Natural Gas - Briefing for Congressional Staff - 18 Sept 2013


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A joint presentation on natural gas presented to U.S. Congressional staff.

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  • Key criteria for projects:Announced projects that, based upon milestones accomplished to date, are deemed very likely to come online. Only industries that are significant consumers of natural gas, because of its use as either a feedstock or other application. Primarily:Fertilizer, methanol and gas-to-liquids facilities use natural gas as a feedstock. Steel industry - newer facilities are using natural gas for the energy component in steel making, but not the feedstock component. Petrochemical facilities, such as ethylene plants
  • Citations:Every $1 billion of LNG sold creates 6,000 new construction/manufacturing jobs Source: U.S. International Trade Administration reduce U.S. trade deficit by billions of dollarsSources: Brookings Policy Brief, “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas” May 2012Baker Institute for Public Policy study, “U.S. Shale Gas and National Security” July 2011 Exports/Export facilities would generate over $10 million/year in new tax revenuesBrookings Policy Brief, “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas” May 2012Baker Institute for Public Policy study, “U.S. Shale Gas and National Security” July 2011
  • The “game” has changed and the ability to develop natural gas from shale is the game changer.The chart above shows how the types of natural gas production have changed and will continue to change:In 2000, more than 70% of natural gas was produced from “conventional” wells.In 2010, conventional production accounted for 34%.And by 2020, conventional wells will be about 20%In fact, in 2020, “unconventional” wells will be the new conventional. 80% of U.S. production will come from shale, tight gas and coalbed methane formations. 40% of U.S. production will come from shale alone.
  • Although we talk about 12 shale plays around the country, we continue to discover more, such as Eagle Ford in south Texas. Shale plays are all over the country, and we have only begun to tap their potential.New shale plays are so frequently discovered that EIA has difficulty keeping up with changes. This May 2011 map is the most recent available. (Re-verified July 2013.)Producers are still learning the vast extent of these remarkable plays, and we expect our “100 years of supply” estimate to keep going up for the foreseeable future.
  • A comprehensive set of federal, state, and local laws address every aspect of exploration and production.In addition, new industry standards advance operations and practices. (Refer to Slide 19-”Industry Stewardship”)The above regulations govern production of conventional natural gas wells AND unconventional wells that are hydraulically “fracked”Hydraulic fracturing has been in use for more than 60 years. (Energy In Depth)Hydraulic fracturing has aided in the extraction of more than 600 trillion cubic feet(Tcf) of natural gas.(Energy In Depth) 600 Tcf = 27 years of total U.S. consumption of natural gas (EIA) 600 Tcf = 618 Trillion Btu, enough to meet ALL the energy needs of Washington DC for more than 3 years (EIA 2009 state energy profile – DC’s entire energy consumption in 2009 was 180 trillion Btu – homes, manufacturing, power generators and transportation combined)Natural gas production operations and hydraulic fracturing are extensively regulated at the state level.National organization of government, public and private stakeholders -- STRONGER Inc. -- has completed reviews of 21 state programs accounting for regulation of over 90% onshore production of oil and natural gas in U.S.. Newest aspect of the reviews include states’ regulation of hydraulic fracturing.  
  • The 16,000 miles of interstate pipeline approved in the last decade is the largest amount in 40 years.  In contrast, only 900 miles of electric transmission lines have been approved.represents an enormous jump in growth– only 297,000 miles of transmission pipeline in the U.S. altogetherLots of new storage.Half of new storage put in since 2008 is high-turnover salt dome – enhances ability to respond quickly to demand changesPipelines are the safest form of energy transportationWhile all forms of transportation have risks, pipeline safety is continually improvingThe three main causes of pipeline leaks are corrosion, material/weld flaws and excavation damage. Data collected by the Pipeline and Hazardous Materials Safety Administration show frequency of leaks from all causes decreasing.
  • LISTENING TO COMMUNITY –Natural gas companies listen to community concerns about natural gas development, resulting in some unique solutions.Example: in response to Ohio County community concerns about traffic, Chesapeake Energy promised that trucks would only travel in the same direction as school buses. The company also provided money to Ohio County Schools to purchase CB radios for school buses so drivers can communicate with Chesapeake trucks when necessary. (Wheeling News-Register, March 27, 2011)STRINGENT INDUSTRY STANDARDS AND RESPONSIBLE HF PRACTICES – Through the API’s standards-setting process, the industry has issued five best practice guidances on hydraulic fracturing. See SURFACE IMPACTS – API HF3 “Practices for Mitigating Surface Impacts Associated With Hydraulic Fracturing”OFFSHORE SAFETY AND SPILL CONTAINMENT - Companies operating in offshore waters must comply with rigorous requirements. Numerous federal agencies, including the U.S. Coast Guard, perform drills and inspections. Inspections have increased since the Deepwater Horizon spill in 2010 and industry has collaborated on a new spill containment system.
  • FAIR ACCESS - Although the federal government lifted its ban on deepwater drilling in the GOM last October, very few new wells have been permitted since. In 2009, about 11 percent of our natural gas came from the Gulf of Mexico. CONTINUED STATE REGULATION - States provide strict regulatory oversight of hydraulic fracturing, which also falls under several federal regulations. Let states continue to oversee.LEVEL PLAYING FIELD - Policies to promote clean energy should be market-based. If a mandate such as a Clean Energy Standard, is put in place, it should allow utilities and generators the option to use natural gas.TAX POLICY - Tax policy should not discourage natural gas E&P or slow down job growth.FINANCIAL REGULATIONS - Financial reform (Dodd-Frank) could sweep in natural gas companies that use hedging and OTC markets to reduce risk -- with the unintended consequence of forcing companies to set aside capital to meet proposed new CFTC “clearing requirements.” This is capital that would otherwise be invested in infrastructure and growth. PIPELINES - Current regulations work well to promote pipeline investment and safe operations – do not change them.
  • Natural Gas - Briefing for Congressional Staff - 18 Sept 2013

    1. 1. Natural Gas: America’s Abundant Resource - Heating our homes - Generating more electricity - Reviving U.S. manufacturing - Fueling transportation - Creating American jobs Natural Gas Roundtable Congressional Briefing – September 18, 2013
    2. 2. 2 Scott Morrison - APGA Government Affairs Manager Erik Milito – API Director, Upstream and Industry Operations Randall Luthi - NOIA President Don Santa INGAA President Jeff Schrade - NGSA Director, Government Affairs David Sweet WADE Executive Director
    3. 3. 3 Natural Gas Has Many Uses Natural gas heats homes - 177 million Americans use it at home - 71 million U.S. homes and businesses use natural gas Natural gas increasingly used to generate electricity  In 2002, natural gas provided 16 percent of U.S. electric generation  In 2011, natural gas provided 31 percent Natural gas is also used in the manufacturing, chemical and fertilizer industries
    4. 4. 4 Natural Gas: Good news for U.S. Manufacturing New projects 2012-2019
    5. 5. LNG Exports 5  Natural gas becomes liquid when chilled to -260ºF  Chilling shrinks it 600 times – making it easier to transport  LNG is… -Cold, clear, and colorless -Non-toxic, non-corrosive and non-explosive 22 export facilities have been proposed to export LNG to non-free trade countries - 4 LNG export facilities have been approved so far
    6. 6. Natural gas: Good news for the Environment 6 “Greater use of natural gas in early 2012 resulted in the lowest U.S. carbon emissions since 1992” U.S. Energy Information Administration, August 1, 2012
    7. 7. 7 Shale Changed the Game  Improvements in technology brought down production costs  Shale gas production quadrupled between 2006 – 2012 and is poised to comprise more than 40% of U.S. gas production in 2020  Diversity of supply complements strong and growing pipeline system, reduces vulnerability to hurricanes, brings natural gas closer to consumers Gas Production by Type Through 2040 Source: EIA Annual Energy Outlook 2013
    8. 8. 8 Technology Makes It Possible  Drilling technology improvements and efficiencies in shale have emerged  Longer horizontal laterals  Multiple-stage hydraulic fractures per lateral  Small surface footprint for multiple, extended wells  Ground water separated by thousands of feet and tons of impermeable rock and protected by state and federal regulation  Significant amount of water is recycled  “Micro-seismic” technology evolving and enabling even greater precision in fracturing wells Source: American Petroleum Institute
    9. 9. 9 Abundant shale widespread across U.S. U.S. Gas Reserves Increased 22% between 2006 – 2009 Primarily Due to Shale Development Source: Energy Information Administration based on data from published studies Updated: May 2011
    10. 10. 10 Natural gas production has shifted Part of the reason Federal drilling permit 2005 – 154 days Federal drilling permit 2011 – 307 days State drilling permit average – 12 to 15 days
    11. 11. 11 Positive News for the Economy America’s New Energy Future: The Unconventional Revolution and the Economy, IHS, October 23, 2012 Total Supported Employment • 2.1 million jobs supported in 2012 • 3.9 million jobs supported in 2025 Including 515,000 manufacturing jobs - Jobs tend to high quality and high paying $35/hr vs. $23/hr in general economy Capital Expenditures • $121 billion in 2012, rising to $240 billion by 2025 - $2.75 trillion cumulative between 2012 and 2025 Gross Domestic Product Impact • $284 billion in value added contributions in 2012 - Increases to $533 billion / year in 2025 Federal and State Government Revenues • $74 billion in 2012 - Increases to $240 billion in 2025 Average Increased Disposable Household Income via Lower Energy Prices $1,200 in 2012, rising to $3,500 in 2025
    12. 12. Natural Gas Industry: Highly Regulated Regulated by state and federal agencies  Clean Water Act – surface water discharge, storm water runoff  Clean Air Act – air emissions throughout production to usage  Safe Drinking Water Act – underground injection disposal/reuse of produced water and flowback fluids  Federal Land Policy and Management Act – permitting for federal onshore resources  Outer Continental Shelf Lands Act – permitting for federal offshore resources  National Environmental Policy Act – permits and environmental impact statements  Occupational Safety and Health Act – requires information about chemicals used at every site  Emergency Planning and Community Right-to-Know Act – annual reporting to emergency responders of chemicals stored and used above certain quantities  Extensive State Oversight – implement federal laws and regulate drilling fluids and produced water management  Detailed state regulatory information available at 12
    13. 13. 13 Natural gas estimates keep growing  Estimates have grown significantly with improvements in technology If the 1966 estimate of 600 trillion cubic feet (Tcf) had remained static, the U.S. would have run out of natural gas about 10 years ago  Estimates have been conservative – history shows there is more to be discovered
    14. 14. 14 Pipeline System Extensive and Expanding at Record Pace  Between 2000 and 2010, FERC approved more than 16,000 miles of new interstate pipeline - Capacity to move an additional 113 bcf per day  Pipeline system connects U.S. with Canada and Mexico  Storage capacity grew 22% from 2006 - 2010  Half of new storage is flexible high-turnover salt domes closer to customers
    15. 15. U.S. Natural Gas Infrastructure: Anticipated Investment Through 2035 Source: INGAA Foundation’s North American Natural Gas Midstream Infrastructure Through 2035 $205B in midstream infrastructure investments 125,000 jobs every year for 20 years $57B in federal, state & local tax revenue since 2005, pipeline avg. cap/ex: $8.8 Billion/yr 15
    16. 16. Off Limits Under Federal Law or Moratorium Available for Energy Exploration but closed to leasing due to current Federal Policy Available for Production & Exploration Offshore access is the key
    17. 17. Estimated Offshore Resources We still have a lot out there 17
    18. 18. Natural Gas Vehicles A growing NGV market addresses a number of America’s priorities: • Foreign oil displacement • Urban pollution reduction • Jobs • Balance of trade  20-25% of transit buses on US roads are natural gas powered, and last year over 50% of trash trucks purchased were NGVs  The biggest driver is… cost savings 18 Propane – from natural gas processing - is also used to fuel vehicles
    19. 19. 19    
    20. 20. 20 To Continue to Make Good things happen… Industry is Committed to Good Stewardship  Listening to and addressing community concerns  Use of stringent industry and government standards on land reclamation, well construction, water management and pipeline safety  Responsible hydraulic fracturing practices  Minimizing surface effects on land and infrastructure  Offshore safety and spill containment
    21. 21. 21 … And Government Must Do Its Part As Well  Fair access to onshore and offshore resources  Continued strong and effective state regulation of hydraulic fracturing  Level playing field: avoid picking winners and losers through mandates  Tax policy must be fair, not burdensome, and compatible with resource development and job creation  Financial regulations must not create “economic drain” on investment  Provide regulatory environment compatible with pipeline infrastructure investment and safe, reliable operation
    22. 22. 22 American Petroleum Institute (API) 1220 L Street, NW Washington, DC 20005-4070 202-682-8000 American Public Gas Association (APGA) 201 Massachusetts Avenue, NE, Ste C-4 Washington DC 20002 202-464-2742 Interstate Natural Gas Association of America (INGAA) 20 F Street, NW, Suite 450 Washington, D.C. 20001 202-216-5900 National Ocean Industries Association (NOIA) 1120 G Street, NW • Suite 900 Washington, DC 20005 202-347-6900 Natural Gas Supply Association (NGSA) 1620 I Street, NW, Suite 700 Washington, DC 20006 202-326-9300 World Alliance for Decentralized Energy (WADE) 1513 16th Street, NW Washington, DC, 20036 (202) 667 5600