European Coal Crisis? // California's Natural Gas Supply // Mountain Valley Pipeline

European Coal Crisis?

Europe is already worried about gas consumption going into winter. Its major and minor economies have begun to reduce energy consumption, especially natural gas consumption. But gas supplies aren't the only concern. A new ulcer is forming: coal.

"The problem is that the EU will soon be deprived of its biggest supplier: The bloc slapped sanctions on Russian coal in April, forbidding further imports starting August 10," reports Politico. "That means the 2 million tons of coal it is set to receive from Russia this month will be the last such shipment."

Indonesia, Colombia, and South Africa could supply the coal, but the logistical challenges are steep--as are the prices. "Coal prices on the API2 Rotterdam hub, a European benchmark, hit $380 per thousand tons this week, already a more than fourfold increase on this time last year."

Supply chain bottlenecks also pose a problem. About 8 million tons of coal are stuck in ports.  

Poland and Germany will fair the worst.

Shortages of coal could hammer the German steel and chemical industries. The power sector would also take a hit, but not as hard. Power plant operators have told the German government they have enough coal to run even without Russian imports.

Political turmoil has swallowed Polish politics regarding the country's inability to secure coal stockpiles. "Some 2 million households in Poland still rely on hard coal for heating, with each burning an average of three tons per winter, according to Robert Tomaszewski, a senior energy analyst at the Polityka Insight think tank. Before the war in Ukraine, the country imported around 7 million tons of coal annually from Russia for this purpose."

Once the bans on Russian coal kick in, Poland will find itself 1 to 2 million tons short. 

California's Natural Gas Supply

California's natural gas inventories are patchy. Overall, the state has 4% more gas than it did last year, but Northern California has far less than Southern California. 

"As of June 30, PG&E, which accounts for 28% of the working natural gas capacity in Northern California, held approximately 13.0 Bcf of natural gas in storage, 40% less than it did one year ago," reports the Energy Information Administration. "SoCalGas held 87.6 Bcf in working natural gas inventories, 17% more than at the end of June last year."

How did this disparity between the northern and southern halves of the state happen?

For Northern California, the California Public Utilities Commission made a decision that resulted in PG&E reclassifying a substantial portion of its gas to "base gas," or "the quantity of natural gas needed to maintain adequate reservoir pressures and deliverability rates throughout the withdrawal season." As a result, PG&E's gas storage dropped by 52.5 billion cubic feet. Plus, deliveries from the Pacific Northwest dropped by 5% over the past year. 

As for Southern California, in November of last year, "the CPUC decided to allow SoCalGas, operator of four storage facilities in Southern California, to increase its working gas capacity at the Aliso Canyon Natural Gas Storage Facility to 41.0 Bcf from 34.0 Bcf to help ensure energy reliability in the region." The upshot is that inventories have increased by 17% in Southern California. 

Mountain Valley Pipeline

Senator Joe Manchin has gotten Senate Majority Leader Chuck Schumer, House of Representatives Speaker Nancy Pelosi, and President Biden to commit to allowing the Mountain Valley Pipeline's Completion. 

"The commitment to the West Virginia senator from Democrats Biden, Schumer and Pelosi will be used to pass legislation for the state's pipeline to be completed and "streamline the permitting process for all energy infrastructure,'" reports Pipeline & Gas Journal. 

MVP was designed to move natural gas over 300 miles from West Virginia to southern Virginia. 

The Federal Energy Regulatory Commission approved MVP in 2017, but since then it has had several of its approvals struck down in court by the Fish and Wildlife Service, Forest Service, and Bureau of Land Management. The project is years behind schedule and billions over its budget. 

"The legislation will be voted on by the end of the fiscal year, which is Sept. 30, 2022, according to the statement quoted in the news outlet," PGJ reports.

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Conversation Starters

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