The national thirst for natural gas requires more infrastructure — pipelines, storage and processing facilities. A new study, in fact, says that both the United States and Canada will require annual investments of about $26 billion a year over 15 years to meet its energy needs.
Like all infrastructure projects, those orientated to natural gas aren’t any easier to get permitted than those tied to generating and transmitting electricity. But natural gas has gained some market favor over the last decade, namely because it is replacing coal as a primary fuel for electric generation. As such, producers need to get the commodity from point-to-point and to be able to store it until it will be consumed.
“We saw a need to reexamine infrastructure needs in light of significantly lower commodity prices,” said INGAA Foundation President Don Santa. “While exploration and production activity may dip temporarily because of lower prices, we still will need significant capital investment, particularly in natural gas midstream infrastructure.”
“This report shows a vibrant natural gas market in the future, and this creates the need for additional midstream infrastructure to deliver affordable natural gas to consumers,” Santa adds. “The good news is that the natural gas industry has a proven track record of constructing and financing this level of infrastructure.”
The analysis, performed by ICF International, assumes shale gas will make up two-thirds of the natural gas mix by 2035. Prices, it says, should go no higher than $7 per million Btus. They are now in the $2 range, although the winter heating season is over. In January 2017, they are anticipated to in the $3 range.
By 2030, the U.S. and Canada will need approximately 29,000 to 62,000 miles of additional natural gas pipelines as well as 370 billion to 600 billion cubic feet of additional storage capacity, an earlier ICF study had said. If the country does not to rise to the challenge, it would create supply disruptions and price volatility would increase.
But developers are hard-pressed to invest if the impediments to construction are too onerous and there is not enough gas to keep the new lines filled to capacity. Developers also want to make it easier for gas distributors to enter into long-term contracts that help pay for the lines.
But as New York has recently shown, getting pipelines permitted is a difficult task. Last week, the New York Department of Environmental Conservation voted down a permit to build the 124-mile Constitution line that would connect the state with Pennsylvania. Regulators said that there were too many sensitive water bodies along the route.
Federal regulators, however, are sympathetic. They are concerned about potential energy shortages and any subsequent rolling blackouts. To cope, the Federal Energy Regulatory Commission is trying to get all regulatory agencies to coordinate their schedules and reviews. The goal is not to subvert the permitting process but rather, to streamline it.
“To meet the growing demand for natural gas, the Commission must continue to respond quickly when companies propose to expand and construct needed pipelines and related facilities,” says FERC. “The Commission has expedited the certification of natural gas pipelines by having Commission staff actively participate in projects (that pre-file).”
Undoubtedly, the debate is tinged in politics, with those believing that the nation ought to rely more on green energies are quick to say “no” to more natural gas infrastructure. But those who think that the natural gas is both America’s newfound gold and a critical replacement to coal-fired power say that the investments are necessary. Despite their position of strength, natural gas producers and pipeline developers will need to come to the table, listening to the needs of critical stakeholders and making key concessions.
Ken Silverstein is editor-in-chief of Business Sector Media, publisher of Environmental Leader and Energy Manager Today.
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