natural gas in michigan

MICHIGAN PUBLIC SERVICE COMMISSIONMICHIGAN PUBLIC SERVICE COMMISSION

Michigan Public Service CommissionOperations and Wholesale Markets Division

Gas Operations Section

May 11, 2012

Natural Gasin Michigan

MICHIGAN PUBLIC SERVICE COMMISSIONMICHIGAN PUBLIC SERVICE COMMISSION2

Michigan’s Natural Gas Overview

• Gas Operations Section Responsibilities

• Production• Storage• Transmission &

Distribution• Safety• Abundant, affordable

supply


Michigan Gas Production• Primarily located in

Northern Lower Peninsula• Approximately 10,500

active wells producing• Gas production accounts for

approximately 20% of consumption annually

• 14 year decline due to lack of new discoveries

• Collingwood/Utica formation potential


Gas Operations Responsibilities• Public Act 9 of 1929, Production and Transmission Rules – Well Connections Permits

• Authorize Production / Allowable• Well Inspections

– Production Data• PSC Collaboration with DEQ to Track Natural Gas Production


Natural Gas Wellhead


Michigan Gas Production

0

50

100

150

200

250

300

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Year

Annu

al P

rodu

ctio

n Vo

lum

e (B

CF)

Antrim Shale

OtherFormations


Antrim Shale Formation• Shallow formation producing in Northern Lower Peninsula

• Limited production began in 1940’s• Economically viable production possible in 1980’s due to newer technologies

• Most wells stimulated by hydraulic fracturing • Over 10,000 producing wells permitted and 3 TCF of gas recovered since 1984

• Approximately 80% of Michigan production• 5% annual production decline


Antrim Shale Permitting and Production

Antrim Shale Well Permits

0

200

400

600

800

1000

1200

1400

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Year

Num

ber o

f per

mits

issu

ed

Antrim Shale Production

0

50

100

150

200

250

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Year

Annu

al P

rodu

ctio

n V

olum

e (B

CF)


Utica/Collingwood Shale Potential• Deep formation ( as deep as 10,000‐

12,000 feet) in Northern Lower Peninsula

• State Pioneer 1‐3 discovery well completed in March 2010 produced 2.5MMcfd during well test

• May 2010 State oil and gas lease auction offered over 118,000 acres and generated a record breaking $178 million

• 21 permitted wells and 12 pending applications

• First 2 producing wells online in January 2012 produced 6.5 and 3.1 MMcfd during first seven‐days sales period and have estimated recoveries of 90 bbls of NGLs per MMcf of natural gas produced


Michigan Gas Production Challenges• Hydraulic Fracturing

– Necessary for shale gas production – Nationwide scrutiny has raised concerns regarding the protection of Michigan’s water resources and environment.

– To protect Michigan’s water resources, environment, and citizens, strict regulations are already in place governing well construction, drilling sites, environmental monitoring, water withdrawal, hydraulic fracturing, and waste fluid disposal.

– Over 12,000 wells safely fractured since the 1950’s.


Michigan Gas Production Challenges• Natural Gas Prices

– Low gas prices reduce profitability of exploration and production and has resulted in decreased activity

– Liquid‐rich potential of Collingwood‐Utica could help spur exploration and production since NGL prices closely follow crude oil prices.


Michigan Gas Storage• 667 Bcf of working gas capacity –

more than any other state• 55 gas storage fields

– 53 converted from producing fields and 2 salt caverns

• High porosity of geologic structures makes our storage fields among the best in North America

• On a peak day demand of 7.5 Bcf, over 2/3 can be withdrawn from storage fields

• Helps stabilize prices and provides for more efficient use of transmission pipelines


Gas Operations Responsibilities• Public Act 238 of 1923

– Authorize the Construction Storage Fields– Staff Responsibilities

• Review Proposed Field• Review Design and Engineering Specs.


Michigan Gas Storage Challenges

• National Weather Service forecasted colder‐than‐normal temperatures across Michigan for 2011‐2012 winter; however, it was one of the warmest winters on record.


Michigan Gas Transmission• 9,215 miles of transmission main and regulated gathering lines

• 28 intrastate transmission operators

• 6 interstate transmission operators



– Authorize the Construction of Natural Gas Pipelines (Intrastate Only)

– Staff Responsibilitieso Review Proposed Routeo Review Design and Engineering Specs.o Review Environmental Impact


Gas Operations Responsibilities

• Public Act 16 of 1929– Authorize the Construction of Crude Oil or Petroleum Pipelines (Intra‐ and Interstate)

– Staff Responsibilitieso Review Proposed Routeo Review Design and Engineering Specs.o Review Environmental Impact


Michigan Gas Transmission Challenges• Right‐sizing the system

– Balancing storage, compression, and transmission with customer concentration and use

– System upgrades and facilities required for gathering of Collingwood‐Utica production

– Estimated that nearly $10 billion will be spent in Great Lakes region to improve transmission lines and compressor stations to ensure reliable transport of natural gas


Michigan Gas Distribution Challenges• Economic downturn

– Customer Attachment Programs– Manufacturing– Decrease in Metro Detroit population– Theft

• Infrastructure replacement programs– Main renewal programs– Meter move out programs


Michigan Gas Distribution

DOIT9

DOIT9 Need to look at 2011 data to confirm / restate this information. Department Of Information Technology, 4/25/2012



– Distribution Franchise Rights– Avoid Duplication of Distribution Facilities– Compliance with Safety Standards


Michigan Gas Safety• MPSC Staff enforces the Michigan Gas Safety

Standards and acts as an Interstate Agent for PHMSA

• 45 regulated operators• 75 state regulations that exceed federal

requirements• Infrastructure Upgrades

– Meter move‐out programs– Main replacement programs



– Federal Pipeline Safety Grant– Liaison with Federal Agencies

• DOT/PHMSA• NTSB

– Liaison with State Agencies (NAPSR)– Michigan Gas Safety Standards– Non‐compliances– Incident Reports


Gas Operations Responsibilities• Public Act 53 of 1974 (Protection of Underground Facilities)– Michigan Damage Prevention Board

• Best Practices• P.A. 53 Rewrite

– Federal “One Call” Grant– Federal “State Damage Prevention” Grant– Dispute Resolution


Gas Operations Responsibilities

• Service Requirements– Customer Attachment Programs (CAP)

• Engineering– Metering

• Inspection of Meters• Reports• Accuracy of Testing Equipment

• Retirement

• Meter Accuracy– Bill Adjustments– Refunds

• Shutoff of Service– Establishing Service– Hazards– Shutoff of Service

• Gas Quality

Technical Standards for Gas Service


Michigan Gas Safety Standards• Inspection and Enforcement of Intrastate• Inspection of Interstate• Reporting

– Annual Reports– Incident Reports

• Inspections of Facilities / Programs– Materials / Design– Construction / Testing– Welding / Joining– Meters / Service Lines


Michigan Gas Safety Standards• Inspections of Facilities / Programs Corrosion Control– Operations & Maintenance/Procedures– Operator Qualification– Pipeline Integrity– Distribution Integrity

o Corrosion Repairso Leak Repairso Meter Move Outo Main Replacement


Michigan Gas Safety Standards

• Inspections of Facilities / Programs (cont.)– Public Awareness Plans– Drug and Alcohol Plans– Incident Investigations


Northern Natural Pipeline Rupture

• June 23, 2009– 16” Pipeline

rupture in Gogebic county

– 387 customers shutoff initially

– Bottle Trucks used to provide gas to Ramsay and Bessemer

– Northern Natural Interconnect with Great Lakes East of Bessemer


3544 Farnsworth, Detroit

• February 16, 2008– DTE/MichCon– Explosion & Fire– Gas Theft by

Connecting Rubber Hose to Service Line


Third party damage, Blissfield

• October 3, 2011– Consumers Energy– 3rd Party Damage– US 223 road

construction project– Investigating staking


Bluewater Gas Storage Incident

• January 12, 2011– Bluewater Gas

Storage


Consumer – Salem Storage Field

• October 8, 2007– 12” Pipeline within

the Salem Storage Field

– Operating at 1,467 psig at the time of failure


Consumer – Salem Storage Field


Michigan Gas Safety Challenges• Weighing the cost of safety versus benefits

– Difficult to quantify benefits– Balance between costs and length of time to realize impact

– Public perception• Recent incidents nationwide have increased awareness to safety

• New and changing regulations affecting the cost of safety


Clean, Affordable, Abundant Domestic Supply

• Increased gas‐fired electric generation

• Could play an even larger role in the near future due to regulatory pressure on coal‐fired generation


2011 Michigan Natural Gas Consumption by Sector

316070

160195

152220

115319

290

Residential

Commercial

Industrial

Electric Power

Vehicle Fuel

Consumption in MMcf


Electric Power Generation

• Major drivers– Regulatory pressure on coal‐fired electric generation

– Fuel prices– Shale Gas potential– Cost and schedule to build new facilities

– Permitting

• Constraints– Infrastructure limitations– Price volatility– Lack of storage– Lack of Firm Transportation service


Michigan’s Largest Natural Gas –Fired Power Plants


Power Plant Fuel Emission Impacts


CNG Vehicle Opportunities

• Michigan is home to the U. S. Auto Industry to support emerging growth opportunities

• Leverage low natural gas prices to:– Reduce dependence on foreign oil– Recharge the U.S. Auto Industry

• It’s not just about fleets!• Need incentives for infrastructure and fueling station

development


Michigan’s Natural Gas Future• Growing Natural Gas Producer• Unrivaled Storage Capability• Excellent Pipeline Infrastructure• Focused on Safety• Clean, Abundant, Affordable Supply• Increased Gas‐fired Electric Generation• NGV opportunities

But… we need to keep rates LOW

natural gas in michigan

Documents