Gas Advocates Step Back, Look Forward

February 2011, Vol. 238 No. 2

Erin Nelsen, Online Editor

The Gas Technology Institute (GTI) holds an unusual position in the natural gas industry: although it is a nonprofit, its business plan is based around an intense focus on the market. And although it advocates for natural gas, it’s looking for long-term innovation, not short-term politics.

The combination of the two positions means GTI has a unique vantage point from which to view the big picture of the natural gas industry—and to try to adjust that picture’s focus.

The organization’s process is simple. “The first question we always ask when we’re considering a new project is, ‘Is this good for the natural gas industry?’” explains vice president of corporate development Ron Snedic. “Is this technology going to move the needle?”

CEO David Carroll puts it slightly differently. “A wise person in the research business once told me, you really need to be working on important problems. If you’re not working on important things, number one, they’re probably not worth solving, and number two, people don’t need to pay you to solve them.” Carroll says that reasoning has guided him in directing GTI since he took over in 2006.

If the project under discussion passes the good-and-important test, GTI applies its scientific experts and formidable Rolodex. “GTI’s strengths are collaboration, project management, research capability and leveraging funding resources,” explains Snedic. “We bring people together to accomplish things they couldn’t alone.” The institute usually has around 300 projects in the works at any one time, slotted into departments for supply, delivery, and utilization, with a strong focus on renewables across each of these areas.

Even at that scale, GTI’s influence is rising. In 2010—its tenth anniversary year—GTI racked up $68 million in net new business, an $8 million increase over 2009. “A very strong year for us in new business,” Snedic acknowledges. For GTI’s predecessor organizations, that kind of footprint would have meant success in lobbying FERC or Congress to direct public money toward their efforts. But GTI is wholly funded by its projects, the royalties they earn and the voluntary investments of other organizations. Each dollar in new business is a vote from the industry that the institute is contributing to its mission. (See sidebar “Happy Birthday, GTI.”)

A few examples of GTI’s current projects of interest:
Water use in shale plays. In the Marcellus shale, GTI is currently involved with projects to quantify water use (and thereby soothe community fears with hard data); detail exactly what additives hydraulic fracturing leaves in wastewater; and develop better, more efficient and cheaper methods of purifying the resultant solution. (See sidebar “Shale Plays And Water Use.”)

CNG fueling stations. In 2010 GTI and the City of Chicago began the process to install a network of natural gas fueling stations throughout the area to encourage wider use of compressed natural gas-powered vehicles. Waste collection companies Groot and Waste Management have already introduced a fleet of CNG-powered garbage trucks locally, and Snedic reports that taxis and long-haul semis will be among the private-sector adopters in 2011.

Smart energy grid. “The federal government has spent $4 billion on the electric smart grid, but they haven’t invested anything similar on natural gas yet. What we’re attempting to do is ensure that we don’t end up with a super-intelligent electric infrastructure and a gas infrastructure that isn’t really able to communicate with it,” says Snedic. GTI and several partner organizations envision an advanced energy infrastructure grid that is flexible, environmentally friendly and reliable, capable of incorporating wind and biologically sourced methane but backed up with natural gas for stability. “If the wind goes away, the gas comes up, and you can react quickly and continue safe, reliable operation.” Aside from the addition of labor-saving smart meters and other known improvements, the system as imagined could give homeowners remote controls that turn their appliances on or off at a distance, or send data on gas and electricity prices to a dual gas/electric heating system to ensure the cheapest option is always used. For natural gas companies, that would likely mean more predictable prices and increased volumes sold.

Biomass and gasification efforts. With the current focus on lowering carbon emissions and adopting alternative fuels, GTI has logged a number of projects evaluating landfills, animal waste and other sources of renewable methane. A recently added $40 million gasification facility at GTI’s Illinois headquarters turns feedstock into synthetic gaseous or liquid fuel. The facility—and the niche experience that comes with it—is in high demand. Snedic says, “People literally come from all over the world—places like Asia and Scandinavia—to work with us and prepare to build full-scale plants. It’s a scale-up facility for them.”

Scanning the future
One of the benefits of GTI’s methods is a position of trust at the center of the industry. Public interests and regulatory organizations like the EPA are more likely to rely on GTI’s data as an independent research organization, as demonstrated by the projects under way in the Marcellus shale. The institute can bring together resources from many companies to benefit all of them at much lower risk, as in the Sustaining Membership Program supported by local distribution companies, which celebrated its 25th year of activity in 2010 and has accrued nearly 50 patents. (See sidebar “Ideas And Partners.”)

Some of GTI’s initiatives fulfill multiple goals in a way neither a private company nor market-disinterested nonprofit could achieve. For instance, the installation of Chicago’s NGV fueling stations is the result of a grant to GTI and the City of Chicago through the Department of Energy’s Clean Cities initiative. While the new stations benefit producers and transporters of gas servicing Chicago with more points of sale and increased demand, the citizens of Chicago also benefit from cleaner air and lower emissions compared to petroleum fuel. And the United States’ policy goal of energy independence creeps forward with lower imports and higher use of domestic resources. Clean air and national security interests are as well served as the industry’s own.

Meanwhile, GTI can point natural gas companies in the direction they need to go, even if it contradicts their short-term goals.

“People will come to me and say, ‘I need to sell more gas. Why should I increase efficiency?’” Snedic says. “But there’s more than $1 billion a year in energy efficiency funding that becomes available to green technologies.” That money represents not only a current growth opportunity for a company that aligns itself with efficiency, renewables and lowered emissions, but a pattern that predicts the future. Convincing individual companies to go greener now might affect not just their bottom lines in years to come, but the public image of natural gas as the world debates policy on fossil fuels and energy sources.
“Most industries don’t have an R&D organization like us, who looks out for its interests on a big-picture level,” Snedic says. That doesn’t bother GTI. “The whole point of research is looking ahead, finding out where the trends are going to take us.”

Shale Plays And Water Use
One ongoing project of particular interest involves a number of studies on hydraulic fracturing technologies, providing scientific data to inform and educate regulators in areas where popular fear is limiting the expansion of the technique. Kent Perry, the project lead, tells P&GJ about three disparate projects. One measures the volume of water required for fracing.

Another examines the water’s composition, including what chemicals are present and in what concentration. “We measure flowback waters for 250 different constituents, and we compare them to the amounts in other uses. For example, say arsenic levels are .0002 milligrams per liter of water. That’s a very low amount of arsenic in the water, but most people need a comparison. We do a comparison to the levels in sludges from sewer waste treatment. There’s a thousand times more arsenic in the sludge material.” What happens to sludge? “Well, it’s usually spread for fertilizer on our farmland.” The comparisons inform discussions about the dangers that might be present in fracing, and also the dangers that probably aren’t. “It’s not a witch’s brew of toxins that’s flowing back out of the wells. It’s predominantly saltwater. That has to be managed as well and kept out of the freshwater aquifer, but for comparison, last winter we spread 20 billion pounds of salt on the roads. Where does that go? Well, it goes into the freshwater aquifer.”

However, while desalination techniques are a thriving industry, “it becomes very expensive to get that last couple percent of salt out of the water.” A third arm of the project is aimed to evaluate various methods of water treatment with the minimum expenditure of energy and cash. Most of the current processing methods use heat: “Thermal processes more or less boil the water, and you can recover the stream that condenses off. It’s a commercial process. Some processes recapture heat and are very efficient in that regard. But they require heating the water, which is expensive. We’re doing research on a process called electrodialysis, which is much less energy intensive, and a reverse osmosis process mainly using membranes, so the energy required is much lower. We’re looking to develop a toolbox of treatment technologies along with an overall understanding of the produced water issues.” Perry estimates that getting membranes or electrodialysis techniques to work would reduce cost-per-barrel desalination costs by a factor of five.
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Ideas And Partners
Whenever a brilliant innovation changes the landscape, the first question is “Where did that idea come from?” According to Snedic, “Ideas come from industry and our researchers. A lot of times we’ll look at other industries—the medical field has provided us a lot of insight for things like keyhole technology. In the old days, the utilities would cut curb to curb to put a new service in or do some work on a pipe.” Keyholing–using long-handled tools and small excavations to complete underground operations–was inspired by arthroscopic surgery, in which doctors use the same technique to minimize intrusion when operating on a knee, heart or other compact body part.

Business and research partners, meanwhile, are generally chosen for their expertise on an niche topic. “We look for companies that have capabilities we don’t have,” Snedic explains. GTI is a fairly large organization, but we can’t do everything.” The partner company contributes to the research and development costs, and in return may receive rights to manufacture, sell or distribute the new products or methods. For the partner company, it’s an opportunity to address the problem without assuming all the risk of an equivalent R&D effort on its own. GTI, meanwhile, can bring concepts to fruition without the necessity of competing against their own constituent organizations—or handling the complex marketing, promotion and sales sides of the business of creation.
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Happy Birthday, GTI
GTI was born in a merger between two gas research organizations in 2000. Back then, the union was a financial necessity—the parent organizations’ funding was gone, and neither was poised to take on the competitive marketplace alone.

The two parent organizations, the Institute of Gas Technology (IGT) and Gas Research Institute (GRI), came to the table with very different viewpoints. CEO Carroll says,“IGT was an academic-oriented research laboratory. People did hands-on technology work, bench-scale chemistry and the like.” It was a contractor organization for GRI, whose mission focused on project management rather than performing the research. “They tended to be very good in their market focus and customer sensitivity, but they weren’t hands on.”
GRI’s budget was formed from a FERC fee levied on interstate pipelines per decatherm of gas passing through, and reached the neighborhood of $200 million a year. From that money, it employed IGT and handfuls of other contractor organizations on individual projects. When FERC announced in 1998 that the fee would be ramping down over the next six years until it eventually disappeared completely, the future did not look good for either gas institute.

The organizations’ boards had many overlapping members, though, and they came up with a plan to combine the two. With the clock ticking, Carroll says, “The realization hit that we were going to have to focus on customers on the front lines, solving problems, delivering energy, making money.” The way would also involve drastic cuts, restructuring and hard decisions unlikely to be popular.

The gas industry’s leadership was in place to help as much as possible. IGT CEO Dr. Bernard S. “Bernie” Lee and GRI CEO Dr. Stephen Ban both retired. Pipeliner John Riordan took the reins at the new organization. Riordan was an industry lion with a history of charging ahead through tough situations. By Carroll’s account, his term, though tempestuous, set GTI firmly on the path to success. “I joined this company to have the opportunity to work for John Riordan. He did a great job of integrating two really different cultures. It was a multi-year exercise, but I’m happy to say we’re through that.”

Riordan headed an organization trying to fuse IGT’s technological prowess with GRI’s project-management savvy. It aimed to secure funding from the natural gas industry itself, via a cocktail of research fees from LDCs, grants from local and state governments, investments from private companies, royalties and project-based federal money. The newborn GTI would have to develop a client base and prove its worth to those customers. It had to become market driven, responsive, and ever ready to take on what the industry most needed. If its smorgasbord of income sources was going to keep it alive, it would have to demonstrate that it was well worth the expense.

Just over a decade into the experiment, it’s safe to say that Riordan’s methods have proved out.
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