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US Energy Secretary tackles gas infrastructure challenges

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Hydrocarbon Engineering,

Prolific natural gas production from the Marcellus Shale in Pennsylvania and oil from the Bakken Shale in North Dakota has upended the traditional flow of oil and gas as new areas become hubs for fuel supplies.

Now, the Department of Energy is looking for recommendations on how to get that energy supply to consumers. But at a public meeting yesterday morning, it was concluded that, a decade into the “shale gas revolution,” pipeline issues remain as surging production makes distribution a challenge.

“We have a huge infrastructure problem,” US Energy Secretary Ernest Moniz told a few dozen people at Carnegie Mellon University yesterday. His department is taking comments for an energy review addressing gas transportation, storage and distribution.

The challenges of getting the gas to market

Moniz and other speakers spoke about how quickly natural gas production has grown, especially in the Marcellus shale play that accounts for 20% of the national product. But developers and regulators cannot satisfy the need for pipelines and other infrastructure to move all that gas to markets, many said. Some pipelines must be reversed to move gas and by-products out of areas that only imported it.

“We are seeing booming production in areas that weren't, at least recently, major centres of production,” Moniz said, citing North Dakota and Pennsylvania.

Bottlenecks and shortages

The so-called “polar vortex” that brought record cold temperatures to the Northeast in January and February “provided a snapshot of where the bottlenecks are” and highlighted the implications, said Rory Miller, a senior vice president at the Tulsa-based Williams Cos.

Moniz noted that New England relies on natural gas for 50% of its electricity generation, but inadequate pipelines and other issues led to a gas shortage that sent spot prices for that region to more than US$ 120 per unit, compared to about US$ 5 elsewhere.

“We're trying to deliver gas to New England through a garden hose,” said Jim Sullivan, a leader of the American Public Gas Association and Chair of the Board of Public Utilities Commissioners in Norwich, Conn.

How to catch up

Roadblocks to catching up include the speed of growth in the gas fields, changes in the market and, most importantly, permitting delays, industry leaders said.

Shelly Corman, an Executive Vice President at Texas-based Energy Transfer Partners, said low gas prices in recent years shifted developers toward more liquid-rich gas areas before the dry gas fields were connected, and companies have to remake import facilities as export terminals.

Most speakers said they need a smoother, faster process to win regulatory approval for projects.

Williams, which has nearly US$ 5 billion worth of projects awaiting government OK, spent seven years getting approval for four miles of pipeline to supply Brooklyn with natural gas. “We don't have a practical process in place,” he said.

Pipeline builders run into a patchwork of rules even within a single county or state, said Kris Evanto, a Development Manager at Oklahoma City-based Access Midstream Partners. “It would be good to see some consistency,” he said, noting developers must plan years in advance, but government rules can change quickly.

Linking supplying and demand

Mr. Moniz said the need to find better ways to link supply and demand is evidenced by railroads now being used to transport oil because there are too few pipelines. The use of rail to move crude oil has come under fire in the wake of a number of accidents.

Four year effort requested by President Obama

Mr. Moniz made his remarks during the DOE’s Quadrennial Energy Review, which is part of President Barack Obama’s Climate Action Plan. The meeting in Pittsburgh was one of more than a dozen to be held across the country to gather recommendations on infrastructure improvements.

In a few weeks, the DOE will hold a public meeting in Bismark, N.D.

This is the first year of the four-year energy review by the DOE. In coming years, the department will also look at power generation, end-use infrastructure and energy efficiency.

Moniz explained that it is a part of a four year effort requested by President Obama to provide input into developing a national energy policy. Each will include a number of energy-related topics that eventually will include discussions of the US electric grid, renewables and other factors that will be used to create a comprehensive energy policy.

Moniz reiterated that he supports an “all-of-the-above” strategy for US energy production that includes coal, natural gas, nuclear, solar and wind. He said the shale gas revolution of the past decade, which by 2011 placed the USA as the top natural gas producer in the world, has created a large infrastructure challenge.

In his opening remarks, Murphy noted that shale gas now accounts for 25% of domestic natural gas production, up from 1% just a decade ago.

But as the need for more pipeline infrastructure has grown along with the increased production, Murphy said, so has the demand for pipe and tube products.

That situation has created a trade fight over foreign countries illegally dumping cheap pipe products, despite the fact that US domestic producers can supply the same products.

Edited from various sources by Elizabeth Corner

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