WASHINGTON, June 8 (Reuters) - Key U.S. lawmakers have reached a deal on legislation that would boost the federal government's loan guarantee for building a massive pipeline that would transport Alaska's huge natural gas reserves to the lower 48 States.
Senate Energy and Natural Resources Committee Democratic chairman Jeff Bingaman and top panel Republican Lisa Murkowski have agreed to a measure that would raise the 2004 loan guarantee program for the pipeline project to $30 billion from $18 billion.
TransCanada Corp (TRP.TO) received a state license in December to build a $26 billion pipeline from Alaska to a pipeline hub in Alberta. North Slope Gas producers BP Plc (BP.L) and ConocoPhillips (COP.N) have also proposed an Alaskan gas line project, however.
Either project would be eligible for the Senate measure, which also clarifies that the federal government will step in and repay loans for up to 80 percent of the cost of the total project if the pipeline's owners default on the financing.
"Hopefully these changes will speed the pace of efforts to get a gas line built and offset the financial challenges caused by lower natural gas prices and tighter financial markets," Murkowski said in a statement.
Since the 1970s government officials and industry groups have sought to construct a pipeline that would be used to ship the North Slope's known natural gas reserves of 35 trillion cubic feet.
If approved, the pipeline measure will be folded into a larger energy package that tackles a variety of issues including establishing a renewable electricity standard and increasing appliance efficiency standards. The Senate panel is set to vote on the entire energy bill as early as Tuesday. (Reporting by Ayesha Rascoe; editing by Jim Marshall)
Tuesday, June 9, 2009
Monday, June 8, 2009
Natural Gas Laws in Colorado Painful for Some
By DENNIS WEBB/The Grand Junction Daily Sentinel
Sunday, June 07, 2009
PARACHUTE — Mineral owners Saturday assailed a Democratic lawmaker over the state’s new oil and gas rules, while Republican gubernatorial candidate Scott McInnis said new natural gas discoveries across the country are playing the primary role in Colorado’s drilling slowdown.
“The new regulations basically took away my minerals rights,” Tom Rutledge told state Rep. Kathleen Curry, D-Gunnison, at a meeting of the National Association of Royalty Owners in Parachute.
The Grand Junction resident said his land in North Park was declared off-limits to drilling under new rules designed to protect wildlife.
“I didn’t donate my land to become wildlife habitat,” he said.
“I don’t appreciate the tone of this entire discussion,” Curry said after also hearing criticism from other mineral owners, including one who said “Demoncrats” are responsible for taking people’s property rights.
The new rules were pushed by Democratic Gov. Bill Ritter and approved this year by a Democrat-controlled Legislature.
“This is your fight; this isn’t my fight,” McInnis joked to Curry when she asked the Grand Junction resident whether he wanted to jump into Saturday’s debate over the new rules.
McInnis instead gave a speech focusing on the numerous new natural gas plays in other parts of the country that have left the United States awash in natural gas and helped lower prices and reduce local drilling.
McInnis is a former western Colorado congressman who recently filed paperwork to run for governor in 2010. In an interview after his speech, he said the state’s new rules aren’t the central cause of Colorado’s drilling slowdown, although they may be a contributing factor.
He said it’s too early to judge the new rules, and the state has a right to be demanding in its regulation of energy companies.
“I just want it to be balanced. I don’t want it to be punitive. I just want it to be fair,” he said.
Curry, chairwoman of the House Agriculture, Livestock and Natural Resources Committee, said the Colorado Oil and Gas Conservation Commission did its best to create rules that balance competing interests.
Oil and gas commission member Tresi Houpt also defended the rules, speaking to mineral owners and in an interview. She said the state hasn’t taken away people’s opportunity to develop their minerals in areas falling under new restricted-surface-occupancy rules. It only requires that they work with the Division of Wildlife to find a way to put in habitat protections, she said.
Diane Roth, a lobbyist for mineral owners, spoke in defense of Curry, saying she has been “one of the best legislative champions on royalty issues.”
Sunday, June 07, 2009
PARACHUTE — Mineral owners Saturday assailed a Democratic lawmaker over the state’s new oil and gas rules, while Republican gubernatorial candidate Scott McInnis said new natural gas discoveries across the country are playing the primary role in Colorado’s drilling slowdown.
“The new regulations basically took away my minerals rights,” Tom Rutledge told state Rep. Kathleen Curry, D-Gunnison, at a meeting of the National Association of Royalty Owners in Parachute.
The Grand Junction resident said his land in North Park was declared off-limits to drilling under new rules designed to protect wildlife.
“I didn’t donate my land to become wildlife habitat,” he said.
“I don’t appreciate the tone of this entire discussion,” Curry said after also hearing criticism from other mineral owners, including one who said “Demoncrats” are responsible for taking people’s property rights.
The new rules were pushed by Democratic Gov. Bill Ritter and approved this year by a Democrat-controlled Legislature.
“This is your fight; this isn’t my fight,” McInnis joked to Curry when she asked the Grand Junction resident whether he wanted to jump into Saturday’s debate over the new rules.
McInnis instead gave a speech focusing on the numerous new natural gas plays in other parts of the country that have left the United States awash in natural gas and helped lower prices and reduce local drilling.
McInnis is a former western Colorado congressman who recently filed paperwork to run for governor in 2010. In an interview after his speech, he said the state’s new rules aren’t the central cause of Colorado’s drilling slowdown, although they may be a contributing factor.
He said it’s too early to judge the new rules, and the state has a right to be demanding in its regulation of energy companies.
“I just want it to be balanced. I don’t want it to be punitive. I just want it to be fair,” he said.
Curry, chairwoman of the House Agriculture, Livestock and Natural Resources Committee, said the Colorado Oil and Gas Conservation Commission did its best to create rules that balance competing interests.
Oil and gas commission member Tresi Houpt also defended the rules, speaking to mineral owners and in an interview. She said the state hasn’t taken away people’s opportunity to develop their minerals in areas falling under new restricted-surface-occupancy rules. It only requires that they work with the Division of Wildlife to find a way to put in habitat protections, she said.
Diane Roth, a lobbyist for mineral owners, spoke in defense of Curry, saying she has been “one of the best legislative champions on royalty issues.”
Saturday, June 6, 2009
Natural Gas Rig Count is Down Again
NEW YORK, June 5 (Reuters) - The number of rigs drilling for natural gas in the United States fell 3 to 700 this week, a fresh 6-1/2-year low, according to a report issued Friday by oil services firm Baker Hughes in Houston.
U.S. natural gas drilling rigs have been in a steady decline since peaking above 1,600 in September, and now stand at about 793 below the same week last year, the lowest level since late November 2002 when there were 695 gas rigs operating.
Tight credit and a 75 percent slide in natural gas prices over the last 11 months have forced many producers to scale back drilling operations.
Near record-high gas production last year and a deep recession that sharply cut demand led to a severe oversupply that has kept gas prices this spring below the $4 per mmBtu level from their peak above $13 last July.
With the natural gas drilling rig count likely to continue to fall in coming weeks, most analysts expect to see year-on-year output declines soon, probably by early summer, which should tighten the overall supply-demand balance. (Reporting by Joe Silha, editing by John Picinich)
© Thomson Reuters 2009 All rights reserved
U.S. natural gas drilling rigs have been in a steady decline since peaking above 1,600 in September, and now stand at about 793 below the same week last year, the lowest level since late November 2002 when there were 695 gas rigs operating.
Tight credit and a 75 percent slide in natural gas prices over the last 11 months have forced many producers to scale back drilling operations.
Near record-high gas production last year and a deep recession that sharply cut demand led to a severe oversupply that has kept gas prices this spring below the $4 per mmBtu level from their peak above $13 last July.
With the natural gas drilling rig count likely to continue to fall in coming weeks, most analysts expect to see year-on-year output declines soon, probably by early summer, which should tighten the overall supply-demand balance. (Reporting by Joe Silha, editing by John Picinich)
© Thomson Reuters 2009 All rights reserved
Friday, June 5, 2009
Natural Gas Inventory is UP
NEW YORK (AP) — Natural gas stockpiles rose more than analysts expected last week, the government said Thursday, as demand continues to lag.
The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 124 billion cubic feet to about 2.34 trillion cubic feet for the week ended May 29.
Analysts expected an increase of 115 billion to 120 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The inventory level was 22 percent above the five-year average of about 1.91 trillion cubic feet, and 31 percent above last year's storage level of about 1.79 trillion cubic feet.
Natural gas lost 1.57 cents at $3.609 per 1,000 cubic feet in morning trading on the New York Mercantile Exchange.
Copyright © 2009 The Associated Press. All rights reserved.
The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 124 billion cubic feet to about 2.34 trillion cubic feet for the week ended May 29.
Analysts expected an increase of 115 billion to 120 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The inventory level was 22 percent above the five-year average of about 1.91 trillion cubic feet, and 31 percent above last year's storage level of about 1.79 trillion cubic feet.
Natural gas lost 1.57 cents at $3.609 per 1,000 cubic feet in morning trading on the New York Mercantile Exchange.
Copyright © 2009 The Associated Press. All rights reserved.
Wednesday, June 3, 2009
Natural Gas in Shale is a Good Thing
NEW YORK, June 2 (Reuters) - Rich Kinder, chairman and CEO of pipeline and storage company Kinder Morgan Energy Partners LP (KMP.N) said Tuesday huge untapped reserves of shale gas are actually bullish for the natural gas industry, a contrarian view for most in the energy business.
"I would look at the overall shale situation as very bullish for the industry, very bullish for a midstream company like Kinder Morgan," Kinder told the Reuters Energy Summit in Houston.
"Upstream folks will tell you we have '100 years of natural gas supply' that we know we can access in the lower 48 without importing any LNG. When you look at a way to solve the CO2 problem, natural gas has got to be an enormous part of that solution and now we know we have the supply to do that," Kinder said.
He added, "We are going to have a lot of supply and more need for natural gas transportation in this country," the place where Kinder Morgan steps in as the second largest gas pipeline system in the nation.
Kinder said there was no question shale gas is having a "severe impact on prices" and he expects that to continue until drilling rates cut back and demand improves as the economy picks up.
"What the upstream sector has done in the natural gas field, strictly with the shale plays is just a dramatic improvement. The common accepted knowledge just a couple of years ago was, 'we're depleting our resources in the lower 48, the imports from Canada are not what they used to be and we need all the LNG we can get,'" he said.
Kinder said shale plays and vast improvements in horizontal drilling techniques have led to much more access to natural gas production and a much greater impact on prices.
Kinder also said gas storage has been pushed to near record highs this year but cautioned the summer and hurricane season are still ahead.
"We don't know what the electric demand is going to be during the summer. We don't know how hot it's going to be, whether we're going to have any hurricane disruptions," but Kinder said storage will affect the price.
PIPELINE OUTLOOK
Kinder Morgan is also joint developer of the huge Rockies Express natural pipeline with Sempra Energy (SRE.N) unit Sempra Pipelines and Storage, and ConocoPhillips (COP.N).
When complete, the 1,679-mile pipeline will be one of the largest gas pipelines in North America, delivering about 1.8 billion cubic feet per day of gas from Rio Blanco County in Colorado to Monroe County in Ohio.
Adverse weather delayed the eastern advance of the pipeline several times in the past few months, but Kinder said the project is "weeks away" from reaching Lebanon, Ohio and affirmed the projected in service date to Clarington, Ohio, for Nov. 1.
Drilling activities were suspended due to flooding on both the Illinois and Wabash rivers.
In November, Sempra said project costs had ballooned to $6 billion from earlier estimates of $4.4 billion, due to rising labor and permitting costs on the eastern leg of the line. Continued...
"I would look at the overall shale situation as very bullish for the industry, very bullish for a midstream company like Kinder Morgan," Kinder told the Reuters Energy Summit in Houston.
"Upstream folks will tell you we have '100 years of natural gas supply' that we know we can access in the lower 48 without importing any LNG. When you look at a way to solve the CO2 problem, natural gas has got to be an enormous part of that solution and now we know we have the supply to do that," Kinder said.
He added, "We are going to have a lot of supply and more need for natural gas transportation in this country," the place where Kinder Morgan steps in as the second largest gas pipeline system in the nation.
Kinder said there was no question shale gas is having a "severe impact on prices" and he expects that to continue until drilling rates cut back and demand improves as the economy picks up.
"What the upstream sector has done in the natural gas field, strictly with the shale plays is just a dramatic improvement. The common accepted knowledge just a couple of years ago was, 'we're depleting our resources in the lower 48, the imports from Canada are not what they used to be and we need all the LNG we can get,'" he said.
Kinder said shale plays and vast improvements in horizontal drilling techniques have led to much more access to natural gas production and a much greater impact on prices.
Kinder also said gas storage has been pushed to near record highs this year but cautioned the summer and hurricane season are still ahead.
"We don't know what the electric demand is going to be during the summer. We don't know how hot it's going to be, whether we're going to have any hurricane disruptions," but Kinder said storage will affect the price.
PIPELINE OUTLOOK
Kinder Morgan is also joint developer of the huge Rockies Express natural pipeline with Sempra Energy (SRE.N) unit Sempra Pipelines and Storage, and ConocoPhillips (COP.N).
When complete, the 1,679-mile pipeline will be one of the largest gas pipelines in North America, delivering about 1.8 billion cubic feet per day of gas from Rio Blanco County in Colorado to Monroe County in Ohio.
Adverse weather delayed the eastern advance of the pipeline several times in the past few months, but Kinder said the project is "weeks away" from reaching Lebanon, Ohio and affirmed the projected in service date to Clarington, Ohio, for Nov. 1.
Drilling activities were suspended due to flooding on both the Illinois and Wabash rivers.
In November, Sempra said project costs had ballooned to $6 billion from earlier estimates of $4.4 billion, due to rising labor and permitting costs on the eastern leg of the line. Continued...
Tuesday, June 2, 2009
Champaign Natural Gas Tax No Sip of Wine
By Mike Monson
Monday, June 1, 2009 8:03 AM CDT
E-mail Story Printer-friendly
CHAMPAIGN – Implementing a new natural-gas use tax on bulk purchases of out-of-state natural gas could wind up becoming a big income generator for the city of Champaign.
But there are still a number of questions about the proposed tax, including whether it would be applied to the University of Illinois and Unit 4 schools.
The city council will consider a number of proposed tax and fee increases at a 7 p.m. study session Tuesday. The meeting will be in council chambers at the City Building, 102 N. Neil St.
In the case of the natural-gas use tax, City Finance Director Richard Schnuer is asking the city council for authorization to further investigate imposing a 2.75 percent tax on entities purchasing natural gas out of state.
The city currently charges a 2.75 percent utility tax on users of natural gas and electricity bought through AmerenIP as well as on water purchases.
But larger natural-gas customers, such as the UI, the Unit 4 school district and some local businesses, don't pay the city tax. Those entities buy natural gas out of state, known as "from the wellhead," and then have it shipped here. State law exempts such purchases from the city's utility tax, which is based on the cost of gas sold.
But, under state law, the city can charge a natural-gas use tax that charges on a per-therm or volume basis for those out-of-state purchases, according to Schnuer. The city doesn't currently levy such a tax.
Schnuer said he talked with an AmerenIP official and that, based on the number of natural-gas therms that were transported to Champaign by AmerenIP that were bought out of state, the city could earn as much as $1.4 million from the new tax. That's substantially above the $150,000 that Schnuer originally estimated.
Schnuer said the current situation – with large users paying no tax while smaller users do pay a city tax – is inequitable.
"I think people would agree that, in general, when two parties are doing something similar, you want to treat them similarly," he said.
In a memo to the city council, Schnuer wrote that the proposed tax would apply to public entities such as Unit 4 schools. He also wrote that the city has not discussed the issue with UI officials and that the such discussions would take place if the city council gives the go-ahead.
The UI has long taken the position that it is not subject to taxes assessed by units of local government. But, in some cases, the university does make payments in lieu of taxes, such as in lieu of paying the city's food and beverage tax, Schnuer wrote.
Terry Ruprecht, the UI's director of energy conservation, confirmed that the UI does not believe it is subject to local taxation.
"The state does not get taxed by a city," he said. "That position has been consistent in the 21 years I've been here."
Ruprecht said a 2.75 percent tax would cost the UI a substantial sum, likely about $1 million, if it were imposed. The UI bought $35 million worth of natural gas in the fiscal year that ended June 30, 2008.
In his memo, Schnuer noted that the town of Normal levies a 5 percent natural-gas use tax and that Illinois State University pays the tax.
Unit 4 Chief Financial Officer Gene Logas said the school district bought about $800,000 in natural gas last year and that about 80 percent of that was bought out of state. He estimated such a tax would cost the school district $20,000 annually.
"Obviously, we'd rather work with the city to avoid that," he said. "We're facing the same budgetary constraints that they are."
Schnuer added that it is "not the intent" of city staff to raise $1.4 million from the tax, and that the city council could consider a number of different options. For example, the city council could generate an additional $150,000, as originally projected, by lowering the gas utility tax charged small users to 1.5 percent and imposing a gas-use tax of 1.4 percent on out-of-state purchases. Or the city could impose a smaller use tax on big customers to raise the $150,000.
The city could also opt to exempt the UI and Unit 4 from such a tax.
Monday, June 1, 2009 8:03 AM CDT
E-mail Story Printer-friendly
CHAMPAIGN – Implementing a new natural-gas use tax on bulk purchases of out-of-state natural gas could wind up becoming a big income generator for the city of Champaign.
But there are still a number of questions about the proposed tax, including whether it would be applied to the University of Illinois and Unit 4 schools.
The city council will consider a number of proposed tax and fee increases at a 7 p.m. study session Tuesday. The meeting will be in council chambers at the City Building, 102 N. Neil St.
In the case of the natural-gas use tax, City Finance Director Richard Schnuer is asking the city council for authorization to further investigate imposing a 2.75 percent tax on entities purchasing natural gas out of state.
The city currently charges a 2.75 percent utility tax on users of natural gas and electricity bought through AmerenIP as well as on water purchases.
But larger natural-gas customers, such as the UI, the Unit 4 school district and some local businesses, don't pay the city tax. Those entities buy natural gas out of state, known as "from the wellhead," and then have it shipped here. State law exempts such purchases from the city's utility tax, which is based on the cost of gas sold.
But, under state law, the city can charge a natural-gas use tax that charges on a per-therm or volume basis for those out-of-state purchases, according to Schnuer. The city doesn't currently levy such a tax.
Schnuer said he talked with an AmerenIP official and that, based on the number of natural-gas therms that were transported to Champaign by AmerenIP that were bought out of state, the city could earn as much as $1.4 million from the new tax. That's substantially above the $150,000 that Schnuer originally estimated.
Schnuer said the current situation – with large users paying no tax while smaller users do pay a city tax – is inequitable.
"I think people would agree that, in general, when two parties are doing something similar, you want to treat them similarly," he said.
In a memo to the city council, Schnuer wrote that the proposed tax would apply to public entities such as Unit 4 schools. He also wrote that the city has not discussed the issue with UI officials and that the such discussions would take place if the city council gives the go-ahead.
The UI has long taken the position that it is not subject to taxes assessed by units of local government. But, in some cases, the university does make payments in lieu of taxes, such as in lieu of paying the city's food and beverage tax, Schnuer wrote.
Terry Ruprecht, the UI's director of energy conservation, confirmed that the UI does not believe it is subject to local taxation.
"The state does not get taxed by a city," he said. "That position has been consistent in the 21 years I've been here."
Ruprecht said a 2.75 percent tax would cost the UI a substantial sum, likely about $1 million, if it were imposed. The UI bought $35 million worth of natural gas in the fiscal year that ended June 30, 2008.
In his memo, Schnuer noted that the town of Normal levies a 5 percent natural-gas use tax and that Illinois State University pays the tax.
Unit 4 Chief Financial Officer Gene Logas said the school district bought about $800,000 in natural gas last year and that about 80 percent of that was bought out of state. He estimated such a tax would cost the school district $20,000 annually.
"Obviously, we'd rather work with the city to avoid that," he said. "We're facing the same budgetary constraints that they are."
Schnuer added that it is "not the intent" of city staff to raise $1.4 million from the tax, and that the city council could consider a number of different options. For example, the city council could generate an additional $150,000, as originally projected, by lowering the gas utility tax charged small users to 1.5 percent and imposing a gas-use tax of 1.4 percent on out-of-state purchases. Or the city could impose a smaller use tax on big customers to raise the $150,000.
The city could also opt to exempt the UI and Unit 4 from such a tax.
Monday, June 1, 2009
Russian Natural Gas Player is Novatek
By LIAM DENNING
Competing with Gazprom on its home turf is no mean feat. But independent Russian natural-gas producer Novatek hasn't done badly. Since its global depositary receipts debuted in London in 2005, they have risen 175%, valuing Novatek at almost $16 billion.
But the stock now commands a giddy 25 times 2009 earnings, and cracks are showing in the investment case.
Novatek agreed last week to pay $650 million for 51% of an undeveloped natural-gas field from companies linked to Gennady Timchenko's Volga Resources fund. The same week, Volga raised its stake in Novatek to 18.2% and Mr. Timchenko joined its board.
Analysts say production from the field is more than a decade away. The large upfront investment needed risks eroding free cash flow, a major element of Novatek's appeal.
The other element is high growth. Before the financial crisis, this looked secure. Gazprom, apparently struggling to produce enough natural gas to export to Europe, was happy for others to take share in the domestic market.
Suddenly, Gazprom's exports have slumped. Europe faces a slow recovery and wants to diversify its energy supplies. Prospects have dimmed at home. Thane Gustafson at IHS Cambridge Energy Research Associates reckons Russian natural-gas demand could peak in 2015.
Novatek, which can't export, risks being crowded out. Gazprom aside, its other competitors are mostly oil companies producing natural gas as a side product, making it hard to fit output to lower demand.
Novatek's largest shareholder, with a 20% stake, is Gazprom itself. How much protection that offers in a slowing market, however, is far from certain.
Write to Liam Denning at liam.denning@wsj.com
Competing with Gazprom on its home turf is no mean feat. But independent Russian natural-gas producer Novatek hasn't done badly. Since its global depositary receipts debuted in London in 2005, they have risen 175%, valuing Novatek at almost $16 billion.
But the stock now commands a giddy 25 times 2009 earnings, and cracks are showing in the investment case.
Novatek agreed last week to pay $650 million for 51% of an undeveloped natural-gas field from companies linked to Gennady Timchenko's Volga Resources fund. The same week, Volga raised its stake in Novatek to 18.2% and Mr. Timchenko joined its board.
Analysts say production from the field is more than a decade away. The large upfront investment needed risks eroding free cash flow, a major element of Novatek's appeal.
The other element is high growth. Before the financial crisis, this looked secure. Gazprom, apparently struggling to produce enough natural gas to export to Europe, was happy for others to take share in the domestic market.
Suddenly, Gazprom's exports have slumped. Europe faces a slow recovery and wants to diversify its energy supplies. Prospects have dimmed at home. Thane Gustafson at IHS Cambridge Energy Research Associates reckons Russian natural-gas demand could peak in 2015.
Novatek, which can't export, risks being crowded out. Gazprom aside, its other competitors are mostly oil companies producing natural gas as a side product, making it hard to fit output to lower demand.
Novatek's largest shareholder, with a 20% stake, is Gazprom itself. How much protection that offers in a slowing market, however, is far from certain.
Write to Liam Denning at liam.denning@wsj.com
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