from service during freezing temperatures — the state’s House Energy and Natural Resources Committee met to discuss the crisis.

El Paso Natural Gas — which had to contend with low system linepack during the cold when supplies from the field fell short and consumers pulled hard on the system — was dealing with high linepack conditions that materialized as temperatures climbed from their frigid depths.

The Public Utility Commission of Texas called for the Electric Reliability Council of Texas (ERCOT) independent market monitor to investigate the causes of a level three emergency alert on Feb. 2 and power plant outages that followed. Additionally, Texas Sen. Troy Fraser was calling for hearings in the coming weeks on the protocol for curtailing gas-fired power plants in the state, which relies heavily on gas for power generation.

Last year 58% of Texas’ installed generating capacity was fueled by gas, and 38% of its power came from gas-fueled plants, second only to coal-fired plants, which provided 40% of the state’s power last year.

The freezing temperatures in the Southwest, which froze some natural gas wells in Texas’ Barnett Shale and caused rolling blackouts in much of the state, were the most severe test of Texas natural gas deliverability since the winter of 1989, a reliability council representative told the Railroad Commission of Texas (RRC) last week.

After listening to Ron Kitchens, chairman of the Texas Energy Reliability Council (TERC) for less than an hour, RRC commissioners seemed as if they were thinking it might be time to revisit RRC Order No. 489, which dates back to the early 1970s and pertains to curtailment of natural gas deliveries within Texas.

While customers with interruptible delivery contracts — including power generators — saw their gas supplies curtailed last week, Kitchens said he was not aware of any entity holding a noninterruptible contract that did not get its gas. Kitchens lamented what he said is a general lack of understanding among the public of what an interruptible contract is in the natural gas world.

“The interruptible transporter knows the rules of the game but he’s willing to take the risk to have his transportation interrupted,” Kitchens told the three RRC commissioners. An end-user might choose an interruptible contract in exchange for lower rates, or it might be forced to take such a contract when there is insufficient capacity to allow for firm service, Kitchens said. In either case, the end-user knows what it’s getting.

Kitchens said there was “a substantial loss of wellhead [natural gas] production” last week, but he couldn’t say how much production was lost.

Besides wellheads freezing in the icy temperatures, some producers had trouble getting produced water and condensate hauled from their drillsites as road conditions were icy, Kitchens said. This also resulted in the shut-in of some production, as did the shutdown of several gas processing plants.

Further, electric power interruptions tripped the controls on some natural gas pipeline compressors and equipment at production facilities, which then had to be restarted manually. Some compressors are electric-powered, too, Kitchens said. Icy roads also affected workers traveling to remote sites to restart equipment.

Regulator devices at some local distribution company citygates also froze, but these were localized instances and brief in nature, Kitchens said.

Natural gas storage withdrawal capacity in Texas of about 16 Bcf/d was called on heavily, Kitchens said, noting that many facilities are salt domes, which can sustain very high deliveries but only for a few days. “The industry has been able to partially replenish these salt dome facilities over the last few days in anticipation of the next cold event,” Kitchens said.

Besides the storage capacity, Texas gas well productive capacity is about 20 Bcf/d, Kitchens said. However, much of both the storage and productive capacity is dedicated to interstate commerce.

Kitchens emphasized that firm service to power generators was not curtailed, and he noted that some power generators received more than their contracted volumes in order to maintain electric service.

“I’m not aware of any curtailment of gas deliveries to any power plant that contracted for firm service,” he said.

“I’d have to conclude that the gas industry from the wellhead through the end-user performed its firm obligations very satisfactorily during last week’s event. Those customers that contracted for firm service received firm service. Those customers that chose interruptible service were in many instances interrupted during the height of the cold event.”

Commissioner Elizabeth Jones said she was aware of a natural gas-fired peaking plant that was out of commission because it had an interruptible contract for gas delivery. While the plant operator was warned in advance of the coming curtailment, it could not schedule gas delivery because capacity was not available.

Kitchens said he knew which plant Jones was talking about. “In the summertime it works great…because there is capacity. This was the first real wintertime test of electric power generation since the restructuring [to a competitive retail power market],” he said.

TERC was formed in the early 1970s, and its membership is composed of major intrastate pipeline operators, some natural gas producers, the Texas Oil & Gas Association, storage and facility operators, major gas utilities and the RRC as well as the Public Utility Commission of Texas, the Electric Reliability Council of Texas and the Texas General Land Office.

Near the end of his presentation, Kitchens asked the commissioners to tread lightly on private enterprise when weighing any reforms suggested by last week’s weather-induced energy crisis.

“I think private business has a way of trying to make things work in periods of stress and generally they get things done,” he said. “So I would suggest that you respect the private industry decisions and how they run their businesses. I do also realize that you have an obligation to the citizens of the state to make sure they have the services that they need. And it’s a tough balancing act.”

The Barclays analysts said ERCOT will not escape scrutiny over the crisis in the coming weeks.

“This event will not be brushed away as ‘a freak storm causing a rare event,’ in our view, and will undoubtedly call into question the grid operator’s handling of the incident,” the firm said. “The weather and resultant load caught the market somewhat by surprise. In addition, the fact that several generation units were forced offline or could not start because of temperatures that, while low and persistent, are not unprecedented will obviously force a review of the cold-weather readiness of the state’s generating units…”

And in New Mexico regulators last week said they will launch a “formal and thorough” investigation of the widespread service disruptions experienced by customers of New Mexico Gas Co. The state Public Regulation Commission (PRC) was drafting an order to start the probe at the behest of Chairman Patrick Lyons.

The PRC expects to finalize its order within days and start the investigation, a regulatory commission spokesperson said. The final “structure and format” for the investigation will be put in place when the PRC meets on Tuesday.

The investigation is supposed to examine all of the events leading up to service cutoffs affecting more than 40,000 residents, leaving many of them without gas utility service for several days starting Feb. 2.

New Mexico Gas customers were among the hardest hit when extreme cold swept through the Southwest in the first days of February, causing well freeze-offs and compressor failures due to power outages. The severe weather curtailed gas deliveries to thousands of customers in New Mexico, Arizona and Southern California supplied through El Paso Natural Gas and Transwestern Pipeline.

The governor of New Mexico declared a state of emergency on Feb. 3 with more than 24,000 without gas service, the same day that Sempra Energy’s San Diego Gas & Electric curtailed industrial gas customers.

As a first step in the New Mexico PRC’s investigation, the regulators intend to direct the commission’s acting chief of staff to prepare an agreement to retain an independent third-party to conduct the probe and provide a report regarding the causes of the service disruptions, the PRC spokesperson said. The PRC safety bureau and utility division staff will assist in the investigation.

Lyons’ call for the third-party investigation was supported by the full five-member PRC on Thursday, along with utility representatives who attended and spoke at the commission meeting.

Investigators will examine “whether New Mexico Gas’ response to the situation was appropriate,” said the spokesperson, noting whether the gas utility’s decisions regarding which customers were curtailed and for how long were appropriate will be investigated. And they will look at what can be done in the future to make sure similar curtailments don’t happen again.

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