November 2016, Vol. 243, No. 11

In The News

In the News

Duke Energy Closes Piedmont Acquisition, Adds 1 Million Gas Customers

Duke Energy closed its acquisition of Piedmont Natural Gas with Piedmont, retaining its name and operating as a business unit of Duke. Both companies are headquartered in Charlotte, NC. The acquisition adds Piedmont’s 1 million natural gas customers to Duke Energy’s existing customer base of 525,000 natural gas customers and 7.4 million electric customers.

The North Carolina Utilities Commission on Sept. 30 approved the acquisition – the final regulatory ruling needed to complete the transaction. The Tennessee Regulatory Authority and Piedmont’s shareholders previously approved the transaction. The Federal Trade Commission had already granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

Global Energy Demand Growth Set to Fall, Says WEC

The World Energy Council said per capita energy demand will peak before 2030. This is in stark contrast to historic growth levels, which have seen global demand for energy more than double since 1970. Technological innovation, government policies and lower growth expectations will have a significant impact on the sector in the coming decades.

The findings come in a new set of exploratory scenarios, developed in collaboration with Accenture Strategy and the Paul Scherrer Institute, which were launched last month at the 23rd World Energy Congress in Istanbul by the World Energy Council. The three scenarios, entitled “Unfinished Symphony”, “Modern Jazz” and “Hard Rock,” present three distinct trajectories for the energy sector to 2060, with very different realities across regions.

“It is clear that we are undergoing a grand transition, which will create a fundamentally new world for the energy industry,” said Ged Davis, executive chair of Scenarios, World Energy Council. “Historically, people have talked about peak oil but now disruptive trends are leading energy experts to consider the implications of peak demand. Our research highlights seven key implications for the energy sector which will need to be carefully considered by leaders in boardrooms and staterooms.”

The report suggests there will be a shift in final energy consumption with demand for electricity doubling by 2060. Solar and wind, which account for 4% of power generation, will see the largest increase so that by 2060 they will represent between 20-3% of power generation.

Fossil fuel use could fall to as little as 50% of the primary energy mix in one of the scenarios, with very differing futures for coal, oil and natural gas. However, in all three scenarios the carbon budget is also likely to be broken within the next 30-40 years. Oil will continue to play a significant role in the transportation sector, representing over 60% of the mix in all three scenarios to 2060 and natural gas will continue to increase at a steady rate.

“By 2060, all scenarios point to an increase in demand for gas, as well as a possible peak demand for oil within the 2035-2045 timeframe,” said Nuri Demirdoven, managing director at Accenture Strategy. Misspending, including misallocation of capital, has always been a risk for energy assets and will continue to grow due to fundamental shifts in the industry.”

The World Energy Scenarios, entitled “The Grand Transition,” were built by a network of over 70 experts from over 25 countries and were quantified using a global multi-region energy system model by the Paul Scherrer Institute.

US LNG Heads to South America as Asia Price Premium Disappears

Though U.S. LNG was expected to go mainly to Asia and Europe, lured by prices as much as four times higher than those at home, South America has been the destination of choice, according to Bloomberg.

The global glut has depressed prices so Cheniere Energy has sent over half of the LNG tankers from its Sabine Pass terminal in Louisiana to South America. Premiums once available in Asia and Europe have disappeared and those regions are well-supplied from elsewhere, Bloomberg reported.

The regional trade is easier as larger tankers now use the Panama Canal, cutting travel time and cost. “It’s certainly been good timing for all the parties,” said Ted Michael, a Genscape LNG analyst in Boulder, CO. “Cheniere is coming on and Latin America is looking for a more consistent supply.” The canal can cut travel time to Chile from the U.S. Gulf by 11 days.

DTE Energy Acquires Midstream Assets for $1.3 Billion

DTE Energy is buying midstream natural gas assets worth $1.3 billion that include 100% of the Appalachia Gathering System, 40% of Stonewall Gas Gathering (SGG) from M3 Midstream and 15% of SGG from Vega Energy Partners.

The assets will be integrated into DTE’s non-utility Gas Storage and Pipeline business. The transaction will provide access to various markets, including the Great Lakes region, through interconnections with the Columbia Gas Transmission, Texas Eastern Transmission and NEXUS Gas Transmission projects. The projects are being developed jointly by DTE and Spectra Energy.

The ongoing shift from coal to natural gas for electricity generation, along with economic growth, is driving demand for natural gas in the Great Lakes region. Moreover, low-cost natural gas supplied from the Marcellus/Utica region will pose stiff competition to higher-cost alternatives.

Canadian First Nations, U.S. Tribes Form Alliance to Block Oil Pipelines

First Nations communities from Canada and the northern United States signed a treaty Sept. 22 to jointly fight proposals to build more pipelines to carry crude from Alberta’s oil sands, saying further development would damage the environment.

The Treaty Alliance Against Tar Sands Expansion was approved by 50 aboriginal groups in North America that also plan to oppose tanker and rail projects in both countries, they said in a statement. Targets include projects proposed by Kinder Morgan, TransCanada and Enbridge.

While aboriginal groups have long opposed oil sands development, the treaty signals a more coordinated approach to fight proposals. Among the treaty’s signatories is the Standing Rock Sioux tribe, which opposes the Dakota pipeline.

It was not specified what actions the groups would take to stop development. The Canadian Energy Pipeline Association, whose members include the targeted companies, said in a written statement that the industry would listen to aboriginal concerns.

ExxonMobil to Pay $12 Million in Yellowstone Spill

ExxonMobil Corp. will pay $12 million for environmental damages caused by a pipeline break that spilled 63,000 gallons of crude into Montana’s Yellowstone River and prompted a national debate over lax pipeline safety rules, officials said.

The payment settles claims from the federal and state governments that the 2011 spill harmed natural resources as it fouled an 85-mile stretch of the river that flows through southern Montana. Court approval is pending.

The pipeline break upstream near the town of Laurel killed fish and wildlife and prompted a months-long cleanup. A U.S. Department of Transportation investigation found ExxonMobil workers failed to heed warnings that the 20-year-old pipeline was at risk from flooding.

Assistant U.S. Attorney General John Cruden said restoration of the river is not done. “We’re going to work to bring the river back to where it would have been but for that spill event,” he said.

About $4.7 million of the settlement will go to shoreline and channel restoration and improvement. Another $3.5 million will be for wildlife habitat restoration, $2.4 million for improving recreational access, $900,000 for restoration planning and $400,000 for improving white pelican breeding areas. Montana will receive $9.5 million from the settlement, and the federal government will get the remaining $2.5 million.

ExxonMobil has spent $135 million on cleanup and repair work and paid $2.6 million to resolve federal safety and state pollution violations. Penalties for federal Clean Water Act violations stemming from the 2011 spill have not yet been levied as an investigation by the Environmental Protection Agency continues.

Washington Gas Exceeds Carbon Reduction Goals

Washington Gas said it beat two aggressive greenhouse gas (GHG) emissions reduction goals four years ahead of schedule as part of an ongoing commitment to sustainable business practices and environmental stewardship.

The utility achieved a 74% reduction in absolute GHG emissions from its fleet and facilities and a 20% reduction in methane emissions for every unit of natural gas delivered, exceeding goals of 70% and 18%, respectively, by 2020.

Bureau Veritas North America provided an independent verification of the GHG emissions for both the baseline (2008) and 2014 years, validating the reduction. Washington Gas surpassed its emissions reduction goals earlier than projected through several initiatives, including:

• Establishing a LEED Gold-certified Washington Gas operations headquarters in Springfield, VA. The facility uses Bloom Energy server fuel cells that use natural gas to generate electricity, producing almost half the emissions of conventional grid electricity, and employs a wide range of energy efficiency technologies.

• Deploying nearly 200 natural gas vehicles in the Washington Gas fleet.

• Accelerated pipeline replacement programs in Maryland, Virginia and the District of Columbia to enhance the efficiency, safety and reliability of its natural gas system.

The combination of fleet, facilities and gas supply (intensity) measures has avoided about 312,000 metric tons of carbon dioxide (CO2) emissions from 2008 until 2014. It would take over 8 million trees 10 years to eliminate the equivalent amount of CO2.

Damages to Buried Utilities Fell 9% from Previous Year

Common Ground Alliance (CGA) Damage Information Reporting Tool (DIRT) report estimates underground excavation damages in the U.S. last year dropped 9% from 2014 to about 317,000 damages.

The 2015 damage ratio, which measures damages per 1,000 one-call transmissions, decreased by nearly 4% from 2014. Combined with an 8% increase in locate requests, a 15% increase in housing permit activity and a 4% increase in construction spending on infrastructure, the 2015 DIRT Report indicates damages are decreasing as construction activity increases and as awareness of the free 811 service increases.

The complete DIRT Annual Report for 2015 is available for download at www.commongroundalliance.com. Stakeholders interested in submitting data to the 2016 report or establishing a Virtual Private Dirt account should visit the DIRT site at www.cga-dirt.com.

Alaska, ConocoPhillips Execute MOU to Position for Next Steps

The Alaska Gasline Development Corp. (AGDC) and ConocoPhillips Alaska executed a memorandum of understanding (MOU) to negotiate the formation of a joint venture company to market LNG from the Alaska LNG Project to global LNG markets.

The goal would be to bring LNG buyers and North Slope wellhead sellers together. AGDC and ConocoPhillips also intend to pursue the support of the other major North Slope producers in the formation of the JV.

The MOU is part of AGD’s broader plan to position the Alaska LNG Project for a FEED decision. That plan includes:

• structuring for federal and state tax efficiencies – including seeking a federal ruling on tax exempt status

• advancing low-cost financing and investor options

• engaging engineering, procurement and contracting companies with the ability to shoulder a significant part of the construction risk
• enrolling major North Slope producers to commit their gas to the planned JV or tolling arrangements with the project

• positioning a JV company to engage the LNG market to gauge the extent and timing of demand.

Major Work Planned on Wyoming Gas Pipeline

A pipeline company plans to replace portions of a northeast Wyoming natural gas pipeline that has had two recent leaks, including one that shut down a highway for over two hours, though what caused the problems might not become publicly known.

None of the government agencies that oversee oil and gas pipelines – PHMSA, the Wyoming Public Service Commission or Wyoming Oil and Gas Conservation Commission – have jurisdiction over the 60-mile stretch where the leaks occurred.

The 16-inch pipeline is too far removed from where the natural gas came out of the ground for the Wyoming Oil and Gas Conservation Commission to have oversight. PHMSA only regulates pipelines that cross state lines. The section of pipeline isn’t under Wyoming Public Service Commission purview because it is upstream of a gas-processing plant and not close to a populated area, commission attorney Chris Petrie said.

Hedge Funder Accused of Insider Trading on Pipeline Deal

The Securities and Exchange Commission charged billionaire Leon Cooperman, a Goldman Sachs executive-turned-hedge-funder, and his firm, Omega Advisors Inc., with breaking insider-trading laws.

The complaint alleges that an executive at Atlas Pipeline Partners, a Houston-based energy firm, “shared confidential information with Cooperman … because he believed Cooperman would maintain the information in confidence and not trade on it, and because Cooperman explicitly agreed that he would not use the confidential information.”

Instead, according to the SEC, “Cooperman and Omega used this information to trade and acquire … securities in advance of the public announcement … which Cooperman understood would be beneficial for [Atlas’] stock price.”

When Atlas announced the $682 million sale of the natural gas plant in July 2010, its stock price soared over 31%, making huge gains for Cooperman, who had placed additional bets that the firm’s stock would rise.