National

April 30th, 2014

EPA’s CSAPR Reinstated by Supreme Court Decision

The Supreme Court ruled that the Environmental Protection Agency has the right to reinstate limits on power-plant pollution that blows across state lines. The regulation is known as the Cross-State Air Pollution Rule or CSAPR.

Originally overturned in August 2012, the EPA and federal government won the reversal on Tuesday with a 6-2 vote.

This stands to affect approximately 1,000 power plants in 28 states in the eastern half of the United States – plants will either have to adopt new pollution controls and/or reduce their operations. Coupled with the Mercury Air and Toxics Standards (MATS) rule this could further threaten already vulnerable coal plants.

www.wsj.com

www.wsj.com

A Wall Street Journal article noted this ruling may hurt Texas the most. Luminant, owned by Energy Future Holdings, Co. and based in Texas, has previously stated they would have to shut down two coal plants if the pollution rules went into effect, and would be faced with possibly spending $1.5 billion to install pollution control equipment at their other plants (www.wsj.com).

Luminant, who is already reeling from this week’s bankruptcy filing, said they “will assess and determine its ultimate business and operational decisions” as more information on the precise requirements are known (www.wsj.com).

Though Texas power plants may be affected the most, other operating regions are seeing electricity prices increase for 2016 and beyond. MidAmerican Energy noted that prices were up anywhere from $0.0005 to $0.0008/kWh in non-ERCOT regions of the U.S.

For more background information on CSAPR, please view our other articles on the subject here and here.

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August 14th, 2013

Department of Energy Approves Third LNG Export Facility

On Wednesday, August 7, the Department of Energy approved the United States’ third liquefied natural gas (LNG) terminal. The three now approved projects will have the combined ability to export about 5.6 billion cubic feet of gas a day.

The latest approval, an export terminal in Lake Charles, Louisiana, plans to ship 2 billion cubic feet a day. The approval lasts 20 years and allows sales to all countries. The Federal Energy Regulatory Commission (FERC) still has to grant a construction permit and is contingent upon a review of detailed plans.

The first export project to win approval was Cheniere Energy’s Sabine Pass Liquefaction facility in 2011. The terminal was designed for up to six LNG trains, and is currently entered into four 20-year agreements with various customers. Please see below for detailed contract information:

More than a dozen export proposals are pending before the Department of Energy. While demand for natural gas is strong, analysts are predicting that a limited amount of buyers remain.  The facilities also cost multiple billions of dollars to build. Taking all of this into consideration, Moody’s Investor Services predict only four export projects are predicted to be built.

The debate on what effect the export facilities will have on domestic prices still remains. Some believe the benefit for the US economy outweighs the fact prices may rise.

Click to view other Energy Buzz articles.

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May 24th, 2013

Natural Gas Prices Rally After Energy Department Announcement

Natural gas prices are on the rise again after the Energy Department announced its approval of the first LNG terminal since 2011.

The Freeport Development LP’s project on Quintana Island, Texas, is the second facility to receive approval from the Energy Department to send gas to countries without free-trade agreements with the United States. The terminal still needs approval from the Federal Energy Regulatory Commission. Anticipated export capacity was announced at 1.4 billion cubic feet a day for the ConocoPhillips, Dow Chemical Co., and Osaka Gas Co. joint venture.

London based Goldman Sachs analyst Samantha Dart said in a report emailed to BusinessWeek on May 21 that, “These recent developments support our view that at least 6.8 billion cubic feet a day of liquefaction of capacity will be built in the U.S.”

Proposed Liquefaction facilities (Trains 1 – 3) at Quintana Island Terminal (courtesy of freeportlng.com)

Cheniere Energy

The Energy Department approved Cheniere Energy Inc.’s Sabine Pass LNG Terminal, located in Louisiana, in May 2011 for exports of as much as 2.2 billion cubic feet a day. Just last month, the Sabine Pass LNG Terminal entered into its sixth LNG Purchase and Sale Agreement with Centrica.

Future of LNG Exports

At least twenty applications for export terminals have been submitted in recent months to the Energy Department, which could export the equivalent of 41 percent of U.S. total production this year according to Energy Department data. Those proposed projects will be reviewed for approval by the Energy Department on a case-by-case basis.

London based Goldman Sachs analyst Samantha Dart said in a report emailed to BusinessWeek on May 21 that, “These recent developments support our view that at least 6.8 billion cubic feet a day of liquefaction of capacity will be built in the U.S.”

Arguments for increasing exports at a much more dramatic pace seem to be losing traction. Recent reports following the Freeport announcement are suggesting only two more projects will need approval by mid-2016 to reach 6.5 billion cubic feet a day of gas by 2020, according to New York based Morgan Stanley analyst, Adam Longson.

Those against exporting LNG contend that allowing unlimited export of the gas could raise prices for US consumers – which already rings true simply based on announcements. Proponents for LNG exports believe that without the US’s participation in the process, we will fall behind as terminals are built abroad.

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April 3rd, 2013

Liquefied Natural Gas to Begin Shipping in 2015

Sabine Liquefaction, a subsidary of Cheniere Energy Partners, L.P, has entered into a liqufied natural gas (LNG) sale and purchase agreement with their sixth customer, Centrica. Centrica serves over 11 million households in Britain. The agreement allows Centrica to purchase 91,250,000 MMBtu of LNG volumes per year for twenty years.

Sabine Liquefaction is developing six liquefaction trains and has already begun construction on the first two. They expect to start construction on the third and fourth trains in the first half of 2013 and the permitting process and preliminary engineering have been initiated for the fifth and sixth trains. After all six trains are completed, the Sabine Pass will be able to ship out approximately 4 billion cubic feet of gas per day.

A liquefaction train is what an LNG plant uses to compress natural gas into a liquefied state. The gas is first refined to remove any impurities and is then cooled down to approximately -160 degrees celcius for shipping.

Cheniere isn’t the only US company to have signed long-term agreements with major LNG buyers and recent indications point to several more long-term contracts being announced in the near future. What was just a possibility last year has become a reality in 2013.

As natural gas becomes a world commodity, supply will decrease for the United States as demand increases in places like China and Japan where costs are significantly higher. This  could provide upward pressure on domestic gas rates and once natural gas prices reach $4.50 – $5.00, coal and other fuel sources can become attractive electricity generation options again – potentially causing electricity rates to rise.

Below is a snapshot of current global natural gas prices. Courtesy of FERC.

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February 15th, 2013

Panama Canal Expansion Will Help Provide a World Market for US Natural Gas

For nearly 100 years, the Panama Canal has provided a faster and safer path for goods to be shipped between Asia and North America.  However, with ships growing wider and deeper to carry more goods per trip, the Canal has been forced to expand.  Six years ago, Panama started a $5.25 Billion dollar expansion so that vessels up to three times larger can carry goods along the 48-mile route.

Meanwhile in the United States, technological advances in the drilling industry have allowed us to tap into some of the largest natural gas reserves in the world.  Though natural gas prices in the United States have steadily declined since 2008, global demand and global prices are rising.  Previously a local commodity, natural gas is now being transformed into a liquid state, becoming Liquefied Natural Gas (LNG), making it easier to be shipped overseas and sold at higher prices.  Therefore, shale gas in the US combined with an expanded Panama Canal provides an opportunity for natural gas to enter the global marketplace. This could mean pricing mirroring the oil market, thus eliminating the current low price advantage of the domestic stock.

Jorge Luis Quijano, the Panama Canal Administrator, promises that the expanded passage through Panama will create new markets to exploit bigger ships and deeper ports (Washington Post). The new locks will help accommodate another 2,600 ships, oil tankers and LNG carries.  Previously, only 10% of the world’s 369 LNG-carrying vessels could pass the canal.  However, the expansion will accommodate up to 80% of the fleet.  Expected completion is June 2015.

For more information on the opportunities the expansion can bring please visit this link.

Two cargo ships entering Panama Canal’s Gatun Locks. Ships are raised up to 87 feet to pass through the different lanes of the canal. Image courtesy of PRWeb.

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December 13th, 2012

Excessive Natural Gas Supply Spurring Innovation in the US

Total overall energy production in the United States is expected to surpass Saudi Arabia by 2020 due to America’s vast natural gas resources. With the surplus supply comes an emergence of new innovations. As new uses for the excessive and inexpensive supply become operational, the result will be upward price pressure on natural gas and, in turn, electricity.

The boom in shale drilling has significantly reduced the cost of natural gas in the United States and has encouraged many energy/chemical companies, like Sasol & Cheniere Energy, to build plants.

On December 3, 2012, Sasol, a South African energy company, made an announcement that it plans to build a fuel plant in Louisiana with ability to convert natural gas into diesel and jet fuel, as well as other products.

The plant will be similar to smaller plants located in South Africa and Qatar and cost anywhere from 11 to 14 billion dollars to build. Designed to produce 96,000 barrels of fuel a day using gas-to-liquids (G.T.L.) technology, this facility will be the first of its kind in America.

 

The photograph above is one of Sasol’s gas-to-liquids facilities. Courtesy of EnergeticCity.

David Constable, Chief Executive with Sasol, explained that adding the exclusive G.T.L. technology in the United States’ energy mix will advance the country’s energy independence. More information on the Sasol plant announcement can be found at: http://goo.gl/kVYbQ.

While the Sasol plant’s success depends on natural gas prices remaining lower than other fuel sources, Cheniere Energy’s exporting plant should succeed depending on overseas natural gas demand.

Recently, natural gas drilling has slowed due to the decrease in prices. However, plans for the US to  begin exporting the fuel to Asian countries, where natural gas trades three-to-four times American prices, could encourage drilling to rise again. With natural gas eventually being sold on the global market to the highest bidder, it should provide upward pressure on domestic gas rates. Once natural gas prices reach $4.50 – $5.00, coal and other fuel sources can become attractive electricity generation options again – potentially causing electricity rates to rise.

The U.S. Energy Department is considering approving 15 more liquefied natural gas (LNG) terminals with a total export capacity of 26.5 billion cubic feet a day.

Overall, in an analysis performed by NERA Economic Consulting at the request of the U.S. Energy Department, the benefits of exporting natural gas far outweigh the concerns. Exporting has the potential to bring in near $32 billion in annual revenue and thousands of new American jobs.

Exporting almost one-third of the total US consumption and converting a portion of the rest to liquid fuel will change natural gas prices and our total energy portfolio forever.  How much will this effect the energy cost to the end user?  That remains to be seen.

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August 22nd, 2012

Coal plants in Texas, U.S. no longer under pressure to comply with strict EPA standards

The  U.S. court of Appeals overturned the Environmental Protection Agency’s cross-state air pollution rule (CSAPR). This standard would have required 23 states, including Texas, to decrease sulfur dioxide and nitrogen oxide emissions.

Judge Brett Kavanaugh’s justification for ruling against the standard states:

EPA has used the good neighbor provision to impose massive emissions reduction requirements on upwind States without regard to the limits imposed by the statutory text. Whatever its merits as a policy matter, EPA’s Transport Rule violates the statute. Second, the Clean Air Act affords States the initial opportunity to implement reductions required by EPA under the good neighbor provision. But here, when EPA quantified States’ good neighbor obligations, it did not allow the States the initial opportunity to implement the required reductions with respect to sources within their borders. Instead, EPA quantified States’ good neighbor obligations and simultaneously set forth EPA-designed Federal Implementation Plans, or FIPs, to implement those obligations at the State level. By doing so, EPA departed from its consistent prior approach to implementing the good neighbor provision and violated the Act.

This is a victory for coal plants across Texas and the United States – most will avoid shut down and/or installation of pricey equipment to comply with the EPA’s rules. As you can see in the chart above, almost half of US electricity needs are fueled by coal-fired power plants.

Click here to read the entire ruling. 

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June 18th, 2012

California’s Cap and Trade Program Launching January 1

The California Air Resources Board (CARB) is in the end stages of assembling a greenhouse gas cap and trade program. The program officially launches on January 1, 2013 and will cover major sources of greenhouse gas emissions in the State.

The goal of this program is to fight climate change and reduce greenhouse gas emissions to 1990 levels by the year 2020 eventually achieving an 80% reduction from the 1990 level s by 2050.

California, the first and only state to have created a cap and trade system, has now been joined by Quebec.

“Linking with Quebec is a significant advance in California’s efforts to fight climate change and steer our economy toward a clean energy future,” stated Mary Nichols, chairwoman of the CARB.

CARB is developing California’s carbon market and is scheduled to vote on rules this month. If approved, the first linked auction for Quebec and California companies will take place in November.

Cap and Trade Explained

Emissions caps are established by collecting emissions data from large industries. Business are then grouped and assigned an average emissions benchmark. Businesses are allowed to emit 90% of the benchmark in the first year and companies that operate below the cap may sell their excess allowance on the ‘market’. Companies with emissions above the benchmark may purchase these credits.

The cap and trade is a great way to reward companies for reducing their greenhouse gas emissions but will hurt those using fossil fuels, especially those using coal – the dirtiest fuel. The ultimate goal of the program is to eliminate the reliance on any fossil fuels for energy and incent renewable energy growth.

Obama proposed a nationwide cap and trade program in 2009 which didn’t pass. West Virginia and Indiana– states using coal for more than 90% of electricity generation – are safe from any adjustments for now.

Assuming a nationwide program is eventually put in place, any region heavily relying on fossil fuels for their electricity needs will absolutely see an increase in their electricity prices. To comply, plants will need to purchase emissions credits – costs which would be passed on to the consumers.

Decommissioning fossil fuel-fired power plants and preventing any new construction may be the best way to reduce the nation’s carbon footprint, but will definitely affect the end users. Picture courtesy of Legal Planet (legalplanet.wordpress.com)

 

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March 12th, 2012

Japan Possibly Importing LNG From Continental US

Due to last year’s tsunami effects on Japans nuclear fleet, the country now heavily relies on liquefied natural gas (LNG) for their power needs. The fracking revolution has flooded the US natural gas market – prompting many producers to consider export projects.

LNG Tanker Leaving Japan/Courtesy of Bloomberg

 

Japan is currently in talks with Sempra Energy’s LNG project in Cameron, Louisiana; Dominion Resources’ LNG project in Cove Point, Maryland; and Freeport LNG in Texas to buy a combined 30 million metric tons of LNG a year. More information can be found here.

Gas prices in Asia are about seven times higher than US prices, making the export to Japan a profitable opportunity for US natural gas corporations. Like any commodity, exporting from the US decreases the supply and increases the demand causing prices to potentially increase.

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January 24th, 2012

Natural Gas Gluttony Causing One Major Producer to Reduce Drilling Operations

Chesapeake Energy Corporation (NYSE: CHK), the second largest producer of natural gas in the United States, is making vast changes in order to protect their shareholders. Natural gas prices have hit a ten year low causing Chesapeake to decrease drilling in the Barnett, Haynesville and Marcellus Shale Plays. The company is immediately curtailing gross gas production by up to .5 billion cubic feet (Bcf) per day. If prices remain low, the company is willing to increase the curtailment to 1 Bcf a day.

An abundance of shale gas plays (see above image) has led to a surplus in natural gas inventories. Coupled with the mild winter the US has seen, natural gas prices steadily declined. After Chesapeake’s announcement, the market closed up $0.182 to $2.525. Pundits still feel that to have a real impact, other producers such as Exxon, EnCana and Devon Energy will have to follow suit.

Please visit http://rapidpower.net/rpm-market-news to see a real time update on 12, 24 and 36 month natural gas futures prices.

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