This document discusses the benefits of natural gas in the United States. Natural gas is used to heat homes and generate electricity. It is also used in manufacturing and is fueling growth in transportation. Technological advances have unlocked large shale gas reserves, increasing domestic supply and lowering costs. This has led to economic benefits like job growth and lower energy prices for consumers. The natural gas industry aims to continue developing this important resource while maintaining environmental standards.
Natural Gas - Briefing for Congressional Staff - 18 Sept 2013
1. www.woodmac.com
Natural Gas:
America’s Abundant Resource
- Heating our homes
- Generating more electricity
- Reviving U.S. manufacturing
- Fueling transportation
- Creating American jobs
Natural Gas Roundtable
Congressional Briefing – September 18, 2013
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Scott Morrison - APGA
Government Affairs
Manager
smorrison@apga.org
Erik Milito – API
Director,
Upstream and
Industry Operations
militoe@api.org
Randall Luthi -
NOIA
President
rluthi@noia.org
Don Santa
INGAA
President
dsanta@ingaa.org
Jeff Schrade - NGSA
Director,
Government Affairs
jschrade@ngsa.org
David Sweet
WADE
Executive Director
dsweet@localpower.org
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Natural Gas Has Many Uses
Natural gas heats homes
- 177 million Americans use it at home
- 71 million U.S. homes and
businesses use natural gas
Natural gas increasingly used
to generate electricity
In 2002, natural gas provided 16
percent of U.S. electric generation
In 2011, natural gas provided 31
percent
Natural gas is also used in the
manufacturing, chemical and
fertilizer industries
5. LNG Exports
5
Natural gas becomes
liquid when chilled to
-260ºF
Chilling shrinks it 600 times
– making it easier to transport
LNG is…
-Cold, clear, and colorless
-Non-toxic, non-corrosive and non-explosive
22 export facilities have been proposed to export
LNG to non-free trade countries
- 4 LNG export facilities have been approved so far
6. Natural gas: Good news for the Environment
6
“Greater use of natural gas in early 2012 resulted in the
lowest U.S. carbon emissions since 1992”
U.S. Energy Information Administration, August 1, 2012
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Shale Changed the Game
Improvements in
technology brought down
production costs
Shale gas production
quadrupled between 2006 –
2012 and is poised to
comprise more than 40% of
U.S. gas production in 2020
Diversity of supply
complements strong and
growing pipeline system,
reduces vulnerability to
hurricanes, brings natural
gas closer to consumers Gas Production by Type Through 2040
Source: EIA Annual Energy Outlook 2013
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Technology Makes It Possible
Drilling technology improvements
and efficiencies in shale have
emerged
Longer horizontal laterals
Multiple-stage hydraulic fractures
per lateral
Small surface footprint for multiple,
extended wells
Ground water separated by
thousands of feet and tons of
impermeable rock and protected by
state and federal regulation
Significant amount of water is
recycled
“Micro-seismic” technology
evolving and enabling even greater
precision in fracturing wells Source: American Petroleum Institute
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Abundant shale widespread across U.S.
U.S. Gas Reserves Increased 22% between 2006 – 2009 Primarily Due to Shale Development
Source: Energy Information Administration based on data from published studies
Updated: May 2011
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Natural gas production has shifted
Part of the
reason
Federal drilling
permit 2005
– 154 days
Federal drilling
permit 2011
– 307 days
State drilling
permit average – 12 to 15 days
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Positive News for the Economy
America’s New Energy Future:
The Unconventional Revolution and
the Economy,
IHS, October 23, 2012
Total Supported Employment
• 2.1 million jobs supported in 2012
• 3.9 million jobs supported in 2025
Including 515,000 manufacturing jobs
- Jobs tend to high quality and high paying
$35/hr vs. $23/hr in general economy
Capital Expenditures
• $121 billion in 2012, rising to $240 billion by 2025
- $2.75 trillion cumulative between 2012 and 2025
Gross Domestic Product Impact
• $284 billion in value added contributions in 2012
- Increases to $533 billion / year in 2025
Federal and State Government Revenues
• $74 billion in 2012
- Increases to $240 billion in 2025
Average Increased Disposable Household Income via
Lower Energy Prices
$1,200 in 2012, rising to $3,500 in 2025
12. Natural Gas Industry: Highly Regulated
Regulated by state and federal agencies
Clean Water Act – surface water discharge, storm water runoff
Clean Air Act – air emissions throughout production to usage
Safe Drinking Water Act – underground injection disposal/reuse of produced water and
flowback fluids
Federal Land Policy and Management Act – permitting for federal onshore resources
Outer Continental Shelf Lands Act – permitting for federal offshore resources
National Environmental Policy Act – permits and environmental impact statements
Occupational Safety and Health Act – requires information about chemicals used at
every site
Emergency Planning and Community Right-to-Know Act – annual reporting to
emergency responders of chemicals stored and used above certain quantities
Extensive State Oversight – implement federal laws and regulate drilling fluids and
produced water management
Detailed state regulatory information available at www.STRONGERInc.org
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Natural gas estimates keep growing
Estimates have grown
significantly with
improvements in technology
If the 1966 estimate of 600
trillion cubic feet (Tcf) had
remained static, the U.S. would
have run out of natural gas
about 10 years ago
Estimates have been
conservative – history shows
there is more to be discovered
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Pipeline System Extensive and Expanding at Record Pace
Between 2000 and
2010, FERC
approved more than
16,000 miles of new
interstate pipeline
- Capacity to move an
additional 113 bcf per
day
Pipeline system
connects U.S. with
Canada and Mexico
Storage capacity
grew 22% from 2006
- 2010
Half of new storage is
flexible high-turnover
salt domes closer to
customers
15. U.S. Natural Gas Infrastructure:
Anticipated Investment Through 2035
Source: INGAA Foundation’s North American Natural Gas Midstream Infrastructure Through 2035
$205B in midstream
infrastructure
investments
125,000 jobs
every year
for 20 years
$57B in federal, state
& local tax revenue
since 2005, pipeline avg. cap/ex:
$8.8 Billion/yr
15
16. Off Limits Under Federal Law or Moratorium
Available for Energy Exploration but closed to
leasing due to current Federal Policy
Available for Production & Exploration
Offshore access is the key
18. Natural Gas Vehicles
A growing NGV market
addresses a number of
America’s priorities:
• Foreign oil displacement
• Urban pollution reduction
• Jobs
• Balance of trade
20-25% of transit buses on US roads are
natural gas powered, and last year over 50% of
trash trucks purchased were NGVs
The biggest driver is… cost savings
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Propane – from natural gas processing - is also used to fuel vehicles
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To Continue to Make Good things happen…
Industry is Committed to Good Stewardship
Listening to and addressing community concerns
Use of stringent industry and government standards on land reclamation,
well construction, water management and pipeline safety
Responsible hydraulic fracturing practices
Minimizing surface effects on land and infrastructure
Offshore safety and spill containment
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… And Government Must Do Its Part As Well
Fair access to onshore and offshore resources
Continued strong and effective state regulation of hydraulic fracturing
Level playing field: avoid picking winners and losers through mandates
Tax policy must be fair, not burdensome, and compatible with resource
development and job creation
Financial regulations must not create “economic drain” on investment
Provide regulatory environment compatible with pipeline infrastructure
investment and safe, reliable operation
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American Petroleum Institute (API)
1220 L Street, NW
Washington, DC 20005-4070
202-682-8000
www.api.org
American Public Gas Association (APGA)
201 Massachusetts Avenue, NE, Ste C-4
Washington DC 20002
202-464-2742
www.apga.org
Interstate Natural Gas Association of America
(INGAA)
20 F Street, NW, Suite 450
Washington, D.C. 20001
202-216-5900
www.ingaa.org
National Ocean Industries Association (NOIA)
1120 G Street, NW • Suite 900
Washington, DC 20005
202-347-6900
www.noia.org
Natural Gas Supply Association (NGSA)
1620 I Street, NW, Suite 700
Washington, DC 20006
202-326-9300
www.ngsa.org
World Alliance for Decentralized Energy
(WADE)
1513 16th Street, NW
Washington, DC, 20036
(202) 667 5600
www.localpower.org
Editor's Notes
Key criteria for projects:Announced projects that, based upon milestones accomplished to date, are deemed very likely to come online. Only industries that are significant consumers of natural gas, because of its use as either a feedstock or other application. Primarily:Fertilizer, methanol and gas-to-liquids facilities use natural gas as a feedstock. Steel industry - newer facilities are using natural gas for the energy component in steel making, but not the feedstock component. Petrochemical facilities, such as ethylene plants
Citations:Every $1 billion of LNG sold creates 6,000 new construction/manufacturing jobs Source: U.S. International Trade Administration http://www.ustr.gov/about-us/press-office/fact-sheets/2011/october/trade-agreements-and-jobs.Exports reduce U.S. trade deficit by billions of dollarsSources: Brookings Policy Brief, “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas” May 2012Baker Institute for Public Policy study, “U.S. Shale Gas and National Security” July 2011 Exports/Export facilities would generate over $10 million/year in new tax revenuesBrookings Policy Brief, “Liquid Markets: Assessing the Case for U.S. Exports of Liquefied Natural Gas” May 2012Baker Institute for Public Policy study, “U.S. Shale Gas and National Security” July 2011
The “game” has changed and the ability to develop natural gas from shale is the game changer.The chart above shows how the types of natural gas production have changed and will continue to change:In 2000, more than 70% of natural gas was produced from “conventional” wells.In 2010, conventional production accounted for 34%.And by 2020, conventional wells will be about 20%In fact, in 2020, “unconventional” wells will be the new conventional. 80% of U.S. production will come from shale, tight gas and coalbed methane formations. 40% of U.S. production will come from shale alone.
Although we talk about 12 shale plays around the country, we continue to discover more, such as Eagle Ford in south Texas. Shale plays are all over the country, and we have only begun to tap their potential.New shale plays are so frequently discovered that EIA has difficulty keeping up with changes. This May 2011 map is the most recent available. (Re-verified July 2013.)Producers are still learning the vast extent of these remarkable plays, and we expect our “100 years of supply” estimate to keep going up for the foreseeable future.
A comprehensive set of federal, state, and local laws address every aspect of exploration and production.In addition, new industry standards advance operations and practices. (Refer to Slide 19-”Industry Stewardship”)The above regulations govern production of conventional natural gas wells AND unconventional wells that are hydraulically “fracked”Hydraulic fracturing has been in use for more than 60 years. (Energy In Depth)Hydraulic fracturing has aided in the extraction of more than 600 trillion cubic feet(Tcf) of natural gas.(Energy In Depth) 600 Tcf = 27 years of total U.S. consumption of natural gas (EIA) 600 Tcf = 618 Trillion Btu, enough to meet ALL the energy needs of Washington DC for more than 3 years (EIA 2009 state energy profile – DC’s entire energy consumption in 2009 was 180 trillion Btu – homes, manufacturing, power generators and transportation combined)Natural gas production operations and hydraulic fracturing are extensively regulated at the state level.National organization of government, public and private stakeholders -- STRONGER Inc. -- has completed reviews of 21 state programs accounting for regulation of over 90% onshore production of oil and natural gas in U.S.. Newest aspect of the reviews include states’ regulation of hydraulic fracturing.
The 16,000 miles of interstate pipeline approved in the last decade is the largest amount in 40 years. In contrast, only 900 miles of electric transmission lines have been approved.represents an enormous jump in growth– only 297,000 miles of transmission pipeline in the U.S. altogetherLots of new storage.Half of new storage put in since 2008 is high-turnover salt dome – enhances ability to respond quickly to demand changesPipelines are the safest form of energy transportationWhile all forms of transportation have risks, pipeline safety is continually improvingThe three main causes of pipeline leaks are corrosion, material/weld flaws and excavation damage. Data collected by the Pipeline and Hazardous Materials Safety Administration show frequency of leaks from all causes decreasing.
IF THE OCS WERE OPENED FOR EXPLORATION IT IS ESTIMATED THAT THE OFFSHORE INDUSTRY WOULD SUSTAIN 1.2 MILLION NEW JOBS OVER THE NEXT 30 YEARS AND GENERATE $1.3 TRILLION IN REVENUE.
NOW MANY OF THOSE JOBS ARE DIRECTLY RELATED TO ONSHORE PRODUCTION, BUT THAT JUST BEGS THE QUESTIONCAN WE HAVE SIMILAR RESULTS FOR OFFSHORE?FIRST ARE THERE RESOURCES OFFSHORE YET TO BE DISCOVERED? SHORT ANSWER IS YES, OR AT LEAST YES, WE THINK SO(HIGHLIGHT TOTAL NUMBERS)
LISTENING TO COMMUNITY –Natural gas companies listen to community concerns about natural gas development, resulting in some unique solutions.Example: in response to Ohio County community concerns about traffic, Chesapeake Energy promised that trucks would only travel in the same direction as school buses. The company also provided money to Ohio County Schools to purchase CB radios for school buses so drivers can communicate with Chesapeake trucks when necessary. (Wheeling News-Register, March 27, 2011)STRINGENT INDUSTRY STANDARDS AND RESPONSIBLE HF PRACTICES – Through the API’s standards-setting process, the industry has issued five best practice guidances on hydraulic fracturing. See http://www.api.org/policy/exploration/hydraulicfracturing/MINIMIZING SURFACE IMPACTS – API HF3 “Practices for Mitigating Surface Impacts Associated With Hydraulic Fracturing”OFFSHORE SAFETY AND SPILL CONTAINMENT - Companies operating in offshore waters must comply with rigorous requirements. Numerous federal agencies, including the U.S. Coast Guard, perform drills and inspections. Inspections have increased since the Deepwater Horizon spill in 2010 and industry has collaborated on a new spill containment system.
FAIR ACCESS - Although the federal government lifted its ban on deepwater drilling in the GOM last October, very few new wells have been permitted since. In 2009, about 11 percent of our natural gas came from the Gulf of Mexico. CONTINUED STATE REGULATION - States provide strict regulatory oversight of hydraulic fracturing, which also falls under several federal regulations. Let states continue to oversee.LEVEL PLAYING FIELD - Policies to promote clean energy should be market-based. If a mandate such as a Clean Energy Standard, is put in place, it should allow utilities and generators the option to use natural gas.TAX POLICY - Tax policy should not discourage natural gas E&P or slow down job growth.FINANCIAL REGULATIONS - Financial reform (Dodd-Frank) could sweep in natural gas companies that use hedging and OTC markets to reduce risk -- with the unintended consequence of forcing companies to set aside capital to meet proposed new CFTC “clearing requirements.” This is capital that would otherwise be invested in infrastructure and growth. PIPELINES - Current regulations work well to promote pipeline investment and safe operations – do not change them.