Texas is restricting the flow of natural gas across state borders in an extraordinary move that some are calling a violation of the trade clause in the United States Constitution.
Texas Governor Greg Abbott told a news conference on Wednesday that he was banning the gas from leaving the state until February 21 to ensure that power generators in the state had sufficient supplies. But a copy of Abbott’s order seen by Bloomberg showed that he is demanding that Texas gas be offered for sale in the state before it is shipped elsewhere.
According to the so-called Constitution’s trade clause, state governments are prohibited from interfering in interstate commerce. Abbott said that a disaster declaration he issued on February 12 gave him the freedom to impose such restrictions.
Abbott said he was forced to act while millions of Texans remain without power for the third day amid cold temperatures, without a clear timetable for restoring service. Harris County, which covers Houston, said blackouts in the nation’s third largest county could last for another two days.
“I declare that all natural gas purchased will be made available for sale for local power generation opportunities before leaving the state of Texas, effective until February 21, 2021,” Abbott said in a letter to the Texas Railroad Commission, the main regulator of state energy. “I ask that you immediately take all reasonable and necessary measures to ensure that this mandate is fulfilled.
‘Maximum Withdrawal’
Abbott’s announcement surprised some gas traders and spread confusion in a market that was already experiencing major upheaval. A West Coast trader said he lost $ 1 million in minutes. Unable to read the request, others hastily sought answers: Can the gas still be exported to Mexico? Is LNG affected?
“This is an abuse of the Texas Disaster Act,” said Jared Woodfill, a prominent Republican lawyer who repeatedly challenged Abbott about restrictions on coronavirus in 2020. “It’s amazing that there are no limits on Abbott’s mind for what his authority under the Disaster is. Texas Act. He will have as much power as the courts and the legislature will allow. “
Abbott’s office did not respond to a request for comment. The railway commission team is reviewing the governor’s order, said President Christi Craddick during an emergency three-person panel meeting on Wednesday night. The committee agreed on a 3-0 vote to extend its own February 12 emergency order to save fuel in four days until 23 February.
The collapse of the state’s gas supplies when Arctic temperatures rose earlier in the week was one of the factors driving the cascade of disruptions. Abbott said 19,800 megawatts of gas generation remained offline in Texas late Wednesday afternoon.
The calamity that is unfolding in Texas somewhat resembles the California energy crisis of 2000-2001, when energy suppliers withheld and redirected electricity and gas out of the state, even if it faced deficits, leading to lawsuits. And again, even as Californians faced blackouts in the midst of an extreme heat wave last year, energy suppliers were exporting energy to neighboring states. Subsequently, the state network operator blamed the market design flaws.
Dan Woodfin, executive at Texas power grid operator Ercot, said in an interview that a lack of gas supply is one of the reasons he is having trouble getting power plants back online.
Fossil fuels
A railroad commissioner took the panel’s emergency meeting as an opportunity to bring down windmills and solar panels that have become an increasing part of the Texas energy matrix.
“The result of this storm should not be the future of fossil fuels, but the danger of subsidizing and requiring intermittent and unreliable resources,” said Commissioner Wayne Christian.
The state’s gas stocks are undergoing “maximum withdrawal,” Craddick said at a news conference on Wednesday with the governor and other state officials. She added that some gas plants in southern and western Texas are resuming operations amid the thaw.
Top State
Texas produces more gas than any other state, with a production of about 23 billion cubic feet a day before the deep freeze, according to BloombergNEF data. This is about a quarter of the total production in the 48 states of Baixo. Its two liquefied natural gas export terminals consumed about 4 billion cubic feet of gas a day before the polar explosion.
Abbott asked Freeport’s LNG export terminal earlier in the week to slow its operations. Freeport said it was closing two LNG production units in response.
Texas also exports gas by pipeline to Mexico. Gas is flowing again through the Nueva Era conduit between the two nations after the extreme cold stopped its operation earlier in the week, according to one of the owners of the pipeline.
Abbott also said on Wednesday that he and other state governors expressed concern in a conference call with President Joe Biden about the severe spikes in natural gas prices in the midst of the crisis. Spot prices in neighboring Oklahoma soared to more than $ 1,000 per million British thermal units on Wednesday, increasing more than 100-fold from the previous week.
– With the assistance of Mark Chediak, Christine Buurma, Sergio Chapa, Amy Stillman, Laurel Brubaker Calkins and Naureen S Malik
(Adds a commercial loss of $ 1 million in the fifth paragraph.)