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Polar Vortex Spurs Catch-22 Workaround - Getting New England Gas Pipeline Capacity Built

This year’s polar vortex winter has once again demonstrated how New England power generators suffer from the region’s shortage of natural gas pipeline capacity during peak demand periods. The Catch-22 to-date has been that new pipelines won’t get built without firm, long-term commitments for pipeline capacity, which the New England power market doesn’t compensate generators for. Faced with rising demand and few alternatives to gas fired generation, the six state governments in the region are now proposing a novel fix: an electric-rate surcharge that would help guarantee pipeline developers the steady revenue they need to justify new projects.  Today we examine the states’ plan and its prospects.

Courtesy of the Red, White and Blue: How the US Shale Gas Boom Benefits Asian LNG Importers

Using the US natural gas production boom to promote the idea of a sustainable “global gas glut”, Asian importers have successfully managed to chip away at the longstanding oil-indexed pricing mechanism for liquefied natural gas (LNG) overthe past two years. While oil-indexation in LNG contracts will certainly not disappear overnight, the shale revolution has provided gas importers with significant negotiating leverage and a new degree of pricing flexibility. Today we examine the trend toward more US centric LNG pricing.

Miami 2017—Marcellus Natural Gas Heading to Florida, Part 2

The idea of using natural gas produced in Pennsylvania to generate power in South Florida would have been considered implausible or even unthinkable just a few years ago. But now it seems likely that by mid-2017 Marcellus-sourced gas will, in fact, be moving deep into the Southeast. Williams’ planned Atlantic Sunrise project will make its Transco mainline bi-directional as far south as Station 85 in southwestern Alabama. From there, Spectra Energy and NextEra Energy’s Sabal Trail pipeline will move Marcellus and other gas into central Florida, and NextEra’s Florida Southeast Connection line will take gas still further south. Today In the second of a two part series, we conclude our analysis of the transformational Atlantic Sunrise project.

You Crack Me Up. A Brief History of Hydraulic Fracturing

Many who write about hydraulic fracturing suggest, or state explicitly, that it is a new technology in the oil and gas industry. This can hardly be further from the truth. Indeed, it is probably the case that hydraulic fracturing is older than most of the people writing about it.  Today we begin a series on hydraulic fracturing and why it has had such a significant impact on gas and oil production over the past few years.

“You Never Give Me Your Money”—Some Common Oil & Gas Royalty Disputes

Natural gas and oil development, especially in shale plays that require a lot of wells and a lot of activity, can be inconvenient and noisy.  There are also, of course, various criticisms and protests around some of the processes used, such as hydraulic fracturing, and around the overall level of activity, such as truck traffic.  The gas and oil producing industry values strong relationships with the communities where it needs to work, and can use all the friends it can get as it takes the lead in developing the nation’s vast energy resource.  Bringing big economic benefits to those communities, which are often rural or industrial areas hard-hit by economic downturns, is clearly really important in the efforts to build those relationships and friendships.  There are a lot of different kinds of economic benefits deriving from supply development, but by far the most important to the affected landowners are the royalties resulting from private mineral rights.  Today we continue our examination of the inner workings of oil and mineral rights issues, this time considering some common oil and gas royalty disputes.

The Molecule Laws: I Fought the Law and the Law Won – Export Laws and Hydrocarbon Markets

Here at RBN, we have an often repeated view that the flood of oil and gas being produced from unconventional plays will change everything we once knew about energy markets (see Top Ten Energy Prognostications for 2014).  One such fundamental change is that the U.S. is now producing more natural gas, NGLs and some grades of crude oil than we can use (except for the past three weeks of Polar Vortex weather, of course).  Consequently the U.S. has shifted from a position of hydrocarbon shortage to one of surplus.  That is great news.  But just down the road there are potential problems developing – distortions in the markets.  Some of those surplus products can be exported, some can’t.  The rules regarding exports of these hydrocarbon products that we are living with today were all put on the books during the decades of shortage.  When you look closely at what those rules really say, you’ve got to scratch your head.  Today we begin a series to examine those rules.

“You Never Give Me Your Money”—Royalties are Critical but Complicated

There has been a great deal of publicity around royalties involved with the shale gas—stories of instant millionaires (or “shaleionaires,” as 60 Minutes called them in 2010), stories of producers reducing or even eliminating some royalty payments as the vast oversupply of natural gas took hold in the last couple of years, stories of long, excruciating negotiations to reach a royalty/lease agreement, only to find out that the seller’s side of the table didn’t actually contain the owner of the rights, and stories of neighbors turning on each other when they got radically different deals based on timing or whom they were dealing with, and so on.   Unless you have been directly involved in leasing and royalty work, a lot of it can be confusing.  So today we begin a blog series to illuminate the world of mineral rights, oil & gas leases and royalties.

Miami 2017—Marcellus Gas Heading to Florida

There will be no RBN blog published on Monday, January 20th in honor of the Martin Luther King holiday.

Spectra Energy and NextEra Energy’s planned Sabal Trail natural gas pipeline from near Transco Station 85 in southwestern Alabama to near Orlando in central Florida will do more than provide additional gas-delivery capacity to Florida and the welcomed redundancy of a third pipeline to the Sunshine State. The big news is that Williams’ Atlantic Sunrise project by July 2017 will enable large volumes of Marcellus-sourced gas to be shipped south (backwards!) along the Transco pipeline all the way to Station 85. That (and Sabal Trail) will give Marcellus producers something unthinkable until now: access to major gas users as far south as Miami. Today we lay out the basics of what is being planned.

Golden Years: The Golden Age of U.S. Natural Gas Part IV—How Much Supply Is Reasonable to Expect, and Why?

As we move into the Golden Years of U.S. natural gas, it is important to understand the long-term sustainability of such a large expansion to U.S. natural gas supplies and their uses.  Our strong conclusion is that US natural gas supply will comfortably meet expected increases in demand in the years out to 2025. And that is important, because if the rapid expansion of demand, including hotly debated sectors like LNG exports, really did start putting strain on the nation’s gas supplies, prices could be higher going forward. But if sufficient confidence exists in the ability of producers to supply enough gas to meet plausible demand scenarios for a long time to come, then stable prices can be expected (and are), which will allow some industrial demand projects to actually get built. Today’s blog concludes our series on natural gas supply and demand.

Please Come to Boston—New England Needs More Pipelines Part II

The icy “polar vortex” that swept across the US earlier this week brought freezing cold temperatures and a record 134 Bcf/d demand for natural gas on Tuesday (Jan 7, 2014). As a result natural gas prices on that day spiked over $70/MMBtu at the TRANSCO non-New York hub. New England buyers fared better - paying “only” around $35/MMBtu for their gas - largely because of a timely supply boost from a rare import cargo of LNG at the Canaport New Brunswick terminal. But these price spikes and severe stresses on the Northeast system demonstrate one more time how the pipeline network that delivers natural gas to New England remains inadequate. Today we conclude our analysis of the region’s gas pipeline situation by examining projects in the wings that together could provide the robust, reliable gas supply New England longs for.