APGA's General Counsel, John Gregg of McCarter & English, prepares this weekly report to highlight the industry news for public natural gas professionals.
June 13, 2019
New Jersey Looks to Electrify Gas Buildings and Appliances
The State of New Jersey has released its Draft 2019 Energy Master Plan to reach 100% clean energy by 2050 by transitioning to carbon-neutral power generation and maximum electrification of the transportation and building sectors. The state utility commission says that it “expects that beyond 2030, state policy will have to aggressively target existing natural gas-heated buildings.” It proposes a goal to develop “a transition plan to a fully electrified building sector.” It proposes to “incentivize transition to electrified heat pumps, hot water heaters, and other appliances,” claiming that “owners of natural gas heating systems can find cost benefits and efficiency gains if high-efficiency heat pumps are installed to replace an aging boiler or furnace and air conditioning units.” It is seeking public comment on a range of issues, including what “policy, legislative, or regulatory mechanisms can New Jersey develop to incentivize and accelerate the transition from oil, propane, and natural gas heating systems to electrified heating systems?” The 107-page draft plan reflects work done by stakeholder groups after the governors May 2018 executive order requiring this plan to be developed. It reflects the actions of several other states heading in the same direction. In New Jersey 75% of residences in are heated with natural gas; another 10.3% use oil or propane. The state believes that natural gas- and oil-fueled space heating, water heating, appliances, and industrial use account for 28% of New Jersey’s greenhouse gas emissions. It aims to “offer financial incentives for natural gas-heated properties to upgrade to electric heating and cooling now, and ramp down approval of new subsidies that incentivize building owners to retrofit from oil heating systems to natural gas heating systems.”
PG&E Authorized to Break Green Contracts in Conflict with FERC
As wildfires again afflicted California, PG&E exercised its new authority to cut power to thousands as fire conditions turned bad. Meanwhile, in its bankruptcy proceeding, the judge ruled that the utility may get out of $42 billion in power-purchase agreements, including many wind and solar deals because they are well above current market prices. Companies like NextEra Energy Inc., Consolidated Edison Inc. and Berkshire Hathaway Inc. stand on the other side of those deals. PG&E has $34.5 billion worth of renewable-energy contracts for electricity deliveries between now and 2043, according to a filing with FERC. Rejecting those with above-market prices could save the company $1.4 billion annually, according to Moody’s. The judge is opposed by FERC, which has asserted it also has authority over PG&E’s contract decisions, which proposed side-by-side jurisdiction, which would have made it tougher for PG&E to get out of deals. Contract terminations would chill the alternative energy market. Uncertainty about PG&E has led to the downgrade of some green-energy producers’ debt to speculative grade by Standard & Poor’s.
Low Prices Hitting US Energy Markets
Natural gas prices are low, and crude oil prices are tumbling also as a U.S. supply glut grows. On NYMEX, West Texas Intermediate futures fell another 3% to $51.70 a barrel. The U.S. Energy Information Administration lowered Tuesday its monthly oil demand forecast to 1.2 million barrels a day, a 15% cut from the prior month’s forecast.
Despite softness in the market, Dallas Cowboy owner Jerry Jones is betting big on natural gas prices. The Wall St. Journal reports that he has invested more than $1 billion, most recently putting up $475 million of his own money to help Comstock Resources Inc. buy a larger shale-gas rival, Covey Park Energy, for about $1.6 billion, bringing to about $1.1 billion his interest in the Haynesville Shale in Louisiana and East Texas where Comstock and Covey both drill. “We all know it’s soft out there,” Mr. Jones said. “If it hadn’t been soft, I’d never [have] bought the Cowboys. I bought it when everything was down and out. I got in the oil business back 40 years ago. It was a down and out time.”
Sempra Energy Ships First Liquefied Natural Gas Cargo From Cameron LNG Export Facility
On May 31, 2019, Sempra Energy, the majority owner of the Cameron liquefied natural gas (LNG) export facility, announced that the company had shipped its first cargo of LNG, becoming the fourth such facility in the United States to enter service since 2016. Upon completion of Phase 1 of the Cameron LNG project, U.S. baseload operational LNG-export capacity increased to about 4.8 Bcf/d. Cameron LNG’s export facility is located in Hackberry, Louisiana, next to the company’s existing LNG-import terminal.
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