By TOM MURPHY Jul. 13, 2015 12:56 PM EDT Associated Press
Natural gas overtook coal as the top source of U.S. electric power generation for the first time ever earlier this spring, a milestone that has been in the making for years as the price of gas slides and new regulations make coal more risky for power generators.
About 31 percent of electric power generation in April came from natural gas, and 30 percent from coal, according to a recently released report from the research company SNL Energy, which used data from the U.S. Energy Department. Nuclear power came in third at 20 percent.
A drilling boom that started in 2008 has boosted U.S. natural gas production by 30 percent and made the United States the world's biggest combined producer of oil and natural gas. Hydraulic fracturing has allowed energy companies to tap huge volumes of gas trapped deep underground in shale formations.
That has driven the price of natural gas sharply lower to levels about a third of what they were just 10 years ago.
At the same time, power companies have been installing more natural gas turbines at their plants as they make them more flexible and retiring some older coal-fired facilities. They have long switched between natural gas and coal, depending on commodity prices. However, new regulations that aim to restrict the emission of greenhouse gasses, and the risk that more are on the way, have added pressure to make the switch.
The burning of natural gas produces carbon dioxide and nitrogen oxides, but far less than coal.
The Obama administration next month is expected to complete a so-called Clean Power Plan intended to cut earth-warming pollution from power plants by 30 percent by 2030. The rule will set the first national limits on carbon dioxide coming from existing power plants and set in motion one of the most significant U.S. actions ever to address global warming. The United States limits emissions of arsenic, mercury and lead pollution from power plants, but there are no national limits on carbon pollution from power plants.
Congressional Republicans have vowed to block the rule and some GOP governors have said their states will not comply.
These regulatory and price changes have begun to play out in usage data.
Federal data shows that in April, the amount of electricity generated with natural gas climbed 21 percent compared to April 2014, while the amount generated with coal fell 19 percent.
In April 2010, 44 percent of electric power generation came from coal and 22 percent from gas, according to SNL Energy.
The amount of coal and gas used will continue to vary depending on price.
The EIA said in a May report that it expects the level of coal-generated electricity to rebound as natural gas prices rise later this year and coal-fired plants return from spring maintenance. Overall, the EIA expects about 36 percent of total U.S. electricity generation to come from coal in 2015 and 31 percent to come from natural gas.
The final paragraph of this article compromises that wee bit of good news (for royalty owners) gleaned from the preceding portion the article. When viewed alongside a different article suggesting that most LNG export plants will not make it to the construction phase because of weak demand and the price of U.S. LNG, the immediate future for the Haynesville seems to say that what we now have is what we shall have for a good long while.
With little fanfare, on GHS, two milestones much discussed in the early days have been reached. The first was unconventional gas surpassing 50% of total annual US gas production and now surpassing coal in the generation of electricity. As more facts become available concerning LNG export it has become clear that it is likely to cause only a marginal improvement in the price of gas sourced from the Haynesville/Bossier Shales. Yes, cocodrie man, not great news for royalty owners or for my business for that matter but positive news for the country and our energy future.
Most U.S. LNG projects won’t cross the finish line, new study says
Posted on July 14, 2015 | By Rhiannon Meyers fuelfix.com
Most of the proposed U.S. liquefied natural gas export projects won’t get built amid stiffening competition from foreign competitors who will flood the market with the supercooled gas as demand begins to slow, a new study finds.
Five U.S. LNG projects already under construction, including Cheniere’s two terminals in Louisiana and Corpus Christi, will cross the finish line, but beyond that, construction appears “increasingly unlikely” for the remaining proposals, according to the latest study unveiled Tuesday by a task force of natural gas experts assembled by the Brookings Institution, a Washington D.C.-based think tank.
It’s the latest report to raise doubts about the flurry of multi-billion dollar proposals announced in recent years that would soak up vast supplies of cheap U.S. natural gas destined for markets in Asia.
“We believe it will be increasingly difficult to finance new LNG projects, due to high upfront costs in combination with a substantial number of uncertainties which influence supply and demand,” the report said.
Developers have been rolling out proposals on the assumptions that U.S. natural gas prices will remain at record low levels while LNG prices in Asia and Europe remain high, offering North American exporters attractive margins. Developers also placed bets that U.S. LNG, which is linked to natural gas prices, would allow them to hold a competitive edge over foreign suppliers, whose LNG is tied to crude prices, which were relatively high until they began falling late last year.
The report found that there are flaws in those assumptions that call into question whether U.S. LNG projects will be successful.
“While the projected number of North American LNG export facilities is massive, closer examination of the projects’ financial realities offer a more nuanced story,” the report stated.
U.S. natural gas prices are expected to rise slowly, which could undercut the competitive advantage of U.S. LNG exports unless developers figure out cheaper ways to liquefy, transport and re-heat the gas. Natural gas faces stiffer competition from other competing fuel sources, such as cheap coal and renewables, and that waning demand makes it increasingly difficult for North American LNG projects to turn a profit, the report found. And collapsing crude prices gave a fresh advantage to rival oil-linked LNG projects in other countries.
With international oil price hovering just under $60 per barrel, Australia is more competitive than U.S. exporters when it comes to supplying LNG to lucrative and high-demand Asian markets, the report found.
U.S. projects are “poised to compete favorably” in the global marketplace because they’re cheaper to build, particularly the so-called “brownfield” projects that call for converting import terminals into export facilities. Developers also have access to cheaper energy and “significant skilled labor at a reasonable cost” compared to other countries.
But swelling demand for materials and labor could erode the U.S. advantage at a time when falling oil prices are making foreign projects more attractive, the report found.
“Given all these uncertainties, possible constraints and the fact that a significant amount of projects are permeating the market in the coming years, it may be increasingly difficult to finance projects going forward,” the report said.