Natural Gas Act questions with
verified solutions passed
Wellhead - correct answer ✔✔Point at which oil and gas are produced.
Producers - correct answer ✔✔About 550,000 gas wells produce in the United States. Gas
comes from two types of fields: associated gas/casinghead gas and non-associated gas.
Gas is gathered in small-diameter pipelines (called gathering lines) from all the wells in a field;
run through processing facilities in the field to remove water and impurities; compressed to
boost its pressure so that it will flow into a large transmission pipeline; and transported to
storage or marketing centers.
Associated Gas/Casinghead Gas - correct answer ✔✔Gas that is produced along with oil from
oil wells, separated from the oil, and then sent into gas pipelines.
Non-Associated Gas - correct answer ✔✔Gas that is produced in gas-only fields that have no
accompanying oil production.
Gathers and Gas Processing - correct answer ✔✔Producers may also construct and operate the
gathering lines and field processing facilities, but the increased size of this market in recent
years has brought new entrants into this business.
Transmission Pipelines - correct answer ✔✔Large pipelines of high-strength steel form an
"interstate highway" system of over 280,000 miles for natural gas to travel. Most of the
pipelines are buried underground.
,Interstate pipelines are regulated by FERC using many of the principles of utility rate regulation,
such as conditioning new pipeline construction on certificates of public convenience and
necessity (determinations that the pipeline is "needed" in terms of helping to economically
deliver gas to an area with demand, among other factors) and regulating rates of service.
Many intrastate pipelines also exist and are regulated by a state agency, often the public utility
commission. State agencies, often the oil and gas conservation commissions, also regulate the
smaller gathering lines.
Midstream - correct answer ✔✔Refers to the activities that occur between the upstream
producers and the downstream end users, mainly transmission pipelines, storage facilities, and
sometimes gathering and processing.
Distributors or Local Distribution Companies (LDCs) - correct answer ✔✔In urban areas, there is
usually a "gas company" that purchases gas delivered to the "city gate" by a transmission
company and then distributes the gas using gas mains under the streets to serve homes for
heating and cooking and commercial and industrial businesses. They are usually investor-owned
utilities regulated by the state public utility commission, but, in some cases, municipalities own
and operate the gas distribution business.
If the weather becomes so extreme that even a cutoff of the industrial customers is inadequate
to free up enough gas to serve the firm customers, LDCs typically establish priority lists to
allocate gas among the firm customers.
Industrial Users and Power Plants - correct answer ✔✔Gas is used as fuel in many industrial
processes like boilers and blast furnaces.
Industrial Bypass - correct answer ✔✔Unlike residential and commercial users who buy gas
from the area's LDC, industrial users may take gas directly from the pipeline. Most power plants
also take gas directly from a pipeline or a spur off the pipeline.
, To address variability in demand, what two different methods are often employed? - correct
answer ✔✔First, depleted oil and gas reservoirs nearer to consuming areas are converted into
gas storage units by injecting gas into the reservoir during off-peak days and drawing it out
during peak days. As gas has become the premier fuel for power plants, gas storage facilities
have greatly expanded, and this alleviates, but doesn't eliminate, the problem of supplying peak
demand.
Second, many industrial users that use very large quantities of gas year-round, such as
petrochemical plants or steel mills, maintain alternative coal or fuel oil facilities to which they
can switch if gas is not available or becomes relatively expensive compared to substitute fuels.
These large, flexible customers are quite desirable for a pipeline company, which is always
seeking to maximize the use of its facilities every day of the year. To attract such customers,
pipeline companies designed "interruptible" rates, which allow industrial users to buy gas at low
rates on condition that they can be cut off if the pipeline space is needed, say, for residential gas
heating on very cold days.
Load Factor - correct answer ✔✔Ratio of average demand to peak demand. An industrial user
with a steady demand has a "high load factor." If a firm has an average demand of 8 units and a
peak demand of 10 units, its load factor is 80%.
Usage/Commodity Charge - correct answer ✔✔An interruptible customers pay a rate based
primarily on the amount of gas it actually transports through the pipeline. Charge per unit of gas
(measured by volume or heat content) delivered to the buyer. The customer pays little of the
fixed cost of the pipeline because the pipeline serves the user only when spare capacity exists.
What kind of two-part rate does a "firm" customer (such as a residential consumer) pay? -
correct answer ✔✔1. Usage/Commodity Charge
2. Reservation/Demand Charge
verified solutions passed
Wellhead - correct answer ✔✔Point at which oil and gas are produced.
Producers - correct answer ✔✔About 550,000 gas wells produce in the United States. Gas
comes from two types of fields: associated gas/casinghead gas and non-associated gas.
Gas is gathered in small-diameter pipelines (called gathering lines) from all the wells in a field;
run through processing facilities in the field to remove water and impurities; compressed to
boost its pressure so that it will flow into a large transmission pipeline; and transported to
storage or marketing centers.
Associated Gas/Casinghead Gas - correct answer ✔✔Gas that is produced along with oil from
oil wells, separated from the oil, and then sent into gas pipelines.
Non-Associated Gas - correct answer ✔✔Gas that is produced in gas-only fields that have no
accompanying oil production.
Gathers and Gas Processing - correct answer ✔✔Producers may also construct and operate the
gathering lines and field processing facilities, but the increased size of this market in recent
years has brought new entrants into this business.
Transmission Pipelines - correct answer ✔✔Large pipelines of high-strength steel form an
"interstate highway" system of over 280,000 miles for natural gas to travel. Most of the
pipelines are buried underground.
,Interstate pipelines are regulated by FERC using many of the principles of utility rate regulation,
such as conditioning new pipeline construction on certificates of public convenience and
necessity (determinations that the pipeline is "needed" in terms of helping to economically
deliver gas to an area with demand, among other factors) and regulating rates of service.
Many intrastate pipelines also exist and are regulated by a state agency, often the public utility
commission. State agencies, often the oil and gas conservation commissions, also regulate the
smaller gathering lines.
Midstream - correct answer ✔✔Refers to the activities that occur between the upstream
producers and the downstream end users, mainly transmission pipelines, storage facilities, and
sometimes gathering and processing.
Distributors or Local Distribution Companies (LDCs) - correct answer ✔✔In urban areas, there is
usually a "gas company" that purchases gas delivered to the "city gate" by a transmission
company and then distributes the gas using gas mains under the streets to serve homes for
heating and cooking and commercial and industrial businesses. They are usually investor-owned
utilities regulated by the state public utility commission, but, in some cases, municipalities own
and operate the gas distribution business.
If the weather becomes so extreme that even a cutoff of the industrial customers is inadequate
to free up enough gas to serve the firm customers, LDCs typically establish priority lists to
allocate gas among the firm customers.
Industrial Users and Power Plants - correct answer ✔✔Gas is used as fuel in many industrial
processes like boilers and blast furnaces.
Industrial Bypass - correct answer ✔✔Unlike residential and commercial users who buy gas
from the area's LDC, industrial users may take gas directly from the pipeline. Most power plants
also take gas directly from a pipeline or a spur off the pipeline.
, To address variability in demand, what two different methods are often employed? - correct
answer ✔✔First, depleted oil and gas reservoirs nearer to consuming areas are converted into
gas storage units by injecting gas into the reservoir during off-peak days and drawing it out
during peak days. As gas has become the premier fuel for power plants, gas storage facilities
have greatly expanded, and this alleviates, but doesn't eliminate, the problem of supplying peak
demand.
Second, many industrial users that use very large quantities of gas year-round, such as
petrochemical plants or steel mills, maintain alternative coal or fuel oil facilities to which they
can switch if gas is not available or becomes relatively expensive compared to substitute fuels.
These large, flexible customers are quite desirable for a pipeline company, which is always
seeking to maximize the use of its facilities every day of the year. To attract such customers,
pipeline companies designed "interruptible" rates, which allow industrial users to buy gas at low
rates on condition that they can be cut off if the pipeline space is needed, say, for residential gas
heating on very cold days.
Load Factor - correct answer ✔✔Ratio of average demand to peak demand. An industrial user
with a steady demand has a "high load factor." If a firm has an average demand of 8 units and a
peak demand of 10 units, its load factor is 80%.
Usage/Commodity Charge - correct answer ✔✔An interruptible customers pay a rate based
primarily on the amount of gas it actually transports through the pipeline. Charge per unit of gas
(measured by volume or heat content) delivered to the buyer. The customer pays little of the
fixed cost of the pipeline because the pipeline serves the user only when spare capacity exists.
What kind of two-part rate does a "firm" customer (such as a residential consumer) pay? -
correct answer ✔✔1. Usage/Commodity Charge
2. Reservation/Demand Charge
