NWGA January BOD Call Wrap Up

Hello Board Members,

Here’s a short overview of the discussion during this week’s January teleconference. Please reach out with any questions.

AWB Climate Change Effort Overview:

Gary Chandler, Vice President Government Affairs, and Brandon Housekeeper, Government Affairs Director, for the Association of Washington Business (AWB) provided the board with an assessment of the climate change policy debate in Olympia. Highlights included:

  • Chandler handicapped the chances for Governor Inslee’s cap and trade proposal passing as slim to none. Noting that the proposal may be passed out of committee but would not pass in the senate.
  • The Governor’s endgame is likely to put something on the ballot in 2016. The AWB stood up the Washington Climate Collaborative with this long-term concern in mind. The collaborative is working to bring together a broad coalition of business leaders to begin building consensus against a ballot proposal. Some key findings and conclusions from these initial efforts include:
  • Through public polling with Quinn-Thomas Public Affairs, the collaborative found that even pro-carbon legislation individuals are less likely to support a ballot initiative if it means increased costs for energy (power and gas for space and water heat) and gasoline.
  • The collaborative is pushing the message that Washington is already a very green state, and is cleaner today than it was in 1990. Furthermore, relying on funding from carbon polluters for large projects, like the Governor’s proposed transportation package, is shortsighted, as this funding should decline over time if the policy is successful and emissions are reduced.
  • Climate Collaborative messaging is focused on proposing effective alternatives such as promoting increased transit and efficiency.

 

February Board Meeting Preview:

Cynthia Des-Brisay provided a preview of the February 26 and 27 in-person board meeting in Vancouver, BC.

Day 1 (Thursday, February 26):

  • We’ll kick off with the board business meeting at the FortisBC offices downtown Vancouver from 4-5:30 pm then adjourn for dinner at The Fish House in Stanley Park.
  • Fazil Mihlar, Assistant Deputy Minister, Oil and Strategic Initiatives Division, Ministry of Natural Gas Development will be on hand during the business portion of the meeting to address the BC Government’s Outreach Initiative, “Responsible Resource Development and the LNG Opportunity.” He will provide an overview of natural gas resources in British Columbia, the opportunity that LNG development presents the province and what the province is doing to explain how these resources can be developed in a sustainable way to the benefit of all British Columbians.  The effort includes outreach to cities throughout the province presenting all aspects of the industry from extraction, to pipelines, to LNG plants; how the industry is regulated and what job and business opportunities are expected to arise as a result of establishing an LNG industry.

 

Day 2 (Friday, February 27):

  • The board will take a bus 45 minutes north to the community of Squamish where the Sea-to-Sky gondola will give us a view of the Howe Sound and the Woodfibre LNG export facility site.
  • On the agenda will be a discussion of the Woodfibre project and pipeline expansion efforts.
  • The shuttle will take board members back to downtown and the airport, folks can expect to be at the airport by 4 pm on Friday. Cynthia did note that it’s a short drive north from Squamish to Whistler for anyone that wants to stick around for the weekend.

 

Legislative Activity Update:

Dan provided a brief overview of some legislative activity we’re tracking in 2015 state legislative sessions:

Washington:

HB 1095: Establishes a thermal efficiency standard and promotes combined heat & power.

NWGA members signed in to the house committee hearing on the bill this week largely in support with some concerns. The bill seeks to require utilities with more than 25,000 customers to factor CHP opportunities into their IRP process, members noted that they typically do this anyway and would prefer not to be forced to via statute.

The bill also includes language for a voluntary emissions reduction program for LDCs, largely co-opted from Oregon’s SB844. NWGA members were supportive of this addition.
WUTC Chair, Dave Danner, addressed the committee in support of the bill and the voluntary emissions reduction program but with concerns over the WUTC’s ability to effectively analyze proposed emission reductions projects. Rep. Jeff Morris recommended the WUTC look to their peers in Oregon for input.

Dan will reach out to Rep. Morris regarding expanding the emissions reduction language to include criteria pollutants like PM 2.5, NOX, etc.

Oregon:

With the session starting up on February 2nd,a few natural gas related bills are looming:

  • SB844: Members are seeking technical clarification on some facets of the existing SB844 language. This is the bill authorizing LDCs to propose voluntary emissions reduction programs and directing the OPUC to develop associated rule. The final rule was adopted by the OPUC in November, 2014. The clarifications being proposed came out of the rule making process and aren’t controversial.
  • NW Natural is running a study bill that takes the line extension language from the 2014 effort we were involved in during the Washington session to see what it would look like when applied in Oregon.
  • Most concerning, is a bill that attempts to place barriers around pipeline right of ways, make right of way offers public, and provide for annual easement payments. The effort is being led by constituents near the Pacific Connector pipeline and Jordan Cove LNG export terminal and could unite property-rights Republicans with anti-infrastructure Democrats in the legislature.We’ll continue to monitor as we close in on session.

Idaho:

A working group is developing revisions to the state’s “call before you dig law” and seems pretty close to reaching consensus. Dan’s reading of the language seems to indicate that the final policy would be similar to Oregon’s existing dig law, except oversight would go through the Idaho Lands Commission rather than the PUC. It looks like the lengthy, often painful stakeholder process will yield a pretty good result.

 

What We’re Watching This Week: LNG in Northwestern BC

Check out this great video by LNG Canada detailing some of the outreach efforts going on in Northwestern BC around the development of Liquefied Natural Gas (LNG) facilities.

It’s easy to be afraid of something unfamiliar. This video is an excellent demonstration that while LNG needs to be respected, it’s cold (-260 fahrenheit!) and burns under the right conditions, it also offers plenty of opportunities, both economic and environmental.

What 2015 Holds for Natural Gas in the Pacific Northwest: Three Trends We Are Watching in the New Year

2015 is here and while it doesn’t look much like the creators of “Back to the Future II” predicted (no hoverboards!), we’re living in an exciting time for energy industry observers and stakeholders.

Here are three questions we’re particularly intrigued by at the start of the year. Stay tuned as we seek out answers throughout 2015:

1. Will we see firm investment decisions on big regional demand projects?

We’ve spent the past couple of years talking about the potential for large new industrial natural gas loads in the Pacific Northwest. Proposals include:

  • Three methanol plants. The combined demand from all three facilities would approach one million dekatherms per day, almost half of the entire region’s average daily load.
  • Two LNG export facilities in Oregon and as many as six in British Columbia continue to work toward approval.
  • Numerous smaller-scale projects, including new food processing facilities, a fertilizer plant, and L/CNG for transportation.

Signals of definite intent to move forward on some or all of these projects would serve as an inflection point, kicking off serious discussions on the expansion of natural gas transmission and storage infrastructure to serve the region. In a virtuous circle, large infrastructure development could open the door to additional smaller-scale demand projects.

We’ll go into more depth on these dynamics with the release of our 2015 Natural Gas Outlook Study this spring.

2. What do low oil prices mean for natural gas?

Since June 2014 oil prices have dropped by 57%, a slump largely attributed to growing supply from US shale plays, many of which also produce natural gas. Low oil prices have thrown the stock market into flux, raised concerns about geopolitical turmoil, and tightened the price differential between natural gas and oil.

Will 2015 see an increase in the commodity price of both oil and natural gas as shale producers idle drilling rigs in response to market conditions? These concerns are old hat to natural gas industry observers. Skeptics have been wringing their collective hands over a sudden increase in prices since at least 2011.

The reality has been three years of relatively stable natural gas prices as the US continues to produce more and more natural gas. In fact, US production hit an all-time record in December of 2014. Will oil enjoy the same dynamic? We don’t know. The US Energy Information Administration is projecting 2015 average prices for Oil at $56/barrel and natural gas at $3.44/mmbtu. We are especially interested in the impact of low oil prices on natural gas prices.

3. Will discussions on climate policy embrace or shun natural gas?

2015 brings long legislative sessions in Oregon and Washington with climate change on the agenda in both states. Will legislators recognize the role natural gas can play (and has already played) in reducing CO2 emissions?

Natural gas has proved an effective tool in reducing CO2 emissions, displacing coal while largely enabling the addition of renewable generation. A recent Breakthrough Institute report notes new natural gas additions to the US generating fleet since 2007 have served to avoid almost as many tons of CO2 per megawatt-hour as new wind power installations.

Co2 Avoided

Opportunities exist to reduce regional emissions via the use of natural gas use for transportation, through innovative emission reduction programs like Oregon’s recent Senate Bill 844, and by increased direct use of natural gas for in home use. We’ll be paying close attention throughout the session.

American Gas Association Comments on Natural Gas Emissions Reductions

Washington, D.C. – The American Gas Association today released the following statement related to the White House’s announcement about regulations on the natural gas industry’s emissions:

“Safety is the core value and top priority for natural gas utilities, and due to continuing efforts to modernize infrastructure and enhance pipeline safety, natural gas emissions are on a declining trend. Natural gas utilities are committed to systematically upgrading infrastructure, driven by risk-based integrity management programs, and there is a growing effort to accelerate the replacement of pipelines no longer fit for service.

“These proactive efforts from natural gas utilities, along with involvement in important programs like the EPA’s Natural Gas STAR program, have contributed to the fact that natural gas emissions from utility-owned distribution systems have dropped 22 percent since 1990, even as the industry added nearly 600,000 miles of distribution mains and service lines to serve 17.5 million more customers, an increase of 32 percent. Nearly 90 percent of the emissions declines from distribution systems since 1990 are due to pipeline replacements. According to the Environmental Protection Agency (EPA), only 0.24 percent of produced natural gas is emitted from systems operated by local natural gas utilities.

“In 2014, AGA released a set of voluntary guidelines to serve as a resource for AGA members to assist in evaluating potential options that may lead to further emissions reductions for distribution systems, and AGA is working with EPA to develop a new voluntary Gold STAR certification for the natural gas distribution sector. The natural gas industry is actively engaged in this discussion along with rigorous, science-based analysis to ensure natural gas continues to be a leading solution for our nation’s clean and secure energy future. AGA members are committed to continuing this positive trend of declining emissions, and we look forward to continued collaboration with key stakeholders in this effort.”

New PGE plant will help balance renewables and meet peak demand for customers

Portland, Ore. — Portland General Electric Company (NYSE: POR) today announced that its Port Westward Unit 2 plant, a 220-megawatt natural gas-fired power plant located near Clatskanie, Ore., went into service on Dec. 30, 2014 and is now available to generate electricity for PGE customers. The new plant is a highly efficient facility designed for maximum flexibility to help meet real-time fluctuations in customer demand and integrate renewable resources.

“With the growing amount of variable renewable power coming online, this type of flexible resource is essential in helping us continue to provide reliable service to our customers in an increasingly complex environment,” said Jim Piro, PGE’s president and CEO.

The plant is comprised of 12 reciprocating engines supplied by Wärtsilä North America that are designed to be highly efficient, flexible and responsive. The 25,000-horsepower 50SG engines are the first of their size in the country to run entirely on natural gas.

“Port Westward Unit 2’s advanced technology and unique configuration allows PGE to ramp up the plant to full load in less than 10 minutes,” said Rick Tetzloff, PGE’s project manager for Port Westward Unit 2. “This flexibility allows us to adjust quickly when renewable energy — like wind and solar — rise and fall with natural variability. And it also means that on peak demand days, our customers benefit from increased reliability.”

Port Westward Unit 2 serves as an important component of the company’s diversified portfolio of energy resources, complementing the new 267-megawatt Tucannon River Wind Farm brought online on Dec. 15, 2014.

The new plant is adjacent to PGE’s existing natural gas-fired Port Westward and Beaver plants in Columbia County, Ore. Construction, which began in May 2013, created more than 400 jobs. The plant was completed ahead of schedule and on budget under fixed-price contracts, with final construction costs expected to be approximately $300 million, excluding AFDC.

Black & Veatch and Oregon-based Harder Mechanical Contractors, Inc., in a contractual joint venture, managed the design and construction of the project. Eleven of the plant’s 12 engines have successfully completed all required performance and functional testing. The 12th engine is undergoing final testing before being placed in service.

Completion of Port Westward Unit 2 is a significant milestone in the implementation of PGE’s 2009 Integrated Resource Plan. The plan was acknowledged by the Oregon Public Utility Commission in November 2010. Port Westward Unit 2 was PGE’s benchmark proposal in a competitive bidding process conducted pursuant to guidelines established by the Oregon Public Utility Commission, using objective scoring criteria intended to identify projects that provide the best balance of cost and risk while meeting PGE customers’ needs for reliable, affordable electric power.