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US pipe builders have 'opportunity' to develop tough areas, industry leader says

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Essential Energy Insights - September 17, 2020

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US pipe builders have 'opportunity' to develop tough areas, industry leader says

The potential for natural gas to play a bigger part in the U.S. energy portfolio will continue to drive investment in pipeline projects, especially in regions where politics or market forces have so far restrained such infrastructure, the new chairman of the Interstate Natural Gas Association of America said.

Bill Yardley, executive vice president at Enbridge Inc. and the association's incoming chairman, said pipeline companies are ready to invest in new projects even after most had a tough year on the stock market in 2018.

"Overall, no change in appetite, for sure," Yardley said. "We really do have, as an industry, a lot of opportunity in front of us."

"The demand is truly there," the executive said. "We are seeing it especially, frankly, in some areas that are most challenging to us as pipeline builders." Yardley listed electric power generation, growth for local gas distribution companies and LNG exports among the key sources of gas demand.

The most challenging area for U.S. pipelines might be New England. Yardley noted that Enbridge or Spectra Energy Corp., which Enbridge absorbed in 2017, has had a pipeline project "in flight" there every year for the past 10 years.

"And for the most part, we've had relative success, although it has become more expensive and more trying," Yardley said. "The fact of the matter, though, is demand in that region is increasing. The problems that are mounting really relate to electric generation."

Yardley said Massachusetts officials and other New England leaders must work out a solution to their energy needs and, if they decide natural gas should have a larger role, pass legislation that allows electric power generators to support additional pipeline capacity with firm transportation service contracts, beyond the gas utilities that already form the core base of customers for most New England projects.

Renouncing fossil fuels completely by a certain date might sound good to some in New England, but "the math and the facts are not supporting that," Yardley said. "Something does have to give in the region."

SNL Image

A construction crew puts the final grade on a pipeline right of way.

Source: Federal Energy Regulatory Commission

Yardley made his remarks at a Jan. 10 roundtable with reporters at which the Interstate Natural Gas Association of America chairman for 2019 and INGAA President and CEO Donald Santa Jr. outlined the trade group's priorities for the year. The group will focus on talking about the value of gas infrastructure to lawmakers and the public, maintaining and improving what Yardley and Santa described as the industry's solid record on pipeline safety and cybersecurity, and pushing for permitting changes that help pipelines meet rising gas demand in the U.S. and abroad.

Industry observers have said the U.S. pipeline industry might shift from large, new pipeline projects to lower-profile projects that expand existing lines. Yardley agreed with this but noted that the U.S. pipeline grid grows in stages.

"If you use history as a guide, we have seen over the course of time periods of significant buildout, where you are building out the major arteries, and then periods of time when you are either building laterals off those arteries to serve various loads or attach different supplies, or you are enhancing the actual artery itself through compression," Yardley said. "Now, you can only do that for so long before the laws of physics take over and you can't compress anymore given the steel that you've put in the ground."

"So maybe we do see a period of time where we have compression and some along-the-line ... looping or pipeline enhancements made that aren't necessarily the multibillion-dollar greenfields that we've seen a fair bit of over the last decade," Yardley said. "It's been an extraordinary period for the build-out."

"And it is true that a lot of the areas where we are seeing the growth are areas where we have built major arteries to, right?" Yardley said. "So think about the LNG growth along the Gulf Coast, for example. There are a lot of interstate and intrastate pipelines that traverse the Gulf. It's probably better to build on existing infrastructure and improve that, and it is actually much more friendly to our landowners, as well, than perhaps building a major greenfield."

In a challenging time to build, the Federal Energy Regulatory Commission and other agencies must do a thorough review of pipeline projects, and pipeline developers must meet all the requirements of their permits, Yardley and Santa said.

"Very clearly, given the fact that the pipeline certificates and various permits issued to pipes are challenged on a regular basis, it does highlight the importance of the need for very thorough analysis to build record to support those decisions and support those permits," Santa said.