Climate Change Agenda Could Have FERC Selecting Pipeline Projects

Worries about potential escalating demand for natural gas from electric utilities and industrials forced to switch fuels because of climate change legislation from Congress was the major factor behind the FERC natural gas infrastructure workshop on Nov. 21.

But it is not clear that the commission will change any of its pipeline siting policies during an Obama Administration to help get shale gas from the Rockies more quickly to both coasts.

What worried Claire Burum, senior vice president of regulatory and government affairs, NiSource Gas Transmission & Storage, who appeared on behalf of INGAA, was the prospect of congressional legislation dictating that FERC come up with a national plan for siting of new pipelines, based on some sort of federal analysis of potential new supplies and demand. That was the requirement in the Natural Gas Strategy Act introduced last year by Reps. Tim Bishop (D NY) and Elijah E. Cummings (D MD). FERC Chairman Joe Kelliher seconded Burum’s criticism of the bill. “If it’s a government orchestrated or run planning process, they’re going to miss major projects,” Kelliher said. “If FERC were in charge of planning the pipeline network, I doubt we would identify the right projects.”

New infrastructure approval dictates to FERC could come directly via an energy bill Congress is likely to pass in 2009, or indirectly in the form of a headlong, fuel switching drive hastened by legislation limiting emissions of carbon dioxide and other greenhouse gases. “One issue that I think is important to all the commissioners is the impact of the current uncertainty on climate change policy on gas demand,” explained Kelliher in opening the workshop.

Kelliher’s comments on climate change were echoed by Commissioner Jon Wellinghoff, who because of his closeness to Senate Majority Leader Harry Reid, is considered a good possibility for FERC chairman in an Obama administration. “I think there are a number of options that we need to look at, as to how we can better and best utilize natural gas in this country, so that in a carbon-constrained world, it doesn’t come back to bite us,” Wellinghoff said.

Kurtis Haeger, managing director of wholesale planning at Xcel Energy, explained that relatively low cost gas-fired generation capacity is an appropriate bridge strategy until advances are made in developing other technologies such as carbon-capture and storage, or until additional baseload plants with longer lead times such as nuclear can be constructed. Xcel has approximately 3,000 megawatts of wind generated energy in its system. “As a result, I know all too well, how important the flexibility of gas-fired generation can be in integrating wind generation into the grid,” he stated.

The big question seemed to be where the added gas supplies would come from, and how it would be delivered to electric utilities and manufacturing plants. Clearly, there are big hopes for gas production out of the Barnett, Fayetteville and Marcellus shale plays.

There is no question that efforts to increase production of shale gas are going on full bore. Terrence Ruder, senior vice president of the marketing and midstream division at Devon Energy Corp. and also vice chairman of the Natural Gas Supply Association, said currently shale developments provide an estimated six to eight billion cubic feet a day, or roughly 10 to 12 percent of U.S. natural gas demand. “Over the next 10 to 15 years U.S. shale production could triple from today’s levels to an estimated 15 to 20 billion cubic feet a day,” he added.

But Alex Strawn, chairman of Process Gas Consumers Group, worried that expansion of pipeline infrastructure to take out that shale gas was now being called into question because of flagging gas prices, “flattening out of the economy” and capital problems at transmission companies.

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