While natural gas pipeline expansion remains a critical part of building today’s U.S. infrastructure, it would appear that the announcement of numerous pipeline projects has calmed the anxiety of the industry, as attention is now focused on securing regulatory approvals for the proposed projects.
According to the 2015 Black & Veatch Strategic Directions: U.S. Natural Gas Industry report, the survey showed that compared to the previous year, the urgency expressed by respondents for adding incremental pipeline capacity dropped off in every major market area. Urgency dropped by nearly 18 percentage points for New England, 14 points for the Mid-Atlantic and nearly 10 for the West Coast.
“There has been conflicting information, particularly coming from New England, where different studies have frequently come to varying conclusions about the need for capacity,” said Denny Yeung, Principal Consultant for Black & Veatch’s management consulting business. “It may also be that respondents perceived ‘incremental’ as something in addition to the various major projects that have already been announced.”
New England is still ground zero of pipeline capacity shortage, identified by nearly 60 percent of respondents as having the most critical need of incremental delivery capacity over the next five years, with the Mid-Atlantic and Southeast markets immediately following.
Barriers to Construction
The two factors that pipeline respondents felt were the most significant barriers associated with the construction of new pipeline capacity were delays from opposition groups (78 percent) and regulatory uncertainty (68 percent). To provide additional guidance for project participants, the Federal Energy Regulatory Commission (FERC) recently issued a set of guidelines that it expects the pipelines to follow – 1) check with landowners and the community, 2) know who you should notify and 3) learn how to deal with environmental groups.
“If an energy company has not checked the boxes, it is pretty clear that FERC is not going to process the application to build the pipeline,” Yeung said.
At the same time, the interstate pipeline industry is pushing back against the noisy opposition, rather than letting the activist groups monopolize the story unchallenged.
“Industry associations are finding new ways to reach the public, such as the use of social media and other venues, while attempting to reach the landowners first,” said Rick Porter, Director for Black & Veatch’s management consulting business.
Porter said the key lies in educating the public and engaging in community outreach sooner than later.
“Every proposed pipeline project must include a proactive public and community relations effort,” Porter said. “Even FERC experienced the activist push at its meetings and has seen everyday citizens become unexpected interveners in routine filings.”
Favorable Gas Prices Feeding Market Needs
The extended favorable pricing of natural gas relative to other energy sources continues to feed the demand for increased deliverability of gas to fuel-hungry markets, Porter said. Satisfying this demand is limited by both the takeaway capacity from producing regions and the deliverability to consuming areas. Thus, it is no surprise that expansions of mainlines and laterals on the interstate pipeline system are identified by industry participants as the type of capacity most needed to serve emerging gas demand.
“The need for incremental takeaway capacity in the Mid-Atlantic market is centered on the projected growth of the Marcellus and Utica shales,” Porter said. “Lower oil and gas prices may have slowed drilling activity and dampened near-term expectations, but many survey respondents still expect it to be the most prolific basin by 2020.”
Published originally on Black & Veatch Solutions.
