FERC report shows investment in natural gas

This week the Federal Energy Regulatory Commission issued its monthly energy infrastructure update covering May 2013. The report details highlights in expansions of energy assets, ranging from natural gas pipelines to electric generation and transmission facilities. It provides a monthly snapshot of recent activity, and can be used to spot trends in domestic energy development. The current report illustrates increased investment in natural gas-related infrastructure, ranging from proposed new liquefied natural gas export terminals to newly installed natural gas-fired power plants.

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Natural gas exports poised for growth. Last month two facilities to liquefy natural gas for export advanced through the FERC regulatory process:

  • Jordan Cove Energy requested authorization to construct and operate four liquefaction trains and storage facilities at a proposed export terminal in Coos Bay, Oregon. If authorized and built, the project could export up to 900 MMcf per day of liquefied natural gas (LNG). This gas would likely be destined for Asian markets.
  • Golden Pass Products proposed a larger project in Texas. Along with Golden Pass Pipeline, Golden Pass Products commenced the FERC prefiling process to construct and operate a 2,100 MMcf per day liquefaction facility for export at an existing import terminal located in Sabine Pass, Texas. The Golden Pass project also includes proposed modification of an existing pipeline system to enable 2,500 MMcf per day of bidirectional capacity to the proposed export terminal.

These projects demonstrate increased interest in exporting natural gas to overseas markets. The boom in domestic shale gas production has led to low natural gas prices in the U.S. Domestic pricing is roughly one-third of the price that exporters can get by sending LNG to Europe or Asia. Whether and to what extent the U.S. will allow exports remains to be seen, but in the interim, developers are scrambling to secure permits for export.

New electric generation, mostly fueled by natural gas. Last month a total of 33 new electric generation units came online. Nearly three-quarters of the newly installed capacity is fueled by natural gas, adding 2,529 MW of new natural gas-fired electric generating capacity. The new gas projects vary widely in scope:

  • The largest, Mitsubishi Corporation’s 850 MW CPV Sentinel Energy Expansion in Riverside County, consists of eight 106.25 MW units. Mitsubishi’s generation is sold to Southern California Edison under a long-term contract.
  • In the middle, Procter & Gamble Company developed a 64 MW natural gas fired project to produce power for its paper products manufacturing facility in Wyoming County, Pennsylvania.
  • At the opposite end of the scale, two landfill gas-fired projects came online in New York. Wehran Energy Corp.’s 4.5 MW Brookhaven facility consists of three 1.5 MW Caterpillar Inc. generators. The Brookhaven project was also joined by a 1.6 MW expansion of Waste Management Inc.’s Oneida-Herkimer project.

These projects illustrate the diversity of new natural gas fired projects being developed this spring. The abundance of low-cost natural gas drives interest in the utility scale gas projects, while a desire to capture landfill-produced methane and put it to use as biogas supports the smaller projects. As a result, natural gas’s share of total installed operating generating capacity grew slightly to 42.56%. Despite a resurgence of coal as a fuel for electric generation, coal remains in second place in the installed capacity race, representing 28.9% of total U.S. installed capacity.

While each monthly energy infrastructure update represents only one data point, in the aggregate, they paint a picture of the direction of U.S. energy infrastructure development. Natural gas is squarely in the center of this picture. Based on consensus projections that natural gaswill remain the most cost effective fuel for decades to come, increased expansion of natural related infrastructure is likely to continue for some time.