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Gas reliability a concern amid New York's hard-line stance on pipelines

New York's decision to deny a permit application for a Transcontinental Gas Pipe Line Co. LLC system expansion sparked worries among natural gas utilities in the state, even as those in other areas find ways to continue growing.

In a May 15 decision, the New York State Department of Environmental Conservation rejected "without prejudice" an application for a Clean Water Act Section 401 certificate submitted by Transco, a subsidiary of Williams Cos. Inc., which showed the state's continued resistance to new pipelines. The agency said Transco failed to show how its 400-MMcf/d Northeast Supply Enhancement project would comply with applicable water quality standards.

"Time and time again we are seeing politics overrule pragmatism," American Gas Association President and CEO Karen Harbert said in a statement. "Lack of natural gas infrastructure in the Northeast means people are expected to rely on other sources of energy, driving costs and emissions up and denying New York families and businesses, and others across the region, access to the benefits American natural gas can provide."

As a result of the decision, National Grid USA said it will not provide natural gas distribution service to new customers in Long Island and New York City service areas until New York state reconsiders its rejection, as the Northeast Supply Enhancement project would serve National Grid utilities.

"While we continue to receive applications for new and expanded firm natural gas service from residential, commercial and industrial customers in Brooklyn, Queens and on Long Island, none will be processed until the permits are received and the project is allowed to proceed," National Grid said in a May 20 email.

National Grid said it remains "cautiously optimistic" that the project will proceed and be ready for service by the winter of 2020-2021. If the project does move forward, utilities will fulfill all requests for gas service in the order they were received, the company said.

Concerns over increasing demand, gas reliability and pipeline constraints have been plaguing the state as New York has been denying permits for several pipeline projects over the last few years as part of its shift away from fossil fuels. This prompted Consolidated Edison Co. of New York Inc. to place a moratorium on oil-to-gas conversions in one service territory early in the year.

Many New York residents applied for natural gas utility service in the months before the Consolidated Edison Inc. subsidiary imposed the moratorium. "Demand for natural gas in the New York City area has increased in recent years, leading to concerns about reliability of service," the U.S. Energy Information Administration said. The federal agency said the demand has outstripped the strong growth in gas production in the Northeast.

Still, as opposition to natural gas projects gains more attention, utilities that move the fuel to customers across the U.S. are still finding ways to expand, often by reaching common ground with the communities where the companies operate, a number of industry executives said.

Spire Inc., for instance, is on the cusp of putting into service its STL Pipeline LLC this year. The 65-mile pipe is largely "demand pull, not producer push," which helped with local support for the project, Steven Rasche, Spire's executive vice president and CFO, said May 22 on the sidelines of the American Gas Association's Financial Forum.

"We were able to show a pretty compelling reason why we needed a diverse supply … into the St. Louis market," Rasche said of the process.

Chesapeake Utilities Corp. also managed to advance expansion projects in recent years, executives said at the forum. The company's Del-Mar Energy Pathway pipeline proposal has faced some resistance, but general counsel James Moriarty said the fact that the line would displace wood-chip burning as a heat source helped win over opponents.