Posts Tagged ‘Natural Gas’

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Ohio cities to end natural gas purchasing initiative

March 27, 2010

Michael Giberson

Via Tim Haab at Environmental Economics, a news story from The Columbus Dispatch reporting that five Columbus suburbs were ending a program in which the communities bought gas on behalf of residents that didn’t opt for another supplier.

“There’s really not a need for government to be in it,” said Dana McDaniel, Dublin’s assistant city manager, who announced the decision yesterday.

In May, The Dispatch reported that the group’s prices were often higher than those of Columbia Gas of Ohio, the regulated utility. The fixed price was set each year and stayed the same for 12 months, while Columbia’s price changed every month.

Some residents had voiced concerns that the group’s fixed-rate prices were too high and that the opt-out system for enrollment was confusing.

One of those residents, Barbara Drobnick of Gahanna, withdrew from the program in December after finding out that she had been automatically enrolled. Yesterday, she said she was pleased to hear the program was being discontinued.

“I like that they’ll be doing what cities are supposed to do, rather than making deals with private companies on my behalf,” she said.

More:

Since the consortium began in 2005, its price was higher than Columbia’s in 43 out of 63 months, according to a Dispatch analysis of pricing and consumption data. Customers who had the city group plan that entire time and had average gas usage would have paid nearly $800 more than if they had gone with the utility.

It is a bit unfair, as McDaniel said later in the article, to compare the 12-month fixed rate price in the program to monthly variable price deals offered by Columbia.  A fairer comparison would look at what other 12-month fixed rate plans were offering at the same time the five-city group renegotiated each next year’s rate.

But I tend to agree with the McDaniel’s line quoted above, “There’s really not a need for government to be in it.”

Posted in Energy markets | Tagged , , | 1 Comment »

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Many views on the Haynesville shale resource

February 21, 2010

Michael Giberson

The documentary film Haynesville offers a view of the shale gas boom from the point of view of several landowners in northeastern Louisiana. One of the landowners is a sort of good-ol’-boy type who hung onto family land and added to it even as family members moved away. His 300 or so acres of backwoods land made him a multi-millionaire when the gas developers came to town. Another part of the story shows the impact of the gas money on a growing church congregation; the preacher wants to build a new Christian school with the money. The film also follows the activities of a mother who gathers small landowners into a large block to negotiate with the gas companies for both higher payments and contractual protection for water quality and other environmental values.

Haynesville movie thumbnail imageIntertwined in these stories are some talking-head interviews with energy, environmental, and policy experts. I found these parts of the film mildly intrusive – but that’s probably because I already spend too much of my life reading about energy resource policy issues; likely most viewers will find the contextual information helpful. The film should be required viewing for landowners sitting over shale gas resources, especially in areas not used to oil and gas development.

The documentary is making the rounds. A showing is coming up in Houston on March 4, and the film will be part of the SXSW festival in Austin in a few weeks. If you’re interested in more information on the film, check out the website or become a fan of Haynesville on Facebook.

One of the natural gas companies doing a lot of the development of the Haynesville shale resource is Chesapeake. See, for example, their “February 2010 Investor
Presentation,” which details their interests and optimism about their work in Haynesville and elsewhere. This three-page document explains Chesapeake’s hydraulic fracturing process, including a description of the (very small amount of) chemical additives that get injected along with a lot of water and sand as part of the fracing. The summary is produced by Chesapeake, so maybe it minimized the possible risks, but the environmental risks do appear to be small. Some information on the topic is included in the Wikipedia article on hydraulic fracturing.

Meanwhile, the new conventional view that shale gas will ensure plenty of domestic natural gas for the United States for the next 100 years remains under criticism from skeptics who believe the resources are significantly over-estimated. Allen Brooks, at Musings from the Oil Patch, provides a review of some recent analysis from skeptics. As I’ve said before, it seems obvious to me that the people in the best position to know – the folks doing the drilling and producing from shale formations – have clearly signaled what they think is true by spending huge amounts of money to secure leases and develop additional properties. Nonetheless, production of vast quantities of gas from shale remains a relatively new commercial activity, so a certain amount of unavoidable uncertainty remains.

Posted in Energy markets, Environmental policy, Film | Tagged , , | Comments Off

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Georgia electric consumers want competition to help protect against higher prices, just like they have for natural gas

February 8, 2010

Michael Giberson

From WTVM-9:

Latrese Brown, a Cusseta [Georgia] resident, gathered a group of people who believe Sumter EMC is ripping them off. “Not only mine but my entire community light bills are outrageous high, they’re more than our mortgages, more than our rent, more than our car note,” complains Brown.

… The citizens of Cusseta went to their county commissioners Tuesday night and asked them to consider bringing in another company.

“You should be able to choose who you’re with, we choose our gas company, we should be able to choose who provides our lights to us because we want to choose our customer service.”

Notice what she said? “We choose our gas company, we should be able to choose who provides our lights …” Georgia is, I think, unique in allowing competitive retail natural gas suppliers to operate. Consumer Latrese Brown has experienced a competitive retail gas market and a regulated monopoly electric utility service, and she concluded she’d like to give competitive retail electricity a try, too.

Greg Crowder, vice president of marketing and administration at Sumter EMC says it’s not Sumter Electric calling the shots. He argues they have not increased rates and that the electric service act decided territories for electric companies.

“It was done to keep from duplicating efforts, two utilities running down the same road to serve the same customer then that’s inefficient,” says Crowder.

Of course Georgia is not overrun with multiple natural gas pipes running down the same road. A single natural gas pipeline company manages the distribution pipeline and provides delivery service.  Separately, about 15 or so competing retail natural gas suppliers offer consumers a variety of fixed-price or variable-price contract offerings and other terms.

It is not too complicated to have a single wire running down the street and yet multiple retailers delivering power over that single wire.

… And, the cause for the high bills is nothing more than the heaters reaction to the extreme temperatures, “the heating load is what caused the high bills, we’ve seen it before.”

The proximate cause of the unexpectedly high bills was the much cooler than normal weather experienced this winter.  Nothing unusual about occasionally experiences unusually cold weather. What seemed noteworthy about the news story was that consumers facing unexpectedly high bills were not demanding regulators take direct action to reduce electric rates.  Rather, they sought protection through competition, just like they already enjoy for retail natural gas prices.

Posted in Energy markets, Regulation | Tagged , , | 4 Comments »

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Shale gas supplies and the Alaska gas pipeline question

February 2, 2010

Michael Giberson

For 30 odd years there has been talk of building a natural gas pipeline from the North Slope of Alaska into Canada and down to the lower 48 states.  For a time it seemed almost a necessity given the prospects of diminishing gas supplies in the lower 48 and the cost of competing on the world market for LNG imports.  Then, of course, the boom in shale gas production, which has upset what “everybody knew” about the future of natural gas supplies in the U.S. and moderated gas prices in the process.

Is it still a good idea to spend $20-40 billion for a pipeline? The WSJ offers: “Latest Risk to Alaska Gas Pipeline: More Gas.”

(HT to NewsWatch: Energy.)

By the way, interested in learning a bit more about the shale gas boom?  One perspective is offered by the documentary film Haynesville, which follows the effects of that shale gas play on several Louisiana landowners.  I haven’t seen it yet, but have heard good things.  (I am hoping to arrange a showing in Lubbock.  Lubbock area folks should let me know if you are interested in seeing the film.)

Posted in Energy markets | Tagged , , | 6 Comments »

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Shale gas as a game changer: A view from the UK

December 3, 2009

Michael Giberson

Production of natural gas from shale has dramatically changed the U.S. energy resource picture, and although experience elsewhere is limited* it is increasingly obvious that this not just a North American story. Nick Grealy, at No Hot Air, considers the implications for the UK:

North American shale gas already has a significant indirect effect on UK, European and World Gas Prices. Even in the unlikely event that there are no UK shale plays, the UK, due to exposure to international market forces, will be in the position of benefiting from an acquired immunity which will provide low prices for natural gas for many years to come. Some observers believe that volatility will also ebb and that prices will be both low and stable.

A pair of recent No Hot Air posts emphasize the fallout from the changing gas market: “Gas v. Coal,” and “Gas as the new UK baseload.”

HT to FT:Energy Source, which provides complementary remarks: “LNG glut driving a UK baseload power shift.”

*Experience in the United States is limited, too, as extensive shale gas development began less than a decade ago. (That brief background is one reason significant uncertainty remains about the reliability of the new conventional wisdom about gas resources, at least in the minds of a few analysts.  However, as one gas developer explained, the industry actually has years and years of experience drilling in and around shale formations.  It isn’t as if the resource is unknown; it is just that it was not previously accessible and economic to develop.)

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Apparently “light-handed regulation” is actually a form of regulation

November 20, 2009

Michael Giberson

Tom Fowler, at NewsWatch: Energy, takes note of commentary by Tudor Pickering concerning a FERC investigation into whether three natural gas pipeline companies were over-recovering on their regulated rates. (See FERC press release here; a Reuters article.)

Tudor Pickering, an energy industry advisory and investment company, notes that since 1992 FERC hasn’t required periodic rate cases by natural gas pipelines, but rather has predominantly relied upon pipeline co. initiative or customer complaints to motivate changes in rates.  Rate cases are expensive for pipelines, customers, and regulators, so minimizing the number of rates cases can cut costs.  Even when customers complain, rates are typically settled by agreement rather than through new rate cases.  The 1992 policy switch was part of a “light-handed” approach to regulation that accompanied deregulation or restructuring of many other industries in the 1980s and 1990s.

Apparently now, however, disclosure regulations issued in 2008 resulted in FERC noticing that a few companies appeared to be over-recovering costs.  Not only did FERC notice, they’ve decided to do something about it.  Investigations will be launched, hearings held, etc.  Tudor Pickering finds this turn of events “disturbing.”  The “pipes probably assumed the FERC would continue to let market forces work,” but instead, Tudor Pickering observes in chilling tones: “So much for that. Big Brother is watching!”

Hmmm, who would have thought that, if you disclose information to the government entity regulating your rates, that the agency would use that information in rate regulation?  Apparently “light-handed rate regulation” is actually a form of rate regulation.

Posted in Energy markets, Regulation | Tagged , | Comments Off

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More on natural gas from shale and its critic

November 19, 2009

Michael Giberson

The Fort Worth Star-Telegram has a story on shale gas production critic Art Berman:

Arthur Berman runs a one-man energy consulting firm out of his home near Houston, producing research that says forecasts for natural gas production in the U.S. are flawed. He’s won the industry’s attention and its anger.

Since last month, Chesapeake Energy and Devon Energy, two of the five largest gas producers in the U.S., attacked Berman’s claims. Berman, 59, had his monthly column pulled from the November issue of World Oil after gas companies complained, prompting him to quit the trade journal.

Berman, an oil geologist who worked two decades for Amoco, says company production projections for shale gas in the U.S. are at least double what drill results justify. At issue is the rate of production decline in shale wells, where water, sand and other materials are injected to fracture rock and make gas flow.

“I think that the wells decline at a much higher rate than the operators think they do,” Berman said in an interview in Houston. “They’re being overly optimistic.”

More on the dispute at the linked article.

[HT to NewsWatch: Energy]

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World oil, but apparently not local shale gas skepticism

November 6, 2009

Michael Giberson

Tom Fowler has more on the ditching of shale gas skeptic Art Berman’s column by World Oil magazine.  Now the magazine’s editor is out too.

Read Fowler’s context, then follow the link to the former editor’s remarks, posted today on Berman’s blog.  Excerpts:

… The next day, the president stopped by to tell me that we had to stop Art from writing about shale plays.

I said, “I’m surprised that there haven’t been at least a dozen complaints. I’ve seen worse on other topics.”

It was no use arguing. Ironically, I had already decided that Art should take a break from the shale plays for a while anyway, just because he was running out of new things to say, having written 8 (I’m guessing) columns on that one subject. …

Immediately after I hung up the phone with Art, the Publisher walked in, slapped down a fax from DS, and said, “We’ve got to stop Art from writing about these shale plays, we’re getting too many complaints!”

Posted in Energy markets | Tagged , | 1 Comment »

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Natural gas from shale: long lasting or going fast?

November 4, 2009

Michael Giberson

Daniel Yergin and Robert Ineson have an op-ed in the Wall Street Journal discussing the development and implications of natural gas from shale in the U.S. market. Not much will be new to you if you’ve been following the commentary here for a while, but they do provide a very good, general overview.

The basic story:

The companies were experimenting with two technologies [to access shale gas]. One was horizontal drilling. … The other technology is known as hydraulic fracturing, or “fraccing.” Here, the producer injects a mixture of water and sand at high pressure to create multiple fractures throughout the rock, liberating the trapped gas to flow into the well.

The critical but little-recognized breakthrough was early in this decade—finding a way to meld together these two increasingly complex technologies to finally crack the shale rock, and thus crack the code for a major new resource. It was not a single eureka moment, but rather the result of incremental experimentation and technical skill.

The result: “The supply impact has been dramatic. … Proven reserves have risen to 245 trillion cubic feet (Tcf) in 2008 from 177 Tcf in 2000, despite having produced nearly 165 Tcf during those years. … With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years.”

Yergin and Iseson assess the effects on electric utilities, energy-intensive manufacturing, and other parts of the economy.  They even claim abundant natural gas will help facilitate renewable energy development (but while there are complementarities between gas and intermittent power sources, renewable resources would be better facilitated in the short run by high gas prices).

The other natural gas shale story in the news concerns shale-resource-skeptic Art Berman who claimed on his blog that World Oil magazine killed his monthly column due to pressure from an executive at an independent oil and gas development company.  The tiff attracted commentary from Tom Fowler at NewsWatch: Energy (“Who killed Art Berman’s column?”) and Kate Mackenzie at FT Energy Source (“Shale gas row gets nasty”).

Berman has been challenging the shale boom talk for some time, saying that data he has collected indicates shale gas wells are peaking and declining much faster than expected and therefore the resource is not nearly as significant as some claim. Recently he presented his views at the Association for the Study of Peak Oil and Gas conference in Denver: “Shale plays: A time for critical thinking.”  (Berman has also published counter-arguments made to his position on his blog, “Rebuttals To Our Shale Play Research.”)

Fowler’s post seems particularly thoughtful – he has interviewed Berman in the past, he reports on responses from World Oil and Petrohawk Energy (the oil and gas development company fingered by Berman) – and Fowler promises more information to come.  Of course, the life or death of Berman’s column is the sideshow, but the main event is the substance of Berman’s claims.  I suspect there will be more information to come on the substance as well.

For what it is worth, it appears to me that oil and gas companies believe in the potential of shale gas in a big way. Many of the graduates of the Energy Commerce program at Texas Tech University (where I teach) work for companies heavy into shale gas plays.  The names of several of these companies show up on a couple of Berman’s ASPO-USA slides: Chesapeake, Devon, Petrohawk, Southwest Energy, Encana, XTO, and EOG Resources.  I don’t know if we have students at Range Resources or Newfield, the other two companies mentioned on Berman’s slides, be we probably do. These companies are spending their money on shale resources as if it is a real, long-term resource, and that’s as good an indication as any available to an outsider looking in.

One nit to pick with Yergin and Iseson: they claim that while the “revolution in shale” has been around since 2007, awareness of the issue only reached Washington in the past few months.  Maybe that point is true at the higher levels of Washington society, but down at the data and analysis level Washington has been aware of the issue at least since November 2006.

In November 2006 the U.S. Energy Information Administration produced a preliminary report on Bakken Formation production in Montana and the Dakotas called “Technology-Based Oil and Natural Gas Plays: Shale Shock! Could There Be Billions in the Bakken?” The article states up front: “The Bakken Formation of the Williston Basin is a success story of horizontal drilling, fracturing, and completion technologies.”  In June 2008 the EIA followed with a brief analysis called, “Is U.S. natural gas production increasing?“, which focused on Barnett Shale development in Texas and the potential elsewhere.  Analysts have known for years about the boom in shale gas resources.

Posted in Energy markets | Tagged , , , | 1 Comment »

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Boom in shale natural gas: Not just for North America

October 11, 2009

Michael Giberson

From the New York Times, “New Way to Tap Gas May Expand Global Supplies.”

Italian and Norwegian oil engineers and geologists have arrived in Texas, Oklahoma and Pennsylvania to learn how to extract gas from layers of a black rock called shale. Companies are leasing huge tracts of land across Europe for exploration. And oil executives are gathering rocks and scrutinizing Asian and North African geological maps in search of other fields.

The global drilling rush is still in its early stages. But energy analysts are already predicting that shale could reduce Europe’s dependence on Russian natural gas. They said they believed that gas reserves in many countries could increase over the next two decades, comparable with the 40 percent increase in the United States in recent years.

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