20071022Shurtz to PAC 1-7.pdf

KEVIN B. HOMER, ESQ. - State Bar No. 2901
1565 South Boulevard
Idaho Falls, ID 83404
Telephone: [phone]
e-mail: kbh~khomerlaw.com
Attorney for Timothy Shurtz, Intervenor
r'-:VC 1"",\':".1 t:., '
- '
~ 0
'"'';
b M : i 2
LoU. L- \\1
i\"J!-\iiC i)UBL\~~" ,co
q -
fl;:~ COfv~M\~b\U;It-- ,I~'-'
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF THE APPLICATION
OF PACIFICORP d/b/a ROCKY MOUNTAIN
POWER FOR APPROVAL OF CHANGES TO )
IT IS ELECTRIC SERVICE SCHEDULES
Case Nr. P AC-O7-
RESPONSE OF
TIMOTHY SHURTZ, INTERVENOR,
TO FIRST SET OF DATA REQUESTS
FROM
ROCKY MOUNTAIN POWER
Timothy Shurtz, Intervenor, submits the following as his responses to the
First Set of Data Requests submitted to him by Rocky Mountain Power.
Rocky Mountain Power Data Request Nr. 1: What is the factual basis for
the assertion that natural gas prices have decreased? Please provide any and all
documents that you rely upon in support of your assertion.
Response: That assertion was made in reliance on the statement made by
William C. "Bill" Glynn, President of Intermountain Gas Company, in a news
release issued on August 16 2007. Intermountain Gas had formally requested
overall 8.1 percent decrease in the consumer rate for natural gas. That decrease was
formally requested in Intermountain Gas Company s 2007 annual Purchased Gas
Cost Adjustment Application filed with the Idaho Public Utilities Commission, filed
concurrently with that News Release. In that News Release, Mr. Glynn stated that
the requested decrease in the price of natural gas was a result of "the increased
number of drilling rigs searching for new supplies, as well as increased production
both from new wells and better production techniques.
A copy of that August 16 , 2007 New Release is submitted with these
Responses.
I also based that assertion on the September 2007 report of the Energy
Information Administration, entitled: "Short-Term Energy Outlook Supplement:
Natural Gas in the Rocky Mountains: Developing Infrastructure." As I understand
that report, the industry acknowledges that natural gas has experienced "recent. . .
increased production while consumption and pipeline export capacity have remained
limited." From that report I understand that "dry natural gas production. . . has
increased from an average of 5.49 billion cubic feet per day in 2000 to 8.6l billion
cubic feet per day in 2006." From that report I also understand that: "total natural
gas volumes delivered to consumers. . . are much less than volumes produced.
From that industry report, and based on my admittedly non-professional
understanding of the economic law of supply and demand, I assume-and therefore
assert-that the cost of natural gas has gone down.
A copy of the Energy Information Administration report referred to is
supplied with these Responses.
ROCKY MOUNTAIN POWER Data Request Nr.2: Regarding the
property tax cut referenced in your prefiled direct testimony, what was the amount of
the tax cut? Were than any other corresponding changes in taxes charged to the
utility?
Response: On August 3l , 2006, the Governor of Idaho signed into law
Special House Bill Nr. l , which repealed the school maintenance and operation
Page 3
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
property tax (Idaho Code ~ 33-802). This had the effect oflowering the tax rate on
all taxable property in Idaho by three (3) mills. This tax relief was retroactive
effective as of January 1 , 2006.
Regarding any additional taxes, I have read your filing with regard to tax
issues, and did not see any new tax issues raised in that filing.
I do not know the amount of tax relief which the Company actually received.
I do not know the appraised value of the Company s real property in Idaho, so I am
not able even to estimate the actual net tax benefit which the Company received from
that tax cut-but I do know that a three mill decree in the Company s net real
property tax bill for 2006 and 2007 would have been very significant. My contention
is that that tax savings should have resulted in a decrease in the cost of power
produced by the Company, rather than the increase that the Company is now seeking.
ROCKY MOUNTAIN POWER Data Request Nr. 3: Regarding your
prefiled direct testimony on street lighting, provide calculations, analysis, studies or
work papers relied upon by you for your assertion that bills will be higher in the
winter.
Response. This response partially modifies my assertion regarding street
lighting. When I made that assertion, I did not take into account the fact that the
Company charges a flat rate for regular street lighting. I acknowledge my
Page 4
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
understanding that, with a flat rate, there would not be a seasonal fluctuation in the
cost of street lighting for a municipality.
However that assumption is not in fact borne out by the bills paid by the City
of Shelley, in Bingham County. Although I do not have these charges tabulated in a
cumulative statement from the City, I did learn that the City of Shelley paid the
following amounts for street lighting in 2006:
January $ 1 134.
February 118.49
March 091.12
April 023.26
May 029.
June 043.
July 021.52
August 056.
September 043.
October 088.
November 101.71
December 128.
These numbers show a fluctuation of over $lOO.OO per month between the lowest bill
(July: $l 021.52) and the highest bill (January: $1 134.70). I think it is not a
coincidence that the July bill includes the shortest night of the year, and the
December bill includes the longest night of the year. That "seasonal" fluctuation
Page 5
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
constitutes almost ten percent (10 %) of the entire street lighting budget for that
particular city.
Further, there are several municipalities-for instance, Firth, my home town
where I serve on the City Council--that have decorative street lighting during the
winter (for the Christmas/holiday season). That "non-conforming (i.e. decorative)
lighting is metered and is not covered by the flat rate.
With or without a "flat rate " the fact remains that an increase of over twenty
percent (20%) in a municipality s street lighting budget is significant.
ROCKY MOUNTAIN POWER Data Request Nr. 4: Please indicate
whether you considered what the cost implications would be to the Company s Idaho
customers if the Company were to implement your suggestions on electronic bills
and additional noticing requirements set forth in your prefiled direct testimony.
not, please explain. If yes , please provide copies of any and all studies, analyses
calculations, or work papers relied upon by you.
Response. , I have not undertaken cost studies for these recommendations
that I have made. As a private citizen, I do not have the financial means to make
such extensive studies.
I have, however, spoken with at least twenty five people-all of them rate
payers receiving power from the Company--concerning the requested rate increase
Page 6
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
and their response to it. Candidly, I acknowledge that some of those persons admit
that they are not willing to accept any rate increase just to have the kind of
information I suggest available more readily. However, a majority of those persons
feel that a nominal extra charge added to their bill would be acceptable if they were
personally better informed of the kinds of information that I suggested, including
being kept better informed of the grounds, issues, and arguments pro and con
regarding the rate increase request itself. (For instance, the Company could
publish--even if just on the web--a summary of the arguments in favor of and in
opposition to the requested rate increase much like the "voter information packet"
that is mailed to each registered voter prior to an election, informing the voter about
the expected effect and arguments pro and con concerning each referendum or
initiative on the ballot.) A majority of the rate payers I spoke with concerning this
case told me that they would be willing to "pay for" (at a nominal amount) that kind
of information from the Company.
ROCKY MOUNTAIN POWER Data Request Nr. 5: Please confirm
whether you agree with the Idaho Public Utilities Commission Staffs position to
disallow only those severance costs that exceed the amount of the lower of the actual
amount paid or the savings realized. If you do not, please explain your response.
Response. I agree with the Commission Staff s position on this issue.
Page 7
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
ROCKY MOUNTAIN POWER Data Request Nr. 6: Please provide
copies of all work papers, analysis, documents, and other material relied upon or that
you anticipate relying upon in support (including electronic files with active
formulas) of your return on equity recommendations.
Response. My recommendation concerning the return on equity figure is
based on my understanding of what has been generally granted in other rate cases
(even involving Rocky Mountain Power s sister company, Pacific Power, in its
recent rate case in Washington). I understand that the return on equity for the
Company has typically been ten percent, especially since the last rate case involving
the Company here in Idaho. I also believe that the decline in the interest rate should
make the Company even more attractive to investors.
In any event, I support the Commission Staff in its recommendation on this
Issue.
ROCKY MOUNTAIN POWER Data Request Nr. 7: Please produce any
and all documents that you expect or reasonably anticipate introducing into evidence
at hearing in the above-captioned docket.
Response. I do not anticipate introducing any more documents into evidence
at the hearing.
Signed and submitted t . 9th aY of ctober:
/?~
V'1
trJM
- -g
TIMOTHY SHURTZ, Intervenor
By: his attorney, Kevin B. Homer, with power of attorney
Page 8
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
CERTIFICATE OF SERVICE - by U.S. Mail and by Internet e-mail
I hereby certify that , on this 19th day of October
2007 , I have served a true and correct copy of the foregoing
Responses of Timothy Shurtz , Intervenor , to Rocky
Mountain Power s First Data Requests , in Case No. PAC-
07-, by delivering the same , by U.S. Postal Service First
Class Mail and , where indicated , by e-mail , to the following
persons at the mailing address and e-mail address indicated:
DEAN BROCKBANK , Esq.
Senior Counsel
Rocky Mountain Power
201 S. Main Street , Suite 2300
Salt Lake City, UT 84111
e-mail: dean.brockbank~pacificorp.com
DATA REQUEST RESPONSE CENTER
ACIFICORP
825 N. E. Multnomah , Suite 2000
Portland , OR 97232
e-mail: datarequest~pacificorp.com
JAMES R. SMITH
MONSANTO COMPANY
P. O. Box 816
Soda Springs , ID 83276
e-mail: iim.smith~monsanto.com
ERIC L. OLSEN , ESQ.
RACINE OLSON NYE BUDGE & BAILEY
P. O. Box 1391
Pocatello , ID 83201-1391
e-mail: elo~racinelaw.net
CONLEY E. WARD , Esq.
MICHAEL C. CREAMER , Esq.
GIVENS PURSLEY LLP
P. O. Box 2720
Boise , ID 83701-2720
e-mail: cew~givenspurselv.com
Page 9
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
BRIAN DICKMAN
Manager , ID Regulatory Affairs
Rocky Mountain Power
201 S. Main Street , Suite 2300
Salt Lake City, UT 84111
e-mail: brian.dickman~pacificorp.com
RANDALL C. BUDGE , Esq.
Racine Olson Nye Budge & Bailey
P. O. Box 139l
Pocatello , ID 83201-1391
e-mail: rcb~racinelaw.net
MAURICE BRUBAKER
KATIE IVERSON
Brubaker & Associates
1215 Fern Ridge Parkway, Suite 208
St. Louis MO 63141
e-mail: mbrubaker~consultbai.com
ki v erson~consul tbai. co m
ANTHONY Y ANKEL
29814 Lake Road
Bay Village , OH 44140
e-mail: vankel~attbi.com
DENNIS E. PESEAU , Ph.
Utility Resources , Inc.
1500 Liberty Street S. E., Suite 250
Salem , OR 97302
e-mail: dpeseau~excite.com
BRAD M. PURDY , Esq.
2019 North 17th Street
Boise , ID 83702
e-mail: bmpurdy~hotmail.com
Page 10
SHURTZ, Intervenor- RESPONSE TO DATA REQUESTS
IO&f10 Public Utilities Commission
Office of the Secretary
RECEIVED
EXECUTIVE OFFICES
INTERMOUNTAIN INDUSTRIES,
g~CEj\i
555 SOUTH COLE ROAD. P.O. BOX 7608. BOISE, IDA~fftJ3P1Jci (~~) 37~1~O ~X: 377-6097
Mil ' V
NEWS RELEASE Contact: Brent Wilde
JTlL Nf~"
~!~:
~I~~SjC Director- Marketing &
Industrial Services
[phone]
AUG 1 6 2007
Boise, Idaho
August 16, 2007
Today, Intermountain Gas Company ("Intermountain ) filed its annual Purchased Gas Cost Adjustment ("PGA"
Application with the Idaho Public Utilities Commission ("IPUC") seeking to decrease prices to its residential and commercial
customers. This type of Application is filed each year to ensure that the costs that Intermountain is incurring on behalf of its
customers are properly reflected in its sales prices. In its Application, Intermountain requests permission to adjust its prices
to reflect the costs it expects to incur for natural gas supplies.
William C. "Bill" Glynn, President of Intermountain Gas Company, said
, "
The short-term natural gas supply picture is
strong. This decrease reflects the downward pricing pressures on domestic supplies of natural gas. This is due , in part, to
the increased number of drilling rigs searching for new supplies as well as increased production both from new wells and
better production techniques." Commenting further Glynn said
, "
Intermountain continues to support changes to our national
energy policy that permit additional domestic energy production both on and off our American shore. We also remain
committed to manage the purchasing and pricing of the resources we have so as to provide this low cost energy. This effort
has resulted in us not changing the unit price for the costs associated with the delivery of natural gas to residential
customers for over 25 years.
Glynn went on to say, "We are pleased to be able to offer to our residential and commercial customers this
decrease, however, Intermountain continues to urge all its customers to be conscious of their energy usage and use all
energy wisely. Helpful tips on energy conservation and government energy-payment assistance are provided through bill
inserts, as well as on the Company s website (www.intQas.com). We also have a number of programs to help our customers
level out their energy bills over the year, and stabilize the potential impact that cold weather will have during periods of higher
natural gas usage.
If this proposed adjustment is approved, residential customers using natural gas for heating and water heating could
experience a $6.00 decrease (8.1 %) on an average monthly bill. Those residential customers using natural. gas for space
heating only could experience a $4.00 decrease (7.5%) on their monthly bill. Commercial business customers could realize an
average monthly bill decrease of $29.00 (8.7%). Industrial customers who only use Intermountain s delivery service, but do
not purchase their natural gas from the Company, will experience an average increase of 9.5% or $0.004 per therm delivered.
If approved as filed, the Company s total net revenue will decrease by approximately $25.4 million (7.7%). The
proposed effective date is October 1, 2007. This proposal is subject to public review and approval by the IPUC. A copy of
Intermountain s Application Is available at the offices of both the Idaho Public Utilities Commission and the Company.
INTERMOUNTAIN INDUSTRIES, INC.
555 SOUTH COLE ROAD. P.O. BOX 7608. BOISE, IDAHO 83707. [phone]. FAX: [phone]
Idaho Public Utilities Commission
Office 01 the SecretaryRECEIVED
MJG 1 6 2007
EXECUTIVE OFFICES
Boise, Idaho
Customer Notice
On August 16 , 2007 , Intermountain Gas Company ("Intermountain ) filed its annual Purchased Gas
Cost Adjustment ("PGA") Application with the Idaho Public Utilities Commission ("IPUC") seeking to
decrease prices to its residential and commercial customers. This type of Application is filed each
year to ensure that the costs that Intermountain is incurring on behalf of its customers are properly
reflected in its sales prices. In its Application , Intermountain requests permission to adjust its prices
to reflect the costs it expects to incur for natural gas supplies.
William C. "Bill" Glynn, President of Intermountain Gas Company, said
, "
The short-term
natural gas supply picture is strong. This decrease reflects the downward pricing pressures on
domestic supplies of natural gas. This is due, in part, to the increased number of drilling rigs
searching for new supplies as well as increased production both from new wells and better
production techniques." Commenting further Glynn said
, "
Intermountain continues to support
changes to our national energy policy that permit additional domestic energy production both on and
off our American shore. We also remain committed to manage the purchasing and pricing of the
resources we have so as to provide this low cost energy. This effort has resulted in us not changing
the unit price for the costs associated with the delivery of natural gas to residential customers for
over 25 years.
Glynn went on to say, "We are pleased to be able to offer to our residential and commercial
customers this decrease , however, Intermountain continues to urge all its customers to be conscious
of their energy usage and use all energy wisely. Helpful tips on energy conservation and
government energy-payment assistance are provided through bill inserts , as well as on the
Company s website (www.intgas.com ). We also have a number of programs to help our customers
level out their energy bills over the year, and stabilize the potential impact that cold weather will have
during periods of higher natural gas usage.
If this proposed adjustment is approved, residential customers using natural gas for heating and
water heating could experience a $6.00 decrease (8.1 %) on an average monthly bill. Those
residential customers using natural gas for space heating only could experience a $4.00 decrease
(7.5%) on their monthly bill. Commercial business customers could realize an average monthly bill
decrease of $29.00 (8.7%). Industrial customers who only use Intermountain s delivery service, but
do not purchase their natural gas from the Company, will experience an average increase of 9.5% or
$0.004 per therm delivered.
If approved as filed, the Company s total net revenue will decrease by approximately $25.4 million
(7.7%). The proposed effective date is October 1 2007. This proposal is subject to public review
and approval by the IPUC. A copy of Intermountain s Application is available at the offices of both
the Idaho Public Utilities Commission and the Company.
NEWS RELEASE
And
CUSTOMER NOTICE
CASE NO. INT-G-O7-
INTERMOUNTAIN GAS COMPANY
Idaho Pu~lic Utilities Commission
Office of the SecretaryRECEIVED
AUG t 6 2007
Boise, Idaho
F~ECE;\ .
' www.eia.doe.gov
ela
EnergY lnformation
Administration
'-""
rT / f\!1 I: I Luu
'-' \
.- Fu
UT\t~i.H~g) d:5i\\~\~S\O,
September 2007
~ Short-Term Energy Outlook Supplement:
Natural Gas in the Rocky Mountains: Developing
Infrastructure
Highlights
Recent natural gas spot market volatility in the Rocky Mountain States of
Colorado, Utah, and Wyoming has been the result of increased production
while consumption and pipeline export capacity have remained limited.
This Supplement analyzes current natural gas production, pipeline and
storage infrastructure in the Rocky Mountains, as well as prospective
pipeline projects in these States.
Natural gas reserves in the Rocky Mountain States account for nearly 22
percent of the total natural gas reserves in the United States, and are
mostly located in unconventional tight-gas or coalbed formations.
Dry natural gas production in Colorado, Utah, and Wyoming has
increased from an average of 5.49 billion cubic feet per day (Bd/d) in 2000
to 8.61 Bd/d in 2006.
Total natural gas volumes delivered to consumers in Colorado, Utah, and
Wyoming are much less than volumes produced, totaling 61 trillion
cubic feet (Tcf) (average 1.66 Bd/d) in 2006 which was only slightly above
the level of deliveries in 2001.
Pipeline capacity that exports natural gas flows from Colorado, Utah, and
Wyoming was 8.49 Bcf/d in 2006. Efforts to increase the pipeline
infrastructure in the Rocky Mountain States are expected to add roughly
I Contact: Kobi Platt (Kobi.Platt(g)eia.doe.gov)
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
5 Bcf/d of capacity to transport natural gas from the region by the end of
2008.
Production
Natural gas reserves in the Rocky Mountain States (Colorado, Utah, and
Wyoming) account for nearly 22 percent of the total natural gas reserves in the
United States and are mostly located in unconventional tight gas or coalbed
formations., 3 Colorado, Utah, and Wyoming are net producers of natural gas.
In 2006, these three States produced 3.14 Tcf (average 8.61 Bcf/d) of dry natural
gas (Figure 1).
Figure 1. Dry Natural Gas Production: Colorado, Utah, and Wyoming, 2000-
2006
10 .
E!!.
::0.
III
:E 4
iii 2
Jan-Jan-Jan-Jan-Jan-Jan-Jan-
.Colorado DUtah II Wyoming
Source: Energy Information Administration, Natural Gas Monthly.
2 Energy Information Administration, Natural Gas Division: Natural Gas Navigator.
hUp:!/tonto.eia_doe.gov/dnav/ng/ng em sum dcu NUS a.htm
3 Department of Energy (DOE) Office of Fossil Energy. RochJ Mountain States Natural Gas:
Resource Potential and Prerequisites to Expanded Production, September 2003 (Washington, DC).
hUp:!/www .fossil.energy .gov/programs/oilgas/publications/naturalgas general/rockymtn final.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Growth in annual dry natural gas production in Colorado, Utah and Wyoming
has increased by more than 4 percent per year since 1998 and averaged 9.
percent over the period. Most recently, from 2005 to 2006, Colorado, Utah, and
Wyoming increased their production 5.5, 14., and 5.4 percent, respectively, with
no significant seasonality effect (Figure 1).Assuming that dry natural gas
production continues to increase at a consistent 4-percent rate, these States will
produce an average of 8.95 Bd/d in 2007 and 9.31 Bd/d 2008, which would
account for roughly 18 percent of total u.s. dry natural gas production in those
years.
Consumption
Total natural gas volumes delivered to consumers in Colorado, Utah, and
Wyoming were 0.61 Td (average 1.66 Bd/d) in 2006, only slightly above the
volume consumed in 2001.5 Natural gas consumption in the Rockies is highly
seasonal, with consumption reaching a peak during the winter months when
natural gas is used to meet heating demand.
4 Energy Information Administration, Crude Oil, Natural Gas, and Natural Gas Liquids Reserves
Annual Report, Table 8 (December 1999 and December 2006).
http://www.eia.doe.gov/oil gas/natural gas/data publications/crude oil natural gas reserves/re
serves historical.html
5 Energy Information Administration Natural Gas Monthly.
http://www.eia.doe.gov/oil gas/natural gas/data publications/natural gas monthly/ngm.html
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
..,
Figure 2. Total Natural Gas Volumes Delivered to Consumers: Colorado, Utah,
and W om in ,2001 - 2006
:g 2.
1;' 2.
Gi 1.
B 1.
~ 0.
Jan-Jan-Jan-Jan-Jan-Jan-
. Colorado EI Utah .Wyoming
Note: Data for Colorado and Wyoming in April 2006 were not available and are estimated based on the previous 5-year
average change from March to May.
Source: Energy Information Administration Natural Gas Monthly.
Underground Storage
Some of the natural gas production in the Rockies is injected into underground
storage facilities for use during the winter months. Underground natural gas
storage capacity in Colorado, Utah, and Wyoming is estimated to total 140 Bcf in
2005 (Table 1).
Table 1. Rocky Mountain Region: Underground Natural Gas Storage, 2005
Working Natural Gas Storage Daily Withdrawal CapabilitySites (Bcf) (Bcf)Colorado 42 1.088Utah 52 0.527Wyoming 46 0.302Total 19 140 1.917
Source: Energy Information Administration Us. Underground Natural Gas Storage Developments:
1998-2005 October 2006 (Washington, DC). Table I , pg. 3.
http://www.eia.doe.gov/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage.pdf
6 Energy Information Administration, u.S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table I, pg. 3.
http://www.eia.doe.gov/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage.pdf
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Almost all of the storage capacity within Colorado, Utah, and Wyoming (97
percent) is located in depleted reservoirs, which are characterized as low-
injection and low-deliverability facilities (compared to salt-cavern storage),
mainly due to the relatively low porosity of these types of geologic formations.
For example, in 2005 Colorado maintained eight storage sites with 42 Bcf of
working gas capacity in depleted reservoirs that had a daily withdrawal capacity
of 1.088 Bcf.8 By comparison, Louisiana operated six salt-cavern storage fields
with the same working gas capacity (42 Bcf), but with daily withdrawal capacity
of 2.853 Bcf.9 Due to the low deliverability associated with depleted reservoir
storage fields, these facilities are primarily used for load balancing on the
region s pipeline infrastructure.
Between 1998 and 2005, deliver ability of the Central Region l1 storage capacity
increased only 1.1 percent, and total working storage capacity within the region
increased only 1.4 percent.12 By comparison, the Northeast13 and Southeast14
Regions increased deliverability from storage by 18 percent and 35 percent,
respectively, over this same time period. The only new capacity currently under
construction in the region is Chevron s Windy Hill Natural Gas Storage Project.
Located in Colorado and expected to begin operations in 2008, Windy Hill will
7 Energy Information Administration, u.S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table I, pg. 3.
http://www.eia.doe.goy/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage.pdf
8 Energy Information Administration S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table I, pg. 3.
http://www.eia.doe.goy/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage_pdf
9 Energy Information Administration S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table I, pg. 3.
bttp://www.eia.doe. goy/pub/oil gas/na tural gas/fea tu re articles/2006/ngstorage/ngstorage. pd f
10 Energy Information Administration The Value of Underground Storage in Today s Natural Gas
Industry, March 1995 (Washington, DC). Pg. 33.
http://www.eia.doe.goy/pub/oil gas/natural gas/analysis publications/value underground star
age/pdf/059195. pdt
11 Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South Dakota, Utah, and
Wyoming.
12 Energy Information Administration S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table 1, pg. 3.
bttp://www.eia.doe.gov/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage.pdf
13 Connecticut, Delaware, Massachusetts, Maryland, Maine, New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island, Virginia, Vermont, West Virginia.
14 Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
add about, 3 Bcf (0.5 percent) - of storage capacity and roughly 0.40 Bcfjd (6.
percent) of deliverability in the Central Region.
Pipeline Infrastructure
At present, the Kern River Gas Transmission Company pipeline is the only major
interstate natural gas system that begins in the Rockies and transports natural
gas to another region (Table 2). The pipeline originates in southwestern
Wyoming and travels through Utah and Nevada before terminating in southern
California. In total, the Kern River System runs a distance of 1 680 miles and has
capacity of 1.8 Bcfjd.
Table 2. Export Capacity on the Largest Interstate Natural Gas Pipelines
Originating in Rocky Mountain States, 2005
System
Primary Market Capacity System
Name Served (MMd/d)Mileage
Colorado Interstate Gas Co.Central,Central
Southwest Southwest 000 996
Southern Star Central Pipeline Co.Central Central 2,451 788
Questar Pipeline Co.Central Central 192 745
Wyoming Interstate Gas Co.Central Central 997 585
Kern River Gas Transmission Co.Central Western 833 680
Total 11,473 13,794
Source: Energy Information Administration, Natural Gas Division, Gas Transportation Information
System, Natural Gas Pipeline Projects database
Note: Central Region: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, North Dakota, South
Dakota, Utah, and Wyoming.
Southwest Region: Arkansas, Louisiana, New Mexico, Oklahoma, Texas.
Western Region: Arizona, California, Idaho, Nevada, Oregon, Washington.
Natural gas can also be exported from the region through interconnections with
interstate pipelines that pass through the region. Several large pipelines that
originate in the Southwest Region (Texas and Oklahoma) and transport natural
15 Energy Information Administration, S. Underground Natural Gas Storage Developments: 1998-
2005, October 2006 (Washington, DC). Table 1, pg. 3.
http://www.eia.doe.gov/pub/oil gas/natural gas/feature articles/2006/ngstorage/ngstorage.pdf
16 Energy Information Administration, About U.S. Natural Gas Pipelines Transporting Natural Gas,
June 2006 (Washington, DC).
h Up://www.eia.doe.gov/pub/oil gas/natural gas/analysis pliblications/ngpipeline/central.htmilli
mports
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
gas to the Midwest provide interconnections for pipelines that originate in the
Rockies. Most of these interconnections are located in the eastern parts of
Nebraska, Kansas, and Missouri. The three largest pipelines that pass through
these areas are operated by the Natural Gas Pipeline Company of America (4.5
Bcf/d of capacity), the Panhandle Eastern Pipeline Company (2.8 Bcf/d), and the
Northern Natural Gas Pipeline Company (2.2 Bcf/d)Y While these three major
interstate natural gas pipeline systems technically contribute to the overall
capacity that carries natural gas from the Rockies to the Midwest Region, the
actual natural gas flows are limited by the natural gas pipeline capacity that is
available on the several separate natural gas pipelines that begin in the Rockies
and connect with these larger systems.
Before 2004, the Trailblazer Pipeline Company, which receives natural gas from
the Wyoming Interstate Gas Company and makes use of interconnections
operated by the Natural Gas Pipeline Company of America and the Northern
Natural Gas Company, provided the primary link from natural gas production
facilities in Colorado and Wyoming to the Midwest Region. With 0.95 Bcf/d of
capacity, the Trailblazer system transports natural gas to eastern Nebraska from
northeastern Colorado s Cheyenne Hub.18 In 2004, however, the Cheyenne
Plains Gas Pipeline Company added another major pipeline with significant
flows from the Rocky Mountains to the east (Cheyenne, WY, to Greensburg, KS).
The first phase of the Cheyenne-Plains project included 0.56 Bcf/d of new
pipeline capacity, while the second phase added 0.17 Bcf/d to the system in 2005
to boost total transportation capacity to 0.73 Bcf/d.
Pipeline capacity carrying natural gas volumes from Colorado, Utah, and
Wyoming was 8.49 Bcf/d in 2006, of which 1.70 Bcf/d represented bi-directional
capability (Figure 3 and Appendix A). The natural gas pipeline export capacity
from the Rockies increased slightly more than 40 percent from 2001 to 2006.
17 Energy Infonnation Administration About U.S. Natural Gas Pipelines Transporting Natural Gas
June 2006 (Washington, DC).
http:!/www.eia.doe.gov/pub/oil gas/natural gas/analysis publications/ngpipeline/centraI.htmlfii
mports
18 Energy Information Administration About U.S. Natural Gas Pipelines Transporting Natural Gas
June 2006 (Washington, DC).
http://www.eia.doe.gov/pub/oil gas/natural gas/analysis publications/ngpipeline/central.html#i
mports
19 Cheyenne Plains Gas Pipeline Company.
http://www.elpaso.com/cheyenne/
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
However, average usage rates can be fairly low on interstate pipelines in the
Rockies and throughout the Central Region due to large differences in seasonal
flow levels-high winter utilization to meet heating demand is generally offset
by relatively low summer utilization. For example, the Kern River and the
Trailblazer Pipelines often operate at relatively high rates, recording average
utilization of 94.3 and 89.1 percent, respectively, in 2005. On the other hand,
Kinder Morgan s Pony Express and the Cheyenne Plains Pipelines averaged
percent and 65.6 percent utilization, respectively, over that same period.
Figure 3. Rocky Mountains: Net Natural Gas Supply and Pipeline Takeaway
Ca ad ,2001-2006
; 5
~ 4
::I
c 3
'ti
;;:
!!!. 6
:0-
Jan-Jan-Jan-Jan-Jan-Jan-
Source: Energy Information Administration, Natural Gas Mollthly.
Note: Rocky Mountain States include Colorado, Utah, and Wyoming.
Finally, enhancements to the natural gas pipeline infrastructure in the Rockies
accounted for roughly 26 percent of the additional pipeline capacity added in the
United States during 2006, though none of these projects increased the region
20 Energy Information Administration, Gas Transportation Information System, Natural Gas
Pipeline Projects database.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
interstate outflow capacity.21 In fact, there have been no major additions to the
interstate natural gas pipeline system in the Rockies since 2004.
New Pipeline Infrastructure
Significant efforts are currently underway to expand pipeline capacity from the
Rocky Mountains eastward (Appendix B). When completed, the planned
Rockies Express (REX) pipeline system will be able to carry up to 1.5 Bcf/d of
natural gas from Rio Blanco County, CO, to Audrain County, MO. From there
the REX will gain an additional 0.3 Bcf/d of capacity, bringing the total to 1.
Bcf/d. From its point of origin in Colorado to its point of termination in Monroe
County, OH, the REX will cover a distance of 1,678 miles.22 While the initial 191-
mile section connecting the Meeker (CO) Hub to the Wamsutter (WY) Hub was
completed and approved for service in February 2006, the final 638-mile section
running from Audrain County, MO to the Clarington (OH) Hub is not scheduled
to start up until the middle of 2009. The intermediate phase of the project, a 713-
mile section of pipe connecting the Cheyenne (WY) Hub to Audrain County, MO
was given final approval by the Federal Energy Regulatory Commission (FERC)
on April 19, 2007 and is currently on schedule to begin operation in January
2008.23
In addition to the REX, several other projects are being planned and constructed
in the Rockies (Appendix B). Most recently, Questar Pipeline and Enterprise
Products Partners announced plans to construct a new 7-mi1e, 2.5 Bcf/d natural
gas pipeline from the Piceance Basin to Enterprise s natural gas processing
facility near Meeker, CO.24 If completed, the White River Hub will provide
interconnections to at least six other pipelines: Questar Pipeline, REX
TransCo10rado Gas Transmission Wyoming Interstate Company, Colorado
21 Energy Information Administration Natural Gas Year-In-Review 2006 March 2007 (Washington,DC).
http://www_eia.doe.gov/pub/oil gas/natural gas/feature articIes/2007 /ngyir2006/ngyir2006. pdf
22 Kinder Morgan: Rockies Express Pipeline LLc.
http://www.kindermorgan.com/bllsiness/~as pipelines/rockies express/
23 Kinder Morgan - Rockies Express Pipeline LLc. Planned Interconnect Capacities at the
Cheyenne Hub (January 2007).
http://www.kindermorg-an.com/bllsiness/~as pipelines/rockies express/RE Planned Interconnec
t Capacities Cheyenne.pdf
24 "Firms plan header to link six Rockies pipelines.Platts Gas Daily August 28, 2007.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Interstate Gas, and Northwest Pipeline.25 Already, Questar has dedicated 0.5
Bcf/d of firm capacity to the new pipeline with Enterprise adding 1.5 Bcf/d.
While no FERC filings have been made for the project investors expect the White
River Hub to be operational by the late fall of 2008. Different from the REX, the
White River Hub would not add to the export capacity for natural gas produced
in the Rockies. However, construction of White River would imply that natural
gas export capacity must increase beyond what will exist once the REX is
complete.
Prices
Spot prices in the Rocky Mountain States reported at the Colorado Interstate Gas
(CIG) Pipeline first exhibited large differentials to the Northern Natural Gas
Demarcation (DEMARC) point in Kansas and the Henry Hub in Louisiana
during the latter part of 2002 and the early part of 2003 (Figure 4). These
differentials between neighboring regional spot market benchmarks declined
and markets converged after the completion of pipeline expansions (notably
Kern River and Cheyenne Plains) increased natural gas export capacity by about
2 Bcf/d from the Rockies. From the period beginning in late 2003 to mid-2006
with the exception of the Henry Hub price spike caused by the 2005 hurricane
disruptions, Rockies spot price differentials to the DEMARC and the Henry Hub
remained relatively low.
Over the last 12 months, however, these differentials have again increased. For
example Gas Daily reported that the June 4/ 2007 spot price of natural gas on the
CIG Pipeline dropped to a low of $0.15 per million Btu (MMBtu)26 (averaging
$0.78 per MMBtu for the day).27 On the same day the Henry Hub spot price
averaged $7.73 per MMBtu and the DEMARC spot price averaged $7.21 per
MMBtu.2B Again on August 28/ the spot price on the Kern River Pipeline near
Opal, WY/ dropped to a low of $0.20 per MMBtu (averaging $0.63 per MMBtu for
the day) when the Henry Hub spot price averaged $5.34 per MMBtu and
DEMARC averaged $5.07 per MMBtu.29 Finally, on September 4 the CIG spot
price once more dipped to $0.15 per MMBtu (averaging $0.51 per MMBtu for the
25 Gas Daily August 28, 2007.
261.031 MMBtu = 1 thousand cubic feet (Mcf)
27 Gas Daily June 5, 2007.
28 Gas Daily June 5, 2007.
29 Gas Daily August 28,2007.
Energy Information Administration/Short-Tent! Energy Outlook Supplement - September 2007
day) while the Henry Hub spot price averaged $5.30 per MMBtu and DEMARC
averaged $5.15 per MMBtu.3O Each of these price collapses were attributed to
pipeline maintenance, which reduced available capacity, and mild weather,
which reduced local demand.
Figure 4. Monthly Average Natural Gas Spot Price Differentials
~ 3.
Oit
Jan-Jan-Jan-Jan-Jan-Jan-Jan-Jan-Jan-Jan-
-Henry Hub - Colorado Interstate Gas Differential ($/MMBtu)
Northern Natural Gas Demarcation (DEMARC) - Colorado Interstate Gas Differential ($/MMBtu)
Source: Reuters.
While these spot prices represent the incremental change in the price of natural
gas being traded, it is important to note that they may not accurately represent
the average natural gas price that producers receive due to the large volume of
natural gas that is transported under contract, particularly in the Rockies. As
production has continued to expand in the Rockies, however, the prevalence of
these large spot price declines and increased price differentials between regional
spot markets have exposed a lack of pipeline export capacity at the margin.
30 Gas Daily September 5, 2007.
Energy Information Administration/Short-Tenn Energy Outlook Supplement - September 2007
EIA'Annual Energy Outlook 2007 (AEO2007) projects natural gas production in
the Rocky Mountain region31 will increase nearly 19 percent from 2004 to 2010.
Yet despite expectations of increased natural gas production, at present the
Cheyenne Hub, WY, to Audrain County, MO, phase of the REX (1.5 Bcf/d) is the
only new pipeline scheduled to expand transportation service out of the Rockies
in the near future, increasing the total regional take-away capacity to around
Bcf/d by 2008.33 The addition of new transportation capacity will provide some
near-term relief for natural gas producers who recently faced large spot price
declines. However, historical data indicate that these pipelines rarely operate at
full capacity throughout the course of the year, and potentially cause unplanned
variations in total export capacity from the region. As a result, the region s spot
market may experience continued vulnerability to transmission constraints and
seasonal demand fluctuations until more pipeline and/or storage capacity can be
built, especially if natural gas production increases even more rapidly than
recent projections suggest.
31 The Rocky Mountain Region includes Arizona, Colorado, Idaho, Nevada, Utah, Wyoming,
Montana, and a portion of New Mexico.
bUr://www.eia.doe.gov/oiaf/aeo/supplement/supmap.pdf
32 Energy Information Administration. Supplemental Tables to the Annual Energy Outlook 2007.-
Petroleum, Natural Gas, Coal, Macroeconomic, and Import (Table 104), February 2007 (Washington,
DC). hUp://www .eia.doe .gov/aiaf/aea/supplement/pdf/sup age. pdf
33 hUp://www.kindermorgan.comlbusiness/gas pi relines/rockies express/
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Appendix A.
Table Al. Natural Gas Pi eline Ca aci from Colorado
State State Capacity as of Average
From end of 2006 Utilization
eline (MMcf/d)in 2005 (%)
Colorado Interstate Gas 294 16.
Colorado Interstate Gas 140 22.
Cheyenne Plains Pipeline 730 65.
KM Interstate Gas Co.54.
Southern Star Central Gas PL Co 216 78.
Total 230 60.
KM Interstate Gas Co.62.
KM Interstate Gas Co.62.
KM Interstate Gas Co.62.
KM Interstate Gas Co.255 62.
KM Interstate Gas Co.182 62.
Trailblazer Pipeline Co.945 89.
Total 422 80.
El Paso Nat Gas Co 790 88.4%
Raton Gas Transmissions Co 34.
Transcolorado Gas Trans Co 692 73.
Transwestern Pipeline Co 705 73.
Total 197 78.
Colorado Interstate Gas 381 100%
Total 381 100%
. .
~ 'x:, iijj~~~~~~~*~~lZ:~~fl~~~~~W;
Indicates bi -directional flow capabili ty.
Source: Energy Infonnation Administration, Gas Transportation Information System, Natural Gas Pipeline Projects database.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Table A2. Natural Gas Pipeline Capacity from Utah
State State Capacity as ofFrom To end of 2006
(MMcf/d)
800
800Total
Average
Utilization
in 2005 (%)
94.
94.
eline
Kern River Gas Trans Co
Total
609
609
77.4%
77.4%
Northwest Pipeline Co
Indicates bi-directional flow capability.
Source: Energy Information Administration, Gas Transportation Information System, Natural Gas Pipeline Projects database.
Table A3. Natural Gas Pi eline Capaci from Wyoming
State State Capacity as of Average
From end of 2006 Utilization
eline (MMcf/d)in 2005 (%)
Colorado Interstate Gas
Northwestern Energy Co
Shoshone Pipeline Co
Williston Basin I P L Co
Williston Basin I P L Co 160
Williston Basin I P L Co
Williston Basin I P L Co
Williston Basin I P L Co
Total 456
24.4%
24.4%
24.
24.4%
24.
20.
Williston Basin I P L Co
120
255
Total 375
Total
56.
38.
44.
KM Interstate Gas Co.
KM Interstate Gas Co.
Indicates bi-directional flow capability.
Source: Energy Infonnation Administration, Gas Transportation Information System, Natural Gas Pipeline Projects database.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Appendix B.
Table H1. Future Natural Gas Pipeline Capacity in Colorado, Utah and Wyoming
Added
State State Year of Type of Capacity
Pro ect From Service Status Pro ect (MMcf/d)
Cheyenne Plains Supply Lateral 2006*Complete Lateral 48.
NWPL Parachute Expansion 2007*Complete Lateral 450
Wamsutter Expansion Project 2007 Approved Com-fLat.750
Loop/Com.!
Questar Southern System Expansion (Goshen)2007 Construc.Lat.175
CIG Raton Basin 2007 Expansion 2007 Construc.Loop/Com.
REX Processing Plant Lateral 2007 Applied Lateral 150
Lower Valley Energy Project 2007 Applied New Pipe
Fort Union Gathering 2007 Expansion 2007 Approved Gath.240
Jonah Phase V (2) Ex ansion 2007 roved Com 650
KMP Rockies Express (REX - West)2008 Approved New Pipe 1500
TransColorado Blanco-to-Meeker Expansion 2008 Approved Compo 250
WIG Kanda Lateral 2008 Approved Lateral 406
Cheyenne Plains Kirk Compressor Station 2008 Applied Comp-
CIG High Plains Expansion 2008 Applied New lines 900
WIG Medicine Bow 08 Expansion 2008 Applied Compo 330
Fort Union Gatherin 2008 Ex ansion 2008 roved Gath.409
* Indicates service already underway.
Source: Energy Information Administration, Gas Transportation Infonnation System, Natural Gas Pipeline Projects database.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007
Appendix C.
e Natural Gas S ot Price Com alison, 1999 - 2007Fi ure 5. Monthl
16.
14.
12.
10.
Jan-Jan-Jan-Jan-Jan-Jan-Jan-Jan-Jan-
-Colorado Interstate Natural Gas Spot Price
-Henry Hub Louisiana Natural Gas Spot Price
Northern Natural (DEMARC) Kansas Natural Gas Spot Price
Source: Reuters.
Energy Information Administration/Short-Term Energy Outlook Supplement - September 2007