by sylviamunson

What Can I Say?

It’s not often that I run out of things to write about.  Actually – that has never happened.  The situation that I’m in right now is that there are so many things that need to be written about that I find myself stuck – unable to make a choice and run with it.

I could spend days on the upcoming changes from Order 809.  It is potentially the most exciting set of changes that I have seen out of FERC in quite a few years.  If we don’t do our job well on this one, they could be minimal, boring changes. But I am hoping and praying that we do our job well and make some changes that positively impact our industry and our customers.

I could spend days writing about technology and the challenges that we face when met with such wonderful opportunities in technology.

I could spend days on the details of the business processes in natural gas.  I learn more every day and am regularly surprised at the new ways that companies find to do business in such an ever-changing marketplace.

I love hearing from you.  I have learned through three different people this last week that my questions to you put you in a difficult position. Often you cannot provide a response to my postings because it would be seen as a company position and you cannot afford to make that statement or, more likely, you are not permitted to make that statement. Don’t hesitate to pick up the phone and call me!  Don’t hesitate to send me an email.  I can use the information, if appropriate, by stating that “A friend told me,” or some other vague reference that points no fingers.  I promise that I won’t say “A friend that works in building X for company Y in the Z department told me…”

Sylvia

by sylviamunson

Choose to be Creative – 6 Ideas for Consolidating the Confirmations Process in Natural Gas

FERC Order 809 occupies a large share of the time I allot to “what’s next” thinking.  There are so many opportunities inside what the FERC has assigned the industry in Order 809.

Let’s put our thinking caps on and get creative!

Confirmations

In Order 809 the FERC asked us to “. . . explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary.”  The discussion here is the reference to submittal of electronic confirmations.  There are some pipelines in the gas industry today that have made great progress in implementation of electronic confirmations through EDI. But there are others who have not done any electronic confirmations and, generally, electronic confirmations are executed between interstate pipelines.

So what can we do?

1 – Is there an opportunity for XML to become the standard for confirmations so that it is less expensive to implement and more web-enabled?

2 – Do we need confirmation-clearing companies such as those used in trading?

3 – Do these streamlined confirmations need to cover the entire natural gas supply chain or do they only need to apply to deliveries to electric generation and their suppliers? Do electric generation suppliers only need to confirm upstream to the nearest point of on-demand supply, such as storage, park-and-loan, etc.?

4 – Is there a new on-demand service offering that would provide a service to supplant streamlined confirmations?

5 – Are there new confirmation services that can be offered to expedite the process while still providing reliable delivery?

6 – Should electric generators be allowed to submit hourly nominations and, consequently, incur hourly imbalances to minimize the number of intraday confirmations?

On September 17th the FERC issued an Order on Rehearing (Docket No. RM14-2-001) where they stated “…the Commission requests that the natural gas and electric industries, through NAESB, begin considering the development of standards related to faster, computerized scheduling and file such standards or a report on the development of such standards with the Commission by October 17, 2016.” This gives us a deadline to work toward.  Deadlines are good.  It also give us a lot of time to get the job done.  So let’s start thinking about this assignment.

by sylviamunson

Where do you Network? Is your net working for you?

It is important to network in natural gas.  Is your net working?

Why is it important? Three reasons immediately come to mind.

1 – To learn more about the job that you do. If you are a scheduler, accountant, contract analyst – it doesn’t matter.  Other people in your same position in other companies have something you can learn from.  They are dealing with the same counterparties. They are dealing with the same challenges.  Share the knowledge, share the problems and come up with smarter solutions!

2 – To learn more about the business you’re in.  There is much more to the business than your job.  Your job is a vertical position in the company – a slice of the business process.  Networking gives you the opportunity to learn what other positions do and how the holistic business process operates.  The more you know about the entire business process, the more effective you can be in your job.

3 – To become a part of the solution.  Things are always changing in the energy industry because of technology, market shifts, government regulations and IT solutions.  If you network, you can see changes that are coming and prepare for them rather than react to them.  This is when you become a part of the solution.

In Natural Gas, the FERC has asked NAESB to look at the options for scheduling gas on a more continuous basis.  NAESB will pick up that subject in early 2016 to explore the solutions.  By networking, we can get ahead of the curve, find out what each other is thinking in regard to possibilities in the business process and possibilities with technology.  We can know what the possible solutions are before we enter into those negotiations and we can know what the pain points are that we need to avoid.

Where do you network?  This week, I’ve been at LDC Forums – MidContinent in Chicago with OpenLink.  OpenLink brought me to the Forums to promote my new book – Contents Under Pressure. These folks are great at networking!  They set aside time specifically for networking and create networking venues. They hold multiple LDC Forums throughout the year in different locations in North America.  Where are the places that you network?  Share them so that they can grow and become more effective.  I’d love to get your input.

by sylviamunson

Fun with FERC Order 809 continued – or – “Continuous and Contiguous Scheduling”

We have an interesting challenge ahead of us. One of the take-aways of FERC Order 809 is the requirement for the North American Energy Standards Board (NAESB) to look at and consider ways to make natural gas pipeline scheduling faster and closer to real time. Electric generators have made it clear that they need more flexibility with scheduling as they move more electric generation to a natural gas dependency.

This is not a new idea. It has been tossed about more than once before Order 809. One of the very first principles written by NAESB in GISB Version 1.0 in the mid-1990’s was Principle 1.1.2 which states “There should be a standard for the nominations and confirmations process. Agreement notwithstanding, it is recognized that this is an interim step to continuous and contiguous scheduling.”    (Copyright North American Energy Standards Board, NAESB Version 3.0 published 2014)

NAESB quickly, in Version 1.0, created the standardized Nominations and Confirmations processes including a few touches on the scheduling process in that mix.  A great step was made when NAESB added the Intraday Cycles and now, via NAESB 3.0 and Order 809, there is an additional Intraday Cycle giving shippers a total of 5 nomination opportunities in the day-ahead and day-of scheduling process.

And that’s not all.

Some pipelines have already implemented multiple scheduling cycles throughout the day that are in addition to the NAESB cycles.  A few pipelines have gone so far as to create hourly cycles. But without a consistent solution, the ‘contiguous’ side of scheduling becomes difficult.

Not all pipelines have gone beyond the standard cycles. So, what do we do?  Are we ready for that ‘Continuous and Contiguous’ process that we considered so long ago?

I believe we are. I believe that it will require some serious paradigm-shift-type thinking to make it happen.

The actual excerpt from Order 809 is below, from the Commission request, and as noted in paragraph 107:

However, the use of computerized scheduling would appear to provide an opportunity for faster and more frequent scheduling of intraday nominations for those shippers and their confirming parties willing to commit to scheduling electronically. We request that gas and electric industries, through NAESB, explore the potential for faster, computerized scheduling when shippers and confirming parties all submit electronic nominations and confirmations, including a streamlined confirmation process if necessary. Providing such an option would enable those entities that need greater scheduling flexibility to have their requests processed expeditiously.

What are the opportunities here?

  • If we converted the nomination and confirmation processes to XML based transactions and generated the confirmation request straight from the requested nomination then we could have more immediate communication and create that contiguous chain.
  • If we kept our traditional ‘Timely’ Scheduling cycle, possibly even the ‘Evening’ cycle and then, after that, opened the process to a first come, first serve processing with a quick turnaround, then we could eliminate the interim cycles and provide that continuous service.
  • We would still need a no-bump cutoff where IT shippers could count on their gas to flow. Possibly at the time of the current cutoff already agreed to in NAESB.

These ideas require major technology investments. These are just a few ideas. I have others, but I’d like to hear from other people first.

The NAESB Board has voted to make this aspect of Order 809 a primary topic in 2016.  As an industry, we need problem solvers to step up and create straw man solutions before those NAESB meetings begin.  Let’s get the discussion started.

by sylviamunson

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
by sylviamunson

The Deep, Deep Details – Transaction Types

Do I need to apologize first for this post?  This post gets deep in the weeds of data interaction on the nomination transaction.  But somewhere, somehow, someone has to get down in the weeds to explain why people keep tripping over transaction types.  It has to be said! So here it comes.

Transaction Types are data values on nominations that indicate the shipper’s usage for the quantity that is being requested.  That’s Sylvia’s definition and it assumes you know what a nomination is and who is a shipper.

The standard default transaction type in nominations is ’01 – Current Business’, meaning that this transaction uses the general terms of the contract.  There are over 100 transaction types available in the North American Energy Standards Board (NAESB) Nomination dataset, but a single pipeline will usually support only 5-10 of those types.

Okay – that’s easy – what’s the big deal?  There are, actually, two big deals.  The first is that the transaction type can occur on each nomination in each model type and this opens the door for confusion and varied interpretations.  The second is that there are three different transaction types – Transaction Type, Upstream Transaction Type and Downstream Transaction Type – and people tend to make assumptions regarding their meaning.

The first issue:

A pathed nomination uses one nomination line item to transact business and, therefore, one transaction type.  Easy.

A non-pathed nomination uses two nomination line items to transact business and, therefore, two transaction types.  So we need to have rules in place on what transaction types are used in which situation and how they are balanced.

Then we get to the pathed non-threaded nomination and see that it uses three nomination line items to transact business and three transaction types.  Now things are starting to look complicated.

Let’s look at a few of the most commonly referenced transaction types.  These would be the ’03 – Imbalance Payback from TSP’ and ’04 – Imbalance Payback to TSP’.  Note that TSP in this case stands for Transportation Service Provider.

If you are submitting a pathed nomination and want to use ‘03’ to receive 500 DTH of gas back from the TSP then you’ll submit a nomination with zero as the receipt quantity and 500 as the delivery quantity.  Clear and easy.

If you are submitting a non-pathed nomination then you won’t need to enter an upstream nomination but you’ll enter a downstream nomination with ‘03’ transaction type and 500 DTH as the quantity.  In this case the payback is coming from the pipeline’s linepack volume and there is no need for a receipt type nomination to balance the transaction.  Still clear and easy.

So what happens if you are submitting a pathed non-threaded nomination?  My first choice would be for you to enter a downstream non-pathed nomination with ‘03’ as the transaction type and the quantity of 500 DTH on the downstream non-pathed nomination.  The corresponding pathed nomination and the upstream non-pathed nomination would be with ’01 – Current business’ as the transaction type and would contain either zero or the quantity that needs to be transported.  This seems pretty clean because the shipper is only telling the pipeline where the payback gas needs to be taken off the pipeline, without association to any transportation or supply of gas.  The second choice that I have seen in implementations is to create, essentially, a whole path of gas for this ‘03’ transaction type.  In this implementation, the shipper would create an upstream non-pathed nomination with a quantity of zero, a pathed nomination with a receipt quantity of zero and a delivery quantity of 500, and a third nomination as the downstream non-pathed with a quantity of 500.  All three of these nominations would have the transaction type of ‘03’.  This second choice is technically correct and do-able, but it puts a lot of extra work on the shipper and unnecessarily ties the payback transaction to a path of gas that is not needed.

There are other transaction types which cause these same scenarios, but NAESB and most pipelines do not give clear instructions on how they are used.  This leaves room for interpretation – a dangerous game.  Interpretation results in different pipelines solving the same problem in different ways and  different shippers trying solutions that the pipeline doesn’t expect.  This makes it hard for everyone involved to get the results they expect.

The second issue:

There are three (3!) different transaction types available on the model types.  For a long, long time there was only one transaction type and it was called Transaction Type.  As NAESB standards progressed, pipelines asked for an Upstream Transaction Type and Downstream Transaction Type to be added for the confirmations process.  The Upstream and Downstream Transaction Types, if you look up the NAESB definition, do NOT refer to the business being conducted on the current pipeline. The Upstream Transaction Type refers to the transaction type on the pipeline Upstream of the current pipeline. The Downstream Transaction Type refers to the transaction type on the pipeline Downstream of the current pipeline.  Interestingly, people look at the name and think that the Upstream Transaction Type must go on the Upstream Nomination in the Non-Pathed and Pathed Non-Threaded Model types but this just isn’t so.  The Upstream Transaction Type can go on the Pathed or Non-Pathed Model but NAESB clearly states that it is referring to the transaction type of the nomination on the upstream pipeline.  All of the same logic/rules apply to the Downstream Transaction Type, of course.  And, the Upstream and Downstream Transaction Types do not exist on the Pathed Non-Threaded Model Type at all!

Clearly looking at the definition of data elements is essential before assuming their meaning or intent because the name is not always the only indicator of the purpose.  Nominations are complex transactions.

by sylviamunson

Fun with FERC Order 809 or “How to Put Two Shippers on One Contract” . . .

The Federal Energy Regulatory Commission (FERC) recently issued Order 809 for interstate pipelines. One of the components of the order was for pipelines to support the ability for a Firm transportation contract to have multiple shippers.  The good news is that the pipeline only has to support this ability IF shippers request the service.  The bad news is that the pipeline only has 60 days to implement the service once it is asked for.  This means that the pipeline has to be prepared to offer the service because I don’t know of many pipelines who can implement such a change in just 60 days.

So why on earth would you need two shippers in a contract?  I can imagine several scenarios where this could be advantageous.  For instance, if a shipper needs reliable firm service on an as-needed basis and can find another shipper, such as a marketer, to utilize the un-used firm.  The would give the first shipper the reliability that they need and give them an out for when that service is not needed without having to enter the Capacity Release race on a regular basis.  Another example may be where a shipper needs seasonal firm capacity but the pipeline doesn’t offer a program that meets their specific needs. In this case, the shipper could match up with another shipper that can handle the off-peak quantities and share the transportation obligation. There may even be credit advantages, though I may be stretching my imagination too far on that one.

So what does the FERC have to say about this?  In Order 809, there were very few specifics.  There were references to a number of pipelines already offering this capability and, via that reference, the FERC decided that the service requirement only applies to Firm transportation and implied that there would be an agent involved to manage the contractual relationship and pipeline interaction.

A pipeline could implement such that each shipper had nomination rights.  The pipeline could implement such that the agent is mandatory and the agent manages the different shippers.  In the example pipelines that I researched, it appeared that there was always an agent relationship and the agent was responsible for managing the transactions for the shippers. These pipelines implemented this service prior to Order 809.

Again, the FERC was silent on nominations, billing, quantity rights, and location rights in Order 809.  It did say that the financial responsibility was with both parties.  So, like Capacity Release, if the one party fails to perform, the second party is financially responsible.

If the pipeline implements this in the easiest way, with an agent, then the transaction datasets would be unaffected.  The only impact will be to be able to add two shippers and their separate terms onto one contract and to be able to post those separate terms in the Transactional Reporting requirements.

We have 75 days from the FERC issuance of Order 809 and then 60 days after a shipper issues a request for such a service.  The worst case scenario is that a pipeline would have to implement this on June 14th, 2015 – 75 days after Order 809 was issued. The best case is any 60 day period after June 14th.

Is this something where shippers can find value? Does it help producer services, electric generators or agents?  It will be interesting to see the filings for this requirement, in response to Order 809, and to see how many shippers utilize this offering.

by sylviamunson

Why compliance matters to non-regulated entities

I often hear people comment that compliance issues don’t apply to them because they are not a FERC-regulated company.  If you are involved in transportation at any point in the natural gas business then compliance issues matter to you.

You can see the reason when you refer to the old adage that ‘it all rolls downhill’ but there is more to it than that.

Look at some of the basic FERC regulations.

The Gas Day.  NAESB, hence FERC, says that the Gas Day is from 9:00 am – 9:00 AM Central Time for interstate pipelines.  If you are transporting on an interstate pipeline, you must work within this timeline.  What about if you are delivering onto this pipeline as an upstream interstate pipeline or a midstream operator? Then you must work within this timeline.  What about if you are an LDC or Utility receiving from the interstate? Same story – you must use the timeline.  Now, if you have to use the timeline to put gas onto or take gas off of the interstate, guess what? It’s best if you run your own operations on that timeline! So as a midstream operator or an LDC, the easiest answer is for you to match the gas day of the interstate that you connect with.

This same logic applies to the nomination cycles.  Your business may not need to use all of the nomination cycles, but if you interconnect to an interstate or nominate on an interstate then you have to comply with those cycles in some manner to confirm your gas. You may be able to run your business such that you only have one official cycle, such as the Timely cycle, but you still have to be aware of and confirm on the other cycles.

As a midstream operator, you may not need all of the upstream party and contract information because you know where the gas is coming from in your gathering system, but you will need the downstream party and contract information to be collected with nominations so that it can be provided in the confirmation process.

As an LDC, you may not need the downstream party and contract information because you know where the gas is going in your distribution system, but you will need the upstream side of the information for support of confirmations on your upstream interconnects.

And then there is customer service.  Customers who nominate gas on your system are often the same customers transacting with interstate pipelines.  The more that you use the same terms, deadlines, and processes, the easier the communication will be with your customers.

I believe that there is an opportunity in the NAESB process for nomination model types to be defined that are specific to the needs of the midstream and LDC businesses.  The current model types are close to what these business lines need, but they require too much information compared to the true business model of the upstream.  If a model type existed that supported gathering from many wells without including upstream information but required the interconnect documentation on the downstream side, it would be a golden tool.  If a model type existed that supported the distribution side of the business without all of the unused downstream information but required the corresponding upstream interconnect documentation, it could ease the burden of some of the transactions.

But it takes someone to lead the charge.