Natural Gas & Liquefied Natural Gas (LNG)
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LNG Exports to Non-FTA Countries Approved: Freeport LNG recently became the fourth project to obtain final authorization to export LNG to non-FTA countries. The Department of Energy orders approving Freeport’s applications can be found here and here. The latest summary of domestic LNG export applications from the lower-48 states can be found here.
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Alaskan LNG Project Approved to Export to FTA Countries: The Alaska LNG project received approval to export LNG to FTA countries, although the project’s application to export LNG to non-FTA countries remains pending. Read our full post regarding the authorization for more details regarding the historic Alaskan project.
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LNG Export Applications Open For Public Comment: Two LNG export applications seeking approval to export to non-FTA countries are open for public comment until January 9, 2015. The Department of Energy dockets are Texas LNG, LLC – FE Docket No. 13-160-LNG and Venture Global LNG, LLC – FE Docket No. 14-88-LNG.
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Russian-European Natural Gas Pipeline Project Cancelled: Last week, it was reported that Russian President Putin announced the unexpected cancellation of the construction of a natural gas pipeline into Europe that had been planned for several years. Russia will build a pipeline into Turkey instead, according to reports.
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International Energy Agency’s World Energy Outlook 2014: The IEA’s recently released World Energy Outlook 2014 contains several key projections for natural gas, including: (1) global demand for natural gas will grow through 2040 except for in Europe, although imports in Europe will increase due to a decline in production; (2) LNG will double in the natural gas markets, with the number of countries exporting LNG also increasing and leading to flexibility in the markets; (3) LNG prices will remain high, presenting challenges especially with respect to gas-coal competition in Asia.
Oil
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International Energy Agency’s World Energy Outlook 2014: The IEA’s recently released World Energy Outlook 2014 warns that we should not be “lulled into a false sense of security” by current oil market conditions and identifies several key projections for oil, including: (1) global oil demand growth will increase over the next 20 years, with demand being met primarily by the U.S., Canada, Brazil and the Middle East; (2) U.S. production will grow through 2020 and then start to decline, leaving the unstable Middle East as the primary source to meet demand; (3) In order to get the required production growth out of Middle East in 2020, investments must be made now, with an estimated annual $15 billion investment required in Iraq; (4) Oil prices will have a global impact especially in areas where price levels are critical. IEA estimates that if oil prices stayed at the current levels ($80 at the time), capital spending in the U.S. would decline up to 10% in 2015, and the increase in global demand due to lower prices and corresponding decrease in global investments may produce a growing reliance on unstable Middle East countries.
Electricity
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Natural Gas – Electric Interdependency on the Rise: Recent EIA data reflects natural gas consumption by the electric industry to be on the rise, increasing by 2.6% year-over-year for the month of September. Also highlighted by the EIA is the notable rise is the use of gas-fired internal combustion engines.
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International Energy Agency’s World Energy Outlook 2014: The IEA’s recently released World Energy Outlook 2014 contains several key projections for electricity, including: (1) although electricity demand will not decrease, 40% of capacity will be retired in next 25 years (especially in Europe), giving rise to the need to replace retired plants; (2) half of global growth in new capacity will come from renewables (hydro, wind, solar), presenting reliability issues that will require significant investment, particularly in Europe.
U.S. Environmental Protection Agency (EPA)
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Proposed EPA Ozone Standards Released: During the last week of November, the EPA released proposed National Ambient Air Quality Standards (“NAAQS”) that seek to lower the permissible levels of ozone by 10 parts-per-billion – from 75 ppb to a range of 65 ppb – 70 ppb. The EPA stated that it is also seeking comment on ozone levels for the health standard as low as 60 ppb. As framed by the EPA, it wants to strengthen the NAAQS “based on extensive scientific evidence” with the goal of improving the health of children, the elderly and those with lung diseases. According to reports, opponents of the new standards point to evidence that the current levels are sufficient and lowering the levels to those proposed by the EPA “could be the most expensive regulation ever imposed on the American public,” costing billions of dollars. The EPA noted that by law it cannot consider costs in setting the standard, but acknowledged that costs to meet the standard could range as high as $16.6 billion for the nation at the lower proposed ozone levels. Comments on the proposal will be accepted for 90 days following publishing in the Federal Register. The agency will hold three public hearings in January 2015, details are forthcoming, and a final rule is expected by October 1, 2015. A brief overview of the 626-paged proposal is available here.
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Finalized Revisions to Greenhouse Gas Emissions Reporting for Oil & Natural Gas: The EPA recently issued a final rule revising the Greenhouse Gas Reporting Rules affecting oil and natural gas industries. The final rule, in pertinent part, contains revisions to “certain calculation methods, monitoring and data reporting requirements, terms and definitions, and technical and editorial errors that were identified during the course of implementation.” A summary of the final rule is available. The rule becomes effective January 1, 2015.
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Proposed Revisions to Greenhouse Gas Emissions Reporting for Oil & Natural Gas: The EPA recently released proposed modifications to the Greenhouse Gas Reporting Rules which would, in pertinent part, “add reporting of greenhouse gas emissions from gathering and boosting systems, completions and workovers of oil wells using hydraulic fracturing, and blowdowns of natural gas transmission pipelines.” A summary of the modifications is available. The EPA is taking comments on the proposed modifications.
Federal Energy Regulatory Commission (FERC)
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FERC Proposed Policy on Cost Recovery for Modernization of Natural Gas Facilities: FERC recently announced that it is taking public comments on a newly proposed policy that would permit interstate natural gas pipelines to recover capital expenditures undertaken to modernize pipeline system infrastructure to comply with regulatory requirements (particularly those imposed by the Pipeline and Hazardous Materials Safety Administration and the U.S. Environmental Protection Agency) and to ensure the reliability and safety of the system. The policy proposes the implementation of surcharge or tracker mechanisms.
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FERC Approved Additional Settlements in 2011 Southwest Blackout Case: FERC and the North American Electric Reliability Corporation continue to work towards resolution of their joint investigation into the incident known as the “2011 Southwest Blackout,” during which a power outage left millions in the Southwest in the dark for hours. At the close of November, the agencies announced reaching two settlements with CAISO and Western Area Power Administration – Desert Southwest Region for their roles in the blackout. Since July, three additional settlements had been reached with Arizona Public Service Company, Imperial Irrigation District, and Southern California Edison Company.
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U.S. Supreme Court Will Review EPA’s Mercury and Air Toxics Standards (MATS): Just before Thanksgiving, the High Court granted certiorari to review three consolidated cases (Nos. 14-46, 14-47, 14-49) challenging the MATS issued by the Environmental Protection Agency under the Clean Air Act. The MATS regulate mercury and other toxic emissions from electric utilities and carry an estimated $9.6 billion in annual compliance costs. By contrast, the estimated benefits associated with the MATS standards have been stated to be $4 to $6 million annually. The magnitude of the dispute before the Court is astounding, with 23 states challenging the regulation, 16 others and D.C. on the EPA’s side, and industry organizations and state officials also on the party roster. The Supreme Court limited its review to the following question: “Whether the Environmental Protection Agency unreasonably refused to consider costs in determining whether it is appropriate to regulate hazardous air pollutants emitted by electric utilities.”
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Class Action Lawsuits Filed to Stop Halliburton – Baker Hughes Merger: Two class action lawsuits were reportedly filed at the end of November by shareholders of Baker Hughes, Inc. in an effort to prevent the merger of the oilfield services company with Halliburton.
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Congress Probes FERC – EPA Collaboration on Clean Power Plan: Several members of Congress closed out November, declared by President Obama to be Critical Infrastructure Security and Resilience Month, with a bold statement regarding the threat posed by EPA regulations to U.S. electric grid reliability. Senator Lisa Murkowski and Representatives Fred Upton and Ed Whitfield sent a letter request to the Federal Energy Regulatory Commission (“FERC”) seeking details regarding any coordination between FERC and the U.S. Environmental Protection Agency (“EPA”) during the formulation of the EPA’s Clean Power Plan and other major environmental regulations that may impact the bulk power system. Citing conflicting accounts of the EPA’s consultation with FERC, and concerns raised in the Potential Reliability Impacts of EPA’s Proposed Clean Power Plan Report issued by the North American Electric Reliability Corporation in November, the Congressional letter requested clarification of FERC’s actual consultation with EPA and requested that FERC hold a technical conference in December to gather formal input from the DOE and stakeholders in an effort to “mitigate EPA’s failure to engage FERC and other relevant agencies.”
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Senate Committee Hearing on FERC Nominee Collette D. Honorable: On December 4, 2014, the Senate Committee on Energy & Natural Resources held a hearing regarding the nomination of Collette D. Honorable (current Chair of the Arkansas Public Service Commission and President of the National Association of Regulatory Utility Commissioners) to serve as a Commissioner of the Federal Energy Regulatory Commission. A webcast of the hearing and Nominee Honorable’s statement are available.
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House Committee Hearing Will Revisit 30 Year Old Energy Policy Legislation: The House Energy and Commerce Committee’s Subcommittee on Energy & Power will hold a hearing on December 11, 2014 titled “The Energy Policy and Conservation Act of 1975: Are We Positioning America for Success in an Era of Energy Abundance?” to explore whether the legislation is outdated and irrelevant given the current state of the country’s energy supply. Details and testimony will be available here.
In our dynamic global energy market, data is king and leading-edge information is a critical input for the development of sound policy and business strategies. We highlight several resources that recently have been made available and reflect up-to-date insight into industry data and market fluctuations:
U.S. Energy Information Administration (EIA)
International Energy Agency (IEA)
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World Energy Outlook 2014: The IEA World Energy Outlook 2014 is available, with access to the agency’s presentation video and PowerPoint highlights also available. The report covers global expectations for the oil, natural gas, coal, electricity, and nuclear industries through 2040, and it “warns against the risk that current events distract decision makers from recognising and tackling the longer-term signs of stress that are emerging in the energy system.”
