A Stronger Natural Gas Supply Chain, A Stronger Texas

Just one year ago, Texas and much of the U.S. was hit with the deadly Winter Storm Uri. On this anniversary, Texans distinctly remember the lives lost and the unbearable conditions so many Texans across the entire state faced without power, water and the ability to get the basic necessities. With so many affected, we also gratefully remember all who risked their lives and safety to reach those in need – first responders, healthcare workers, shelters, churches and neighbors providing food, comfort and warmth wherever they could. Texas businesses worked 24/7 to support our communities – hotels sheltering those without, food banks keeping the hungry fed, and delivery truck drivers braving dangerous routes to deliver important supplies. Electrical linemen were out in force as were oil and natural gas field workers and technicians in the face of dangerous circumstances to provide for our citizens. Texas is blessed with resources across all communities and business sectors; however, no Texan should ever again have to endure the harsh conditions experienced last February.

With an issue of this magnitude, Texans deserve a serious evaluation of what went wrong, and the meaningful work being done to guarantee increased reliability in future emergency situations. The oil and natural gas industry has an important role as a stakeholder in this process. Not only is Texas the largest natural gas producing state in the nation, but our industry also includes some of the biggest consumers of electricity. Ensuring we have a reliable, affordable and competitive electricity grid and market is essential for every Texan.

 

What Was Learned

With every generation source of electricity experiencing severe difficulties during Winter Storm Uri’s historic, extreme weather and our citizens suffering, Governor Abbott and the legislature acted swiftly and meaningfully to discover the shortcomings of our grid and rectify deficiencies.

Texas is fortunate to be the nation’s leader in wind energy and a growing leader of solar power, and these sources add valuable resources to our grid. With days of cloudy skies, limited wind and icing of wind turbines all across Texas at the same time, what often provides affordable energy when the weather is good could not perform in these conditions.

Even coal and nuclear experienced an unexpected decline in output because the weather was so severe. Reports confirm coal was too frozen and too wet to use and nuclear plants had freezing on intake systems. Natural gas power generators also had freezing on intake systems and other component failures. Natural gas production and transmission faced multiple difficulties such as freezing compressor lines and valves, remote production facilities that could not be accessed due to icy road conditions, power and telecommunication systems that went down, and a variety of third-party stations such as disposal wells along the supply chain that were disrupted. When any part of the supply chain is interrupted, wells may have to be shut-in. The predominant challenge for many producers and transporters of natural gas was the loss of power.

For the natural gas sector, this event revealed a major roadblock of communications that prohibited field operations from applying for “critical load” designation with the Electric Reliability Council of Texas (ERCOT), which would provide important information during an emergency situation and potentially avoid having power cut to the most critical assets. As a result, many operations and third-party support services lost power during load shedding events, or “rolling blackouts,” shutting down producing wells and associated infrastructure like compressor stations and gas processing facilities.

We also learned from ERCOT that fuel limitations were 12% of the reason for unplanned outages at natural gas generation plants. In digging through the FERC/NERC report on Uri that covered SPP, MISO and ERCOT power grids and in making generous assumptions on the causation for outages at natural gas generation plants, worst-case estimates indicate about 15% was attributable to fuel limitations. So, we have two sources indicating about 12% to 15% of the power outages at natural gas plants that puts electricity on the grid was attributable to fuel limitations. It is important to address the small yet meaningful impact, but we must put this into perspective when 85% of the generation outages were caused by other reasons.

Less than 20% of natural gas produced in Texas is actually purchased by and used for the electricity generation sector and residential use is about 2%. Industrial and commercial users purchase about 21% of the total natural gas produced and over half of the natural gas produced in Texas in 2020 is actually purchased by out-of-state consumers. Meaning, if in-state purchasers needed this product they could contract for it, and it would stay in the state.

The vast amount of natural gas storage we have in Texas was brought to the forefront of conversations as a result of Winter Storm Uri. The Energy Information Administration says there is 544 billion cubic feet of natural gas storage capacity in Texas, over 100 days of supply of what is used by natural gas power generators. When you combine the daily withdrawal rates of natural gas combined with continued flow even during difficult periods for production, more than enough gas is in the system to be purchased by natural gas power generation facilities.

 

What Was Done

Improvements in communications have been made among all stakeholders since Winter Storm Uri to better coordinate the natural gas supply chain, especially with electric providers so power can be kept on, and industry has been working with a sense of urgency with all stakeholders to improve coordination of the system.

The natural gas sector is working closely with state regulators to implement Senate Bill 3 (SB 3), which wisely calls for more clarity in the “critical load” designation process, mapping of natural gas facilities that are directly tied to power generation, and requiring weatherization of those facilities.

The Railroad Commission of Texas (RRC) and the Public Utility Commission (PUC) improved rules regarding critical load designation. The agencies adopted rules regarding coordination between the two industries by creating critical load designation parameters.

PUC and RRC have been inspecting and reviewing weatherization plans to ensure natural gas generators and the thousands of oil and natural gas sites across the state are in the best condition to withstand inclement weather, a process that will continue. RRC data indicates 98% of the facilities visited had been winterized, with the remaining 2% in the process of winterizing.

Although oil and natural gas producers spend hundreds of millions of dollars annually to employ protocols as a part of standard best practices, they have also identified lessons learned, as any operator does after a weather emergency, and have taken additional steps to further harden their assets to perform.

Because oil and natural gas production is very remote and often difficult to access timely even in good conditions, many operators are pre-positioning and scheduling more field workers and technicians before a storm is expected to land by renting motel rooms and other housing to be closer to their assets where they can hopefully respond faster, depending on conditions.  Onsight, operators are draining storage tanks so if normal takeaway of disposed product is derailed, they have more storage on site to continue operating longer. Pipeline companies are “line-packing” where all the transport lines are filled in advance of a storm to maintain pressure in the lines. Most companies reached out to their third-party vendors and now require quicker response times. These are all in addition to the winterization best practices employed by so many that can be found at www.txoga.org/winterready.

What’s To Come

Producing meaningful change has required a multi-step process to ensure that our state’s system is winter ready.

The Texas Energy Supply Chain Security and Mapping Committee established by SB 3 was tasked with mapping the electricity supply chain in Texas and identifying the critical infrastructure sources related to the electricity supply chain. Mapping hundreds of thousands of assets will take time, and many operators are charting their assets internally to assist in the process. Both the RRC and PUC are working to expedite the process ahead of the September 1st deadline.

The most important issue that needs to be evaluated and can be addressed is ensuring natural gas generators purchase natural gas, transportation and storage in sufficient volumes and duration to ensure the product is available when it’s needed the most. This requires planning, investment and redundancy to ensure the necessary resources and infrastructure are in place to be prepared to operate under any condition. The PUC was granted the authority to incentivize generators to properly purchase the product they need and we look forward to these programs being developed.

The Texas oil and natural gas industry, PUC, ERCOT, RRC, TDEM, power generators, transmission and distribution facilities, Governor Greg Abbott and the Texas Legislature are committed to ensuring the power stays on in future emergencies. Last February, we saw Texans rally like Texans do and the work continues. Winter Storm Uri exposed weaknesses in our state’s entire power supply chain, and every Texan involved is meeting challenges with determination, creativity and collaboration to ensure Texans’ safety now and in the years to come.

 

Todd Staples is president of the Texas Oil & Gas Association and former Texas Agriculture Commissioner.

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