December 2016, Vol. 243, No. 12

Q&A

Q & A: Jim Hodges Fighting the Good Fight for Natural Gas

Jim Hodges is the 2016-17 chairman of the American Public Gas Association (APGA). APGA is the national trade association for publicly owned natural gas utilities, in other words those owned and operated by government entities rather than stockholders. There are over 1,000 public gas utilities in the United States and over 700 are members of APGA.

Hodges is a 43-year natural gas industry veteran who is executive vice president and CEO of Middle Tennessee Natural Gas Utility District, a local distribution company that serves all or parts of 22 counties in the triangle within Nashville, Knoxville and Chattanooga. He has served Middle Tennessee Natural Gas in engineering capacities since 1985 and was named CEO in 2011.

From 1973-85, he served in various engineering positions at Allen & Hoshall, a regional engineering firm in Memphis, TN, ending his tenure as associate manager of Gas Engineering.

Hodges is a registered professional engineer in multiple states with a bachelor’s degree in engineering from the University of Arkansas. He also completed various graduate courses including the Executive Development Program of the University of Tennessee.

P&GJ: Tell us a little about Middle Tennessee Natural Gas Utility District.

Hodges: Middle Tennessee Natural Gas was created in July 1955 as a municipal corporation to provide natural gas service to residents, businesses and industries in 10 counties located south and east of Nashville. We have grown over the years to deliver about 8 Bcf of gas annually to just over 61,000 meters, 180,000 individuals, in all or parts of 22 counties. We have 133 employees in five area offices. We operate 3,948 miles of mains, 75% polyethylene and 25% coated cathodically protected steel, and 71,618 service lines, 86% polyethylene and 14% coated cathodically protected steel. No cast iron, no bare steel, no transmission, so we don’t have to deal with the issues posed by those types of pipe.

P&GJ: At APGA’s annual meeting in Newport RI you announced the theme for your chairmanship is “service.” What did you mean?

Hodges: We in the natural gas business, particularly the public natural gas distribution business, are in the service business. If we don’t all believe that, we have a problem. Most of our customers don’t know and don’t really care what a therm or a Btu or a Class 300 flange is. They want to be warm and have hot water, and if they have a problem like smelling gas, they want someone to show up quickly and take care of it.

Service to the public is exactly why each of our public gas systems was created. We provide a premium energy product, delivered safely, at reasonable rates. That service fuels our local economies, which allows our towns and rural areas to grow and prosper far beyond anything that could have happened without our public natural gas systems being present.

P&GJ: What are your top priorities for the coming year?

Hodges: My priorities are for APGA to stay strong in the operational nuts-and-bolts part of the industry. To continue APGA’s very important national advocacy efforts opposing the “war” on natural gas and communicating the positive story of natural gas.

P&GJ: What are the plans on the operational issues?

Hodges: The new item in this area is a new Operations Conference that we held in November in Chattanooga, TN. While we do operations advocacy work on an ongoing basis and support operations research efforts through the APGA Research Foundation, along with many operations activities through our APGA Security and Integrity Foundation, we have not held a pure Operations Conference for several years.

P&GJ: What is the war you mention?

Hodges: There are extreme elements of society out to stop natural gas at all levels whether it is production, transportation or end use. I recognize that this war isn’t going to be won during my one-year term as APGA chairman, but we’re committed to stay in the fight for as long as it takes. It is inconceivable to me that some people view plentiful supplies of affordable, clean, domestic energy as a problem rather than the “blessing” that it is.

P&GJ: What challenges do you see at the natural gas production level?

Hodges: As readers of P&GJ are well aware, advances in drilling technology have made substantial untapped domestic natural gas reserves recoverable both on and offshore. These advances in technology have significantly increased the recoverable reserves of natural gas in the U.S.

However, we have an increasing amount of local and state grassroots activities aimed at stopping or restricting natural gas production through initiatives or regulations. APGA supports safe and responsible natural gas development, and we further believe that natural gas production and protection of human health and the environment is not an “either/or” proposition. As long as production regulations are based on actual facts, the production industry and the supply of our premium product will stay strong.

P&GJ: What are the attacks that natural gas transportation is facing? 

Hodges: Similar to production, we are seeing an increasing amount of local and state activists leading efforts to oppose the development of natural gas pipelines. Activists opposed to natural gas are fighting the construction of compressor stations and pipelines through protests, lawsuits and other means.

Activists and some governmental agencies are using permitting and other processes to block the construction of new distribution lines. My company has had a pipeline blocked for four years now by repetitive stalling tactics by federal agencies. We have been able to make several minor operating changes to maintain our level of service in the area this blocked pipeline will serve, but if we are ultimately unable to install that distribution pipeline, the economy of that area of our system (both jobs available and cost to operate a home or business) will be permanently damaged.

Transportation by pipeline is the safest and the most energy-efficient means of moving natural gas and, just like production, this is not an “either/or” proposition. We can build new pipelines and transport gas while protecting the environment.

P&GJ: What are the threats you see for the direct-use of natural gas?

Hodges: As we talk about the direct-use of natural gas, we need to understand the benefits of direct-use. The direct-use of natural gas is 92% efficient with it reaching your home directly at about three times the efficiency of non-gas energy. In addition, natural gas appliances cost about half as much to operate as their non-gas counterparts.

Despite the benefits that direct-use provides, we continue to see an increasing number of attacks on the direct-use at the federal legislative and regulatory level.

On the legislative front, Section 433 of the Energy Independence and Security Act of 2007 mandates elimination of all fossil fuel-generated energy use in federal buildings by the year 2030. The mandate covers new buildings and major renovations of at least $2,500,000 (in 2007 dollars). APGA is working with several other groups toward the repeal of this law. I am pleased that repealing Section 433 is included in comprehensive energy legislation passed by both the House and Senate.

On the regulatory side, the Department of Energy (DOE) has initiated 62 separate efficiency standard regulations in 2015 alone. By far, the most impactful of these regulations upon natural gas consumers is the residential furnace rulemaking. We were extremely disappointed that the DOE once again proposed an energy-efficiency standard for natural gas furnaces that will harm consumers and ultimately undermine energy efficiency.

If implemented, the proposed rule will cause many consumers – especially in southern states – to switch from natural gas to electric heat. Electric heat relies on the indirect combustion of natural gas to generate power rather than the more efficient direct-use of natural gas in residential furnaces. No one disputes that the closer the fuel source is to the home, the more efficient the fuel becomes.

As in the past, DOE continues to ignore this fact. The direct-use of natural gas is incredibly efficient, yet the DOE Supplemental Notice of Proposed Rulemaking (SNOPR) issued this fall that imposes a nationwide condensing furnace mandate with a small furnace (55,000-Btu) exemption will result in fuel switching that will actually increase energy consumption and impose higher monthly utility bills on people who can least afford it.

DOE is attempting to address a problem that doesn’t exist. Data show that the furnace market is working properly without a rule. Where it makes economic sense consumers are already purchasing condensing furnaces. The SNOPR will force many low- and fixed-income families, homeowners in the South, and many others who live in condos or rowhomes to make uneconomic choices.

APGA members are not-for-profit entities and their actions are entirely for the benefit of their consumer-owners. This rule will impose significant harm upon APGA members’ consumers, and as a result, APGA will leave no stone unturned, including possible litigation, to protect our consumers.

P&GJ: What is APGA doing to fight back?

 Hodges: We are urging our members to do more to spread the truth about the benefits of natural gas production, transportation and end use. As government entities, APGA members can talk to their governing boards or city councils to ensure those policymakers are aware of the natural gas advantage. We also live and work in the cities and towns we serve and many members are active in local clubs like Rotary where they can help spread the word.

To help get the message across APGA produced the “Look Closer” campaign, a unified, national marketing campaign to communicate the benefits of natural gas and increase the direct-use of natural gas in their communities. APGA provides its members with a variety of free, professional marketing materials for the campaign including a public service announcement, brochure and advertisements.

The campaign promotes the many benefits that natural gas brings to homes across America such as affordability, efficiency and reliability. Members are encouraged to use these materials to market natural gas and, by doing so, help to spread the reach of the marketing campaign across the country.

P&GJ: Turning to pipeline safety, what are APGA’s big issues?

We’re carefully watching the proposed transmission rule. While only about 5% of APGA’s members have lines classified as transmission, we all have gas transported to us through transmission lines. What the Pipeline and Hazardous Materials Safety Administration (PHMSA) has proposed will be very expensive, and you can be sure the pipelines will seek to pass those costs on to us. We have urged PHMSA to be very careful to ensure any costs they impose on the transmission sector are cost-justified.

P&GJ: What about those APGA members that do have transmission lines?

Hodges: We’re looking out for them, too. Most of the “transmission” lines our members operate really aren’t what you would call transmission. Over half are 8 inches and smaller diameter and a third are 4 inches or smaller. About half operate below 20% of specified minimum yield stress (SMYS) and are only considered transmission because PHMSA defines as transmission any line going from a storage facility to a distribution center, regardless of operating pressure.

We were pleased to see that PHMSA proposed to define “distribution center” as the point where pressure is reduced or gas is metered. That should reclassify much of APGA members’ lines as distribution. We also urged PHMSA to limit the proposed recordkeeping and material verification requirements to pipes operating above 30% SMYS. The safety concern PHMSA is proposing to address is the sudden rupture of lines such as occurred in San Bruno, CA in 2010, and there seems to be a scientific consensus that lines under 30% SMYS won’t rupture. 

P&GJ: What do you think of PHMSA’s excess flow valve (EFV) proposal?

Hodges: EFVs have been very controversial, but now that we have several years’ experience installing EFVs in service lines to single-family homes, the industry seems more comfortable expanding the installation requirement to multi-family and commercial service lines. Middle Tennessee Natural Gas has had generally positive experiences with EFVs operating as they were designed to operate. We’re a little leery of PHMSA’s proposal to require us to notify existing customers and install an EFV at their request, but I think we can make that work.

In closing, the core value of service to the public has carried our segment of the industry through curtailment and supply issues, through pricing issues, and through operating issues of the past. I am confident that service and America’s premium energy product will carry our industry and nation into the future.