7 Natural Gas
History of Coal Gas
Beginning of the natural gas industry was not natural gas associated with the first oil wells in western Pennsylvania, but manufactured gas from coal decades before—a case of a synthetic or manufactured fuel preceding a natural fuel. In 1609, a Belgian physician and chemist reduced 62 pounds of coal to one pound of ash and pondered about what had happened to the missing 61 pounds, the first published account on coal gas. While burning coal in the presence of air reduces coal to ash, heating coal in a closed environment, without a fresh supply of air, produces coke, coal tar, and coal gas. Coke, primarily carbon, is burned as a fuel or consumed in steel production. Coal tar, a waste product, was dumped willy-nilly in streams, rivers, ponds, and on land adjacent to manufactured gas plants. “Free” coal tar became the cornerstone of the modern chemical industry by first being transformed to creosote, tar, pitch, wood preservatives, mothballs, and carbon black. Later on the chemical industry learned to extract benzene, toluene, and xylene for incorporation in gasoline and petrochemicals, and later yet, extract phenol and polynuclear aromatic hydrocarbons for synthetic fibers. Other products developed from coal tar were epoxies, resins, dyes, plastics, disinfectants, germicides, fungicides, pesticides, and pharmaceuticals. Unfortunately, a large amount of the early coal tar was not processed. Many decades later after natural gas replaced manufactured gas, thousands of abandoned manufactured gas plants became classified as hazardous and toxic waste dumpsites whose cost of cleanup is under the US Superfund Program of the Environmental Protection Agency. This is an excellent example of the consumer not paying the full cost for a service; a failure to internalize an externality.[1]
The purpose of manufactured gas plants was not to make coke or coal tar, but coal gas, a mixture of hydrogen, carbon monoxide, carbon dioxide, and methane. Heat content of coal gas, made up partially of noncombustible carbon dioxide, coupled with low thermal output of carbon monoxide, is half that of natural gas. The first demonstration of coal gas as an energy source occurred in 1683 when an English clergyman stored coal gas in an ox bladder, then pricked the bladder and lit the outgoing gas. The first demonstration of coal gas as a means of illumination occurred a century later, in 1785, when a professor of natural philosophy lit his classroom by burning coal gas in a lamp. In 1801, a French engineer used coal gas to light and heat a Parisian hotel. William Murdoch, an engineer working for Boulton and Watt, manufacturer of James Watt’s steam engines, produced coal gas that passed through seventy feet of copper and tin pipe to light a room in his house in 1792 and in 1802 to light a foundry. He experimented with various types of coal heated in the absence of oxygen to different temperatures for varying lengths of time to perfect the method of producing coal gas. This led to the first major commercial use of coal gas to light Manchester cotton mills for round-the-clock operation. For his pioneering work, Murdoch was dubbed father of the gas industry.[2] Other advances followed quickly such as purifying coal gas by passing it through limewater and devising meters to measure usage.
Friedrich Albrecht Winzer, a German entrepreneur, proposed the first centralized gas works where large volumes of gas would be manufactured and pipelined to customers for lighting and heating. Germany was not ready for the idea, so he anglicized his name to Fredrick Albert Winsor and sold the concept to the Prince of Wales, a fellow German of the house of Hanover, who had gaslights installed for celebrating King George III’s birthday in 1805. In 1812, the Westminster Gas Light and Coke Company was chartered by Parliament, and by 1815, the company was supplying London from a centralized coal gas producing plant via 26 miles of gas mains of the same three-quarters inch pipe used to make rifle barrels. This placed England in the forefront of a new industry and a font of technological know-how for the introduction of gas lighting in Europe and America.
Two sons of Charles Peale, a well-known portrait painter of Revolutionary War heroes (including fourteen of George Washington), played prominent roles in the formation of the Gas Light Company of Baltimore in 1816. In 1817, the company received a franchise from Baltimore to provide gas lighting. Progress was slow, and only two miles of gas mains supplied 3,000 private and 100 public lamps by 1833. The company’s activities spread into manufacturing gas meters, chandeliers, pipes, fixtures and fittings in order to be able to sell coal gas for illumination. Spread of manufactured gas in major cities for lighting was not particularly rapid, beginning with Baltimore in 1817, New York City in 1825 (Great White Way of Broadway was first lit with gas, not electricity), Philadelphia in 1836 (first municipal owned gas works), Cincinnati, St. Louis, and Chicago in the 1840s, San Francisco in 1854, Kansas City and Los Angeles in 1867, and Minneapolis and Seattle in 1870s. Distribution was a challenge since the motive force to transmit coal gas through pipes was the limited internal pressure within the coal gas plant; the solution was building plants within city centers to minimize distance between plant and consumers.[3]
The reason for the slow adoption of manufactured gas for lighting was its cost, which ranged $2.50–$3.50 per thousand cubic feet (Mcf) or, in current dollars, about $60 per Mcf. Figure CW7.1 shows the more recent delivered cost of residential natural gas, which is far below the cost of manufactured gas in the nineteenth century. In terms of 2014 dollars, average cost during the 1970s were $7.80, 1980s $11.90, 1990s $9.80, 2000s $13.50 and up through 2014 $10.90 per Mcf. The recent decline in residential natural gas costs is a result of increased supplies via fracking reducing the price of natural gas. Delivered costs to residences are considerably higher than wellhead prices and delivered costs to utilities and major industrial consumers.[4]
Figure CW7.1 US Residential Consumers Cost of Natural Gas ($/Mcf)
<FIGURE CW7.1 NEAR HERE>
Coal gas consumers were not given a choice of suppliers who could compete on service and price because laying multiple gas mains and building multiple manufactured gas plants to give consumers a choice was not cost-effective. Manufactured gas was a natural monopoly not only for this reason, but also because manufactured gas companies required municipal assistance, support, and cooperation to get into business. It was necessary that a manufacture gas company obtain a franchise from a municipality to be sole supplier along with permits to lay gas mains under city streets and a contract to light city streets to assure potential investors of sufficient revenue for a satisfactory return on their investment. Once gas mains were laid for city lighting, it was relatively simple to connect to residences and businesses. While municipal authorities recognized that a single company could provide gas at a lower cost than two competing companies with twice the investment in facilities and pipelines, they also recognized that a single company, once ensconced in a market as a natural monopoly, would not necessarily be cheaper. Thus, a franchise that granted a monopoly also specified municipal oversight on entry, expansion, exit, safety, and rates to protect the public interest.
Local or municipal regulation worked well with manufactured gas providers whose plant and distribution system were within the legal jurisdiction of a municipality. Things changed when natural gas began to displace manufactured gas because natural gas fields were normally outside of a municipality’s legal jurisdiction and commonly served more than one municipality. To solve this problem of conflicting regulation by many municipalities, the natural gas industry opted for statewide regulation, a situation that promised greater consistency of rules and rates and reduced the number of regulators to be dealt with (or influenced). This did not spell the end of municipal regulation. Municipalities still play a role today in regulating utilities to protect the interests of their citizens. A utility serving a large city may be regulated on the municipal, state, and federal levels, but the focus of regulation at each level is constricted to a specific sphere of activity to minimize possibility of overlapping and conflicting regulations. Municipal owned and private electricity generation utilities that primarily serve a single population center are often regulated solely by municipalities.
History of Natural Gas
Sacred fires in Persia and elsewhere were natural gas seeps that may have been ignited by lightning. The temple of Delphi was built around a “burning spring.” There is some speculation that fumes escaping into the cavern where the seer made her prognostications may have been sweet smelling ethylene or possibly some intoxicating boutique of gases such as ethylene mixed with methane and ethane.[5] Around 900 BCE (dates vary with source) Chinese discovered natural gas bubbling through brine, which they separated and burned to distill salt. Around 200 BCE, the Chinese learned to tap natural gas deposits drilling 500 feet into the ground with bamboo poles tied together to form a single drilling “pipe.” The bamboo pole had an iron percussion bit at its end to pulverize rock by lifting the pole up by three or so feet and then letting go.[6] Once the well was drilled, natural gas was routed from the well through bamboo “pipes” to distill salt from seawater and cook food.
The earliest reference to natural gas in the US was in the 1600s when explorers noted certain Indian tribes burning gaseous emissions from the ground. In 1821, a more organized approach to capturing escaping or seep gas took place in Fredonia, New York, when a gunsmith piped seep gas to nearby buildings for lighting. In 1827, another source of naturally occurring seep gas was harnessed to supply a lighthouse on Lake Erie. In 1840, the first industrial use of natural gas occurred in Pennsylvania, where gas was burned to heat brine to distill salt, the same thing the Chinese were doing two millennia earlier!
While natural gas provided the lift to force oil to rise in Drake’s well, for the most part, associated natural gas was vented to the atmosphere. There was little use for natural gas. Natural gas was normally not available to municipalities either by being too far away or prevented from third-party access by municipal franchises that protected coal gas manufacturers. One of the first natural gas pipelines, built in 1853, was 25 km long made of cast iron pipe to move natural gas to Trois Rivières, Quebec.[7]In 1872, the Rochester Natural Gas Light Company was formed to provide natural gas to Rochester, New York from a field 25 miles away with sufficient reservoir pressure to transmit gas to the city. Pipes made of two- to eight-foot segments of hollowed out Canadian white pine logs reflected the ultimate in primitive pipeline technology. Problems associated with a rotting and leaking wooden pipeline eventually led to the company’s demise. In the same year, a 5.5 mile, 2 inch wide wrought iron pipeline was successfully constructed to carry waste gas from oil wells near Titusville to 250 townspeople.
But cast and wrought iron pipelines were plagued by breaks and leaking connections held together by screws and transmission distance was limited by reservoir pressure. In 1870 Pittsburgh became the first city to start consuming natural gas as a substitute for manufactured coal gas to clean up its smoke-laden atmosphere. Natural Gas Act, passed in 1885 by the Pennsylvania legislature, permitted natural gas to compete with manufactured gas. This resulted in the formation of Peoples Natural Gas, which by 1887 was serving 35,000 households in Pittsburgh. Another Pittsburgh natural gas distributor, Chartiers Valley Gas, was the first company to telescope pipe from an initial eight to ten and finally 12 inches in diameter to reduce gas pressure before it entered a home, business, or industrial plant. By this time, screws had given way to threaded pipe to hold pipe segments together. Dresser and Company, formed in 1880, specialized in pipe couplings, and in 1887 received a patent for a leak-proof coupling that incorporated a rubber ring in the pipe joints; an invention that would dominate the market until the 1920s.
George Westinghouse, inventor of the compressed-air railroad brake, and before he became a backer of Nikola Tesla’s alternating current idea, took an interest in natural gas. He decided to drill for natural gas and selected, of all places, his backyard. Lo and behold, he struck natural gas as one might expect for the rich to get richer. He became one of the largest gas distributors in Pittsburgh, and relied on natural gas produced from a hundred wells in and around Pittsburgh, including his backyard. Westinghouse was well versed in the dangers associated with natural gas such as gas users not turning off their gas appliances (lamps, stoves, heaters, etc.) when natural gas pipelines were shut down for repair of breaks and leaks. When pipeline service was restored, an odorless and colorless gas filled homes and shops, threatening to kill those within from asphyxiation, fire, or explosion. Westinghouse put his experience with compressed air to good use and originated a number of patents for enclosing main gas lines in residential areas with a conducting pipe to contain gas leaks, introducing pressure regulators to reduce gas pressure before it entered residences and commercial establishments, and cutoff values to prevent any further flow of gas once gas pressure fell below a set point.
These improvements made Pittsburgh the center of the natural gas industry by the late 1880s with 500 miles of pipeline to transport natural gas from surrounding wells to the city and another 230 miles of pipeline within city limits. Andrew Carnegie, the steel magnate, promoted use of natural gas in steelmaking. Natural gas became fuel of choice for glassmaking, breweries, businesses, homes, and a crematorium. Hundreds of natural gas companies were formed to sell gas to municipalities in Pennsylvania, West Virginia, Ohio, and Indiana with backyard supplies of natural gas. Some of these gas fields were rapidly depleted, forcing a switch to manufactured gas (compressors to move natural gas had to wait for the advent of electricity decades away). Early customers were simply charged a monthly rate for a hookup without a means to measure the volume of gas consumed. When meters were eventually installed, a new business sprang up: renting “gas dogs” to greet meter readers on their visitation days.