Texas Mandate to Bar Natural Gas Exports During Power Crisis Likely Unenforceable

By Jennifer Hiller

Feb 18 (Reuters) – The Texas oil and gas regulator on Thursday alerted state natural gas producers of a directive to reserve their supplies for in-state electric generation even as one member questioned whether the directive could be enforced.

Governor Greg Abbott on Wednesday issued an executive order restricting gas exports and asked the state regulator to “take all reasonable steps” to keep fuel in Texas until Sunday, a decision challenged by gas importer Mexico.

Days of freezing temperatures shut in about one-fifth of the region’s refining capacity, shuttered oil and natural gas wells and affected power generation in Mexico, which imports Texas natural gas.

The Texas Railroad Commission, the state’s oil and gas regulator, likely does not have the authority to interfere with contracts between companies to sell gas out of state, Commissioner Jim Wright said in an interview on Thursday.

Producers “are certainly focused on selling everything they can into Texas, but they’re obligated under contract,” said Wright, one of three elected commissioners. “I’m not sure we have authority to mess with that, nor do I really want to.”

There has been no practical impact from Abbott’s order on the gas market, said Bernadette Johnson, vice president at data firm Enverus. Less natural gas has been leaving Texas, but that was because producers had to shut in wells because they lost power and equipment froze.

“You can’t just stop a pipe at the border and turn it around. That’s not a thing,” said Johnson. “The systems are not designed with these crazy orders in mind.”

Wright said he had spoken with Enterprise Product Partners and other pipeline companies, and those with extra supplies of natural gas are selling into the local market whenever possible.

The power crisis in Texas is likely to be resolved by the weekend, Wright said, echoing comments by utility executives.

U.S. spot gas prices eased on Thursday, falling 5% to $3.058 per million British thermal units. The price rose 19% this month amid rising demand due to cold weather.

Kinder Morgan Inc, operator of gas pipelines that deliver to Arizona, California and New England, said it was working with customers and state agencies to deliver natural gas across its network of pipelines. “We will continue to comply with all state orders associated with this event,” said spokeswoman Katherine Hill.

Enterprise Products, whose gas pipelines reach into Louisiana and New Mexico from Texas, did not reply to a request for comment.

Texas producers export gas by pipelines that stretch from California to New England and ship liquefied natural gas (LNG) from Freeport and Corpus Christi. LNG producers declined to comment on the governor’s executive order.

(Reporting by Jennifer Hiller and Eileen Soreng; Editing by Chizu Nomiyama and Jonathan Oatis and Diane Craft)

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