Latest / Not Another Energy Podcast / The Story of Natural Gas: Global Powerhouse and Feel Good Delusions
Transcript
- Bethany Ruhe: Hello, hello, hello, and welcome to your new favorite show, not another energy podcast. I'm Bethany. Teresa Ringenbach: And I'm Teresa. Bethany Ruhe: And together we are Bloom Advisory Partners. Today we are going to be talking about natural gas. The natural gas global powerhouse, and also maybe some natural gas feel-good delusions, which are quite frankly my favorite kind of delusions. ⁓ in May, after more than 20 years, FERC made changes to its pipeline siding rules. Better late than never. ⁓ and the reaction was mixed to say the least, but it did get us thinking, not just about pipelines or regulations, but about the last 25 years of natural gas. Because if you really look at it, the story of natural gas, much like energy, is not just about energy, it's about markets, policy, unintended consequences, and those delusions that we tell ourselves. So Teresa, would you like to kick us off? Teresa Ringenbach: Yes. ⁓ just so everybody knows, I do like natural gas. So if you think you tuned in so that I could like just like shit on that industry, you're gonna be really disappointed. ⁓ so let's I know Bethany Ruhe: Thanks for getting that out of the way. Cause do you I think I think some people do tune in to be like, what's Teresa gonna rage on this week? Teresa Ringenbach: Yes. So let's rewind just a little bit and we're gonna go back to 2001. So after the Enron collapse, and I know everybody thinks of Enron with electricity and I don't know, crazy parties in that movie. ⁓ but after it collapsed, ⁓ n they did a lot with natural gas and natural gas got cheap, like really, really cheap. And for a very long time that became this new normal. regulators, nobody wanted to do anything different with natural gas. It's really, really cheap. Why touch it? Why fix what's not broken? Except that wasn't the case. Natural gas at that time was very, very susceptible to hurricanes. So all of your pricing if you were in the natural gas world came out of what was called the Henry Hub, which was located down in Louisiana. It was so anything that happened on the Gulf, weatherwise, impacted the price of natural gas. So with Hurricane Katrina, a devastating storm that nobody expected hit, we saw gas prices go from $2 $12. Bethany Ruhe: ⁓ my, that is quite the spike. Teresa Ringenbach: Yes, and it did this weird thing in the market initially, which was people had sort of locked in their contracts at two dollars and now gas is at twelve dollars and aren't I a genius? But then in that time frame, obviously contracts roll off and now people are contracting twelve dollar gas. So Bethany Ruhe: quite the sticker shock I'm sure for for many, many companies and people. Teresa Ringenbach: Yes, yes. So what we had was the situation now where we went from gas is so cheap, let's all use it, to gas is really expensive and we're all stuck with this high price. That led to the US government actually investing into LNG import facilities. And we actually started taking gas from overseas and other places. It it was not something that was really produced in the US. But then Bethany Ruhe: Dun dun ⁓ Teresa Ringenbach: Gas had a glow up, right? Bethany Ruhe: That's that's a sentence I never thought I would hear. But Teresa, tell us about this gas glow-up. Y the lingo, you're down. Teresa Ringenbach: I I have teenagers, I can speak the lingo. Fracking. Game changer. It I mean ⁓ before we even get into what it did to pricing, think about it what it did to entire towns. And I know everybody wants me to talk about the bad, but I'm actually gonna talk about the good. There were places in the United States that were so impoverished that people literally didn't even have electricity. And I know Bethany in Pennsylvania, there were towns like that for you guys too. Bethany Ruhe: Yes. Yep. And very familiar with it from where we sit too. Yeah. Yeah, yeah. I mean we're right at the Marcella show here, so I don't does it extend into where you Ohio? Okay. Okay. Bartlett, yeah. Teresa Ringenbach: ⁓ Utica is Ohio. Texas had the same thing. They had Eagleford. ⁓ there were parts of Canada that it ⁓ the same thing, really, really poor areas that suddenly had not just jobs, but I mean we're talking jobs that are like two hundred thousand dollars a year. ⁓ you know, I remember driving to southeastern Ohio and suddenly watching hotels Restaurants being built. I mean it was it it when I say glow up, I mean like it totally changed entire communities. Bethany Ruhe: Yeah, back in my when I worked for a PR agency, one of my clients was actually an Enron spin-off that was here do they actually made like a lot of the ⁓ hydraulic fluids for fracking. And ⁓ I also very clearly remember just driving around ⁓ all the signs for like land leases and you know, I mean it it and it does seem like it kinda happened pretty quickly too, right? I mean, obviously I'm thinking back many, many years, but you know, it did ⁓ I don't want to say overnight, but it definitely changed the landscape in a massive way. Teresa Ringenbach: It did, it did. And from a market and how natural gas was pricing perspective, it changed everything. So remember I I said that we had developed LNG import facilities? ⁓ we actually shifted those and I ⁓ at Direct we actually worked with Centrico, who was their parent at the time, to create an export facility. And that export facility sent Bethany Ruhe: Yes. Teresa Ringenbach: natural gas from the United States over to the UK. Interesting, right? Well do you know what that did to the European market and also the security of Europe? It completely changed everything. Bethany Ruhe: ⁓ 'cause you weren't reliant on maybe like a Russia or yeah. Teresa Ringenbach: Correct. So everybody was relying on Russia and Russia had a strong political influence across the European continent. Well when you are suddenly getting all of your natural gas from the US and you can run on it, people felt a little bit more emboldened to stand up to Russia. It was a ho it that though that shale play in the United States had global ripples beyond just the markets. Bethany Ruhe: That is crazy. I I genuinely and I I would argue you think about this stuff a lot more than I do, especially with with gas. But like when you say it like that, just the the implications that beyond just okay, now we have natural gas, you know, more cheaply here for us in the United States, but just the way that it impacts the globe. I mean, I I genuinely am blown away when you say that. Teresa Ringenbach: Yeah, it was crazy. And I I I mean, just working on some of the stuff, I didn't realize it until I started dealing with some of the the federal policy stuff and then actually went over to the UK and was listening to them talk about it. So for them, it wasn't just about having cheaper natural gas. It literally was about having more ⁓ national security in the UK. So Bethany Ruhe: Yeah. Yeah. That's amazing. Teresa Ringenbach: We talked a little bit about that, but the result of this was also there was a massive change to our infrastructure. So remember what I said, you could pretty much predict gas prices based on hurricanes. And there actually was a whole industry that traded around that. You would watch the weather and you know, based on where you saw the hurricane coming. I mean, Bethany Ruhe: Right. the the early predictive ⁓ marketing or predictive betting w started at gas. Teresa Ringenbach: ⁓ I mean it yes, yes. I ⁓ there were ⁓ companies and training desks that had meteorologists on staff. Bethany Ruhe: We had a meteorologist back at Direct. And he was very funny back in the day when Twitter wasn't cesspole. He was a very funny tweeter. I wish him well. I hope he's doing great. Teresa Ringenbach: Yes, yes we did. I remember meeting him. He was very interesting. But it it was one of those things where you know, ⁓ I I remember meeting some ⁓ younger kid that ⁓ you know my kids went to school with and his mom was like, He's really into the weather, what do you do with And I was like, ⁓ let me tell ya Bethany Ruhe: There's plenty of job opportunities out there. You can work at natural gas. Teresa Ringenbach: Yes, yes. She looked at me like I was crazy, but whatever. so this shale play led to us no longer pricing, we still use the Henry Hub for pricing, but it no longer became tied to what was happening in the Gulf. And in fact, it led to new pipelines being built across the US. Bethany Ruhe: ⁓ yes, because you don't have to worry about hurricanes in Ohio and Pennsylvania. Yes. Teresa Ringenbach: Yes. So back to the point about FERC and changing some of its stuff, you're really late FERC. ⁓ and those pipelines that w we're not gonna get into like some people didn't want them or where they were, but the reality of building those also meant that Bethany Ruhe: Right. Teresa Ringenbach: ⁓ when you pay for natural gas, you pay for your space in the pipeline. It's called capacity. And what was happening were those big pipelines coming out of the Gulf, people weren't using them as much. So they weren't making as much money, but they still needed to exist. And then you had new pipelines that were being built. Bethany Ruhe: Mm. Teresa Ringenbach: And then on top of that, because now everybody's using natural gas, all of those distribution utility pipelines that had been sort of neglected were now getting used more and more and more. But everybody, oops, forgot to maintain these things. So, and I, you know, I know what I've seen in Ohio, there was there was an entire town, Fairport Harbor, that blew up. You can look it up, guys. Bethany Ruhe: Mike. Teresa Ringenbach: They blew up an entire town. Pennsylvania had houses and parts of towns that were in I when I say blowout, I mean it was quite literally blowing things up. ⁓ Massachusetts, it was happening everywhere because regulators went from things are really cheap, this is gonna be forever, to things are really expensive, we have to keep costs as low as possible. So no investment in your distribution system to things are really cheap again, let's just hang out here. And everybody got so myopically Bethany Ruhe: Yeah. Teresa Ringenbach: Focused on trying to keep your bill in one spot, that they forgot to give the utilities money to invest in the infrastructure. Bethany Ruhe: I like nobody like raised this concern then. I mean or or did they not even realize that it was gonna be a problem? Like when when gas was ramping up. I mean, did it take a talent exploding for them to like oops, or do you think they knew and were just deliberately not investing? Like what where do you think that disconnection was? Teresa Ringenbach: I don't think I know because that was in a lot of these rate cases, they focused so much on the commodity price that they were not listening to these utilities telling them, I need more money to invest in my distribution system. And I know everybody wants to make the utilities the bad guy here and even you I know you guys listen to the podcast and you're like, what the hell happened to Teresa? Did she hit her head? Bethany Ruhe: Yeah. My god, she's saying something nice about utilities. Circle this day on your calendar. Teresa Ringenbach: But they did. They they all said it. The pipeline company, everybody said it. But the regulators, and not all of them, a lot of them did allow for investment, but their job is to put out press releases that say I kept the your your rates low. And not to put out a press release that said they went up. So yeah, that's how we got to where we were. Now, today it's a little bit different. ⁓ if you have a gas bill Bethany Ruhe: Right. Okay. Teresa Ringenbach: You pretty much can guarantee that you're gonna have like a customer charge on it that looks pretty hefty. ⁓ you know, $30, $40, and you're seeing that today because you're playing catch-up for all those bad regulatory decisions. So the next time you look at your bill and you see that charge that has nothing to do with how much you use, just remember, you probably don't want to get blown up either. Bethany Ruhe: Yeah, ⁓ yeah. And and I will I will gladly pay thirty dollars a month to not have my house blow up. Teresa Ringenbach: Yes, exactly. ⁓ I I think people f don't realize that, but okay, so we have cheap natural gas, fixing the infrastructure system, everything's rockin' and rollin', right? We have so much of it, we're sending it to Europe, we're changing the global economy, everything's fume roses. Bethany Ruhe: I feel like there's a I feel like there's a butt coming, Teresa. There was the carbon era. Teresa Ringenbach: The carbon era. So I labeled this one feel good blinders. ⁓ you know, y you you whatever you we put right in front of you makes you feel really good, but it's not really what's happening. So you had the state of New York who's who passed laws and said, no, we're not gonna do fracking. And it ⁓ fun fact, they actually do have a huge shell play in New York and said, no, we're not going to let anybody touch it. They Bethany Ruhe: Okay. Yeah. Yeah, like just don't look around. It's so New York. Teresa Ringenbach: Yes, they also passed these interesting ⁓ ordinance and things is in the city that said we're not gonna build out our gas infrastructure. So if you were in the city and you weren't already getting natural gas, you couldn't get any more. But there were all these crazy workarounds because technology and competitive markets always find a way, right? Bethany Ruhe: Ha ha Yes. Teresa Ringenbach: So there were companies that actually had compressed natural gas tankers. So think about, you know, that that thing for your grill or whatever, but put it on like the size of a semi-truck. And they retrofitted the buildings and they would haul them in and just like literally plug them into the building. So the buildings were still using natural gas because it was cheap, remember? Bethany Ruhe: Yeah. Teresa Ringenbach: So they were still using it, but everybody got to feel good. Cause in New York, we we don't frack. We don't use natural gas, right? Like feel-good blinders. Bethany Ruhe: We're just g we're just gonna have giant semi trucks driving around, not at all impacting our carbon footprint. Teresa Ringenbach: Yes, yes. The other thing that happened was you had states like California. Green, renewable, aren't we amazing? They went all in on electrification. So no more natural gas heat in your home. We're driving electric cars. Aren't we amazing? You know what the other thing they did, Bethany? They overbuilt natural gas generation plants to support all that electrification. Bethany Ruhe: Yes. What, Teresa? What? So it's all a facade. It's it's a the most Hollywood thing ever, right? So yes, you're you you're driving your electric car that got charged by a natural gas power plant. Love that from them. Teresa Ringenbach: Yeah. Yes, exactly. Yes. So in the end everybody was like, I'm all electric, I'm clean, I'm green, I'm carbon free and nobody really realized that natural gas was the thing that was holding that whole facade up. Bethany Ruhe: Well, so let me ask you this, because ⁓ in where I am right now, there's ⁓ Homer City, which is, and I think we've talked about this before, they are basically rebuilding an old coal plant into a natural gas fire plant, right? So there's still like I think an appetite to continue building out natural gas. And I know a lot of this is driven by the data centers, but you know, I mean where and I don't mean to derail you, but genuinely curious, like how much are we gonna stay? all in on natural gas, or do you think that that's gonna eventually fall back to the wayside? Teresa Ringenbach: ⁓ so two things. One is ⁓ just real quick, natural gas in the early two thousands was just a peaker plant. It was something 'cause they're they're fast to build, you can put ⁓ up pretty quickly, and the fuel is pretty reliable. They used to build them just to turn on and off when you needed a little boost of electricity. And then as gas got really cheap after ⁓ The shale plays came into play. They started building them as baseload. So if you actually look at your systemics over time, and you can do this online if you're in like a P Jam or a MISO, you can see that we went from a lot of coal to a lot of natural gas with some renewables. There's still a little bit of coal in there, but for the most part, natural gas has taken over. I I'm not going to sit here and say that's forever Bethany. I do think it is the main thing right now because they're they're fast to build and it is a reliable fuel source. And there's a lot of it. And it's proven that there's we have more than enough to support us for like the next hundred years or something crazy like that. So do I think we'll stay there? I don't know. Who knows what the next big thing is? I mean, in our lifetime, like I said, we went from cold and natural gas to a little bit of r I don't know. It could be something completely different. Meteorologist. Bethany Ruhe: Right. Teresa Ringenbach: are probably not playing around in the in the gas markets anym anymore. But, you know, markets change, things change, technology changes, and our world adjusts and shifts with it. Bethany Ruhe: So and let's let's go back to perception for a minute, which you brought up with the whole California thing, right? There's this whole you know, they're just driving their EVs and they're not thinking about where the electricity to power or to charge their EVs came from, right? So, you know, maybe there there's like this whole you're right, it's like the feel good thing, right? You just wanna be able to feel good about something. Teresa Ringenbach: It's my it's the brown box story. Have I ever told you the brown box story? Bethany Ruhe: ⁓ n ⁓ I don't think you actually have told me the brown box story. Teresa Ringenbach: Okay, I'm not gonna I'm not gonna name the city I lived in, but ⁓ if anybody knows me, they probably can figure it out. So this is a true story. I lived in this city, it was an inner ring suburb. Everybody there was very into sustainability and feeling great and you know just nice little hippie culture. ⁓ they literally knitted stockings for the trees at at that time. ⁓ I don't know, Bethany. I mean, now it's probably a whole like, you know, microplastics issue that they created, so unintended consequences. ⁓ but the city at the time had a skunk problem. I mean, a terrible skunk. I mean, you could not walk outside without seeing skunks. They were like everywhere. You get you know, like any place you live, you sort of just becomes your new normal. ⁓ but, you know, in this Bethany Ruhe: That would be terrifying to me, by the way. Okay. Teresa Ringenbach: community people were like, well I don't want the skunks here, but I also don't want to kill the skunks because you know we want to feel good and be nice to animals. So the city developed a live trap program. So you felt really great when you saw that skunk picked up in a live trap. Look we f we got her. Isn't it great? So humane, so compassionate. Don't you feel good? But do you know what happened to the skunk? Bethany Ruhe: We saved the skunk. I'm gonna assume something not good, but I'll I'll let you fill in the details. Teresa Ringenbach: So you cannot actually relocate skunks somewhere else. You can't say, here's my problem, I'm gonna take it to somebody else's city and make it their problem, right? You also can't just take I I know city people think you can just w drive out to the country and dump things off, but ⁓ you can't do that either. It's illegal. So there was yes, so there was a brown box. Bethany Ruhe: Ha ha ha ha. Illegal skunk dumping. Take note, folks. Teresa Ringenbach: And the brown box is a sealed container and they put the skunk inside of it, and then they add a liquid, and the next day, poof, no more skunks. Problem solved. Don't you feel great. Bethany Ruhe: So they euthanized the skunks. Teresa Ringenbach: I don't know where the skunk went. It was no longer in the box. Maybe it went to a different dimension, Bethany. Yes. Bethany Ruhe: Cas it. They were they were time traveling skunks. That's crazy, but everybody still got to pat themselves on their back, right? And ⁓ look how look how the skunks are fine. Teresa Ringenbach: We use live traps traps. Like this they're great, they're living in a skunk nirvana somewhere. Bethany Ruhe: No, you were being frickin' portled out of a brown box by some mystery liquid in Ohio. But at least the neighborhood got to feel good about themselves. It's I was gonna say that's just that's what well yeah, I mean well, I think that it plays into what we were talking about with California, the just you know, don't look in the brown box, just drive your E V car. Teresa Ringenbach: Yes, yes. So what does that have to do with natural gas? Pretty much, pretty much. ⁓ so just to wrap, it it natural gas drives our economy. It it is a game changer for places in the United States who were in such abject poverty that they didn't even see a way out. And now i I mean it's probably been ten years now. If you drive to those communities, it's completely different. Their schools are amazing, their housing is amazing, it's a great place to live. ⁓ I even listened to some podcast the other day talking about how a lot of people who can work remotely are now moving to those rural communities. How amazing is that? Bethany Ruhe: Yeah, that's great. I mean, I don't blame them. The older I get, the more I just want five acres between me and my neighbors. So I get it. Teresa Ringenbach: Ha ha ⁓ global politics do rely on this. I know right now, you know, we're talking about what's happening in the Middle East, but ⁓ you know, I had friends when some of the Ukraine stuff was starting, and I was like, Do you guys you guys do understand how tied in we are to what's happening over there? That the fact that Europe can get natural gas from the United States, that we're helping fuel them, is why Russia can't move beyond Ukraine. So that I know. Bethany Ruhe: Right. Right. 'Cause they're not dependent on them. I know well go go go go us. But no, I mean it's I think you you know, you you're just making the connection between our abundant natural gas and what it plays in in overall global security. Teresa Ringenbach: That was a very patriotic American statement. There's other issues, but Yeah, yeah. Yes, yes. So if you think you're going all electric, you're not really opting out of the system. You know, I I I I I realize I'm probably ripping off your blinders and not making you feel great right now, but we're all part of the energy system, and natural gas, at least right now, is a critical part of it. So doesn't mean that you're totally removed, it doesn't mean that you can't feel good, but remember your skunks probably aren't alive. Bethany Ruhe: Don't look in the box. Well, you you know, on that upbeat note, I'm gonna go ahead and wrap this up. I don't think I could do anything to top a skunk in a box. So that's it for today, folks. Thank you so much for joining us. Thank you for listening. Once again, I am Bethany. Teresa Ringenbach: Don't look in the box. And I'm Teresa. Bethany Ruhe: And Teresa has got some stories to tell. Well I I can't wait to see what you're gonna bring us next week, Teresa. I hope that y'all join us. Thank you so much. And again, remember guys, energy is never just about energy.