Originally created 05/04/04

Inconsistent quality of natural gas raises safety and reliability concerns

It used to be that natural gas producers would strip out traces of propane and butane before piping the desired fuel - primarily methane - to power plants and utilities. The impurities were actually worth more than the natural gas itself, so collecting them gave producers a nice side business.

But today, with gas supplies tight and valued at twice their historical average, many producers want to pump as much as they can - impurities included. The result is a fuel cocktail that many power plants and home appliances weren't designed to handle, presenting a number of safety, environmental and reliability concerns.

Industry officials frustrated by the increasingly inconsistent quality of natural gas have warned federal regulators about potentially dangerous levels of carbon monoxide emissions in homes, increased pollution from power plants and needless wear and tear on gas turbines and home appliances.

With as much as a third of the natural gas from the lower 48 states no longer processed to remove propane, butane and other liquid hydrocarbons, "it can lead to a number of consequences - all of which are bad," according to Keith Barnett, vice president of fundamental analysis at American Electric Power Inc., one of the largest producers of electricity.

In New York, the utility KeySpan Energy was forced to shut down a plant several times in 2003 after receiving unprocessed fuel that differed significantly from "what the plant was originally designed to handle," according to a filing with the Federal Energy Regulatory Commission.

The characteristics of natural gas are also changing as high prices attract more imports and domestic drillers find new sources of fuel in unconventional geologic formations once deemed too costly to tap.

Such is the case in Utah, where Quester Gas Co., has been urging some customers to spend upwards of $100 per home to adjust settings on older furnaces and water heaters. The company is concerned that the carbon-dioxide rich gas it is siphoning out of coal seams might emit dangerous levels of carbon monoxide without the changes.

Several industry officials said it is too soon to know just how widespread and severe the problems may be. However, around the country power producers and utilities are facing higher maintenance costs and have, at times, been forced to cut off service to clean equipment.

"This is not a panic situation by any stretch of the imagination," insisted Lori Traweek, senior vice president of operations and engineering at the American Gas Association, which represents local gas distribution companies. "There has to be comfort in knowing that this issue is being addressed."

Yet other industry officials were more cautious in their analysis, stressing the need for more research into the potential safety and reliability risks.

"We're still in the learning phase," said Mark Kendall, vice president of technical affairs at the Gas Appliance Manufacturers Association, an Arlington, Va., trade group that will hold a conference on the issue in June. Concerns at GAMA, Kendall said, are excessive carbon monoxide emissions, as well as excess soot and other damage to gas stoves, water heaters and furnaces that could reduce their lifespans by as much as 50 percent.

Robert D. Wilson, director of environmental operations at KeySpan Energy, told FERC in a March 22 filing "the assumption that existing appliances will not be significantly impacted by gas quality variability would not be prudent and additional technical evaluation is needed prior to drawing any conclusions."

Meanwhile, the National Petroleum Council, a consortium of energy executives that advises the Energy Department, urged the government last September to address the issue of natural gas standards in preparation for rising imports of liquefied natural gas, or LNG.

FERC held a conference on the matter in February after it began to see a growing number of legal disputes over gas specifications between natural gas suppliers and pipeline owners.

While the problems associated with inconsistent fuel quality have been known for decades, they are more relevant now as the industry tries to keep up with rising natural gas demand.

In the past, suppliers had an economic incentive to strip out most impurities from the methane, creating a relatively uniform product from year to year. But in recent years it has made more financial sense for suppliers to leave them mixed in the gas stream, boosting overall volume and revenue by about 5 percent, as well as eliminating the need for expensive processing plants.

Trouble is, a natural gas stream with a heavier concentration of liquid hydrocarbons can damage equipment that isn't properly calibrated ahead of time.

The industry has safeguards to prevent "slugs" of liquid from gumming up gas turbines and appliances, but executives acknowledged these protections don't always work. In fact, some protective equipment was taken out of the system in the 1990s when it seemed that natural gas would remain cheap and uniform in quality.

"There have been instances where these liquids get carried all the way to the turbines, which damages them and sometimes shuts them down," said AEP's Barnett, who estimated it would cost several hundred thousand dollars per power plant to make highly sensitive equipment more flexible to different gas varieties.

Without these adjustments the "wet" unprocessed gas, which burns hotter, could also cause power plants to unintentionally spew more pollutants than they are allowed to under laws set by the Environmental Protection Agency, Barnett said.

Another trend drawing attention to the chemical characteristics of the nation's natural gas supply is the increase of LNG being imported to make up for declining domestic production. Much of that fuel, shipped to the United States in refrigerated tankers from as far away as Qatar and Nigeria, burns hotter, just like the "wet" gas, and thus has the potential to cause similar problems.

In spite of the potential problems, industry officials said they are equally concerned about regulatory changes that could limit the supply of natural gas. For now, FERC is giving the industry time to work up a collaborative solution - probably a combination of new standards for producers and end-users, as well as methods for adhering to them.

A fix will likely require extra spending on gas processing and new equipment, and a portion of those costs is expected to be passed along to consumers.


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