Federal Process for Siting Natural Gas Infrastructure 17th IPEC Conference Michael J. McGehee Director, Division of Pipeline Certificates Office of Energy Projects Federal Energy Regulatory Commission San Antonio, Texas September 1, 2010 FERC Organization Chart Chairman Jon Wellinghoff Energy Projects Administrative Litigation Commissioner Philip D. Moeller External Affairs Administrative Law Judges Commissioner Commissioner Marc Spitzer John R. Norris Enforcement Energy Market Regulation Federal Energy Regulatory Commission Electric Reliability Executive Director Commissioner Cheryl A. LaFleur General Counsel Secretary Energy Policy & Innovation 1 How the Commission is Appointed The Federal Energy Regulatory Commission (FERC or Commission) is composed of up to five Commissioners who are appointed by the President of the United States with the advice and consent of the Senate. Commissioners serve five-year terms, and have an equal vote on regulatory matters. To avoid any undue political influence or pressure, no more than three Commissioners may belong to the same political party. There is no review of FERC decisions by the President or Congress, maintaining FERC's independence as a regulatory agency, and providing for fair and unbiased decisions. The Commission is funded through costs recovered by the fees and annual charges from the industries it regulates. One member of the Commission is designated by the President to serve as Chair and FERC's administrative head. Federal Energy Regulatory Commission 2 Natural Gas Act The Natural Gas Act is the law that sets out FERC’s areas of responsibilities: Section 1 – Identifies projects exempt from FERC jurisdiction Section 3 – Allows FERC to authorize import / export projects Section 7 – Allows FERC to authorize interstate pipeline projects (including storage) and grant eminent domain Federal Energy Regulatory Commission 3 Projects Exempt from FERC Jurisdiction Local Distribution Company facilities (e.g., Baltimore Gas and Electric, Washington Gas Light, etc.) Intrastate pipelines (where gas is produced, transported and consumed within a single state) Hinshaw pipelines (gas is produced in one state, but is transported and consumed within another) Gathering facilities Federal Energy Regulatory Commission 4 Gas Pipeline Program Evaluate applications for facilities to import, export, transport, store or exchange natural gas Authorize the construction and operation of facilities for such services Approve abandonment of such facilities Conduct environmental reviews of proposals involving construction, modification, or abandonment Implement the “Pre-Filing Process” Conduct inspections of LNG facilities and pipeline construction Federal Energy Regulatory Commission 5 Office of Energy Projects - Functions OEP has the engineering and environmental expertise to: certificate new gas pipeline projects, Authorize LNG import / export projects authorize and monitor hydroelectric projects, provide “backstop authority” to site electric transmission facilities, and analyze energy infrastructure needs and policies. OEP focuses on: project siting and development, balancing environmental and other concerns, ensuring compliance, safeguarding the public, and providing infrastructure capacity information. Other FERC Offices OGC has corresponding hydro and pipeline legal responsibilities Other offices also have input to our products Federal Energy Regulatory Commission 6 Project Evaluation How Does FERC Evaluate All Of These Major Projects? What Are The Criteria Used in This Evaluation? Federal Energy Regulatory Commission 7 In the United States, there are approximately 217,300 miles of interstate natural gas transmission pipeline. Source: Based on data from Ventyx Global Energy Decisions, Inc., Velocity Suite, January 2010, and EIA’s Natural Gas Pipelines. Federal Energy Regulatory Commission 8 Balancing Interests People Like... But They Also Want... Due Process Expedited Process Smaller Government Effective Government Less Regulation Assurance of Fair Markets Market-dictated Outcomes Protection from Market Dysfunctions, Unexpected Risk, and Unjust Rates Protection for the Environment and Property Interests Ample Supplies of Low-cost Energy Federal Energy Regulatory Commission 9 Certificate Process Overview Non-Environmental Review and Analysis • Engineering – GQI, storage, hydraulic flow • Tariff – rates, terms & conditions of service • Policy – precedents, rules, regulations • Accounting Application Filed Parallel Processing Paths Order Issued Environmental Review and Analysis • Biological – fish, wildlife, vegetation • Cultural – historic preservation • Land use – recreation, aesthetics • Soils and geologic • Air and noise – quality, loudness • Socioeconomic impacts • System alternatives Federal Energy Regulatory Commission 10 Timeline for Project Review Applicant’s Activities Prepare Draft Resource Reports Submit PF letter Start PF Review 0 File At FERC 1 2 3 4 Issue Draft EIS Determine Application Complete Review Draft Resource Reports & Prepare Preliminary DEIS Issue Final EIS Issue Order FERC’s Activities 5 6 7 8 9 10 11 12 13 14 15 16 (months) 11 Federal Energy Regulatory Commission 11 Certificate Policy Statement Goals ─ Foster Competition ─ Consider Captive Customers ─ Avoid Unnecessary Physical Impacts ─ Achieve Optimal Amount of Facilities ─ Encourage Complete Record ─ Expedite Review Time Federal Energy Regulatory Commission 12 Certificate Policy Statement Develop Record Adverse Impacts on • Existing Customers and Pipelines • Landowners • Communities Specific Benefits (meet new demand, eliminate bottlenecks, access new supplies, lower cost to consumers, new interconnects to improve grid, provide competitive alternatives, increase electric reliability, clean air objectives, etc) Need and Market (precedent agreements, demand projections, etc) Condemnation Impact Federal Energy Regulatory Commission 13 FERC Process FERC’s process is a model of efficiency Pre-filing Application Analysis Post-authorization This process works for all stakeholders Project sponsors Federal, state, and local agencies NGOs Landowners Other concerned entities Federal Energy Regulatory Commission 14 Overview of Shale Play Development Natural gas production from hydrocarbon rich shale formations is one of the most rapidly expanding trends in domestic production. As traditional sources of natural gas continue to be depleted, new sources of supply, such as shale gas, must be developed in order to continue to meet the energy demands. Hydraulic fracturing and horizontal drilling have allowed previously unrecoverable sources of gas to be developed in an economical and environmental safe manner. Because it is located in both traditional and non-traditional production locations, shale gas development presents unique economic opportunities to maximize each state’s resources in a manner that is environmentally safe. The development of natural resources expands the economy of local communities by creating jobs and providing residents increased capital through royalty payments. State governments benefit from increased natural gas production through increased tax revenues. Because of its role in alternative energy strategies and reducing greenhouse gas emissions, natural gas use is expedited to continue to rise. Federal Energy Regulatory Commission 15 Future U.S. Gas Supply Alaska LNG Imports Net Pipeline Imports Gas Shales Coalbed Methane Conventional Offshore Source: EIA Annual Energy Outlook 2010 and EIA spreadsheets. Federal Energy Regulatory Commission 16 The growing importance of shale gas is substantiated by the fact that, of the 1,836 Tcf of total potential resources, shale gas accounts for 616 Tcf (33%). PGC Resource Assessments, 1990-2008 Total Potential Gas Resources (mean values) Source: Report of the Potential Gas Committee (December 31, 2008) “Potential Supply of Natural Gas in the United States” June 18, 2009 Federal Energy Regulatory Commission 17 Regional Resource Assessment Traditional Coalbed Total U.S. 1,673.4 Tcf 163.0 Tcf 1,836.4 Tcf 374.4 51.9 51.3 2.6 24.0 16.6 274.9 7.5 193.8 57.0 353.5 17.3 455.2 3.4 Source: Report of the Potential Gas Committee (December 31, 2008) “Potential Supply of Natural Gas in the United States” June 18, 2009 Federal Energy Regulatory Commission 18 United States Shale Basins Maximum Reported Gas-in-Place (in Tcf) Bakken Shale (15) Niobrara Shale (13) Baxter/Lewis/Mowry Shale (265) Monterrey/McClure Shale Total Shale Gas 3,700 Tcf Antrim Shale(76) Devonian Shale (244) Caney Woodford Shale Shale (101) Cane Creek Shale Lewis Shale (61) New Albany Shale (160) Huron Shale Palo Duro Shale (42) Barnett and Woodford Shale (265) Marcellus Shale (1,500) Fayetteville Shale (52) Barnett Shale (168) Floyd/Chattanooga Shale (22) Haynesville Shale (717) Pearsall Shale Note: While some shale basins have been identified with reserve estimates, others have no reserve data available. Source: Energy Velocity and Navigant Consulting’s North American Natural Gas Supply Assessment – July 4, 2008 Federal Energy Regulatory Commission 19 Shale Gas Estimates Shale Gas Production In Bcf/d 9 8 7 6 5 4 3 2 1 0 2005 Woodford 2010 Barnett 2015 Fayetteville 2020 2025 2030 Haynesville Marcellus Eagle Ford Source: ICF International Data Base and Compass Report April 2010 Federal Energy Regulatory Commission 20 Summary of FERC Related Projects and Potential Projects Impacting the Shale Basins Source: FERC Federal Energy Regulatory Commission 21 Major Projects to move shale gas out of East Texas and Arkansas. Fayetteville Shale Woodford Shale MarkWest 638 MMcf/d ** Approved *** Pending/ Pre-filing Kinder Morgan Energy Fayetteville Express 2,000 MMcf/d** Barnett Shale Boardwalk Gulf Crossing 1,732 MMcf/d Midcontinent 1,500 MMcf/d & 300 MMcf/d Haynesville Shale Tiger Pipeline 1,250 MMcf/d ** & 400 MMcf/d*** Texas Gas Transmission Fayetteville/Greenville & Compression 1,609 MMcf/d & 2,300 MMcf/d CenterPoint Carthage to Perryville 1,237 MMcf/d & 280 MMcf/d & 274 MMcf/d LaCrosse (Enbridge) (1,800 MMcf/d) *** Gulf South Pipeline Haynesville/Perryville Expansion 556 MMcf/d** Trunkline Gas North Texas Expansion 510 MMcf/d** Southeast Supply Header 1,140 MMcf/d & 175 MMcf/d & 360 MMcf/d** Source: Based on data from Ventyx Velocity Suite, July 2010 & FERC applications Federal Energy Regulatory Commission 22 Summary of Natural Gas Facilities Impacting the Barnett, Woodford, Fayetteville, and Haynesville Shale Basins Source: FERC Federal Energy Regulatory Commission 23 Marcellus Shale Projects Corning Marcellus Shale Projects Tennessee’s Station 219 Leidy Rivervale Linden Oakford Lambertville Appalachian Basin Clarington Princeton Transco’s Comp Sta 195 Source: FERC Source: FERC Approved or Pending Projects Appalachain Expansion (NiSource) Line 300 Exp (Tennessee) NiSource/MarkWest & NiSource N Bridge, TIME 3, TEMAX (TETCO) Appalachian Gateway (Dominion) Line N, R & I Project (NFG) Tioga County Extension (Empire) Low Pressure East-West (Equitrans) East-West – Overbeck to Leidy (NFG) NJ-NY Project (TETCO & Algonquin) Sunrise Project (Equitrans) Potential Projects TEAM 2012 Project (TETCO) Northeast Upgrade (Tennessee) West to East Connector (NFG) NYMarc (Iroquois) New Penn (NiSource) Marcellus to Manhattan (Millennium) Northern Access (NFG) NSD Project (Tennessee) Federal Energy Regulatory Commission Appalachia to Market Expansion & TEAM 2013 (TETCO) Keystone (Dominion/Williams) Marc I Hub Line (Inergy) Northeast Supply Link (Transco) Northeast Supply (Williams)* * Combined Transco’s Rockaway Lateral and Northeast Connector Projects 24 Summary of Natural Gas Facilities Impacting the Marcellus Shale Basin Source: FERC Federal Energy Regulatory Commission 25 Major Pipeline Projects Certificated (MMcf/d) 1. Algonquin (285, 131) 2. Islander East (285) 3. Iroquois (230,85, 100, 200) 4. Columbia (135,270) 5. Algonquin (140) 6. Transcontinental (105) 7. Transcontinental (130) 8. Transcontinental (100,142, 250) 9. Columbia (94) 10. Maritimes (80,360,418) 11. Algonquin (301) 12. Tennessee (500) 13. Mill River (800) 14. Tennessee (136) 15. Texas Eastern (900) 16. Algonquin (325) 17. Algonquin (800) 18. Broadwater (1,000) 19. Mid-Atlantic (1,500) 20. Algonquin (140, 281) 21. Tennessee (350) January 2000 to July 2010 Northwest (162,113) NorthernStar (1,300) Northwest (224) Pacific Connector (1,000) Tuscarora (96) 22. CIG (282,92) 23. CIG (85,133,118,105,899,130) 24. TransColorado (125,300,250) 25. WIC (120,116,675,350,556,330,230,285) 26. El Paso (140) 27. Rendezvous (300) 28. Entrega (1,500) 29. Northwest (450) 30. Rockies Express West (1,800) 31. White River Hub (2,565) 32. Northwest (582) 33. Rockies Express (200) 34. Sundance Trail (Northwest) (150) 35. Diamond Mountain (WIC) (180) WBI (80) GTN (207) Northwest(191) Ruby Pipeline (1,456) Questar Overthrust (550, 750, 300) 27 34 25 28 32 8 24 622 29 Kern River (282) Kern River (135,886,145) El Paso (502) North Baja (500, 81 2,700) Trailblazer (324) 31 23 26 Trunkline (510) El Paso (230,320,620,150) Center Point (1,237, 280, 274) Discovery (200) Tiger (2,000) Natural (200,300) Oasis Pipeline Port Arthur (3,000) (600) Trunkline (200) Point Comfort (1,000) Dominion South (200) San Patricio (1,000) 112.54 BCF/D Total 16,021 Miles TETCO (250) Rockies Express East (1,800) Cheyenne Equitrans Midwestern Plains (560,170) (130) (120) MarkWest (638) Center Southern Trails (120) Point (113,132) Midcontinent (1500, 300) Transwestern (150,375,500) Sonora (1,000) Tennessee (320) Vista del Sol (1,100) 16 Millennium (525) NFS/DTI (150) TETCO (150, 150, 455) 33 30 35 Questar (272,102,175) Dominion (700) 14 Empire(250) East Tenn. (86) Cameron (1,500,850) 12 9 10 20 13 17 1 11 5 8 18 721 32 6 15 19 4 Columbia Transco (165) (172, 100) East Tenn. (225) East Tenn. (276) East Tenn. (170) Transco (204,236,323,309) Southern/Magolia (82) Southern (336,330, 375) Florida Gas (239,270,100, 820) Gulf LNG (1,500) Tennessee (400,200,100) Calypso (832) Cheniere Creole Trail (2,000) Ocean Express(842) Trunkline(1,500) Port Dolphin Kinder Morgan (3,395) (1,200) Gulfstream Golden Pass (2,500) (1,130, 345, 155) Cheniere Corpus Christi (2,600) Federal Energy Regulatory Commission 26 All Storage Projects (Capacity in Bcf) ANR Pipeline (14.7) ANR Pipeline (17.0) Bluewater (29.2) NFG (8.5) UGI (14.7) Dominion (4.4) Dominion (9.4) Columbia (5.7) SemGas (5.5) Arlington Storage (7.0,1.4) Central NY (13.0) Dominion (0.1) Dominion (18.0) Steckman Ridge (12.0) UGI LNG (0.2, 1.0) Chestnut Ridge (25.0) Texas Eastern (3.0) Tenasda (17.5) Northern Natural SourceGas (10.4) (8.5, 2.1, 2.0) Ryckman Creek (25.0) Leader One (7.5) Magnum Gas (11.2) CIG (1.0) Natural (10.0) Magnum Gas(42.0) Blue Sky (4.4) ANR Pipeline (70.0) East Cheyenne (18.9) Columbia (6.7) Unocal Windy Hill (6.0) CIG (7.0) KM (1.0) Columbia (12.4) Southern Star (2.6,1.4)Texas Gas (8.2, 4.1) Texas Gas (11.3) Northern Natural (6.0) Mississippi Hub (3.0) Orbit (5.0) Texas Gas (8.25) Tricor Ten 22.4) Mississippi Hub (12.0, 15.0) Natural (10.0) Arizona Natural Gas (3.5) ANGS/El Paso (20.0) Multifuels (8.0) Sawgrass (25.0) CenterPoint (3.0) Bobcat (12.0,1.5, 24.0) Atmos (15.0) Bobcat (2.1, 9.3) (16.4) Enstor-Waha Storage (7.2) Turtle Bayou Cadeville (12.0) AGL (16.0) Enstor (30.0) Spectra Energy (6.5) Natural (10.0) Certificated Since 1/1/2005 Currently Pending Pre-Filing On The Horizon Tres Palacios (36.0) Enterprise (10.0) Starks (19.2) Liberty (17.6, 18.9) Pine Prairie (24.0) Egan Hub (8.0) PetroLogistics (6.0, 5.3, 4.6) Perryville (15.0) Federal Energy Regulatory Commission Monroe Gas (12.0) Four Mile Creek (8.0) Tarpon Whitetail (8.6) Freebird (6.1) County Line (6.0) Caledonia (11.7, 5.2) Southeast Gas Storage (24.7) Sempra Energy (2.5) Falcon MoBay (50.0, 9.6) SG Resources (12.0) SG Resources (16.0) Petal (5.0) Copiah (12.2) EnergySouth (12.0) Floridian Natural (8.0) BCR (15.0) Petal (10.0) Petal (4.0) Petal (2.8) Leaf River Energy (32.0) Black Bayou (15.0) 27 North American LNG Import Terminals Existing M A F B, I C, L O H,K D G J E Canada M. Saint John, NB: 1.0 Bcfd, (Repsol/Fort Reliance Canaport LNG) N US Jurisdiction As of August 3, 2010 * 28 Expansion of an existing facility U.S. A. Everett, MA : 1.035 Bcfd (GDF SUEZ - DOMAC) B. Cove Point, MD : 1.0 Bcfd (Dominion - Cove Point LNG) C. Elba Island, GA : 1.2 Bcfd (El Paso - Southern LNG) D. Lake Charles, LA : 2.1 Bcfd (Southern Union Trunkline LNG) E. Gulf of Mexico: 0.5 Bcfd, (Excelerate Energy - Gulf Gateway Energy Bridge) F. Offshore Boston: 0.8 Bcfd, (Excelerate Energy – Northeast Gateway) G. Freeport, TX: 1.5 Bcfd, (Cheniere/Freeport LNG Dev.) H. Sabine, LA: 2.6 Bcfd (Cheniere/Sabine Pass LNG) I. Cove Point, MD : 0.8 Bcfd (Dominion – Cove Point LNG - Expansion)* J. Hackberry, LA: 1.8 Bcfd (Sempra - Cameron LNG) K. Sabine, LA: 1.4 Bcfd (Cheniere/Sabine Pass LNG – Expansion)* L. Elba Island, GA: 0.4 Bcfd (El Paso – Southern LNG –Phase A Expansion)* FERC MARAD/USCG Federal Energy Regulatory Commission Mexico N. Altamira, Tamulipas: 0.7 Bcfd, (Shell/Total/Mitsui – Altamira LNG) O. Baja California, MX: 1.0 Bcfd, (Sempra – Energia Costa Azul) 28 North American LNG Import Terminals Approved APPROVED - UNDER CONSTRUCTION U.S. 1. Sabine, TX: 2.0 Bcfd (ExxonMobil - Golden Pass) 2. Elba Island, GA: 0.5 Bcfd (El Paso - Southern LNG Expansion)* 3. Pascagoula, MS: 1.5 Bcfd (El Paso/Crest/Sonangol - Gulf LNG Energy LLC) 4. Offshore Boston, MA: 0.4 Bcfd (GDF SUEZ- Neptune LNG) APPROVED - UNDER CONSTRUCTION Mexico 5. Manzanillo, MX: 0.5 Bcfd (KMS GNL de Manzanillo) 21 22 4 16 9 18 11 17 2 23 3 10 12 1 1314 7 8 6 15 19 20 US Jurisdiction 5 As of August 3, 2010 * 29 FERC MARAD/USCG Expansion of an existing facility Federal Energy Regulatory Commission APPROVED - NOT UNDER CONSTRUCTION U.S. - FERC 6. Corpus Christi, TX: 1.0 Bcfd (Occidental Energy Ventures – Ingleside Energy) 7. Corpus Christi, TX: 2.6 Bcfd, (Cheniere – Corpus Christi LNG) 8. Corpus Christi, TX : 1.1 Bcfd (4Gas - Vista Del Sol) 9. Fall River, MA : 0.8 Bcfd, (Hess LNG/Weaver's Cove Energy) 10. Port Arthur, TX: 3.0 Bcfd (Sempra) 11. Logan Township, NJ : 1.2 Bcfd (Hess LNG - Crown Landing LNG) 12. Cameron, LA: 3.3 Bcfd (Cheniere - Creole Trail LNG) 13. Freeport, TX: 2.5 Bcfd (Cheniere/Freeport LNG Dev. Expansion)* 14. Hackberry, LA: 0.85 Bcfd (Sempra - Cameron LNG Expansion)* 15. Port Lavaca, TX: 1.0 Bcfd (Gulf Coast LNG Partners – Calhoun LNG) 16. Bradwood, OR: 1.0 Bcfd (Northern Star Natural Gas LLC – Northern Star LNG) 17. Baltimore, MD: 1.5 Bcfd (AES Corporation – AES Sparrows Point) 18. Coos Bay, OR: 1.0 Bcfd (Jordan Cove Energy Project) U.S. - MARAD/Coast Guard 19. Gulf of Mexico: 1.0 Bcfd (Main Pass McMoRan Exp.) 20. Offshore Florida: 1.2 Bcfd (Port Dolphin Energy - Hoëgh LNG) Canada 21. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy TransCanada/PetroCanada) 22. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France) Mexico 23. Baja California, MX : 1.5 Bcfd (Sempra - Energia Costa Azul Expansion) 29 North American LNG Import Terminals Proposed 3 1 2 PROPOSED TO FERC 1. Robbinston, ME: 0.5 Bcfd (Kestrel Energy - Downeast LNG) 2. Astoria, OR: 1.5 Bcfd (Oregon LNG) 3. Calais, ME: 1.2 Bcfd (BP Consulting LLC) PROPOSED TO MARAD/COAST GUARD 4. Gulf of Mexico: 1.4 Bcfd (TORP Technology - Bienville LNG) 5. Offshore Florida: 1.9 Bcfd (GDF SUEZ - Calypso LNG) 4 5 US Jurisdiction FERC MARAD/USCG As of August 3, 2010 30 Federal Energy Regulatory Commission 30 Market Knows Best FERC is not the market FERC will present a “menu” of infrastructure solutions that are: In the public interest Will cause the least environmental impact Will be safe The market is in the best position to select the infrastructure projects that get built Federal Energy Regulatory Commission 31 Conclusions The Commission process has benefited all stakeholders in natural gas projects More needs to be done Turn opposition into understanding Continue to refine the siting process More infrastructure is coming Alaska Pipes from non-traditional sources Hydrokinetics Electric transmission Federal Energy Regulatory Commission 32 Contact Info: Michael J. McGehee Director, Division of Pipeline Certificates Office of Energy Projects Federal Energy Regulatory Commission michael.mcgehee@ferc.gov 202-502-8962 Federal Energy Regulatory Commission 33