FOSSIL FUELS

Impact of New Pipeline Infrastructure Tied to Firm Capacity Contract Debates

On May 2, 2016, the Federal Energy Regulatory Commission (FERC) issued a favorable environmental assessment for the Atlantic Bridge natural gas pipeline project that would supply New England states and the Maritime provinces of Canada. The project would provide additional firm pipeline capacity required to meet Northeast market growth and has preexisting agreements to account for its entire capacity. FERC has convened a technical conference to consider wholesale market rules that encourage firm capacity contracts to facilitate pipeline expansions and projects. Electric market design changes providing ways to recover the cost of firm pipeline capacity – where needed for electric reliability – would support existing and incentivize additional pipeline infrastructure necessary to alleviate constraints.

California Addresses Gas Shortage Risks Following Aliso Canyon Leak

On April 5, 2016, California energy agencies released an action plan identifying measures to preserve gas and electric reliability in the greater Los Angeles area following a major leak at the Aliso Canyon underground natural gas storage facility. The plan is expected to reduce the possibility of electric interruptions, although it will not completely eliminate the risk. The incident, which has triggered regulatory efforts at state and federal levels, could bolster the Administration’s plans to curb methane emissions and further regulate underground storage.

PHMSA Proposes Revisions to Expand Scope of Natural Gas Pipeline Safety Regulations

On March 17, 2016, the Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed revisions to safety standards for onshore natural gas transmission and gathering pipelines. The revisions could impose significant regulatory requirements for additional miles of natural gas pipelines, including pre-1970 pipelines previously exempt from PHMSA regulations, and are estimated to cost industry between $39.8 and $47.4 million a year. Regulatory requirements for automatic shut-off valves and underground storage have been postponed for future rulemaking.

California Leak Exposes Risks of Increasing Reliance on Natural Gas

Key Takeaways: The California Department of Conservation (DOC) will issue emergency natural gas storage regulations in response to a persistent leak at the Aliso Canyon Natural Gas Storage Facility in Los Angeles County This incident exposes underground storage risks and regulatory disparity as utilities continue to increase natural gas-fired generation Innovative methane detection technology will…...

Spending Bill Lifts U.S. Oil Export Ban And Extends Tax Credit For Renewables

Key Takeaways: Removal of crude oil export restrictions expands U.S. access to the global market, but an immediate boost to U.S. crude exports is unlikely due to the global oil-supply glut and low prices Crude oil exports could harm the domestic refining industry, although the level of impact depends on the refining sector growth and…...

Regulators Reconsider Utility Hedging Policies Given Shifts In Natural Gas Flow

Key Takeaways: Florida’s investor-owned utilities will continue to employ current natural gas hedging practices, which have resulted in approximately $6B opportunity costs Evolving supply-demand dynamics of the natural gas market spur utility commissioners to reconsider hedging policy Ongoing state efforts to enhance hedging mechanisms reflect the need for long-term supply contract structures   Insight for…...

New Pipeline Expansions Target Emerging North American Demand Centers

Key Takeaways: Natural gas pipeline expansions will deliver new incremental production from the Marcellus and Utica regions to emerging markets in the Midwest, Southeast and Gulf Coast Cross-border pipelines are increasing natural gas exports to Canada and Mexico Bidirectional pipeline projects will optimize potential excess supply in the Northeast during spring and fall Impending liquefied…...

DOT Proposes Tougher Safety Regulations for Hazardous Liquids Pipelines

Key Takeaways: The Department of Transportation’s proposal to strengthen hazardous liquid pipeline safety would expand the agency’s integrity management requirements related to assessments, repairs, and leak detection The proposal would establish reporting requirements for certain unregulated pipelines, including all gathering lines New conservative repair criteria and response timelines would increase the number of anomalies that…...

Shell Cites Restrictive Regulations In Ceasing Arctic Drilling Operations

Key Takeaways: Royal Dutch Shell will close its Arctic drilling activities, demonstrating the increasing complexity of Arctic operational conditions Declining oil prices create unfavorable environment for capital-intensive offshore drilling projects Finalized regulations and revised timelines that reflect challenging Arctic conditions are needed to foster Arctic oil and gas development in the future   Insight for…...

U.S.-Mexico Oil Swaps Unlock Avenue for U.S. Light Crude

Key Takeaways: Light tight oil production from unconventional resources has prompted industry to seek export avenues Approval of U.S.-Mexico crude oil swaps provides an additional market for light crude and increases its value given the current limitations in U.S. refinery capability Oil exchange transactions will potentially enhance refinery utilization in the United States and Mexico…...

Senate Energy Package Focuses on Fossil Fuels and Electric Infrastructure

Key Takeaways: The Energy Policy Modernization Act of 2015 contains comprehensive reforms with impacts to gas, electric, and renewables, and it is likely to pass after the August recess The bill would require the Department of Energy (DOE) to issue final decisions on applications to export natural gas to countries that do not have a…...

Mexico’s Close-to-Shore Oil Auction Falls Short of Expectations

Key Takeaways: Mexico’s July 15 opening Round One close-to-shore oil and gas auction fell short of expectations with only 2 of 14 blocks auctioned and a number of major international players sitting out Subsequent Round One auctions for deepwater oil fields will attract more interest from major players, but Mexico will be forced to revisit…...