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Natural Gas Quality & Interchangeability Docket No. PLO4-3

This document presents key discussion points from Chevron's May 2005 technical conference on natural gas quality and interchangeability, emphasizing obstacles like regulatory uncertainty and ineffective supply response in global markets. Recommendations include granting a petition for rulemaking to establish nationwide gas quality standards, implementing a tariff safe harbor mechanism, and promoting efficient energy capital deployment. The aim is to enhance regulatory certainty while ensuring infrastructure safety, flexibility in supply, and public interest are prioritized.

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Natural Gas Quality & Interchangeability Docket No. PLO4-3

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  1. Natural Gas Quality & InterchangeabilityDocket No. PLO4-3 Jay Ellzey, Director Production Services & Regulatory Affairs Chevron Natural Gas May 17, 2005 Technical Conference

  2. Discussion Points • Obstacle • Recommendation • Practical application • Policy Objective • Public Interest

  3. Obstacle: Regulatory Uncertainty • Wasted Energy Capital Investment • Unnecessary Supply Loss Risk • Inefficient Supply Response World Consumption = 251 Bcfd FSU – 35% 1953 Tcf North America – 5% 256 Tcf Europe – 4% 203 Tcf Middle East – 36% 1980 Tcf Africa – 8% 418 Tcf Africa3% Middle East8% Asia Pacific – 8% 445 Tcf North America29% South America – 5% 250 Tcf Asia Pacific 12% FSU24% South America 4% Europe 20% Resources (Tcf) Source: U.S. DOE – EIA (2003 figures)

  4. Recommendation • Grant the Petition for Rulemaking Filed Yesterday • Adopt Nationwide Gas Quality and Interchangeability Regulatory Specifications • CHDP 15 Degrees Fahrenheit Minimum • 1400 Wobbe Index • 4% Maximum Inert • 1.5% Maximum Butanes Plus • Create Non-Discriminatory “Safe Harbor” Tariff Mechanism Maximizing Supply

  5. Practical Application • Adopt Nationwide Specification for Certainty • Require Tariff Safe Harbor Concept for Supply Flexibility • Require Tariff Language Establishing the Use of Aggregation, Blending and Pairing on a Non-Discriminatory Basis • Maintain Tariff OFO as Safety Mechanism • Use Economic Analysis to Determine Appropriate Remedial Action on As-Needed Basis • Ensure Availability of Natural Gas Quality Data

  6. Policy Objective • Maintain Infrastructure Safety and Integrity • Continue Supply Flexibility • Increase Regulatory Certainty • Position U.S. to Safely Access New Domestic and Imported Supplies • Develop Flexible and Various Supply • Deploy Energy Capital Efficiently • Avoid Distorted Market Signals for Processors

  7. Maximize SupplyRegulatory Certainty National Specifications Tariff Safe Harbor Economical Remedial Action Safety OFO Mechanism Conclusion: Satisfy Public Interest With Workable Regulatory Solution

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