1

The Impact of Using LNG-Derived Natural Gas in the

South Coast Air Basin

January 2006

2

Background

• Future natural gas demand in the United States will rise

• Traditional natural gas sources are increasing in cost and new supplies will not meet demand

• Regassification of LNG imports is commercially feasible and economically beneficial

• Imported LNG typically has higher heat content (HHC) than current NG in the South Coast– More ethane, propane, butane

– Less N2, CO2, and O2

3

Air Quality Background• South Coast is a severe-17 ozone non-attainment

and serious PM10 non-attainment area– NOx is an ozone and PM10 precursor– 2003 AQMP: reduce NOx 48% from 2003 to 2010

• Combustion of HHC (e.g. LNG-derived) NG may increase NOx and CO emissions from some types of equipment

• 2003 AQMP control measure MSC-07 proposes upper limit on heating value– Condensing (e.g. extracting) out higher hydrocarbons

– Adding inerts (e.g. N2, CO2)

• Question: what would be the impact of HHC NG on South Coast emissions and air quality?

4

Impact Analysis Approach

• Review relevant emission inventories for SCAB natural gas combustion emission categories– Compare to overall SCAB inventory

• Review equipment test data comparing the emissions from HHC gas combustion to base gas combustion

• Apply emission ratio to SCAB stationary source natural gas combustion inventory categories and assess the inventory impact

• Apply applicable SCAQMD regulatory limits, where possible – assess inventory impact

5

SCAB Emission Inventory

15 553

2 7

807

454

63

308

1049

0

200

400

600

800

1000

1200

VOC CO/10 NOx SOx PM10

Natural Gas Combustion Total

tons/day

Source: CARB, 2003 Inventory for SCAB, anthropogenic only

6

Contributions to 2003 NOx Inventory

Remaining Sources

2%

NG-Industrial3%

NG-Residential2%

Other Fuel Combustion

3%

All Mobile90%

1049 tons/day NOxStationary Source Combustion Sources

* Other fuels include diesel, propane, distillate oil, LPG, gasoline, etc.

*

7

South Coast Energy from Different Fuels

Total energy consumed: 1,723,000 Bbtu/yearBased on reported fuel consumption from 2000 Fuel Tax Report, SoCalGas

Gasoline47%

Diesel8%

Natural Gas45%

8

HHC Emission Studies

• Initial SoCalGas sponsored tests of gas-fired equipment (2005 Final Report, SoCalGas)– Tests used NG with higher heating values and Wobbe

numbers, compared to base gas– Wobbe = heating value / square root of specific gravity– Equipment was NOT modified / adjusted for HHC gas

• Gas #6 (HHV=1100, Wobbe=1400) results were used in the analysis– Gas #3 (HHV=1150, Wobbe=1430) used for residential

forced air heating units since equipment was not tested on Gas #6

– 2003 LNG Research Study – Phase I for IC engines

9

NOx Test Results for Base and HHC Gas (Gas #6)

Emissions (ppm @ 3% O2)

Note: For HCFAU, Gas #3 results used. For ICE, 2003 LNG Study Report results (after controls)

ICE

16

66

90

37

54

111

89

39

64

88

3

10

52

133

101

0

20

40

60

80

100

120

140

CommercialWater Boiler

HorizontalCondensing

FAU

Legacy WaterHeater

ICE Ultra Low NOxSteam Boiler

Wall Furnace InstantaneousWater Heater

CommercialConveyor

Broiler

Source Category

Em

iss

ion

s (

pp

m @

3%

O2

)

NOx Base Gas Emissions

NOx Gas Six Emissions

* The test results which were applied to Scenario 1 and 2 test results.

*

****E N V I R O N

10

Emission Impact Analysis

• Total Basin natural gas usage: 2.04 Bcf/day• Assessed the emission impact from two

scenarios:

1. Replacement of 1 Bcf/day with HHC gas

2. Replacement of 0.5 Bcf/day with HHC gas• Adjusted the emissions from each source

category with related test results• Assessed impact for the effect of certain

SCAQMD rules

11

Applicable Test Results

Tested Equipment1 Source Category 2003 NOx Emissions (tons/day)

Internal Combustion Engine2

All ICEs 6.9

Commercial Water Boilers

All boilers categories 7.8

HCFAU3 Residential, service and commercial space heating

10.6

Legacy water heater Residential, service and commercial water heating

10.7

None available

(no adjustment)

gas turbines, oven heaters, in-process fuel, other

16.9*

1. LNG study April 2005, except as noted2. LNG Research Study – Phase 1, 20033. Gas #3 results used

* 5.8 tpd from residential (cooking and other)and 3.3 tpd from gas turbine engines generallyin RECLAIM

12

Rule Adjustments

• Almost all in basin sources that emit over 4 tons/day of NOx are in RECLAIM– Net Basin change in emissions from those

sources would be zero• RECLAIM applied to:

– All electric utilities, co-generation, oil / gas production, petroleum refining, and industrial / manufacturing categories

• No rule or permit limits applied to any other categories

13

NOx Impact of HHC Gas

NOx tons/day

14

Seasonality

• Ozone season is summer/early fall• Emissions are seasonal

– Greater electrical generation in summer• Sources under RECLAIM, BACT

– Residential emissions reduced in summer• No space heating July through October• Reduced water heating needs• Pool heaters not used during hottest periods

– Commercial/Industrial – less seasonality

15

VOC Emission Impacts

3.3

394.0

1.63.8 10.31.2 1.6

31.2

76.8

37.5

230.0

215.0

232.8

22.8

0

50

100

150

200

250

300

350

400

Ultra LowNOx Steam

Boiler

Legacy FloorFurnace

InstantaneousWater Heater

CommercialWater Boiler

Wall Furnace ICE Low NOxSteam Boiler

Em

iss

ion

s (

pp

m @

3%

O2

)

Base GasLNG

Emissions (ppm @ 3% O2)

Analysis shows a 0.8 ton/day reduction for Scenario 1

16

Latest SCAQMD Modeling Analysis

2010 Ozone Control Strategy

2010 Ozone Control Strategy

• Black lines are ozone episode isopleths

• Colored lines are annual average PM2.5 isopleths

Ozone decreases as NOx increases

PM2.5/PM10 insensitive to NOx changes

Ozone and PM2.5/PM10 decrease as VOC decreases

Source: SCAQMD, 2007 AQMP Technical Advisory Group, 12/7/05

17

Other Air Quality Impact Issues

• NOx emissions from residential and service / commercial sources are spread throughout the SCAB– For example, emissions changes in San Fernando Valley

do not affect peak Inland Empire areas• Weekday/Weekend Effect

– Natural gas usage 13% higher on weekdays, but 65% of ozone exceedences occur on weekends

• Uncertainty in mobile source emissions greater than potential NOx increase due to HHC combustion

• Air quality modeling possible, but may be insensitive to such small emission changes

Ozone and PM2.5/PM10 air quality impacts expected to be negligible, with impact potentially beneficial

18

Preliminary Conclusions• 0.11% annual increase in NOx emissions if 1.0

Bcf/day of LNG-derived natural gas is used – 0.06% increase for 0.5 Bcf/day– Does not account for reductions from proper tuning– Does not account for non-RECLAIM emission limits

• Ozone and PM10 air quality impact expected to be negligible, with impact potentially beneficial

• Given the small potential impact, other more cost-effective, local approaches should be considered

– Expanded use of natural gas instead of higher emitting diesel and gasoline