SECTION 5 - NATURAL GAS

Transcription

1 Virginia s Natural Gas Prviders SECTION 5 - NATURAL GAS Natural gas is used as an industrial fuel t heat and cl hmes and businesses, t generate electricity, and fr transprtatin. Natural gas is transmitted frm prductin areas t ppulatin centers thrugh transmissin pipelines and distributed t end users by lcal distributin utilities (als called LDCs r Lcal Distributin Cmpanies). Ten natural gas LDCs in Virginia serve custmers in assigned territries. Investr-wned LDCs include Clumbia Gas f Virginia, Washingtn Gas, Virginia Natural Gas, Ranke Gas, Atms Energy, Appalachian Natural Gas Distributin Cmpany, and Suthwestern Virginia Gas Cmpany. Municipal LDCs include the Cities f Richmnd, Charlttesville, and Danville. LDCs primarily sell gas t the residential and cmmercial markets. Large natural gas users have been able t cntract directly fr natural gas purchases under Federal Energy Regulatry Cmmissin rules. The LDCs serve apprximately 37 percent f husehlds and 90,000 cmmercial natural gas custmers. The LDCs perate apprximately 20,000 miles f distributin pipelines. Figure 5-1: Service Areas f Virginia Natural Gas Distributin Cmpanies 1 1 State Crpratin Cmmissin, June 23, Sectin 5 Natural Gas Page 5-1

2 Natural Gas Cnsumptin In 2008, Virginia cnsumers used billin cubic feet (BCF) f natural gas. An additinal 13 billin cubic feet was cnsumed fr lease and pipeline peratins. Natural gas use increased n average by 0.8 percent per year ver the last decade. Grwth was primarily attributable t new custmer grwth and use f natural gas fr electric generatin. The grwth pattern changed and demand drpped by nearly 6 ½ percent frm 2007 and 2008 primarily attributable t the ecnmic dwnturn and warmer than nrmal winter weather. Table 5-1: Natural Gas Cnsumptin, (millin cubic feet) 2 Year All Cnsumers Residential Cmmercial Industrial Vehicle Fuel Electric Pwer ,244 73,905 61,895 85, , ,233 63,186 58,283 92, , ,269 69,189 61,516 95, , ,975 79,701 66,098 76, , ,407 70,249 59,809 65, , ,351 75,476 62,699 73, , ,009 85,330 64,004 69, , ,307 82,755 64,518 72, , ,885 85,355 65,838 73, , ,786 71,693 62,352 70, , ,711 80,957 66,444 71, , ,355 79,725 67,006 62, ,983 Figure 5-1: Natural Gas Cnsumptin Virginia Natural Gas Cnsumptin 350, ,000 Millin CF 250, , , ,000 All Cnsumers Residential Cmmercial Industrial Vehicle Fuel Electric Pwer 50, EIA. Natural Gas Navigatr. June 23, 2010 Sectin 5 Natural Gas Page 5-2

3 Natural gas cnsumptin in Virginia shuld grw ver the next ten years. Dminin has included cnstructin f six new natural gas fired generatin plants thrugh 2020 in its Integrated Resurce Plan. Nn-utility prducers may als cnstruct new natural-gas fired plants t serve Dminin and ther electricity markets. Additinal retail cnsumers will hk up t natural gas distributin systems as Virginia s ppulatin grws. Transprtatin uses may increase demand fr natural gas. Natural gas is an efficient fuel fr fleet uses such as schl bus, public transit, and lcal fleet services. This use may create new markets fr Virginia natural gas. Virginia s Natural Gas Utility Regulatry Structure Under traditinal rate regulatin, LDCs, in respnse t being given a mnply service area, are required t ffer service at just and reasnable rates and are limited t earn a maximum rate f return set thrugh rate cases befre the State Crpratin Cmmissin (SCC). Starting in 2000, LDCs were authrized t ffer all custmers direct access t natural gas suppliers, called retail supply chice. Washingtn Gas and Clumbia Gas ffer this chice t all custmers. In 2008, 7.9% f eligible residential custmers and 22.5 percent f eligible cmmercial custmers participated in the chice prgrams. 3 LDCs have the pprtunity t enter int perfrmance-based ratemaking (PBR) agreements that allw higher rates f return n meeting perfrmance standards. Clumbia Gas, Virginia Natural Gas and Washingtn Gas have used SCC apprved PBR plans. Natural gas LDCs are authrized t undertake Cnservatin and Ratemaking Efficiency (CARE) prgrams t decuple earnings frm the vlume f gas sld. Rate decupling is cnditined upn adptin f an SCC apprved plan fr prmting and investing in cnservatin and efficiency by the cmpany s custmers. As f summer 2010, Virginia Natural Gas and Clumbia Gas have implemented CARE plans. Virginia enacted the Steps t Advance Virginia's Energy Plan (SAVE) prgram in 2010 t prvide timely cst recvery fr large-scale replacement f aging lcal distributin pipeline infrastructure. 3 EIA. Retail Unbundling Virginia. May 16, Sectin 5 Natural Gas Page 5-3

4 Natural Gas Transmissin Natural gas cnsumed in Virginia cme frm three main surces: The Gulf f Mexic and ther suthern supply surces thrugh the Transc natural gas transmissin pipeline; Virginia and ther Appalachian natural gas prductin thrugh the Spectra pipeline system in Suthwest Virginia and the Clumbia Gas Transmissin pipeline system thrugh West Virginia t Nrthern Virginia; and The Cve Pint Liquefied Natural Gas (LNG) imprt facility in Maryland thrugh the Dminin/Virginia Natural Gas pipeline serving Eastern Virginia. There are apprximately 2,950 miles f natural gas transmissin pipelines in Virginia. Figure 5-3: Majr Natural Gas Pipelines in Virginia 4 4 Mdified frm VEPT. Majr Natural Gas Pipelines. June 23, 2010 Sectin 5 Natural Gas Page 5-4

5 Table 5-2: Principal Natural Gas Pipeline Cmpanies Serving the Virginia 5 Pipeline Name Interstate & Imprting Pipelines Clumbia Gas Transmissin C Dminin Cve Pint LNG LP Dminin Transmissin Crp East Tennessee Natural Gas C NORA Gas Transmissin C Transcntinental Gas Pipeline C Intrastate Pipelines** Virginia Natural Gas C Principal Supply Surce(s) Suthwest, Appalachia LNG Imprts, Interstate System Suthwest, Appalachia Interstate System Interstate System Suthwest Interstate System Figure 5-4: Nrtheast Regin Natural Gas Pipeline Netwrk Natural gas cmpanies have added new pipeline capacity acrss the state in recent years, including: Virginia Natural Gas HRX pipeline that prvided a third pipeline water crssing in Hamptn Rads; 5 The pipeline table and fllwing tw pipeline figures are taken frm EIA. Abut US Natural Gas Pipelines. June 23, 2010 Sectin 5 Natural Gas Page 5-5

6 Spectra s Patrit Line frm the East Tennessee Line t Suthside Virginia and Nrth Carlina; and Spectra s Jewell Ridge Pipeline t deliver natural gas frm Virginia s gas prductin areas t the East Tennessee line and Saltville natural gas strage facility. Spectra is adding additinal pipeline capacity t the East Tennessee Pipeline t serve a new gas-fired pwer plant TVA is cnstructing near the Virginia brder. Natural Gas Prices Virginia s residential cnsumers paid n average $16.20/thusand cubic feet (MCF) in Cmmercial custmers paid n average $12.98/MCF, industrial cnsumers paid n average $11.49/MCF, and utilities paid n average $10.87/MCF. Figure 5-6: Average Natural Gas Price by Sectr 6 Natural gas prices in Virginia have traditinally been higher than in prducing sectins f the cuntry, such as the Sutheast and Rcky Muntain areas. The higher price is largely attributable t the need t transprt the natural gas lng distances t Virginia. This cst structure may change as new prductin cmes n line frm the Marcellus shale depsits in the East that have lwer transprtatin csts. 6 VEPT. Natural Gas and Cal Bed Methane Average Price by Sectr. June 23, 2010 Sectin 5 Natural Gas Page 5-6

7 Table 5-3: US Reginal Natural Gas Prices Sectr/Regin Residential New England Middle Atlantic East Nrth Central West Nrth Central Suth Atlantic East Suth Central West Suth Central Muntain Pacific U.S. Average The DOE EIA predicts natural gas prices will remain stable ver the next 10 years, estimating that the average delivered price fr natural gas in the United States will be $10.61/thusand cubic feet fr all end users. 7 Figure 5-7. EIA Natural Gas Price Prjectin 7 EIA, Annual Energy Outlk Natural Gas Supply, Dispsitin, and Prices. May 16, Sectin 5 Natural Gas Page 5-7

8 Efficiency and Cnservatin Natural gas is mre efficient as a direct fuel fr uses such as heating and transprtatin than when it is burned as a fuel t generate electricity fr thse uses. Prviding fr direct use f natural gas can imprve verall energy efficiency f energy use in the Cmmnwealth. Lcal distributin natural gas utilities must include plans t prmte and invest in natural gas cnservatin and efficiency as part f Cnservatin and Ratemaking Efficiency (CARE) alternate ratemaking plans. As f summer 2010, Virginia Natural Gas and Clumbia Gas have implemented CARE cnservatin and efficiency prgrams fr their custmers. Other lcal distributin natural gas utilities have implemented cnservatin and efficiency prgrams fr their custmers utside f the CARE prgram, such as the City f Richmnd s nline hme energy audit and Washingtn Gas energy efficiency and safety prgram. Virginia has included natural gas appliances and equipment in its energy efficiency rebate prgrams funded thrugh ARRA grants. Custmers are receiving rebates t replace ld, less efficient appliances and equipment with mre efficient, Energy Star appliances and equipment t reduce future natural gas bills. Natural Gas Prductin Virginia s natural gas explratin and prductin cmpanies prduced billin cubic feet f natural gas frm 6,428 wells in This amunt is equal t 43 percent f the natural gas cnsumed in Virginia in Apprximately 80 percent f Virginia natural gas prductin is frm calbed methane wells. The remaining 20 percent is prduced frm shale frmatins lcated belw the cal seams in Suthwest Virginia. Figure 5-8: Appalachian Basin Calbed Methane Frmatins Sectin 5 Natural Gas Page 5-8

9 Figure 5-9: Appalachian Basin Natural Gas Shale Frmatins Virginia natural gas prductin has increased by an average f 12.4 percent per year ver the last 10 years. Mst f the increase has been frm expanded calbed methane prductin in Buchanan, Wise, and Dickensn Cunties. 8 Virginia ranked 16 th highest f the 32 states with natural gas prductin in Figure 5-10: Natural Gas Prductin in Virginia, VEPT. Gas Prductin By Cunty. 9 VEPT. Virginia Ttal Histric Gas Prductin. Sectin 5 Natural Gas Page 5-9

10 Prductin may increase if the Marcellus Gas frmatin in Virginia is able t prduce marketable quantities f natural gas. Figure 5-11: Marcellus Shale Frmatins Natural gas prduced in Virginia is cllected in gathering pipeline systems. These systems include lw pressure pipelines frm wells t cmpressin facilities where the gas is cleaned and cmpressed. After being cmpressed, the gas is fed int the interstate pipeline netwrk where it is delivered t custmers. Natural gas prduced in Virginia is sld in Tennessee, Suthwestern Virginia, and Nrtheastern states because there is limited pipeline capacity t deliver the gas frm Suthwestern Virginia t the Central and Eastern Virginia markets. The capacity t deliver Virginia natural gas t the Nrthern, Central, and Hamptn Rads regins f Virginia increased with the cnnectin f the Spectra Patrit Pipeline t the Transc interstate pipeline. Natural gas prducers can serve up t 35 custmers and public schls in areas nt lcated in a lcal natural gas distributin cmpany service territry, allwing custmers in Suthwest Virginia nt cvered by a public utility t receive natural gas service. Prices fr Appalachian regin natural gas have stayed in the high $3 t lw $4/thusand cubic feet range in The Dminin Suth hub price was $4.42 fr the week f May 15, Future prices will depend n factrs such as demand, price f il, and reginal natural gas prductin levels. As shwn in Figure 5-7 abve, the EIA prjects natural gas wellhead prices will increase annually ver the next decade, increasing frm $4.06/thusand cubic feet in 2010 t $7.18 in NTI Weekly Natural Gas Price Index, Firm Physical Natural Gas Price Bulletin Histry, Fr Natural Gas Delivered at Dminin- Suth. May 16, EIA, Annual Energy Outlk Natural Gas Supply, Dispsitin, and Prices. May 16, Sectin 5 Natural Gas Page 5-10

11 Offshre Natural Gas There is an estimated 1.66 trillin cubic feet f natural gas reserves in federal waters in the Virginia administrative bundary areas ffshre Virginia. The value f natural gas in the Virginia ffshre administrative bundary areas culd ttal mre than $10 billin (1.66 trillin cubic feet at $6/thusand cubic feet). The value will depend n the actual amunt f recverable resurces and the cst f gas. Offshre natural gas prductin wuld supprt infrastructure expansin in Hamptn Rads, attracting new business and creating jbs in the supply chain and explratin and prductin. Develping ffshre natural gas resurces is dependent n an extensive federal lease sale and permitting prcess. Offshre extractin will need t be cmpatible with Department f Defense peratins in Virginia ffshre waters. Federal-state cperatin can lead t develping a cmpatible explratin and prductin plan. The Bureau f Ocean Energy Management, Regulatin and Enfrcement (frmally Minerals Management Service) has suspended ffshre leases until the causes f the 2010 Deepwater Hrizn accident and il spill are better understd and suitable prtectins are put in place. Figure 5-9: Mid-Atlantic OCS Prpsed Lease Area Surce: U.S. Department f the Interir, MMS, Prpsed Final Prgram f the Outer Cntinent Oil and Gas Leasing Prgram, , April 2007, map 9, p. 68. Sectin 5 Natural Gas Page 5-11

12 Virginia s castal regins may hld prducible methane hydrate resurces if the technlgy is develped t prduce the methane hydrates frm gelgic frmatins fund ffshre Virginia. The technlgy t prduce these resurces is nt expected t be develped in the 10-year term f this Plan. Natural Gas Strage Virginia is hme t tw undergrund natural gas strage facilities, the Spectra salt cavern strage facility in Saltville and Early Grve undergrund strage field in Sctt and Washingtn Cunties. Other undergrund natural gas strage services available t Virginia utilities and cnsumes are lcated in West Virginia, Pennsylvania, and Ohi. Dminin is ne f the largest peratrs f these undergrund natural gas strage facilities. Figure 5-12: Undergrund Natural Gas Strage Facilities Virginia LDCs perate peaking natural gas strage facilities near their lcal distributin netwrks. These facilities include cmpressed natural gas tanks, liquefied natural gas tanks, and ne undergrund prpane strage cavern. Cmpanies stre gas in these facilities when demand is lw and inject gas int the pipeline system during times f peak demand. Sectin 5 Natural Gas Page 5-12

13 Adequacy f Supply Natural gas prductin in the calfield regin shuld rise incrementally as prducers cntinue t drill new calbed methane and cnventinal shale wells in Suthwest Virginia. Virginia s natural gas reserves were estimated in 2008 t be 2,378 billin cubic feet. 13 Given current remval rates, this reserve wuld supprt prductin fr abut 20 years. 14 Additinal reserves and prductin are available in the Marcellus Shale areas west f the Shenandah Valley and ffshre. A grwing amunt f ut f state supply is available frm shale prductin areas in Pennsylvania, West Virginia, and elsewhere. The federal Energy Infrmatin Administratin predicts there shuld be adequate supplies frm new dmestic prductin fr expanded uses f natural gas. 15 Disruptins in Gulf f Mexic supply r interstate transmissin pipelines will affect multiple states including Virginia. States will need t wrk with the federal Department f Energy t crdinate respnses t supply disruptins. 13 EIA. Advance Summary: U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, 2007 Annual Reprt This annual natural gas remval rate is based n a three-year average rate f prductin fr the years based n VEPT numbers. 15 EIA. Annual En ergy Outlk, May 16, Sectin 5 Natural Gas Page 5-13