America’s Need for Energy Infrastructure

Mark Green
Posted April 8, 2016

Great discussion this week at a program focused on the role of natural gas in America’s future economy, hosted by the Hudson Institute. The discussion couldn’t have been timelier, given surging U.S. natural gas production and the U.S. Energy Information Administration’s recent projection that for the first time ever, natural gas will be the United States’ No. 1 fuel source for electricity generation this year.

Yet, the natural gas discussion quickly, necessarily, turns into a conversation about building new gas infrastructure – needed to serve areas that for lack of infrastructure are either isolated from the resource or the supply is significantly constrained, impacting utilities, consumers and businesses.

Picture this: During a Q&A segment of the Hudson event, an audience member from Vermont asked why it’s so difficult to get natural gas pipelines into his state and southern New England, even though lots of people seem to want gas service. Spectra Energy’s Richard Kruse:

“It is challenging to build pipelines in New England. It’s challenging to build pipelines anywhere. But it is critical, as we go through the permitting process, that private citizens and businesses step forward and express their desires because the opposition to pipelines, the advocates for alternatives or anything but gas pipelines, are very vocal. … You have to get out there and have your voice heard.”

Being heard is what elections are all about. We’re in the middle of a presidential campaign and also campaigns for Congress and state and local governing bodies. Polling shows Americans overwhelmingly support increased domestic production of oil and natural gas – the primary fuels of our modern way of life. A large majority also says it’s more likely to support candidates who favor more production here at home. In Harris’ survey last fall, 80 percent – 8 in 10 registered voters – said they support increased development of U.S. energy infrastructure. These voices need to be heard – and can be heard if Americans Vote 4 Energy.

The need for infrastructure is acutely seen in New England, where Kruse explained that limited pipeline capacity becomes obvious in peak heating months. Kruse said the Texas Eastern Pipeline, which delivers natural gas from Texas to New York City, and the Algonquin Pipeline, connecting New York City and Boston run full year-round. Kruse:

“There are tremendous challenges in New England. There’s been a tremendous switch to natural gas – that’s good. … The problem is a lack of infrastructure. The challenge is how do you build infrastructure? Just in terms of gas-fired generation, you saw how they were growing in terms of their load on the two pipelines, on Texas Eastern the (power) generators have about 20 percent of their winter peak covered by firm contracts. The rest of it is being used basically on loan by LDCs (local distribution companies). … [B]ut when it gets cold 80 percent of those gas-fired generators, in terms of their usage, is at risk of being interrupted.”

Kruse continued:

“… New England is very competitive from an electric price standpoint with MISO (Midcontinent Independent System Operator) the summer months. In the winter months when the pipeline constraints become predominant because the LDCs are pulling more and more of their capacity back, prices flare up because natural gas is the price-setting mechanism in New England … as gas into the region becomes tighter, prices go up and the region pays tremendously more.”

According to EIA, despite the fact that New York and New England are close to the energy abundance of the Marcellus Shale play in Pennsylvania, New Englanders paid up to 68 percent more for their electricity than the national average in the winter of 2014 – a truer measure, given the mildness of this past winter. The industrial sector paid up to 105 percent more for its electricity than the national average – again, basically because of infrastructure limitations. A study last year estimated that failing to expand natural gas and electricity infrastructure could cost New England households and businesses $5.4 billion in higher energy costs and more than 167,000 private-sector and construction jobs between this year and 2020. Michelle Bloodworth, MISO’s executive director for external affairs:

“We all know we have an abundance of natural gas, but being able to get it delivered to the point of use where it is needed we are going to need a lot more of not only infrastructure but pipeline products and services.”

There are pipeline projects proposed. Spectra’s Access Northeast line would upgrade the existing Algonquin system, providing needed capacity and market area storage. Williams Company and partners are advancing the Constitution Pipeline project that would link natural gas supplies in Pennsylvania with counties in southern New York. The project was approved by the Federal Energy Regulatory Commission in late 2014 but is seeing permitting delays in New York. Delay means delayed energy to the region and delayed opportunity for the workers who would build the pipeline. Peter Stearns of the Laborers’ International Union of North America Local 157:

“We’re talking real-world consequences, where our members will have to scramble to pay their bills and try to maintain their family’s medical coverage. While a handful of environmentalists celebrate the continued quagmire in Albany, our men and women sit at home.”

Infrastructure is energy, jobs and economic growth. An IHS study estimated total oil and natural gas transportation and storage infrastructure investment could total $1.15 trillion over the next decade. They key is moving forward, recognizing the opportunity of energy that’s home-grown, clean-burning, safe, abundant and affordable. Tony Giunta of Nobis Engineering in an op-ed in the New Hampshire Union Leader:

“Because consumers demand power access to power 24-7 as well as low costs, electrical producers choose fuels that are least expensive and most reliable. If you were going to build a power plant in New England today, you would want to power it with a fuel source that is abundant, allows you to run reliably at low cost and with relatively low emissions. As you look for this Goldilocks fuel, power plants located in New England are less than a day’s drive from the Marcellus shale formation, one of the largest natural gas reserves in the entire world.”