American LNG Exports Hit Record High

Gas flows to American LNG export plants have broken another record. But US natural gas producers are chomping at the bit for more LNG exports in order to ease the current domestic glut of gas and low prices.

“From the heady days of last summer, when fears over global shortages peaked, prices at Henry Hub — the Louisiana pipeline that serves as a national benchmark — have tumbled almost 80%,” reports Bloomberg. “This week they dipped below $2 per million British thermal units, a level akin to 2020 prices.”

Yet relief is but a small silhouette on the horizon. The Gulf Coast has seen a bumper crop of natural gas facilities for freezing and shipping the fuel, but the next major export facility won’t switch on another year at least.

The fact that the US is producing more gas as a by-product of shale oil basins may exacerbate the problem.

In the meantime, US producers are dropping rigs, hedging, and tapping debt to ride out the downturn.

The Great American Transformer Shortage

America has got an electrical transformer shortage on its hands, spelling more troubled for the nation’s already beleaguered power grid.

The push to “electrify everything” has put a huge strain on the supply chains for electrical transformers—putting pressure on utilities which are then passed along to customers.

“In two short years, everything that we sell on average, [has gone] up by about a third,” Matt Brandrup, the CEO of the Rural Electric Supply Cooperative in Wisconsin said on a recent episode of Power Hungry. “That's a staggering inflationary increase in two years that in my 25 years in the business, I've never seen, even going back to the housing boom years of 2006-2007...we saw some pretty good inflationary rates on the products that we sell back then. But they were in the 7% to 8% range. So to see an almost a 33% increase in two years is pretty staggering, and quite frankly, tough on our members and non-member utilities to deal with.”

Lead times for transformers now push into years. America is creating problems for its electricity sector faster than it can solve them.

EPA Comes for North Dakota Coal Plant

The Environmental Protection Agency is proposing to deny Coal Creek Station's alternate liner demonstration project, which could force the power plant to shut down for three years.

“The issue is an alternate liner demonstration project, for deposit of byproduct coal ash. North Dakota’s Department of Environmental Quality OK'd that project, but the EPA is proposing to deny it,” reports the Bismarck Tribune. “Coal ash contains contaminants such as mercury, cadmium and arsenic, according to EPA. Without proper management, the contaminants can pollute waterways, ground water, drinking water and the air, the agency says on its website.”

“With today’s proposed denials, EPA is holding facilities accountable and protecting our precious water resources from harmful contamination, all while ensuring a reliable supply of electricity to our communities,” EPA Administrator Michael Regan said.

The EPA’s proposal could spell the rebuilding of an existing facility at Rainbow Energy’s Coal Creek, taking the coal-fired power plant offline for an estimated three years. The plant dispatches a whopping 8 million megawatt hours of electricity per year to Minnesota and to the Midcontinent Independent System Operator.

"There's concern the EPA position on this may interrupt the supply of reliable power," North Dakota Transmission Authority Director John Weeda said. "The Coal Creek Station has been depended on, through thick and thin, and has an almost untarnished reputation of being there for the power grid."

MISO has seen a swathe of coal closures over the years with more retirements on the way. This has created reliability problems that both the North American Electricity Reliability Corp. and MISO have publicized. MISO imports power when times get tight from its eastern neighbor, PJM. But PJM has reported a similar fragilizing dynamic.

Like what you’re reading? Click the button to get Grid Brief right in your inbox!

Conversation Starters

1. India wants to keep its fuel to itself. “India has extended restrictions on the export of diesel and gasoline, the government said in a notification, as New Delhi tries to ensure the availability of refined fuels for the domestic market,” reports Reuters. “The government had imposed the curbs on gasoline and gasoil exports through the end of the financial year on Friday. The latest notification, issued late on Saturday, did not specify how long the curbs would remain in the place. It asked refiners to commit to selling 50% of their annual volume of gasoline exports and 30% of their diesel exports in the domestic market.”

2. OPEC+ production looks saggy. “Crude oil production from OPEC declined by 70,000 barrels per day (bpd) in March compared to February, as operators suspended some production in Kurdistan due to a halt in exports from the Mediterranean and as Angola carried out some field maintenance,” reports Oilprice.com. “All 13 OPEC members produced 28.90 million bpd in March, according to the survey tracking the supply to the market from tanker tracking providers and sources at consultancies, OPEC, and oil firms. The 10 OPEC producers part of the OPEC+ pact saw their compliance with the quotas jumping to 173% of pledged cuts in March, up from 169% in February.”

3. Natural gas withdrawals from South Central storage in the United States hit a record low this winter. “Natural gas storage helps balance supply and demand, particularly during the winter months when colder weather causes natural gas consumption to increase in response to increased demand for heating. As a result, withdrawals from and injections into storage are significantly influenced by temperatures and can vary regionally with weather patterns,” reports the Energy Information Administration. “Heating degree days (HDD) have been 13% below the 10-year (2013–2022) average in the South Central storage region this winter heating season, reducing the need to withdraw natural gas in response. As a result, natural gas consumption in the residential and commercial sectors in the South Central storage region was 13% below the five-year average this winter heating season, according to data from S&P Global Commodity Insights.”

Crom’s Blessing