11

Gas Quality & Interchangeability UpdateGas Quality & Interchangeability UpdateNARUC Annual Convention November 11-14, 2007NARUC Annual Convention November 11-14, 2007

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Gas Quality & Interchangeability:An LDC Perspective

1.1. Understanding the technical issues Understanding the technical issues

2.2. Merging Policy & Science – NGC+ ReportsMerging Policy & Science – NGC+ Reports

3.3. Utilization Issues – Do we really have the Utilization Issues – Do we really have the answers ?answers ?

4.4. Defining the implementation ProcessDefining the implementation Process

Can We Reasonably & Rationally Meet The Challenges of The Second “Great Conversion”

• Supply Mix Is Changing………

• LNG Imports Will Play A Major Role

• End-use Technology Has Evolved

• Begs The Question….

Is Yesterdays Research Sufficient To Examine Today’s Challenges ??

44

0%

2%

4%

6%

8%

10%

12%

14%

16%

TypicalProcessed

Pipeline Gas

TypicalUnprocessedPipeline Gas

ProcessedImported LNG

UnprocessedImported LNG

UnprocessedBTU AdjustedImported LNG

Coal Seam Gas

Gas Stream

%

Oxygen/Ar

Nitrogen

Carbon Dioxide

Total C6+

Pentane(s)

Butane(s)

Propane

Ethane

How Do Supply Compositions Vary?It’s Not Just Methane!

55

Global LNG Supply ProfileGlobal LNG Supply Profile

1000

1050

1100

1150

1200

0 50 100 150 200 Million Ton/annum

Global Production Capacity 2006

Btu

-co

nte

nt

(btu

/scf

)

0 2 4 6 8 10 TCF/annum

Typical interstate pipeline gas in USA

LNG supplies

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What is Gas Interchangeability?What is Gas Interchangeability?

The ability to substitute one gas for The ability to substitute one gas for another without impacting end useanother without impacting end use

• Adjustment GasAdjustment Gas• Substitute GasSubstitute Gas

End Use ImpactsEnd Use Impacts

• Flame CharacteristicsFlame Characteristics• EmissionsEmissions• EfficiencyEfficiency• SafetySafety• Equipment/system integrityEquipment/system integrity

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Interchangeability IS NOT a New Concept….

• Dates back to early days of manufactured gas as well as SNG and current peak shaving operations • AGA Bulletin 36 1940’s

• Experience of Brooklyn Union, PSE&G, Boston Gas, Commonwealth, Baltimore Gas, SOCAL, GTI ……to name a few

• Recent work of TIAX for the proposed Crown Landing facility and the reactivation of Cove Point and Elba Island

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Potential LDC Gas Quality Issues

• Day-to-Day gas distribution operations

• Domestic peak shaving liquefaction

• Conventional gas combustion equipment

• Electric production (Gas Turbines)

• Distribution System Infrastructure Concerns

• NGV’s, & Engines

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Did The White Paper Help ???

Interim Guidelines Include:

• Historical Wobbe +/-4%

• Capped at 1,400 + 1,110 HHV

• Butanes+ 1.5 %

• Total Inerts 4 %

•Wobbe Alone May Not Be The Answer !!

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Utilization ConsiderationsReal or Perceived ?

AppliancesAppliances Power Generation - DLE Gas TurbinesPower Generation - DLE Gas Turbines Vehicle & Stationary EnginesVehicle & Stationary Engines Infrastructure IssuesInfrastructure Issues Feedstock Applications Including LNG Feedstock Applications Including LNG

Liquefaction Peak ShaversLiquefaction Peak Shavers

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Interchangeability Concerns for Turbine Operators

• GT combustion technology has advanced significantly yet manufacturers fuel specifications have not

• Fuel compositions may vary beyond design / startup fuel composition analysis • Emissions, combustion dynamics & tuning to address variation in fuel composition become critical parameters

• We need relatively consistent fuel compositions!!!!

Flo

w V

elo

city

Fuel-Oxygen Ratio

Lifted Flames

Lift

Seated or Lifted Flames

Seated Flames

Drop-Back

Flashback

Blowout

Extinction

BlowoffDiffusion GT

Premixed (DLE) GT

Footnote: (Glassman 1996)

Flame Regime Illustration

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Preferred Interchangeability Parameters to Address Combustion Turbine Issues

• Wobbe Index most robust, however Wobbe alone is not the answer for all applications including gas turbines

• Modified Wobbe (MWI) for turbines vs Wobbe offers turbine operators some flexibility as MWI can be adjusted via pre-heat

• Additional parameters such as heating value coupled with MWI & MWI time-rate-of-change may be required for turbines

• Specific constituent limits such as C4(+) and inerts may be required based on specific manufacturers requirements.

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Distribution System Infrastructure Concerns

• Compositional changes may contribute to changes within certain infrastructure components (elastomers in compression couplings etc..).

• These changes alone do not necessarily result in component failures (leaks), rather there are “synergistic” effects (temperature, pressures, installation practices etc..) that may lead certain component designs to experience performance changes.

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LNG Liquefaction Feedstock Remains an Issue

• 62 Plants in North America which make up a critical component of LDC supply Infrastructure.

• Specific Limits on Non-Methane Hydrocarbons are necessary to ensure continued reliable and efficient operations.

• Nitrogen added by terminals for BTU stabilization also impacts operation.

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Northeast LNG Liquefaction PlantsNortheast LNG Liquefaction Plants

- 7 Plants spanning New York through MA7 Plants spanning New York through MA

- Critical component of regional supply infrastructureCritical component of regional supply infrastructure

- Over 66 MM / Day potentially impactedOver 66 MM / Day potentially impacted

- Retrofits will most likely be required – some substantialRetrofits will most likely be required – some substantial

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Merging Policy & ScienceMerging Policy & ScienceImpact of Recent FERC DecisionsImpact of Recent FERC Decisions

FERC has recognized that the FERC has recognized that the NGC+ White PaperNGC+ White Paper needs to needs to be considered – not simply the interim guidelinesbe considered – not simply the interim guidelines

Don’t forget Finding #10 & Recommendations #6 & 10 !!!Don’t forget Finding #10 & Recommendations #6 & 10 !!!

Stop whiningStop whining unless your directly connected to the pipeline unless your directly connected to the pipeline under considerationunder consideration

MUST SHOW IMPACTS BASED ON SOUND MUST SHOW IMPACTS BASED ON SOUND ENGINEERING and DATA……………… No “What if’s”ENGINEERING and DATA……………… No “What if’s”

End Use retrofit cost recovery is not within FERC’s End Use retrofit cost recovery is not within FERC’s jurisdiction ??jurisdiction ??

3

Interchangeability Implementation Process

1

Understand Historical Supply

2

Identify “Sensitive Receptors”

- LDC’s catalog potential sensitive customer equipment

4

Assessment

- Assess sensitive equipment- Establish extent of retrofits- Negotiate fixes

5

SettlementAgreement

- Establish interchangeability Tariff parameters - Establish most economical Retrofit strategy , & schedule cost sharing

mechanism ?

- Work with Pipelines to establish system adjustment

gas

• Work with Pipelines and Suppliers• Establish reasonable supply compositions

Understand “Zone ofInfluence”

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Survey ParticipantsSurvey Participants

KeySpanKeySpan PSE&GPSE&G Connecticut NaturalConnecticut Natural Southern ConnecticutSouthern Connecticut NISOURCENISOURCE

NStarNStar ConEdConEd New England GasNew England Gas Middleboro Gas & ElecMiddleboro Gas & Elec Bay State Bay State

2020

Specific Industry Groups Include:

- Commercial Food Commercial Food ProcessingProcessing

- Chemicals & Allied Chemicals & Allied ProductsProducts

- Rubber & Miscellaneous Rubber & Miscellaneous PlasticsPlastics

- Electronic & Other Electronic & Other EquipmentEquipment

- Stone, Clay & ConcreteStone, Clay & Concrete

- Primary Metals IndustriesPrimary Metals Industries

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Other Applications Considered

Distributed GenerationDistributed Generation

- - Engines/CogenEngines/Cogen

- Fuel Cells- Fuel Cells

- Micro Turbines- Micro Turbines

Power GenerationPower Generation

- - Gas TurbinesGas Turbines

NGV’sNGV’s

LNG Liquefaction PlantsLNG Liquefaction Plants

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Interchangeability Implementation Strategy

Establish a Communications Strategy For Existing CustomersEstablish a Communications Strategy For Existing Customers

Establish Guidelines For Potential New CustomersEstablish Guidelines For Potential New Customers

Assess Installed Appliance PopulationAssess Installed Appliance Population

Evaluate / Establish Retrofits For LNG LiquefactionEvaluate / Establish Retrofits For LNG Liquefaction

Evaluate Potential Elastomer Impacts For Distribution SystemsEvaluate Potential Elastomer Impacts For Distribution Systems

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Implementation Experience & SummaryImplementation Experience & Summary

Work collaboratively with Pipelines & Suppliers to establish Work collaboratively with Pipelines & Suppliers to establish appropriate tariff requirements based on the appropriate tariff requirements based on the

“ “five step processfive step process” ”

KNOW YOUR ADJUSTMENT GAS !!KNOW YOUR ADJUSTMENT GAS !!

Review & Understand FERC’s Policy StatementReview & Understand FERC’s Policy Statement

Make sure you are talking to your supplier…. your OEM and that Make sure you are talking to your supplier…. your OEM and that

you are collecting data today you will need foryou are collecting data today you will need for tomorrow tomorrow……….……….

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Resulting Settlement Proposal Under Consideration – Taking a “Fresh Look”

Wobbe & HHV Capped at 1400 / 1110Wobbe & HHV Capped at 1400 / 1110

Non-methane Hydrocarbons 12% (C4+ capped at 1.5%)Non-methane Hydrocarbons 12% (C4+ capped at 1.5%)

Total Diluents 2.75% (Oxygen + Nitrogen with Oxygen capped at 0.2%)Total Diluents 2.75% (Oxygen + Nitrogen with Oxygen capped at 0.2%)

Total Inerts & Diluents 4% (CO2 capped at 2.0%)Total Inerts & Diluents 4% (CO2 capped at 2.0%)

CHDP 15F EquivalentCHDP 15F Equivalent

Appropriate Tariff Language to afford us all the Appropriate Tariff Language to afford us all the certainty and flexibility we need to maximize certainty and flexibility we need to maximize supply while minimizing end use impacts………supply while minimizing end use impacts………

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Research Holds The Key To Unlocking Supply Access As It Relates To End Use…..

• DOE challenged by FERC to help lead the research necessary to answer questions identified by the NGC+, particularly with DLE combustion turbines & engines.

• NYSEARCH & GTI are currently looking into infrastructure material impacts related to changing composition.

• GAMA & AGA are looking into new appliances. NYSEARCH has recently approved a project to study in-service appliances & potential risks associated with maladjustment

• SOCAL / CEC are leading research into Commercial / Industrial Burners with various industry stakeholders.

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SUMMARYSUMMARY

• Recognition & Implementation of the Recognition & Implementation of the White PaperWhite Paper, , not simply not simply the interim guidelinesthe interim guidelines will help bridge the trust gaps…. will help bridge the trust gaps…. Realization that not all LNG’s “fit” the U.S. marketplace Realization that not all LNG’s “fit” the U.S. marketplace

80-85% of reasonably expected global supply can meet the 80-85% of reasonably expected global supply can meet the interim guidelines with approximately 2% nitrogen additioninterim guidelines with approximately 2% nitrogen addition

KNOW YOUR ADJUSTMENT GAS !!KNOW YOUR ADJUSTMENT GAS !!

Work collaboratively with impacted Pipelines & Suppliers to Work collaboratively with impacted Pipelines & Suppliers to establish appropriate tariff requirements based on the establish appropriate tariff requirements based on the

“ “five step processfive step process” ”

Settlement Agreements must consider both downstream and Settlement Agreements must consider both downstream and upstream effects on long haul systems & potential impacts with upstream effects on long haul systems & potential impacts with interconnecting pipelines as well as reasonably anticipated new interconnecting pipelines as well as reasonably anticipated new suppliessupplies