Natural Gas 101

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Have you ever wondered how natural gas is produced? How it gets to your home? There are many steps that take place behind the scenes in order to get natural gas to your home, and Dominion Energy Solutions is here to help you understand the process. 

Natural Gas Production

Natural gas is a nonrenewable fossil fuel comprised of organic material; primarily the remains of plants and animals that lived millions of years ago. As plant and animal remains build up deep beneath the earth’s surface, they’re exposed to extreme heat and pressure. The continuous heat and pressure eventually break down the carbon bonds in the organic material, creating natural gas.

The final product consists almost entirely of methane, a gas with one carbon atom and four hydrogen atoms. Today, scientists and engineers work together to find production sites to drill for natural gas, both onshore and offshore. Natural gas is then procured by drilling wells into silt and/or rock formations which contain gas deposits deep underground.

Natural Gas Extraction

Once natural gas bubbles to the surface through the well, it is transported from the wellhead and producing fields through pipelines to a gas processing plant. At a natural gas processing plant, methane-rich gas is separated from heavier gases like ethane and butane and potentially harmful gases like sulfur and mercury.

Natural Gas Distribution

Once processed, natural gas moves along transmission pipelines to a compressor station, where the gas is pressurized to give it energy to move through pipelines at a steady pace of 15 miles per hour. The gas then flows into distribution pipelines maintained by your utility. When the gas reaches the utility company, mercaptan is added. This chemical gives natural gas its distinctive smell of "rotten eggs" and acts as a safety feature alerting consumers to any potential gas leaks.

Next, the natural gas is pumped through smaller underground pipelines called “mains”, before finally reaching the smallest lines, called “services”, which connect directly to your home or business. Since the demand for natural gas is significantly greater in the winter months, gas is stored along the way in underground storage systems throughout the remainder of the year, and is released into transmission pipelines when people begin to use more gas.

Natural Gas Pricing for Consumers

Once natural gas is transported to your home, it’s used to power many common home components including central heating, natural-gas powered ovens and ranges, and natural gas-heated clothes dryers. Depending on where you live, you may have the option of switching natural gas suppliers and choosing the most competitive plan. Learn more about Dominion Energy Solutions’ natural gas plans.

The majority of factors that influence the price of your natural gas include:

Fuel – Fuel costs fluctuate minute-by-minute; they are influenced by the amount of supply available and current demand.

Transmission and Distribution – Utilities must pay pipeline companies to use their pipelines to transport natural gas from the production site to your home. The cost of maintaining current pipelines and constructing new pipelines to meet demand factor into the final natural gas price. In high-demand areas where pipelines are constrained, such as New England, costs increase as limited pipeline availability drives prices up. A region’s proximity to producing areas also affects their price. Consumers closer to wells pay less in transportation costs.

Weather/Seasonality – Hurricanes, unexpected cold spikes and other extreme weather events have an effect on pricing, as supply is often unable to react quickly to sudden increases in demand. Increased demand during the winter months for heating causes seasonal prices to increase.

Throughout the non-winter months, natural gas is placed into storage facilities throughout the United States, and is released during periods of high demand to lessen the increase in prices during cold-weather months. In some regions, pipeline availability is constrained, meaning pipelines already operating at full capacity will experience even greater increases in price when demand rises.

Regulations – States have differing taxes and other regulations affecting the final price.

How is Natural Gas Priced?

Quantities of natural gas are usually measured in cubic feet, representing the physical supply. Some bills charge consumers in dollars or cents per Ccf (100 cubic feet) or Mcf (1,000 cubic feet). A common unit of measurement on a customer’s natural gas bill is “therms”. Therms measure the potential heat that can be generated from the supply of fuel.

Natural Gas Usage

According to the American Gas Association (AGA), in 2009, the average U.S. household consumed approximately 721 therms (70,500 Ccf) of natural gas annually, or 1.97 therms (193 Ccf) per day. Many gas appliances, such as stoves, measure natural gas consumption in BTUs, or British Thermal Units. One therm is equal to approximately 100,000 BTUs. For example, if your gas stove consumes 10,000 BTU/hour on the medium setting, and you cook a pot of stew for three hours, you would use 30,000 BTUs, or approximately 0.3 therms.

Winter rates vs. rest of year rates

Increased demand for heating in the winter months causes prices to increase during these times, and pipeline availability is constrained in some regions. Pipelines operating at full capacity will experience even greater increases in price, as they have no space to transport additional supply to meet increased demand. Unexpected cold spikes and severe storms also have an effect on pricing, as supply is often unable to react quickly to sudden increases in demand.

During the non-winter months, natural gas is placed into storage facilities throughout the United States, and is released during periods of high demand to lessen the increase in prices during cold-weather months.