House Energy Committee OK’s Natural Gas Expansion, Could Offer Incentive to Drillers
Published: February 11, 2019 |
The House Energy Committee approved a bill intended to help keep natural gas supplies flowing to communities served by old vertical wells that are producing little gas or are uneconomical to run.
HB 2661 is backed by Dominion Energy and Dominion officials explained and promoted the bill during the meeting.
The bill allows a gas utility to petition the Public Service Commission to offer incentives (unspecified in the bill) to gas producers to increase well production or drill new wells for areas lacking dependable, low-cost supplies of natural gas.
If the options of increasing production or drilling news wells fail, the bill allows the utility to convert its customers to another form of energy — liquid natural gas, propane or electricity for instance — and recoup the costs of conversion from across its entire customer base.
Dominion’s Jeff Murphy explained that conventional vertical well production has decreased by 58 percent in the last 10 years. With the current low prices for natural gas, it’s difficult for the small companies to maintain existing wells or drill new ones.
These communities are often located in areas served by higher-volume shale gas production from vertical wells, he said, or their systems are too old to handle the higher pressures and volumes of shale gas transmission.
“There’s no silver bullet here,” he said, but this bill provides a couple options. And a gas utility can only offer the incentives, not force a producer to accept them. Which accounts for the conversion provision: those communities would be “abandoned.”
Murphy named about a dozen counties facing this problem, including major shale-gas counties Doddridge, Harrison and Wetzel, and others such as Braxton, Gilmer and Calhoun.
The bill doesn’t specify, and incentives weren’t discussed during the meeting, but people who know the industry said in hallway conversations that one would be guaranteeing the producer a certain price for the gas. Murphy told members that current gas prices are in the $2 to $3 per thousand cubic feet range, and a more realistic price for these producers is $5-$7.
As with the conversion costs, recouping incentive costs would be spread across the entire customer base, he said, to minimize impact. Cost-based rate hikes would have to be approved by the PSC.
Dominion has about 112,000 customers (households, not individuals) and about 15,000 – more than 10 percent of them — face this problem. Dominon’s Jonell Carver cited the 2017 Weston gas outage as an example of a community facing limited supplies.
Members approved the bill unanimously. It goes to the full Senate now.
Source: The Dominion Post
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