APGA Weekly Update March 17, 2016

03-17-2016 12:22

APGA Weekly Update, March 17, 2016

APGA Comments on DOE's Methodology for Source Energy Calculations
On March 14, APGA submitted comments to the Department of Defense (DOE) on their Request for
Information (RFI) on a proposed alternative methodology for calculating source energy from noncombustible
renewable resources. DOE is gathering information from stakeholders to help inform the
Office of Energy Efficiency and Renewable Energy (EERE) on whether a change to the source energy
calculation should be proposed. This potential change would impact the site-to-source ratios used in
analyses that inform EERE reports, standards, and evaluations such as the Home Energy Score.
Accounting for the total source energy of electricity produced from combustible fuels (e.g., coal, natural
gas, oil) is relatively straightforward since the energy content of these fuels is known. However, for noncombustible
renewable resources (e.g., wind, solar, hydro, and geothermal), because there is no fuel
used, a choice must be made to determine how to account for the primary energy of electricity
generated from these sources.

The current fossil fuel equivalency accounting convention, which is used by the Energy Information
Administration (EIA) to calculate the reported source energy number, assumes that non-combustible
renewable electricity (RE) generation has the same source energy per kilowatt hour (kWh) as the
average of fossil fuel electricity. This factor, equivalent to a heat rate, represents the average amount of
fossil fuel energy required to produce a kWh of electricity. Alternatively, the factor can be thought of as
the amount of fossil fuel energy displaced by a kWh of RE. The most recent value reported by EIA is
9,541 BTU/kWh, which is equivalent to a generation efficiency of roughly 36 percent.
The captured energy alternative convention accounts only for the energy output from a noncombustible
generator. This assumes that the conversion from energy resource (e.g. sunlight, wind,
water, etc.) into electricity is 100 percent efficient. The energy content of electricity generated from a
non-combustible source using this accounting convention is 3,412 BTU/kWh, which is a unit conversion.
Using the captured energy approach decreases the site-to-source ratio from 2.98 to 2.77 as compared to
the fossil fuel equivalency approach.

APGA’s comments focused on the point that DOE should consider multiple source energy calculations
based on the context. For example, the marginal efficiency calculation is useful for decision-making,
such as design and investment strategies for homes and buildings, whereas the captured energy
approach suggested in the RFI is not. Captured energy and other average energy approaches may make
sense, however, for determining carbon footprint or greenhouse gas inventory or for benchmarking
purposes.

APGA will continue to work with DOE and other stakeholders to ensure that any methodology used to
determine source energy will reflect the benefits of the direct-use of natural gas.

For questions on this article, please contact Dan Lapato of APGA staff by phone at 202-464-2742 or by
email at dlapato@apga.org.

Administration Reverses Plan to Allow Offshore Oil and Gas Drilling in the Atlantic

On March 15, the Obama administration announced a reversal of its previous January 2015 plan to allow
oil and gas drilling off the coasts of Virginia, Georgia, North Carolina, and South Carolina as part of its
2017-2022 federal offshore oil and gas leasing plan, while also announcing an expansion of offshore
leasing areas in some parts of the Gulf of Mexico and off the coast of Alaska.

The administration gave three rationales for the change: local coastal opposition, impact on defense
facilities and coastal protection, and negative impacts on competing economic activities. In just over one
year since the President originally announced support for Atlantic leasing as part of the 2017-2022 plan,
approximately 100 local coastal communities throughout the four states raised significant alarms about
the plan, arguing that drilling activities are fundamentally unsafe. This anti-drilling sentiment itself was a
reversal of previous opinions in many of these coastal towns that previously supported offshore
production. However, in light of the Deepwater Horizon spill, many communities reversed course and
passed resolutions opposing offshore production.

With respect to the impact on the U.S. Department of Defense (DOD) and coastal security, a Washington
Post article from March 14 discussed how the Obama administration was reworking the leasing plan in
response to, “strong opposition from the Pentagon, which says the activity could hurt military
maneuvers and interfere with missile tests the Navy relies on to protect the coast.” Furthermore, the
article went on to note that, “The Pentagon confirmed Sunday that it provided an assessment of
Interior’s map for oil exploration on the coastal outer shelf ‘that identifies locations … areas where the
[Defense’s] offshore readiness activities are not compatible, partially compatible or minimally impacted
by oil and gas activities,’ spokesman Matthew Allen said.”

Lastly, the administration also argued that other commercial concerns including fishing and tourism
would be negatively impacted by allowing drilling in the Atlantic, with lack of needed infrastructure in
some areas also contributing to their opposition.

Though not stated as a reason for the opposition, it seems very likely that environmental concerns
played a role in the President’s decision. Environmental groups have consistently called for blocking oil
and gas leasing in certain areas including the Atlantic, with some groups going much further calling for
an immediate end to all oil and gas production based upon climate change concerns. Unsurprisingly,
industry issued statements indicating their displeasure with the decision citing lost jobs, tax revenue,
and other economic benefits with congressional supporters of oil and gas drilling surely to follow.
As far as a practical impact on the supply of natural gas, the reinstatement of the ban on production in
federal waters in the Atlantic will likely have almost no impact primarily because the area wasn’t
currently producing and the fact that onshore production has boomed since 2010 thanks to the shale
gas revolution, the resources of which are overwhelmingly located on private, non-federal lands. While
shale gas production has skyrocketed, it did so at the expense of offshore production, which has been in
decline for several years. For example, according to data from the Energy Information Administration
(EIA), of the 26,679 BCF of natural gas produced in the U.S. in 2014, 23,169 BCF came from non-federal
lands and only 1,060 BCF came from offshore federal lands. In short, the Atlantic area would not have
contributed much to the already declining offshore federal production due to the higher cost of
production versus onshore shale gas. Nonetheless, this action combined with newly announced
methane rules will continue to challenge the natural gas industry to stay competitive in a time of
heightened scrutiny from regulators.

For questions on this article, please contact Scott Morrison of APGA staff by phone at 202-464-2742 or
by email at smorrison@apga.org.

Nominations Open for 2016 APGA Awards!

Each year, APGA presents awards to recognize individuals within our organization who have gone above
and beyond to represent the interests of APGA and public natural gas. These awards will be presented at
the Annual Conference in Newport, R.I., in July.

Please take a few minutes to recommend likely candidates for each of the following awards and return
the attached nomination form to the APGA office by April 15. You can nominate a candidate online at
https://www.surveymonkey.com/r/2016APGAaward or send this PDF back to APGA by email, mail, or
fax.

Nominations are open for the:

• Distinguished Service Award - Recipient has made substantial contributions to the public
natural gas industry, maintains an unusual devotion to duty, exemplifies the highest ideals
and finest traditions in the management of publicly owned natural gas systems, and has
made contributions to the betterment of the community. Nominee holds a management
position with an APGA public natural gas system member and has been active in APGA for at
least five years.

• Public Gas System Achievement Award - Recipient is an APGA public natural gas system
member whose performance is widely recognized in the public natural gas industry, has
made substantial contributions to the community, other utilities and the goals of APGA. The
system has expressed a willingness to exchange ideas and technology with others to ensure
the gas industry will be the safest and most knowledgeable of all utilities. The system has
been an active member of APGA for at least five years.

• Personal Achievement Award - Recipient has made substantial contributions toward the
goals of APGA and the natural gas industry. Nominee is an employee of an APGA public
natural gas system member.

• Harry M. Cooke Personal Service Award - Recipient has made substantial contributions
toward the goals of APGA and the natural gas industry. Nominee is not an employee of an
APGA public natural gas system member.

• J. Hardie Johnston Service Award - Individuals who are retiring after serving 25 years in the
gas service business and have participated as an APGA member system representative or a
retiring APGA Charter Member.

• APGA Safety Award - This contest is based on the number of employee hours worked and
the number of hours lost to accident or injury during the 2015 calendar year. Please enter to
win this award through a separate application at
https://www.surveymonkey.com/r/2016safetycontest.

For questions or if you would like to email your nominations and/or supporting documentation, please
contact Sheila Deringis at sderingis@apga.org.

Enter the 2016 APGA Safety Contest

Your gas system is invited to participate in the Annual APGA Safety Contest. All APGA members are
eligible to enter this contest. This contest is based on the number of employee hours worked and the
number of hours lost to accident or injury during the 2015 calendar year. The winners of each group will
be selected based on a statistical calculation. Systems that qualify for this safety award will receive a
certificate and may also be eligible to receive a safety plaque based on the number of consecutive years
they have won. The Safety Contest rules and entry form can be downloaded here for your completion by
May 15, 2016. You can also complete the survey online at
https://www.surveymonkey.com/r/2016safetycontest.

The winners will be announced at the APGA Annual Conference in Newport, R.I., this summer. For
questions regarding the contest, please contact the APGA office at 202-464-2742.

House Subcommittee on Energy and Power Passes Pipeline Safety Act

The House Subcommittee and Energy and Power marked up and passed on a voice vote the Pipeline
Safety Act of 2016 on March 16, forwarding the bill to the full committee for consideration.
The bill is largely non-controversial and focuses on pushing the Pipeline and Hazardous Materials Safety
Administration (PHMSA) to issue the numerous outstanding regulations from the 2011 pipeline safety
bill, improving underground storage standards, and providing direct hire authority to PHMSA to quickly
fill open positions.

The bill does contain one provision of concern, Section 15, which “Provides the Secretary of
Transportation with emergency authority to order operational controls, restrictions, prohibitions, and
safety measures as may be necessary to abate an imminent hazard that presents a substantial likelihood
of death, severe personal injury, or significant harm to property or the environment.” This gives PHMSA
authority to order all natural gas entities to make changes without a rulemaking or review if there is an
imminent threat.

At the beginning of the hearing, Representative Barton (R-Texas) spoke forcefully in opposition to
Section 15 and stated that he would offer and withdraw an amendment to strip out Section 15 at the
request of the subcommittee and full committee chairman to maintain a spirit of bipartisanship. Rep.
Barton stated that at the appropriate time, he would offer his amendment to strip out Section 15 or
another amendment to significantly modify the section.
Subsequently, a number of amendments were offered and descriptions of each and their outcomes are
included below.
Representative Capps (D-Calif)
Amendment: To expand the definition of High Consequence Areas (HCA) by including all coastal
recreational waters and lands adjacent to them as HCAs.
Outcome: Withdrawn at the request of Chairman Upton who pledged to work with her moving forward
to make sure it is appropriately targeted. It seems like this will be considered at the full committee
markup.
Amendment: Any hazardous liquid pipeline in a HCA would be required to have an automatic shutoff
valve and automatic spill detection equipment.
Outcome: Withdrawn at the request of the Subcommittee Chairman to clarify the status of HCA
requirements and will work on prior to full committee markup.
Amendment: Increased inspection frequency of hazardous liquid pipelines in HCAs from a risk-based
standard to every year.
Outcome: Withdrawn but will likely be back at the full committee markup.
Representative Tonko (D-N.Y.)
Amendment: Increases civil penalties on pipeline operators who fail to abide by safety regulations from
$100,000 to $200,000 for certain violations and increase the penalties for a series of violations increased
from $2 million to $4 million.
Outcome: Withdrawn at the request of Chairman Upton who pledged to work with Tonko moving
forward. It seems like this will be considered at the full committee markup.
Amendment: Provides change to criminal penalties statute by changing willfully and knowingly standard
to willfully, knowingly, or recklessly standard—effectively lowers the standard).
Outcome: Withdrawn but will likely be back at the full committee markup.
Representative Green (D-Texas)
Amendment: If a 30-day Emergency Order is given by the Department of Transportation (DOT), timeline
can become an issue for DOT and affected operator. The amendment seeks to clarify the timelines
involved.
Outcome: Withdrawn at the request of Chairman Upton who pledged to work with Mr. Green before
the full committee markup.
Representative Barton
Amendment: To strip Section 15 from the bill.
Outcome: Withdrawn at the request of Chairman Upton who pledged to work with Mr. Barton before
the full committee markup.
Representative McNerney (D-Calif.)
Amendment: Strikes duplicative risk and cost benefits requirements because they are already being
considered as rules from the previous pipeline safety bill by the Office of Management and Budget.
Outcome: Withdrawn, at the request of the Chairman and will work on prior to full committee markup.
Representative Pallone (D-N.J.)
Amendment: Adds back mandamus provision, which allows the public to force PHMSA to enact
regulations on which it has not acted.
Outcome: Withdrawn but will likely be back at the full committee markup.
Representative Engel (D-N.Y.)
Amendment: Creates mandatory role for Department of Homeland Security in siting liquefied natural
gas pipelines and hardened from terrorist attack and cyberattack.
Outcome: Withdrawn but will likely be back at the full committee markup.

Moving forward, the Energy and Commerce Committee will hold a full committee markup of the
Pipeline Safety Act of 2016. The committee has much work to do before that markup and it is possible
that it could be held next month. It appears highly likely that Section 15 will be altered at minimum
before the next markup, while the fate of other amendments remains unclear at this time.
For questions on this article, please contact Scott Morrison of APGA’s staff by phone at 202-464-2742 or
by email at smorrison@apga.org.

PHMSA Advisory Group to Meet June 1-2

The Pipeline and Hazardous Materials Safety Administration (PHMSA) announced that its Technical
Advisory Group (TAG) will meet June 1-2 to review two pending proposed regulations and advise PHMSA
if the rules are reasonable, technically feasible, practical and economically justified. The TAG is
composed of pipeline safety experts from industry, government and the public that was created by
Congress to review and advise PHMSA on pipeline safety regulations. Rich Worsinger of City of Rocky
Mount, N.C., represents public natural gas on the TAG.

On June 1, the TAG will review PHMSA’s proposed changes to plastic pipe regulations. APGA filed
written comments on the approximately 25 separate regulatory changes proposed by PHMSA, in most
cases supporting changes such as prohibiting installation of Poly Vinyl Chloride (PVC) plastic pipe other
than for repair of existing PVC systems, allowing higher operating pressures for Polyethylene (PE) pipe
and allowing plastic pipe to be installed above ground inside casings in certain circumstances—for
example, risers at regulator stations. APGA’s comments questioned PHMSA’s proposal to prohibit using
socket fusion to join plastic pipe over 1 and one-quarter inch diameter. APGA’s comments also
recommended changes to PHMSA’s proposal to require operators to keep records of tracking and
traceability information, supporting the concept, but questioning the specifics of PHMSA’s proposal.
On June 2, the TAG will meet jointly with the hazardous liquid TAG to review proposed changes to
operator qualification, incident notification and drug and alcohol regulations. APGA also filed written
comments on these proposed changes, pointing out inconsistencies in the proposed changes and
questioning the need for some of the detailed, prescriptive requirements in the operator qualification
program changes. The major change is to the definition of a covered task, where the current four-part
test would be revised to include construction and emergency response tasks as covered tasks.

TAG meetings are open to the public and APGA encourages its members to attend. The meeting will be
held in the Washington area, but the hotel has yet to be announced. For questions on this article, please
contact John Erickson of APGA staff by phone at 202-464-0834 or by email at jerickson@apga.org.

EIA Reports Storage Decrease of 1 Bcf to Put Working Gas Storage at 2,478 Bcf

Here is the weekly EIA Summary Report issued on Thursday, March 17, 2016, which reports the week’s
storage report highlights for Friday, March 11, 2016. A 1 Bcf decrease has been reported.
Working gas in storage was 2,478 Bcf as of Friday, March 11, 2016, according to EIA estimates. This
represents a net decline of 1 Bcf from the previous week. Stocks were 998 Bcf higher than last year at
this time and 807 Bcf above the five-year average of 1,671 Bcf. At 2,478 Bcf, total working gas is above
the five-year historical range.

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