2Natural Gas Fueling Florida’s Future Florida Natural Gas Association presentation to the Florida Gas Utility Annual Convention June 11, 2008
3Meeting Florida’s Energy and Climate Change Challenges Recent State Policy Issues and InitiativesThe Role for Natural Gas in Florida’s FutureNatural Gas Expansion to Serve More Florida ConsumersReliable Natural Gas SupplyExpanded Gas Delivery CapabilityEnvironmental and Consumer Benefits of the Direct Use of Natural GasGas Industry Policy RecommendationsRetail Use of Natural Gas: Part of the Solution –Not Part of the Problem
4Energy and Climate Change Policy Initiatives Governor’s Executive Orders ( and )Carbon emission reductions for electric generation: 2000 levels by 2017; 1990 levels by 2025.15% increase in stringency for Florida Energy Code.Governor’s Action Team on Energy and Climate Change proposed additional measures to Legislature.2008 Florida Legislature (HB 7135)Legislative Florida Energy Commission becomes the permanent Florida Energy and Climate Commission.Carbon Emission reductions for Electric generators.Electric Generation Carbon Emission Cap and Trade Program – DEP to develop rules.Renewable Portfolio Standard for generators.Increased Electric DSM programs.50% increase in Energy Code stringency by 2019.
5The Role for Natural Gas in Fueling Florida’s Future Continued expansion to serve electric power generation.Increased use of compressed natural gas (CNG) as a clean motor fuel.Expand natural gas service to retail end-users: lower electric generation needs and reduce carbon emissions.700,000 existing natural gas residential customers in Florida.47% existing main saturation.770,000 potential customers on main not using gasConvert potential customers to gas tankless water heating.2.1 Billion Pounds of Carbon per year eliminated.571 MW of electric generating capacity avoided.100K to 200K new homes constructed each year offer additional savings opportunities.
6Reliable Production and Transmission Drilling activity is at a 20 year high – (U.S. reserves are growing – but most new production areas are distant from the market in Florida).No expansion of Gulf off-shore exploration areas.Gulf Coast production is decreasing while Western and Mid-Continent production and LNG supply capability is increasing.Increased quantities of Gulf Coast gas will be available for Florida as new Western supply moves to the Northeast and Mid-West.Gas industry has a long history of investment and expansion in transmission and distribution systems to meet Florida consumer and power generation demand growth.
7Reliable Production and Transmission Several current Interstate pipeline expansion projects will deliver new gas supply into Florida.Interstate pipelines are increasing on-shore supply interconnections to help mitigate storm impacts on supply deliveries.Gas storage capacity is significantly increasing.Florida gas distributors are supporting increased supply reliability by committing to supply, storage and transmission contracts.Expanded production, term contracting and enhanced fuel risk management programs will help stabilize natural gas prices.
17SONAT Cypress Pipeline - Project Phase I – In service May 2007166 mile 24 in. pipeline220,000 MMBtu/dPhase II – In service May 200810,350 hp compression336,000 MMBtu/dFGT operational capacity at interconnect is 265,000 MMBtu/dPhase III –20,700 hp compression500,000 MMBtu/dSNGFGTSCANAAGLPhase IIICompressionPhase IICompressionNotes:Still on target for May 2007 in-service dateCypress project adds significant pipeline infrastructure and gas supply in South GA and North FLPhase II permitting complete; design, engineering and procurement underway; targeting May 2008 in-service date1717
19FGT Onshore Gas Supply SESH Enbridge GA AL MS Midcontinent Supply FL TXLAMSALGAFLMidcontinentSupplySESHBay Gas &Southern PinesStorageMidcontinent& West TexasSupplyEnbridgeOnshore LAProductionS. TexasProduction
20FGT Onshore Gas Delivery Capability Receipt PointVolume Capability(MMBtu/day)Production AreaStart DateCrosstex75,000South Texas Onshore & Black Warrior Basin (MS)Pre-KatrinaHPL (Magnet Withers)(Texoma)100,000120,000South Texas Onshore , Permian & Mid-ContinentTejas60,000South Texas OnshoreNGPL (Jefferson)(Vermilion)285,000Mid-Continent &Onshore LouisianaEnbridge200,000Mid-ContinentAugust 2008Gulf South (Boardwalk)300,000Post-KatrinaSoutheast Supply Header (SESH)1,200,000Bay Gas Storage*600,000400,000Mississippi Salt Dome2008Southern Pines Storage*1,000,000Total4,700,000* Max. Deliverability for 4-5 Days
21Gulfstream Natural Gas System Initial In-Service – 200220 Delivery Points3 LDC17 ElectricGenerationContracted CapacityBcf/d2008 – 1.1 Bcf/d2009 – 1.25 Bcf/d
23Gulfstream Supply Interconnects Supply Growth (Bcf/d) 2006 Contracted ProposedDestin 1.00DIGP System 0.32Mary Ann Plant 0.22Gulf South 0.32MBPP 0.63Transco 0.40Williams Plant 0.53New Domestic AdditionsSoutheast Supply HeaderMoBay Storage 1.00Transco (includes SGR Storage attachment) 0.20Potential LNG AdditionsGulf LNG or Chevron Cassotte Landing, Pascagoula, MS 1.30Suez Calypso LNG, offshore Ft. Lauderdale 1.00Hoegh LNG, Port Dolphin, offshore Tampa Bay 1.50Total Supply Interconnect CapacityStorage improves reliability for hurricane vulnerable offshore supplySESH, Transco and other projects provide increased volume, liquidity, reliabilityFuture LNG terminals may provide incremental supplies 2010+
24Energy Information Administration Annual Energy Outlook Natural Gas Supply and Consumption Forecast2005201020202030Supply (Tcf)21.7523.3023.2822.68Consumption22.0123.2523.2322.72
25Environmental and Consumer Benefits of Expanding the Direct Use of Natural Gas
26There’s no question: using a fuel at the source is the most efficient use of any fuel
27Fuel Emission Levels Pounds per Billion Btu of Energy Output Pollutant Natural GasOilCoalCarbon Dioxide117,000164,000208,000Carbon Monoxide4033208Nitrogen Oxides92448457Sulfur Dioxide11,1222,591Particulates7842,744Mercury0.0000.0070.016Source: EIA – Natural Gas Issues and Trends
29Direct Use of Natural Gas Implications for Power Generation, Energy Efficiency and Carbon Emissions Black and Veatch Engineering study conducted for the American Gas Foundation.Analyzed the increased use of natural gas for power generation and the resulting impact on the environment.Analyzed the impact of increased direct use of natural gas for residential and commercial end uses. Space heating Cooking Water heating Clothes DryingQuantified the direct use of natural gas on: Energy Consumption Total Energy Cost CO² Emissions
30Impact on Energy Consumption in 2030 Increased Direct Use Of Natural Gas Reduces Total Energy ConsumedA 50% shift of the switchable electric load to natural gas end-use can produce:Energy Savings = to 2.00 quadrillion BtuAvoided Generation 126 to 160 fewer power capacity = 63 to 80 GW plants (500 Mw)Avoided Investment costs = $49B to $122BAnalysis: switching from electricity to natural gas for 12% of overall electricity consumption(Note: 12% is 50% of switchable load)in all scenarios, produces a net decrease in overall gas consumption as well as energy costs because the decrease in gas demanded for power generation is higher than the increase demanded for direct use in residential and commercial applicationsEnergy Savings represents 6% of total energy consumption growth projected by AEO through (2 out of 31 quads)Avoided Generation Capacity equates to 41% of total electric generating capacity growth projected by AEO through 2030 (80 out of 195 GW)Avoided investment costs: compare to $400B investment EIA anticipates will be necessary to address climate change in the same time periodSource: Energy Information Administration (EIA), B&V Analysis30
31Impact on Energy Costs in 2030 Increased Direct Use Of Natural Gas ReducesTotal Energy CostsIn the most conservative scenario analyzed:Energy Cost Savings = $18B to $29B.Greater than the Gross National Product of 83 nations.In all scenarios considered, a net decrease in energy costs is projectedIn the gas constrained scenario where CO2 restrictions mirror those proposed in by Lieberman-Warner, energy costs are estimated to fall anywhere from $18 billion to $29 billion by 2030AGA: Need to insert reference point: as % of ___?Source: Energy Information Administration (EIA), B&V Analysis31
32Impact on CO2 Emissions in 2030 Increased Direct Use Of Natural Gas ReducesCO2 EmissionsIn all scenarios CO2 emissions decreased ranging from60 million to 200 million tons.Annual greenhouse gas emissions from millionpassenger vehicles.Carbon absorbed by million acres of pine or fir trees.Annual CO2 emissions from million homes.In all scenarios considered, a net decrease in CO2 emissions is anticipated from an increased use of natural gas for residential and commercial applicationsCO2 emissions reduction potential represents 3-10% of CO2 emissions growth projected by AEO for the time periodSource: Energy Information Administration (EIA), B&V Analysis, EPA32
33FNGA Policy Recommendations I. Strengthen Natural Gas Supply Reliability and Minimize Commodity Price Volatility.State support for expanded exploration and production access to natural supplies.Encourage FPSC support for LDCs seeking pre-approval to recover costs for long-term supply contracts, risk management hedging agreements and storage and transmission agreements.Encourage the FPSC to develop a pre-approval process and LDC cost recovery mechanism for critical supply infrastructure, peaking facilities, gas storage facilities and Compressed Natural Gas (CNG) fuel facilities.
34FNGA Policy Recommendations II. Expand Reliable Natural Gas Transportation Infrastructure.Support and expedite gas infrastructure in Florida including pipeline expansions, LNG terminals and gas storage projects.Support alternative methods of funding gas distribution system expansion – economic development rates, area expansion rates, special taxing districts, state-wide gas expansion fund.
35FNGA Policy Recommendations III. Expand the Efficient End-Use of Natural Gas to ImproveFlorida’s Energy Security and Reduce Greenhouse GasEmissions.Tighten the compliance stringency of the Florida Energy Code.Adopt performance standards for buildings in the Florida Energy Code that consider greenhouse gas emissions produced in the total energy supply chain.Adopt innovative rate designs that decouple a LDCs recovery of its fixed operating costs from consumer gas usage.Adopt FEECA Energy Conservation Programs that promote gas appliance installations and consider carbon emission reductions.Encourage the FPSC to allow cost recovery of LDC funded installations combining renewable energy and natural gas technologies for domestic water and space heating.
36Natural Gas Will Play an Important Role in Florida’s Energy Future Diversity in electric generation fuel mix is critical – growth in Florida will require a mix of clean coal, nuclear and natural gas to ensure reliable and affordable electric generation.Increasing natural gas use in multiple consumer applications can reduce demand for Florida’s peak electric generation and help mitigate the need for more power plants.Natural Gas is the best alternative available to make a significant, positive and immediate impact on the Energy Efficiency and Carbon Reduction goals established by the Governor and Legislature.Retail use of Natural Gas is part of the SOLUTION, not part of the problem