PowerSource Voice: With energy security comes benefits - and challenges

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The long-held assumption that America would be dependent on other nations for our natural gas through imports — much as we have been for crude oil — has been proven false.

In an economy that consumes approximately 25 trillion cubic feet (Tcf) of gas a year, we import under 3 Tcf. And nearly all of that comes from a friendly neighbor, Canada. Furthermore, net natural gas imports make up less than 6 percent of U.S. consumption, down from 16 percent in 2007.

As for liquid petroleum, our dependence on foreign oil has decreased steadily since 2005. Today, our nation produces over 60 percent of what it consumes. We are the world’s largest consumer of oil, and by next year are projected to be the world’s largest producer. Of the 40 percent imported, nearly a third comes from Canada and 10 percent from Mexico.

When you put this all together, you get a picture of a nation that is more energy secure than it has been in decades.

Just the last few months have proven the importance of energy in geopolitical affairs. It is impossible to understand what is going on in Ukraine and central and eastern Europe without understanding global energy.

Those same events underscore the economic and national security opportunity this nation has to offer our allies as an energy trading partner.

Nowhere is this potential more evident than in the possibilities offered by liquefied natural gas. The flood of natural gas flowing into the U.S. market is creating the impetus for something that would have been nearly unthinkable a decade ago — a raft of applications before the Federal Energy Regulatory Commission for export facilities — rather than import facilities.

If gas is to be exported — or used anywhere here in the U.S. — it has to get from the wellhead to the burner tip or the LNG plant. That is why FERC’s gas pipeline permitting role is so critical.

Shale basins have seen significant pipeline investment in recent years. Projects that are either in-service or in some stage of FERC permitting total 3,741 miles, delivering 37,227 (million cubic feet per day) MMcf/d of capacity, with a total investment of over $19.2 billion.

In the Marcellus and Utica basins, over 25 pipeline projects have already been put in-service or nearly so. They total over 7,200 MMcf/d of capacity with 559 miles of associated pipe.

On the crude oil side, FERC has received and acted upon more than 30 petitions in just the last three years — essentially pipelines looking for ratification of their cost recovery and rate principles — about 15,000 miles of pipeline.

In years past, energy security was nice rhetoric, but perhaps not reality. Today it is a choice.

The daunting thing about a choice is that it is not a fait accompli. How do we choose the path of energy security?

Number one: We keep going with what works. The comprehensive local and state regulation of the oil and gas industry has worked. Tens of thousands of wells have been drilled safely. If there is anything remarkable, it is how few documented problems actually exist.

We should also acknowledge that federal authority — FERC’s siting authority and comprehensive oversight of interstate natural gas facilities — has worked quite well since the restructuring of the industry that began over 30 years ago.

This is not to say there aren’t challenges, but it does put in perspective the enormous net benefits.

It should also caution against drastic new federal regulations, or misguided reinterpretations of existing statutes.

Number two: Infrastructure development will be key — especially pipeline development. 

We must find better ways to ensure this product is able to get to market in the most efficient, safest way possible. For liquid fuels, rail options have been a good alternative, but it is hard to believe more pipelines won’t also be needed.

On the natural gas side, we saw the necessity of more pipelines to constrained areas of the nation this winter. While prices remained modest in regions awash in gas — like in the heart of the Marcellus — prices behind constraints — especially in New England — soared.

I do not underestimate the challenge of adding pipelines. Rarely are landowners thrilled about the prospect of utility infrastructure on or near their property. But it is often necessary.

There are some things I learned having been a state infrastructure regulator in North Dakota at the heart of a huge energy play, and now in my regulatory role at FERC: 

- Adjust your staffing levels, so as an agency you are able to handle the cases that are coming your way.

- Do not cut corners when siting projects. At the same time, do not allow unnecessary red tape to stop projects vital to our national interest.

- Understand that acting in a few days of haste can mean years’ worth of delay. Applicants sometimes push regulators to move, but sometimes regulators protect applicants from themselves. It is very easy for courts to trip regulators on due process issues.

- Those proposing projects should do it the right way. Treat landowners with respect. Hire land agents who know the territory and are respected in their areas.

These are the basics of infrastructure development. It is not fancy work, but if done right, can save headaches later.

Tony Clark is serving his first term as a commissioner of the Federal Energy Regulatory Commission. His five-year term expires in 2016. This column was adapted from a speech given at the recent DUG East conference in Pittsburgh.

To contribute to PowerSource Voice, a regular feature offering insight and opinion on energy subjects, contact Associate Business Editor Teresa F. Lindeman at tlindeman@post-gazette.com


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