April 30, 2012 | last updated June 4, 2012 12:07 pm

Regulations affirm CT commitment to natural gas

CONTRIBUTED PHOTO
CONTRIBUTED PHOTO
A natural gas well in the Midwest. The large number of new wells popping up on shale rock formations in places such as Texas, Pennsylvania and Ohio caused the U.S. Environmental Protection Agency to create air quality regulations for the wells. The new rules are not expected to have a major impacting on the rising production and falling price of domestic natural gas.

New environmental regulations on natural gas harvesting have bolstered the commitment of Connecticut policymakers and power companies to the fuel.

The U.S. Environmental Protection Agency this month released rules regarding some of the byproducts of the hydraulic fracturing method of harvesting natural gas — better known as fracking. While the rules impose new costs on the power industry, EPA says the new rules are designed to be cost-effective for well operators and not limit production or increase price.

"It is clear they want to continue production of natural gas. This is a good thing," said Tom Kiley, president and chief executive officer of the regional trade group Northeast Gas Association, which represents companies such as Yankee Gas, Southern Connecticut Gas and Connecticut Natural Gas. "The U.S. will continue production of this domestic fuel."

Connecticut government and industry officials have sought an increase in the use of natural gas in the state for electricity generation in power plants and for heat in homes and businesses. Environmentally, burning natural gas emits 30 percent less greenhouse gas than petroleum and 45 percent less than coal.

The price of natural gas is falling; in January, the cost per thousand cubic feet of natural gas in Connecticut hit a nine-year low at 4.69 cents.

This drop in prices is a major reason electricity prices in Connecticut have fallen 5 percent over the past year. More power plants are generating electricity using natural gas. In 2011, New Jersey-based NRG Energy, Inc. switched on two 200-megawatts natural gas power plants in Middletown and Milford, and Kleen Energy Systems brought a 620-megawatt plant online in Middletown.

"Natural gas is still going to be part of our portfolio," said David Gaier, NRG spokesman.

Yankee Gas, Southern Connecticut Gas and Connecticut Natural Gas are working on major expansion projects, trying to convince more Connecticut ratepayers of the benefits of heating their businesses and homes with natural gas. A major selling point of their campaigns is natural gas costs half as much as fuel oil.

As New England increases its natural gas use, energy companies see the opportunity. Spectra Energy Corp. of Texas announced in April its plans a $500 million pipeline expansion to bring more shale gas to Connecticut and the rest of the Northeast.

Fracking is the reason natural gas prices have dropped over the past three years. New technology in the natural gas harvesting made the process cheaper, which caused domestic production and supply to increase drastically, driving commodity prices down.

Looming over fracking production, though, has been the environmental side effects. In the process of extracting natural gas from shale, drillers shoot high-pressure fluid into the rock to break it apart and create pockets where the gas can be released into a well.

The process emits methane and other volatile organic compounds that cause air pollution, as well as possible groundwater contamination.

The EPA first proposed regulation in July to deal with the air pollution problem; and after receiving more than 150,000 responses from the industry on the proposal, came up with rules that addressed the pollution without preventing further fracking.

"The final rule increases compliance flexibility for well owners and operators," said Enesta Jones, EPA spokeswoman. "Our analyses estimate that natural gas production is not likely to change as a result of today's rules. Likewise, the average price of natural gas is not expected to change."

The rules will impact 13,000 natural gas wells annually in places such as Ohio, New York, Pennsylvania, West Virginia and Texas. The regulations allow the operators to burn off the greenhouse gases until 2015, after which they must catch the gases as they come out of the wells, a process known as green completion.

"This is in-line with expectations," said Dan Dolan, president of the regional trade association New England Power Generators Association, representing companies such as NRG. "We are comfortable with it not impacting the supply for natural gas generation."

The Connecticut Department of Energy & Environmental Protection is developing its integrated resource planning this year to determine how the state should generate its electricity. In the draft under review for public comment, the planning calls for a significant commitment to natural gas. The DEEP plan will be submitted for final approval by the Public Utilities Regulatory Authority in May.

The EPA regulations are "not likely to have a major impact on current trends," said Dennis Schain, DEEP spokesman. "The fracking has made natural gas more plentiful and cheaper."

Natural gas appears to be the winner in EPA regulations for the power industry. New England already has lost close to 1,300 megawatts of power generation due to older plant retirements, and another 3,300 to 5,300 megawatts are expected to be impacted by new EPA rules on water, air and toxicity.

Those threatened megawatts come from aging coal and oil plants, which must either pay for costly upgrades at a time when the cost of electricity is falling, or simply retire their facilities.

Natural gas generation is rising in their place. From 2000 to 2010, the portion of energy generated in New England by natural gas rose from 15 percent to 46 percent, according to ISO New England.

As older plants retire, 41 percent of the proposed new electricity comes from natural gas.

"Those EPA regulations are not going to have a major impact on us," Dolan said.

Comments

Type your comment here:

ADVERTISEMENTS
Most Popular on Facebook
Copyright 2014 New England Business Media