Energy Law
5 – Natural Gas
Fall 2014
September 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
1. Natural gas in the energy mix
5
Energy Flow, 2011 (Quadrillion Btu)
EIA, Annual Energy Review (2011)
Energy Sources  Uses
http://www.eia.gov/totalenergy/data/annual/pecss_diagram.cfm
Source: EIA, MANUFACTURING ENERGY CONSUMPTION SURVEY (MECS)
(Click for video - 11.58)
Pop Quiz
Natural gas and the energy mix
1.
True or false? Natural gas is the
only energy input that has
decreased in price during the
period 1998 - 2010.
3.
1.
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.
4.
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.
True or false? The process of
hydraulic fracturing was invented in
the 1940s?
Answers: 1-T / 2-b / 3-b / 4-T
2. Natural gas production / transport
Production by state
EIA: Natural gas production by state
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)
(Click for video - 5:04)
Oklahoma City
Source: EIA, About US Natural Gas Pipelines
Natural gas
Pros:
Cons:
 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
 Still fossil fuel (nonrenewable)
 May lead to overdependence and be disincentive for innovation
 Fugitive methane
contributes to GHG
 Safety considerations –
highly explosive and
potentially dangerous
3. Natural gas regulation
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
Natural gas- timeline
1900
1930
1960
1990
2020
Pop Quiz
Natural gas – production, transport & regulation
1.
True or false? The Rule of Capture
applies to fracking operations just
like traditional gas extraction
operations.
1.
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?
Answers: 1-T / 2-A / 3-A / 4-F
4. Future of natural gas
Source: EIA, 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 law
State regulation
Local 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 Hypo
Many communities in the State of Serenity
are considering whether to impose
moratoria on fracking.
You may want to consider the status
of fracking moratoria in
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
New York state
California
Colorado
Pennsylvania
The end