Trunzo: What’s Up with NatGas Supplies During ‘Cold Weather’?

Cold Weather

 

EDITOR’S NOTE: During the extended stretch of polar vortex-induced cold that began in late December, utilities switched interruptible customers off of natural gas due to excessive demand. New England Fuel Institute President and CEO Michael Trunzo addressed the issue in the following letter submitted to the Wall Street Journal.

 

“Con Edison is interrupting Gas Sales and Transportation Notification Customers beginning Friday, January 3, 2014 at 1:00 A.M…”

 “…as a courtesy of National Grid. An interruption of natural gas service has been scheduled for all Temperature Controlled, Semi Automatic and Interruptible customers.”

 “Orange and Rockland Utilities, Inc. (“O&R”) is calling for a gas curtailment effective Friday, January 3, 2014 at 10:00 A.M…. Failure to comply with this Gas Curtailment will result in the assessment of penalties…”

 

The three notices above were all issued on or around December 31, 2013, by natural gas utilities, going out to a certain segment of the customer base. This class of customer, called “interruptible customers,” is those who use natural gas as their primary source of heat but must rely on a back-up or alternate fuel supply—in most cases, heating oil—when the weather gets cold. This is necessary because in cold weather, natural gas contracts, and utility companies cannot continue to supply natural gas as per their contract due to lack of supply pressure. In New York City, there are over 4,000 “interruptible” customers who, when these notices are received, need to switch to ultra-low sulfur heating oil for their needs, and create demand and potential price spikes for regular heating oil customers. This circumstance occurs all throughout the Northeast.

 

Question: So what is the problem? 

 

Natural gas is an unreliable fuel source in cold weather. When temperatures reach certain degrees of cold, natural gas contracts in the pipeline, resulting in a pressure failure – and the inability of utilities to deliver sufficient gas supplies. This occurs on top of an inadequate interstate pipeline infrastructure to move the abundant production of crude oil and natural gas products from the source to the market (from west to east), especially to New York and New England.

So when cold weather sets in, which is not unusual in the Northeastern United States, natural gas companies need to rely on heating oil as the savior for their heating customers who have nowhere else to turn.

One might question the panacea of public policy proposals calling for the expansion of natural gas pipelines, and utility efforts to continue to add new customers, citing natural gas as a cheap, abundant, efficient, and clean source of fuel for commercial and residential customers alike. This expansion ignores several factors and serves only to exacerbate the unreliable nature of natural gas during cold weather periods.

This brings to the forefront several energy issues:

 (1) In 2013, the United States produced the largest volume of crude oil and natural gas in the nation’s history. This, along with shale formation development in Canada and Mexico, leads to the fact that with an all-in energy policy, North America could be energy independent from the rest of the world and even become a leading exporter of energy. Reliance on one fuel will not bring the U.S. or North America to that place of independence … and energy independence can be achieved in an environmentally friendly way. The challenge for the U.S. is to move the lower-cost U.S. crude and natural gas products from source to market, west to east, as our current transportation systems are not adequate in this regard.

(2) Today’s cleaner burning ultra-low sulfur diesel home heating oil advances energy efficiency, and when blended with biodiesel, ensures a renewable, environmentally clean and adequately supplied source of liquid fuels for heating and power generation. And when bio-blended at just 20 percent, this ultra-efficient fuel actually burns cleaner than natural gas.
In fact, according to the “NYC Clean Heat” program, a division of the NYC Mayor’s Office, “ULS2 (ultra-low sulfur 2 oil with a government-mandated blend at 2 percent), has close to zero soot emissions, the lowest of all conventional heating fuels”.

(3) U.S. Senator Ed Markey (MA) recently released a House Natural Resources Committee staff report on leaking pipeline infrastructure and the $20 billion in profits natural gas utilities made from charging U.S. ratepayers for product that escaped into the atmosphere. Utility companies agreed that “lost” or “leaked” gas is a problem, and it will require considerable investment to resolve. The current “leaking” pipelines should be repaired before investments in new pipeline infrastructure are made, and it should be paid for by the utilities alone, not their ratepayers.

(4) “Lost” or “Fugitive” gas and its impact on greenhouse gas (GHG) emissions must also be considered. The U.S. Environmental Protection Agency notes that the 100-year warming influence of one ton of methane (a byproduct of natural gas) is 28 times greater than one ton of carbon dioxide (a byproduct of heating oil), and with a minimum confirmed 1.5 percent “fugitive” gas leaks, natural gas is worse for the environment than heating oil.

 As most government regulators seem to be flocking to natural gas due to its current trading price, the fact, as demonstrated in New York and the New England states, is that natural gas is not reliable in cold weather, and its price can spike to levels greater than current heating oil and diesel fuel costs. And all commodity pricing is cyclical: For most of the last 20 years, heating oil has been less expensive than natural gas … and with the future exportation of liquefied natural gas, the price disparity will eventually narrow.

All that said, the home heating oil and diesel providers in the Northeastern United States are already working with national and state policymakers on their commitment to safe, affordable and environmentally secure energy.

New York City has already embraced the blending of biodiesel with ultra-low sulfur diesel, a.k.a. Bioheat® heating oil, and pending legislation may expand the use of Bioheat® heating oil statewide. Many of the New England states have laws or regulations on the books or under consideration to do the same. And unlike the utility sector, no considerable investment in this area will be required.

Moreover, the infrastructure necessary to deliver today’s low-sulfur diesel and bio-blended heating fuel already exists in your local communities with over 4,100 heating oil companies throughout the Northeastern United States.

The home heating oil industry has reacted accordingly, rolled up its sleeves and is getting the job done. We work to serve our heating oil customers with prompt and efficient fuel supply and service, and to bail out our competitors’ customers in “cold weather” situations. But one must question the business practice that requires a customer to have a competitor’s fuel as a back-up option because their “named-fuel,” natural gas, is not reliable for heating purposes and/or power generation in cold weather.

 

Michael C. Trunzo
President/CEO
New England Fuel Institute

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