LDCs Really Are Different!

My career has been heavily pipeline transportation focused – hence the book on pipeline transportation! In the last several years I have been working more with Local Distribution Companies (LDCs). While I worked in the pipeline world, I had always considered LDCs as a flavor of pipeline, just like intrastate pipelines, midstream, and interstates are pipelines.

Most LDC’s accept nominations! Doesn’t that make them a pipeline?  Not really!!

All natural-gas LDCs are pipelines in the literal sense. They are physical pipelines in the ground that are used to distribute natural gas. Some LDCs come closer to acting like an interstate or intrastate pipeline because of deregulation – in the instances where they are required to support transportation on behalf of others – such as marketers and shippers.

Acting as a pipeline is only one of the many services that LDCs perform. There are a host of others.

This is the first of a series of posts on LDCs. I thought I understood them. I now know that I have a lot to learn from them.

NAESB? Nahhhzbe? Nazzz-bee? Nayz-bee?

If a telemarketer calls me and they call me Ms. Mooon-son or Ms. Mun-ster, then I know they definitely don’t know me!!

The same thing happens with NAESB!

The ways that people pronounce “NAESB” are hilarious! NAESB, in case you don’t know, stands for the North American Energy Standards Board. Anyone that actively participates in the organization pronounces the term as Nayz-bee – with a long A. If you want to sound like an insider, say it the way the insiders do.  Try it out. . . . Nayz-bee – with the long A sound. Now you can sound like an insider, too.

If you want to be a real insider, check out the web page at NAESB.org and consider joining the organization. There is a lot to be learned from then.

The Aggravation of Nomination Aggregation in the Pathed Non-threaded Nomination Model

Four-score and seven years ago – okay, really – only one score of years ago – when the Pathed Non-threaded (PNT) Nomination Model was created it was an outlier model type used by one company.  Today that model type is used by many companies and is becoming the source of a lot of interpretation.

There are problems with the way the model type is being implemented today and there are two factors contributing to this problem. We’ll look at them individually then pull them back together to find a solution.

Factor 1:

The Service Requester Contract (SrK) is mandatory on the upstream and downstream nominations of the PNT model and it should not be. Kinder Morgan, Boardwalk and Iroquois have submitted a request to have this changed.

When the model type was created, for NGPL, the NGPL representative, Mike Schisler, explained that the shipper contract (NAESB term = Service Requester Contract) had no meaning on the upstream and downstream nominations of the PNT model.  But the data set designers insisted that it remain. The compromise was that NGPL would fill that field with the service requester’s DUNS number.  That solution has worked for NGPL for many years even though many of us in the industry as well as more recent implementers did not understand the real impact of the decision. The solution implemented by other pipelines varies, is inconsistent, and provides for unintended inconsistencies.

Note that I do not believe there is any documentation in the NAESB standards or implementation guides that specifically says the SrK should be filled with the service requester’s DUNS number.  This was only an “understanding” – which adds an additional level of confusion and was not conveyed to other parties attempting to implement the model in the same way.

Factor 2:

The Service Requester (SR) is defined as the shipper or their agent.

There is one field for a Service Requester on a nomination.  My understanding has been that if the shipper is submitting their own nominations then they will provide their own identifier as the service requester.  If the agent is submitting nominations for a shipper then the agent identifier will be used in the service requester field and the service requester contract will be used to distinguish shipper rights for that agent.

Basic Math:

When we add these two factors together in the model type, you would think that we’d get 3 simple variations since both are mandatory.  SrK used + SR Agent, SrK used + SR Shipper, SrK DUNS + SR.  Not so!  What we’ve seen in the industry is that we have 4 (rumor is that there may be a 5th) variations of how pipelines use these fields to define nominations for the upstream and downstream nominations of the PNT model.

Pipeline Scenario 1:

SR = Agent, SrK = agent DUNS

Result:

I have to admit – this is the way that I thought that the PNT model should work when an agent was engaged.  I did not initially recognize the implication of this scenario.  If I, idealistically, apply the definition of the SR and then use the rule of putting the SR’s DUNS into the SrK field then the result is this scenario.

However – if you consider a group of upstream nominations at a receipt location where all of them are designated for the agent, then how does the pipeline determine which transactions belong to which shipper and how is shipper-must-have-title rule being followed?  This would be a plausible solution if the agent has asset-manager rights but not for a traditional shipper agent.  This forces the agent into what I would call an agent-level aggregation where all of the agent’s transactions at a location are aggregated under that agent and not distinguishable by shipper.

Pipeline Scenario 2:

SR = Agent or Shipper, SrK = shipper DUNS

Result:

This scenario works the way that I believe the model type was originally intended but it has to abuse the data elements in order to make the model type work.  In this scenario, all of the quantities for one shipper are aggregated at a location so that they can then be distributed among the threaded, contract-specific nominations on the other side of that same location.

If the shipper is the SR then this scenario is clean and easy, though the pipeline is still forced to repeat the shipper DUNS in the SrK field.  When the agent is the SR is where the information becomes muddy and where it becomes obvious that an additional data element, to distinguish the agent from the shipper, is necessary.

Some pipelines have solved this scenario by using the EDI enveloping to identify the agent and, then, identifying the shipper in the SR field.  This works, but it is another forced use of the data elements in a way they were not intended to be used.

Pipeline Scenario 3:

SR = Agent or shipper, SrK = shipper contract

Result:

If the pipeline has chosen to use the shipper contract on the upstream and downstream nominations then the issue of whether the party identified in the SR field is nullified.  The level of nomination aggregation has been taken to a lower, contract level, and the contract for aggregation has been identified.  This contract-level aggregation does not provide as much flexibility for the shipper, but all of the data needed to accomplish the task is included.

However, even though the SrK solves the problem, the solution should be consistent across all of the nomination models and model usages.

Pipeline Scenario 4:

Any of the above plus Threaded Nomination association

Result:

I am including this scenario because I have seen several companies implement the PNT model in this way even though the data in the transaction does not support this implementation! In this scenario, the upstream and downstream nominations are directly tied to a threaded nomination.  This is essentially a pathed-nomination in most examples where a single upstream is tied to a single threaded nomination and a single downstream, but the implementation does allow for two or more upstream or downstream nominations to be tied to that middle threaded nomination.  There is no aggregation at the contract or shipper level in this scenario because the upstream and downstream nominations are tied to an individual threaded nomination.

Again – the data in the dataset does not support this implementation.  The implementer has to create an artificial connection to tie the various nominations together. The artificial solutions that I have seen are through tracking id’s, package id’s or through the use of a pipeline-managed database internal id that is not maintained by the shipper.  This scenario would be impossible to implement using EDI in the existing dataset.

So where does this leave us?

We need a solution so that shippers know what to expect. We need a solution so that the implementations of the model type can be clean and consistent. We need to add and define the data in the dataset so that it fully supports the model type. We can continue to perpetuate some of our incorrect decisions, but, ultimately that does not buy any efficiency, it allows us to continue with bandaids as solutions.

Here are my suggestions:

1              Split the current “Service Requester” data element into two fields:

Service Holder or Shipper and

Agent

Service Holder/Shipper could either be mandatory in all cases, or conditional with a condition that it is mandatory except where a pipeline supports agent-level aggregation and the nominating party has provided an Agent DUNS. I would prefer mandatory and let the pipeline implementation determine how the shipper information is used.

Agent would be conditional – either an agent or service holder must always be provided and Agent is required if the party submitting the nomination is different than the party holding the service contract.

2              As Kinder Morgan, Boardwalk and Iroquois have requested, make the service requester contract a business conditional data element on the upstream and downstream nominations of the PNT model.  It should remain mandatory for all other cases.  It should only be used on the PNT model’s upstream and downstream nominations if the pipeline supports contract level aggregation. Otherwise, it is not used.

3              Make it clear in the nomination implementation guides that there are three levels of aggregation and that a pipeline will generally only support one of those levels.  The three levels are Agent-level aggregation (give an example), Shipper level aggregation (give an example) and Contract level aggregation (give an example).  If parties desire the dataset support additional levels of aggregation then those parties need to submit a request to NAESB for the requirements of that aggregation level to be supported.

 

 

 

Gas Happens

Gas Happens

I’ve wanted to say this for a long time.  For those of you who know me, you’ve probably heard me say this more than once.  We need to change the way we think of Natural Gas.

Natural Gas is a Renewable Resource.

Natural Gas (Methane, CH4) is a byproduct of organic decomposition. Period. We have been taught that natural gas is a fossil fuel. That implies that it is coming from those decomposed dinosaurs that have been marinating in our soil for bazillions of years. And it is true – we have gotten a lot of gas from that source, but there are lots of other sources.

Today, we are tapping gas off of landfills, we are running wastewater treatment facilities off of the gas that the facility generates, and we are running farms off of cow poo.  Methane seems to be everywhere!  This is not new news, but we need to associate the fossil fuel with the bio fuel and group these into one awesome renewable resource.

Did you know that in India small farms have their own bio dome to put their animal and plant waste into and it generates enough methane to meet the needs of the home? It’s fascinating, though I’m sure my homeowner’s association would have fits if I tried putting one in my urban yard!  I’ve listed references on some of the India articles at the end of the document.

When I was a little girl, we lived in Florida on the edge of the swamp.  Take a step into a good mucky bit of swamp water and what do you get – nice big bubbles of swamp gas – aka Methane!    I don’t think we are close to replacing our drilling mindset but I do think that we should begin to look at where all of this gas comes from and how use it efficiently rather than letting so much of it dissipate into the atmosphere.

The forecasts for how many years of natural gas have been interesting to watch.  20 years ago, it was believed we had 175 TCF (Trillion Cubic Feet) of reserves in the ground.  Today that number is close to 350 TCF. I’ve heard that the reason that our forecasted reserves has grown so much is because of a) new discoveries and b) new technology that lets us produce more gas. But I think there is one more reason that our reserves are increasing and that is because our earth is still producing more Methane.

We need to harvest biogas as Natural Gas and create a mechanism to feed excess biogas back into the mainstream of gas distribution. Methane comes from our cows, from our decomposing pumpkins, from our wastewater treatment facilities, from our worm beds.  All of these sources of biogas are just as valuable as our dinosaurs, and I believe that we can find cheaper and easier ways to get the Methane we need through renewables that are here on the surface.

We admit that we are greedy consumers.  Can gas field production keep up with our new desires to use clean Natural Gas as the solution for all of our environmental woes?  I don’t think that is the right approach.  The right approach is to explore the additional sources of natural gas and create ways to inject those sources into the mainstream of consumption.

References:
Tal Lee Anderman, Of Cow Dung, Cook Stoves and Sustainability in Practice, http://blogs.ei.columbia.edu/2013/05/15/of-cow-dung-cook-stoves-and-sustainability-in-practice/
R N Bhaskar, Policy Watch: Nov 10, 2014, http://www.dnaindia.com/analysis/column-policy-watch-oh-shit-a-rs-150617-crore-business-2033671
Jo Lawbuary, HES, Biogas Technology in India: More than Gandhi's Dream?; https://www.ganesha.co.uk/Articles/Biogas%20Technology%20in%20India.htm

Source: U.S. Energy Information Administration, U.S. Crude Oil and Natural Gas Proved Reserves

Welcome

It seems like this first posting should explain why I’m writing a blog for Contents Under Pressure. I have worked in the natural gas industry for more than 30 years.  Out of that fabulous experience, I have just completed a book, titled “Contents Under Pressure – The Complete Guide to Natural Gas Transportation”. This is the book you have been waiting for and it will be available in early September.

But that’s not all.

In my work in the industry I get a lot of questions. Sometimes they make me dig deep into history and research to find the answer. Sometimes I know the answer off the top of my head.  And the fun questions make me look at the way I think about the business in a whole new way.

This blog is for those fun questions.

Here we will cover things that make you think (I hope) about the way you look at the business. It will cover super detailed explanations of really nit-picky issues that come up again and again. And we’ll will talk about what is going on in the industry that affects our business – market happenings, FERC rulings, and such that could impact or have already impacted our business.

I hope you enjoy it.  I love working in the natural gas industry because it is constantly changing through government rulings, market shifts and technology advances.  If you like change, natural gas is a great place to work.

Sign up to receive emails as they are posted.  Follow me! Pre-Order my book so that you’ll be ‘in the know’.  Provide comments and questions so that this can be as beneficial to you and your gas industry career as you need it to be.

Sylvia