Oil and Gas Lawyer Blog
With the recent cold snap, we’re all remembering what we were doing last February when the lights went out.
Repercussions continue. As reported by Michell Ferman at Texas Tribune, Vistra corporation is in a dispute with Energy Transfer over its bill to Vistra for $21.6 million, for gas sold to Vistra during the freeze. Energy Transfer has threatened to cut off gas supplies to Vistra if it doesn’t pay, and Vistra has asked the Texas Railroad Commission to prevent that. Ferman writes:
During last year’s winter storm — which caused the near-total collapse of the state’s power grid, left millions without power for days and caused hundreds of deaths — Vistra spent approximately $1.5 billion for natural gas, ‘twice its planned natural gas cost to fuel its entire Texas fleet for a full year,’ the filing said. Vistra paid Energy Transfer more than $600 million during the storm, ‘which is more than 96% of all amounts invoiced by [Energy Transfer].’
Texas Monthly weighed in with Russell Gold’s article, “The Texas Electric Grid Failure Was a Warm-Up.” Gold disputes assurances by Governor Abbott, the Legislature, the RRC, ERCOT and the PUC that the problems with the grid have been fixed. He especially singles out the RRC, disputing Commissioner Craddick’s testimony before the Legislature that the gas industry could not deliver power because it couldn’t get electricity:
That claim, however, doesn’t withstand scrutiny. Craddick was well aware of problems with the gas supply before the blackouts began, something I discovered while reviewing records of dozens of phone calls, emails, and texts among those responsible for keeping the lights on. Five days before the blackouts began, Walker, the PUC chair, received an unwelcome call from an executive at Vistra, an Irving-based company that is the largest power producer in ERCOT. The executive warned that the company would be unable to meet the rising demand for electricity because it would soon face natural gas shortfalls at several of its plants. Texas normally produces about 29 billion cubic feet of gas a day. By February 11, when temperatures hit 22 degrees in Midland, about 915 million cubic feet were already offline, according to a federal report on the blackout. (Six days later, around the peak of the blackouts, 3.7 billion cubic feet were offline. All but 591 million of that was caused by the failure of gas infrastructure.)
Unlike ERCOT and the PUC, the RRC resisted legislative efforts to get it to require the gas industry to winterize. Its elected commissioners rely too much on political contributions from the industry, says Gold.
So what would it cost to winterize all the wells in Texas, as most other states do, and ensure the electricity flows the next time an Arctic blast hits the Lone Star State? Dallas Federal Reserve economists cite a 2011 estimate that it would cost each gas power plant $50,000 to $500,000 to winterize. Statewide, it would cost between $85 and $200 million annually—the rough equivalent of one or two days of revenue from the Texas gas industry, and less than one-fiftieth the cost that the industry charged during the February disaster.