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New England feels gas pipeline squeeze

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New England feels gas pipeline squeeze

Challenges continue to plague New England natural gas infrastructure development, with implications for pipeline companies, utilities and consumers.

One of the challenges is disagreement among industry factions over an energy solution. An industry veteran proposed that to solve New England's energy woes, pipelines, LNG importers and power generators need to stop fighting one another.

"So far the three sectors seem to be fighting with each other all the time, saying 'we can do it if the other guys just go away,'" Rick Smead, managing director at the analytics and consulting firm RBN Energy LLC, said at the LDC Gas Forum Northeast in Boston. "And that's got to stop."

"The right answer is a triad of pipeline capacity, alternative fuels and LNG," Smead said, observing that each of the three has issues. Pipeline expansion projects have to be the right size to get more gas into the region in winter without being too big or too expensive when considering year-round needs. Oil can only be used as an alternate fuel in limited quantities before it runs into air quality standards and logistical problems getting it where it needs to be. And LNG is expensive to buy on the international market and store for a long time.

Major proposed pipeline projects, Kinder Morgan Inc.'s Northeast Energy Direct and the Spectra Energy Partners LP-led Access Northeast projects have had trouble finding customers ready to commit. "There is a lot of opposition, of course, and a lot of politics," Smead said, "but at the end of the day the big pipes have fallen for economic reasons, not political reasons."

On the side of natural gas consumers, there is disappointment as they watch the pipeline projects turn away and frustration over the lack of solutions for the regional gas market.

"I wouldn't have a guess as to when any of [the pipeline proposals] are going to come into service," said Andrew Price, president and COO of Competitive Energy Services LLC. "They are all significantly at risk for delays."

Competitive Energy Services provides energy procurement and consulting services to cities and commercial, industrial and institutional clients in the Northeast and other parts of North America. After a June 7 gas buyers panel at the LDC Gas Forum Northeast in Boston, Price said he did not see a convenient solution to the New England situation.

"An obvious fix is not in the cards in the near future," he said.

Price expected pipeline development to only get more difficult. He saw pipelines building out of the Marcellus Shale region to the west and south, but none to New England.

Pointing to a project panel the day before, Price observed that almost all of the Northeast and mid-Atlantic proposals covered by representatives of pipeline companies were ones that could be done easily with compression upgrades or other work within existing rights of way. The theme was avoiding greenfield projects "at all costs," he said.

There is a geographical disconnect between New England's situation and the finding that, based on pipeline data, U.S. gas pipeline companies continue to spend billions of dollars on new routes and expanded systems to carry more gas from the hottest shale plays, including the Marcellus and Utica shales. An S&P Global Market Intelligence analysis of pipeline data showed the total value of U.S. gas pipeline infrastructure grew by 3.6% in 2016, continuing an overall rising trend since the shale boom began to reshape the nation's infrastructure needs. The value of gas transmission assets rose to almost $139.1 billion in 2016, up nearly $20 billion since 2011, according to data collected by the Federal Energy Regulatory Commission. The growth in the total value of U.S. gas storage and processing infrastructure slowed in 2016 compared to the past two years, but the total value of storage and processing plants also continued an upward trend.

Gas utilities across the country have also been feeling the pressure. They face increasing business risk as the world makes an effort to release less carbon into the atmosphere, including potential hits to gas demand and the difficulties of putting transportation infrastructure in place, an energy economist said. Even with the pending U.S. withdrawal from the Paris Agreement on climate change, energy experts at ICF International and other analysts expect much of the country to move toward a lower-carbon model over the next 30 years. Mike Sloan, a principal and senior economist with ICF's energy and resources group, observed that 19 states have greenhouse gas emissions targets and 30 states have renewable portfolio standards for power generation.

Local distribution companies will look much different in this low-carbon world, Sloan said at the LDC Gas Forum Northeast. "The environmental policies that we're talking about in many states — including the Northeast, including the West Coast — [and] Ontario and Canada will have really significant impacts on natural gas LDCs," he said. "And the natural gas LDCs have to be involved in the conversation. [They] need to be aggressively working to ensure that the full impacts on the entire energy system are being accounted for during the policy debates on environmental emissions."

Sloan's list of challenges appears daunting. Building gas transportation and delivery infrastructure, especially in the Northeast, is getting harder and more expensive for utilities and pipelines. ICF projects demand growth in New England to exceed planned infrastructure development, and the consulting firm assumes additional pipeline capacity will be proposed to keep up. The weather risk to gas deliveries in the region will increase over time as gas demand increases, Sloan said, and this should help drive pipeline construction.