Infrastructure

Mississippi’s Strong Natural Gas Infrastructure

Mississippi has for decades been a major natural gas player, with some production but with an abundance of pipelines and geologic storage capacity. In recent years, Mississippi actually has more nat gas flowing both into and out of the state than any other state. As we saw with extreme temperatures last winter, the ability to transport and store nat gas is critical to meeting demand in peak demand periods. The NE US experienced significant supply issues, which corresponded with absurdly high prices, while the South was able to meet its demand because of its surplus infrastructure and storage capacity. You only have to compare natural gas prices in Mississippi and New York last January to see the difference. From the supply side, while much focus is often on production, storage and deliverability are equally as important.

Below you will find a detailed map of Mississippi’s NG Infrastructure.

Natural_Gas Asset Map

How the State Fuels Up

Energy, mostly in liquid fuel forms, propels the transportation economy.

As with electric power, every family and business depends on transportation fuels daily. Today, more than 5 billion gallons of fuel are used each year in the Mississippi economy. Gasoline  makes up 85% of this total, and diesel – both on-road and off-road – makes up 14%. Aviation and jet fuel account for the remaining 1%.

The supply system consists of a network of petroleum refineries, interstate pipelines, fuel terminals, distributors, and retail outlets. The map below shows the major transportation fuel distribution assets in the state.

Fuel Asset Map w CO2

Electric Power Fuel Cost Comparison

Over the past twenty years, natural gas power generation has gained a large share of power generation capacity in the U.S. Even before abundant new supply coming from the shale revolution of the past several years, ease of permitting and the low plant construction costs compared to coal and nuclear resulted in 73% of all new electric generating capacity being natural gas-fired plants.

Electric power infrastructure may be the single most important necessity to life as we know it in the U.S. Nearly everything in our economy relies on electricity, so reliability and stability in electric power are critical in planning. Because of the long life of electric power assets, full life-cycle costs (construction costs plus fuel and operating costs) must be considered in planning along with maintaining diversity in fuel sources in the interest of reliability and stability.

Because fuel costs make up a significant portion of electricity rates, it’s important as a factor when building assets with 50 year operating lives. The graphs below provide comparisons in fuel costs over the past few years.

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Atmos Announces Industrial Initiative

Energy infrastructure is a key strength of the U.S. economy and a critical driver of industrial project siting. Mississippi, with over 10,000 miles of natural gas transmission pipeline, has abundant supply potential fitting for industrial growth. Forward focus on energy infrastructure enhancements to further increase Mississippi’s energy strengths will serve the state well in the highly competitive economic development contest among states.

Last week, Atmos Energy announced it will begin construction of 23 miles of natural gas pipelines to three industrial parks in east Mississippi next year.

The project is expected to be completed in three phases over six years without using any public funds.

David Gates, president of Atmos Energy and 2014 Chairman of the MS Energy Institute’s Board of Directors, said “When you’re going after these big and even medium size industrial prospects, they want everything. They want you to bring the site to them. They want a package, and this is part of that package,”

“It makes us now a player not just for heating a building, but for the manufacturing process, and natural gas used as an energy source. In the past where we may have been immediately eliminated because we didn’t have gas, now we will receive consideration by prospective companies.”

This initiative demonstrates the cooperation of Mississippi regulators, local leades, and business leaders to attract industrial investment and jobs into the state.

Parkway Pipeline in Service

Construction of the approximately 141-mile, 16-inch diameter Parkway Pipeline, a 50-50 joint venture between Kinder Morgan and Valero, is complete and is now transporting refined petroleum products from refineries in Norco, La., to an existing petroleum transportation hub in Collins, Miss., owned by Plantation Pipe Line Company. The project is the newest addition to Mississippi’s extensive pipeline network.

U.S. Too Slow on Large Infrastructure Projects

The Keystone XL Pipeline project unfortunately remains a symbol of the difficulty of building large infrastructure projects in America today (http://tinyurl.com/abbpzco). This is not specific to energy projects, but rational, growth-minded thinking suggests projects that encourage investment, create jobs, promote expansion, and increase U.S. competiveness should get special attention especially when millions are unemployed. Projects like power plants, pipelines, ports, and highways improve the efficiency of commerce and help our economy. To unnecessarily drag feet on major investments hurts U.S. competitiveness. While thorough procedures and reviews are necessary with complex projects, political and other senseless regulatory barriers should be prohibited, according to a defined process

Diversity, Stability Key to State’s Energy Future

The following opinion article was written by Patrick Sullivan and published in the 2/9/13 edition of the Clarion Ledger.

One year ago, I wrote about the difficulty of building large infrastructure projects and developing energy in America today. At the time, the Keystone Pipeline project, which would supply our country with more oil, as well as offshore energy expansion in Mississippi waters, was the subject of debate.

If we want our economy to grow, infrastructure expansion and energy development are absolutely necessary, and many of these projects like power plants, ports, pipelines, sewer systems and highways are rather large and capital-intensive. They are projects that require a great deal of coordination and broad support from the people and their elected officials. That is why it is so discouraging to see organizations with no real answers for energy in our state attempt to block important projects, thereby hurting our competitiveness, raising expenses and potentially costing jobs. Mississippi Power’s lignite gasification electric power plant in Kemper County is the latest target of this build-nothing-anywhere movement in America.

For those confused by the arguments for or against this project, looking at a previous example may help. In the mid-1970s, Entergy set out with plans to construct a large-scale nuclear power plant at Grand Gulf in Claiborne County. The debate then was quite similar to today’s debate on the Kemper County plant. Opponents said the Grand Gulf plant would cost too much, while proponents said it was the right long-term decision. We now have the benefit of 30 years of experience to judge the performance of that project. The opponents were wrong, just as they are today.

Were the initial capital costs for construction high, requiring rate increases in the 1980s? Of course, but the guiding policy principle then is still the same 30 years later. That is, in electric power generation, avoiding over-reliance on one energy resource is too risky. It is better to diversify.

The capital cost of power generation projects is high, and that cost of capital is critically important to Mississippi ratepayers. Therefore, when investors in energy projects are able to look at Mississippi as a more predictable and safer place to invest, rates will be lower and large projects will cost Mississippi energy consumers less.

Having diversity in energy and producing more of our own energy should be major guiding policy principles. It makes sense both financially and from an energy security perspective. Innovative financing and, importantly, certainty to encourage investment are key components to keeping rates down when we have to build a new power plant. Experts and public officials agree that a new base load power plant is needed by 2014.

Getting down to it, we have three main fuel options for base load power production today — natural gas, nuclear and coal. Natural gas is abundantly available and favorably priced, and natural gas power plants are relatively inexpensive. However, about 65 percent of electricity in Mississippi is made with natural gas, meaning that the future for Mississippi energy consumers is already heavily leveraged on the future of natural gas prices, and the price of fuel makes up the biggest part of power bills. Both coal and nuclear are considerably more costly during construction but have lower and more stable fuel costs over the decades of operations. A healthy mix of all three energy sources is in the best interest of reliability and risk management, and that’s exactly what a coal gasification plant helps achieve. By approving the Kemper County project, the Mississippi Public Service Commission has taken an important step toward long-term energy security for our state.

Shedding Light on the Strengths and Weaknesses of Mississippi’s Energy Economy

As Mississippi considers energy as an area of focus for economic development, we must understand Mississippi’s energy strengths and weaknesses in order to leverage our strengths and fill gaps in critical areas of weakness. Below you will find examples of one strength and one weakness.

In today’s cautiously expanding economy, the shale revolution has been a very bright spot in the economy, maybe the only bright spot. Oil and natural gas production from shale formations has truly been a game changer for the U.S. economy and without it over the past several years, who knows where the economy would be today? Possibly back in recession. One area of strength for Mississippi is the abundance of interstate natural gas pipelines passing through the state. Why is this a strength? Because it gives our state the ability to access enormous natural gas supplies needed for manufacturing. The shale revolution and abundant U.S. energy supply provides the opportunity to see a resurgence in manufacturing, especially energy intensive manufacturing. Hopefully, our leaders in Washington, D.C. will embrace this and not waste away the opportunity with onerous regulations and taxes that send jobs to our global competitors. Mississippi policy and development efforts should consider how to leverage our natural gas assets for manufacturing expansion.

As with most any area of the economy – telecommunications, healthcare, agriculture – technology in energy continues to change rapidly, offering more and better options to the marketplace. Technology development in energy is focusing not only on how we get energy but also on how we use it. The sheer size of the market drives technology development for those looking to capture a small share of an economic necessity. In 2010 dollars, the size of the world energy economy was $6.5 trillion, so capturing 0.1% of the market is a $6.5 billion proposition. The point is, with global demand ever climbing and a competitive economy always looking for better solutions and lower costs, technology development in energy is very active. The problem is, Mississippi has a poor record of attracting private R and D capital, and thus, has poor metrics in recent years for technology commercialization. Publicly funded research at universities has resulted in good public research capacity, but private R and D activity is quite low. If Mississippi is to play a significant role in tech-based economic development, the ability to attract private R and D and commercialization capital must be considered.

Federal Inconsistency on Permitting Efficiency

A Wall Street Journal op-ed piece highlights an action that could be positive for energy and infrastructure developments across the country – streamlining the National Environmental Policy Act (NEPA). The problem is, this kind of attention to job creating, energy supply projects are needed over a large number of projects, not the select favorites of the Administration. When created, NEPA was well intended and purposeful, but through time, the inconsistency and contrast of federal regulations governing NEPA has resulted in an extremely inefficient process slowing the pace at which projects can develop in the U.S and hurting our country’s competitiveness.

Entergy Mississippi Seeks to Join MISO

Entergy Mississippi is proposing to the Mississippi Public Service Commission (PSC) to join the regional transmission organization, MISO. MISO’s network currently serves 11 Midwest states and part of Canada. The addition of Entergy’s transmission system would extend the vast transmission system to the Gulf of Mexico. The proposal to transfer functional control of its transmission assets will allow Entergy access to a much larger system to realize greater economies of scale. A recent report conducted by PSC consultants concludes “substantial prospective net economic benefits to Mississippi.”