POWER August 2018 - 37

NATURAL GAS
vember, " which is within the 5-year range. "
The U.S. natural gas industry is different
from other industries that supply generating
fuels. Gas has three major markets. Gas supplies
home heating, industrial heat and feedstock,
and, most recently, electricity. While
that was once the role of coal, which supplied
home and industrial heat and light (through
coal gas in the 19th century), coke for steel
production, and electric generation, today
U.S. coal's markets are almost entirely electric
generation and steel production.
History of a Versatile Fuel
While natural gas wells have been known for
centuries, it took the development of pipelines
to turn gas into a ubiquitous energy
source. The NaturalGas.org website details
the history of natural gas development. It
notes, " Without any way to transport it effectively,
natural gas discovered [pre-World
War II] was usually just allowed to vent into
the atmosphere, or burnt, when found alongside
coal and oil, or simply left in the ground
when found alone. "
After the war, welding techniques and
advances in metallurgy and steel pipe rolling
led to a boom in gas pipeline construction
and well development (Figure 2). " This
post-war pipeline construction boom lasted
well into the '60s, and allowed for the construction
of thousands of miles of pipeline
in America. "
Federal regulation of the gas industry began
in 1938, when Congress viewed natural
gas production, transportation, and sale as a
natural monopoly, much at it had a few years
earlier seen electricity production and distribution.
The Natural Gas Act gave the Federal
Power Commission, the predecessor to
FERC, authority over natural gas, including
federal price controls.
Price controls applied only to interstate
gas markets. In-state pipelines were free to
respond to market prices. Gas shortages in the
interstate market (while plentiful gas flowed
in states such as Texas) led Congress in 1978
to enact the Powerplant and Industrial Fuel
Use Act (PIFUA). It banned gas for electric
generation, preserving it for so-called " higher
uses " such as home heating. One of the
unintended consequences (perhaps intended
by some parties) was the construction of new
nuclear generating plants in the middle of
major natural gas fields in Texas, Louisiana,
and Arkansas.
By the 1990s, it became clear that federal
price controls and limits on use of natural
gas did not serve the national interest. In
1987, Congress repealed PIFUA. In 1989,
Congress ended wellhead price controls on
natural gas, eliminating all price controls by
1993. FERC continued to approve natural
August 2018 | POWER
2. A fascinating web. The U.S. natural
gas pipeline network is a highly integrated
system that moves gas throughout the
states. The pipeline network has about 3 million
miles of mainline and other pipelines that
link natural gas production areas and storage
facilities with consumers. Source: EIA
industry (Figure 3). When he won the election
and came into office, he soon offered
an antidote to what he viewed as a " war on
coal. "
The Department of Energy (DOE) folgas
pipeline siting. The modern gas industry
is the result. Today's gas industry is fully
competitive, with markets setting prices and
long-term contracts governing the market.
Technology in the mid-2000s created a gas
revolution. After years of experimentation
and technology advances, gas drillers learned
how to use horizontal well drilling and water
under extreme pressures to fracture impervious
shale deposits deep underground, releasing
copious amounts of gas. In addition, in
some of the new gas-producing regions, particularly
in the Mid-Atlantic Marcellus shale,
fracking also produced valuable natural gas
liquids that reduced the costs of developing
the gas to exceptionally low levels. In other
regions, such as the Permian Basin and North
Dakota, the new fracking technology also
produced large amounts of crude oil.
By about 2008, new gas supplies transformed
electric generation, pushing coal
out of the market as the low-cost fuel. Gas
plants, including simple cycle and combined
cycle technology, were so inexpensive
that new coal was not economical. Existing
coal-fired plants and nuclear units also were
in jeopardy.
Over a decade, gas has replaced coal as the
dominant electric generating fuel. Neither
can claim to be the unassailable king of the
generating hill, but it appears that gas is in
ascendance and coal is in decline.
Clouds on the Gas Generation
Horizon
The future of natural gas for electric generation
looks favorable but there are three, interconnected,
clouds on the horizon. They
are: Donald Trump, gas deliverability, and
cybersecurity.
Donald Trump. First up is President
Trump. During his 2016 campaign, Trump
pledged to aid the stumbling coal industry
and coal miners, blaming prior administration
regulatory policy for the decline of the
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lowed up in September 2017 with a proposed
rulemaking, directing FERC to overturn its
policies on competitive wholesale markets to
accommodate uneconomic coal and nuclear
plants based on the concept that coal and
nukes had large onsite fuel supplies, making
them more resilient to disruptions than gas
and renewables. The proposal aimed to keep
coal plants running. FERC, including four
new Trump appointees, unanimously rejected
the DOE proposal in early January 2018,
debunking the resilience argument.
In June, the Trump administration resurrected
its resilience claim, offering a draft
policy statement aimed at bypassing FERC.
The draft proposed a regime to keep failing
coal and nuclear plants running under emergency
provisions under section 202(c) of the
Federal Power Act and the 1950 Defense
Production Act (DPA). The DOE draft says,
" In particular, resources that have a secure
on-site fuel supply, including nuclear and
coal-fired power plants, as well as oil-fired
and dual-fuel units with adequate storage,
are essential to support the Nation's defense
facilities, critical energy infrastructure, and
other critical infrastructure. " As of late June
2018, the draft has not emerged as administration
policy.
The second-generation coal rescue created
immediate outrage from gas producers,
transporters, and electric generators. The gas
industry quickly assembled a lobbying consortium
of what could be considered strange
bedfellows to oppose the administration
plan. It included the American Petroleum
Institute, Advanced Energy Economy, American
Council on Renewable Energy, Ameri3.
As the world turns. While the
Obama administration's policies promoted
natural gas as a cleaner alternative to coal, the
Trump administration has focused its efforts
on saving the coal industry. In this image,
Obama was speaking at the TransCanada Stillwater
Pipe Yard near Cushing, Oklahoma, expressing
the need for more pipelines. Source:
White House/Pete Souza
http://www.NaturalGas.org http://www.powermag.com
POWER August 2018

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