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Energy Law
5 – Natural Gas
Fall 2014September 30, 2014
Alan Palmiter
Not for distribution- for study purposes only
Topic roadmap
1. Natural gas in the energy mix– Compared to other energy sources– History of natural gas
2. Natural gas production / transport– US natural gas production– Transport from extraction to consumption
3. Regulation of natural gas– Regulation of production– Regulation of transport– Natural gas markets
4. Future of natural gas– Unconventional extraction – fracking – Liquid natural gas exports
5
Energy Flow, 2011 (Quadrillion Btu)
1. Natural gas in the energy mix
EIA, Annual Energy Review (2011)
http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm
Energy Sources Uses
Source: EIA, MANUFACTURING ENERGY CONSUMPTION SURVEY (MECS)
(Click for video - 11.58)
1. True or false? Natural gas is the only energy input that has decreased in price during the period 1998 - 2010.
2. Which is false – a. Most natural gas is extracted on
its own without and not in combination with crude oil.
b. The predominant hydrocarbon in natural gas is propane.
c. Natural gas is not sold in global marketplace.
d. Most natural gas consumed in the United States is produced in the United States.
3. Which is false --a. Natural gas is simply organic
matter that was subject to millions of years worth of heat and pressure.
b. The first use of natural gas as a fuel source was in cooking stoves.
c. Originally, natural gas was considered a bi-product of oil production.
d. When Edwin Drake struck oil in Pennsylvania, it was in conjunction with natural gas.
4. True or false? The process of hydraulic fracturing was invented in the 1940s?
Pop QuizNatural gas and the energy mix
Answers: 1-T / 2-b / 3-b / 4-T
EIA: Natural gas production by state
Production by state
2. Natural gas production / transport
Source, BP Petroleum (2012)
Source: Petroleum Geology, Shale Gas and Hydraulic Fracturing
Source: EIA, Analysis and Projections – Shale Oil Study (2013)
Source: EIA, Analysis and Projections – Shale Oil Study (2013)
Source: EIA, About US Natural Gas Pipelines
Natural gas
Pros: Abundant domestic energy
source Burns cleaner than coal or
oil Cheaper than other fossil
fuels Utilized in a variety of
sectors across economy Generates natural gas
related jobs
Cons: Still fossil fuel (non-
renewable) May lead to over-
dependence and be dis-incentive for innovation
Fugitive methane contributes to GHG
Safety considerations – highly explosive and potentially dangerous
Production• Rule of capture (once again!)• Split estates (once again!)• Permitting & operations – oversight
falls to states (unless federal lands)• Federal environmental statutes
Transport• Rates and practices – FERC• Safety and standards – DOT• Intrastate – state level
Markets• Spot (Henry Hub) • Futures • Well head
3. Natural gas regulation
Missouri v
. Kansas G
as Co. (U
S 1924)
Natural Gas A
ct (1938)
FERC Order 436 (1
985)
1900 19901960 20201930
Natural gas- timeline
Edwin Drake well in
PA (1
859)
PUC of R.I.
v. Attleboro Steam & Elec. C
o. (US 1927)
Pipeline im
provement, e
xpansio
n (1940s –
1950s)
Fracking (2
005)
DOI Fracki
ng
Regs. (2013)
Natural Gas P
olicy Act
(1978)
Pennsylvania v.
West Virg
inia (US 1923)
Bunson Burner – NG fo
r lamps a
nd stove
s (~1900)
FERC Order 636 (1
992)
1. True or false? The Rule of Capture applies to fracking operations just like traditional gas extraction operations.
2. Which is false – a. FERC ensures the safe operation
of interstate natural gas pipelines.
b. The Department of Transportation plays a role in overseeing interstate pipeline transport.
c. The horizontal portion of fracking operations can extend for miles away from the well head.
d. States have primary jurisdiction over natural gas extraction, except if it is taking place on federal lands.
3. Which is false --a. Drillers are required by law to
disclose the chemicals used in fracking fluid.
b. The Natural Gas Policy Act of 1978 sought to de-regulate prices for natural gas.
c. Natural gas is regulated like a utility.
d. FERC licenses and regulates onshore LNG terminals.
4. True or false? The EIA estimates that the cost of producing natural gas will decrease in coming years?
Pop QuizNatural gas – production, transport & regulation
Answers: 1-T / 2-A / 3-A / 4-F
4. Future of natural gas
Source: EIA, Today in Energy – Project sponsors seeking Federal approval to export (April 24, 2012 )
Energy federalism
Natural gas Federal State
Production DOI licensing (fed, OCS)State property lawState regulationLocal fracking regs
Gas transportation DOT (pipeline safety)FERC (pipeline rates/service) States (intrastate pipeline)
LNG FERC CAA, CWA – regs + enforcement
State (oversight)
Distribution CAA, CWA State (oversight)
Class HypoMany communities in the State of Serenity are considering whether to impose moratoria on fracking.
The state legislature has not yet acted on the question, so that fracking remains subject to current mining rules and has actually begun in some locations.
Please submit a comment to the City of Columbia reflecting your group’s position:
Group 1: Abundant American Energy Association
Group 2: Natural Gas Producers Association
Group 3: Environmental NGO
You may want to consider the status of fracking moratoria in
• New York state• California• Colorado• Pennsylvania
The end
