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Gas utilities managing to grow, even with regulatory and social obstacles

As opposition to natural gas projects gains more attention, utilities who 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.

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Gas utilities in some regions cannot add new customers unless they can access more gas supply, which often requires laying additional pipe.

Source: Federal Energy Regulatory Commission

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.

The company did hit delays in the Federal Energy Regulatory Commission approval process. Democrats on the commission disagreed with the need for the project, a point raised by another regional pipeline system. Republicans at FERC ultimately sided with Spire because the line provided supply diversity and avoided a seismic zone.

"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.

Not having to go through areas of high population density areas and not dealing with "New York or one of those more volatile jurisdictions" also smoothed the process for the STL Pipeline, he added at the Fort Lauderdale, Fla., event.

Gas companies in New York in recent months have said they will have to stop extending gas service to new customers if more supply does not materialize for them. The shortage is tied to New York state's permit rejections for new gas transmission lines. Other utilities in the sector are keeping close watch over whether state regulatory blockades will prevent large-scale infrastructure from being built elsewhere.

"It is a concern. There's no question about that," Jeffry Householder, Chesapeake Utilities Corp.'s president and CEO, said during a presentation at the Financial Forum. "The entire industry is focused."

Chesapeake Utilities has managed to advance expansion projects in recent years, Householder and James Moriarty, the company's general counsel, said at the forum. The company's Del-Mar Energy Pathway pipeline proposal has faced some resistance, but Moriarty said that the fact that the line would displace wood-chip burning as a heat source helped win over opponents. The 11.8-MMcf/d expansion of the Eastern Shore Natural Gas Co. pipeline system in Delaware and Maryland cleared a FERC staff review in April.

More broadly, Moriarty said the company's approach to stakeholder engagement has kept expansion projects out of hot water.

"We haven't had environmental protests to any of our projects. We take seriously our approach to the environment and the communities we serve," Moriarty said at the forum. "We engage broadly with the political leaders as well as with the environmental community."

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The approval process to build a new gas pipeline differs across jurisdictions and communities.

Source: Federal Energy Regulatory Commission

Chesapeake recently decided to pursue another expansion project: the Callahan pipeline, which would be a 26-mile, 16-inch pipe carrying about 148,000 Dth/d in Florida. Aiming to put the pipe into service in the third quarter of 2020, Chesapeake may also build out other infrastructure, such as combined heat and power, in the area to use the gas that the line would bring, Householder said May 21.

Southwest Gas Holdings Inc.'s utility business has been adding customers and building out its system in recent years. John Hester, Southwest Gas Holdings' president and CEO, attributes the successful expansion initiatives in part to collaboration with developers in the company's service territory who are adding gas demand, such as builders constructing a new stadium in Las Vegas.

"Our economies are really growth oriented. … The developers of those projects know that they can't get those going without the proper infrastructure related to energy, and so they welcome the ability to have increased natural gas facilities," Hester said May 22 on the sidelines of the event.

The company also benefits from something that some of the utilities of New York do not: an abundance of transmission pipeline capacity available in the regions where the company operates, he said. "We've got a lot of access to supply that really doesn't require any new additional pipelines for, I think, decades to come."