Pipelines in the works

Planning, permitting process under way to get more shale gas to New England



New England wants more natural gas to heat its homes and feed its power plants, and the region is looking southwest to its neighbor in the Marcellus Shale to fill that demand.

The region’‍‍s appetite for fuel was thrown into stark relief this past winter, when frigid weeks marked by storms and polar vortexes drove temperatures down and natural gas prices up.

Part of the problem is that the existing pipelines are already pretty full. Several pipeline projects are on the table to take more shale gas from the Marcellus and other shale plays to the region.

“Gas-fired power plants in the east had to compete for an increasingly limited amount of available pipeline capacity from a system that was already constrained, particularly in New England and New York,” the U.S. Energy Information Administration said in a report on Jan. 9.

About a year ago, representatives from each New England state got together to address “the hole-in-the-doughnut problem,” according to Tom Welch, chairman of Maine Public Utilities Commission.

“New England is surrounded by some very attractive renewable energy in the north and natural gas from the Marcellus in the southwest,” said Mr. Welch, who also serves as a manager of the New England States Committee on Electricity, an organization representing the six New England states on regional electricity matters. The organization plans to put out a formal request for energy infrastructure proposals in the near future, according to Mr. Welch.

The group is working out how much natural gas capacity is needed, but Mr. Welch estimates it will be about 1 billion cubic feet above current capacity. The group said it is also looking at adding new electric transmission infrastructure and other measures to make power generation and heating more reliable.

“Some have suggested that it needs to be 2 Bcf/d and others say nothing,” Mr. Welch said.

Energy prices spiked significantly in New York and New England this past winter.

According to ISO New England, the organization responsible for overseeing the wholesale electricity industry in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, gas prices averaged $19.33 per million cubic feet (MMcf) during December, January and February at the Algonquin pipeline delivery point in Massachusetts — almost double the year-ago average price of $11.28/MMcf.

“In January, the average natural gas price rose to $24.19/MMcf at the Algonquin delivery point, the highest average price in more than 10 years,” the ISO NE said in a report issued in April. “The daily gas price spiked to a high of more than $78/MMcf on a day in January.”

When natural gas wasn’t available, power plants turned to oil and coal to make up the difference.

“We’re burning dirty fuel because we can’t get access to natural gas,” Mr. Welch said.

More than half of New England’s power is generated by natural gas power plants, in addition to its use as a heat source, according to ISO NE. Low gas prices and tougher environmental regulations have prompted more power generators to switch from coal and oil to gas.

 

Projects on the table

 

One pipeline expansion project proposed by Houston-based Kinder Morgan, the largest midstream company in North America, is called the Tennessee Gas Pipeline Northeast Energy Direct Project.

The expansion would include upgrading the company’‍s existing system in Pennsylvania and in New York, Massachusetts, New Hampshire and Connecticut. One section of the project would link the the dry gas region of the Marcellus in northeastern to Wright, N.Y. and then link Wright to Dracut, Mass.

The company is still in negotiations with customers and shippers.

“It will be very significant in terms of size and scope,” said spokesman Richard Wheatley. If the Federal Energy Regulatory Commission approves, the project could be in service by November 2018.

“Depending on customer capacity commitments, the pipeline could be as little of 600 MMcf/d or up to 2.2 bcf/d,” Mr. Wheatley said.

Meanwhile, Houston-based pipeline giant Spectra Energy this month announced new plans to expand natural gas pipeline capacity on its Algonquin and Maritimes systems addition to other projects the company already under way.

The announcement was made to anticipate New England States Committee on Electricity‘‍s request for proposals for new energy infrastructure.

Spectra said it can add up to 1 billion cubic feet per day (Bcf/d) by expanding the Algonquin system, which runs from New Jersey to Massachusetts after connecting to the 9,200-mile interstate pipeline Texas Eastern Transmission. Algonquin then links up with Maritimes, which runs from Massachusetts to Nova Scotia.

“With Algonquin and Maritimes, we serve about 60 percent of the New England gas-fired generators currently,” said Richard Kruse, vice president, rate regulatory affairs and chief compliance officer for Spectra.

“Our biggest suggestion is, based on our footprint, we’re already connected to gas-fired generation, and we can expand along existing rights-of-way in a scalable fashion,” Mr. Kruse said. “If they want 1 Bcf, we can do that. If they want something smaller, we can do that, too.”

Meanwhile, Spectra is already working on two other projects that are closer to completion: the Algonquin Incremental Market and Atlantic Bridge projects that mean to take shale gas to New England.

The Algonquin Incremental Market, which is expected to go into service in November 2016 would be located in New York, Connecticut, Rhode Island and Massachusetts and provide 342,000 Mcf/d. The Atlantic Bridge project is expected to go into service in November 2017 and add up to 600,000 Mcf/d.

Diana Oswald, energy analyst for Bentek Energy in Denver, noted that the first project to go into service is Spectra’s Algonquin Incremental Market project in 2016 , which means there will be little relief this upcoming winter.

“What we saw this winter may be repeated again this winter,” Ms. Oswald said. “Until November 2016, there’s no new project that will provide relief to the market.

“The Marcellus is there, but the pipes are full,” Ms. Oswald said. “And you can’t do a pipeline in six months. It takes roughly three to four years from idea to execution.”

Still, if all four projects announced by Spectra and Kinder Morgan are completed, New England ultimately will see about 4.1 Bcf/d of additional natural gas capacity.

“That’s more than plenty,” Ms. Oswald said. “The demand we have seen for that region is about 4 Bcf/d of peak demand in the winter.”

 

Challenges ahead

 

Still, there are some hurdles to overcome. Among them is the way the energy market works in New England.

When pipelines from the south and the west cannot carry enough fuel to satisfy both electric demand and heating requirements, the priority delivery goes to the heating industry because the utilities have firm contracts in place. Natural gas power plants typically do not have firm contracts and operate on a “just in time” delivery system, according to ISO NE.

Pipelines need firm commitments in place to be built, said Don Santa, CEO of the Interstate Natural Gas Association of America, in Washington D.C.

“This isn’t a business where pipelines are built on speculation, both due to the economics — this is long-lived, high-cost immobile infrastructure — and also due to being subject to rate regulations and approval from the Federal Energy Regulatory Commission,” Mr. Santa said. “You have to prove the need for the pipeline, so you the company has to show there’s commitment for capacity on it from others.”

The New England States Committee on Electricity also is evaluating ways to have the cost of the gas infrastructure paid for by electricity consumers through a tariff.

Such a plan, which has drawn both support and criticism, ultimately would have to be approved by FERC.

In addition, new pipeline projects, especially in an area as densely populated as the northeastern U.S., face backlash from residents who don’‍t want to see such a project cut through their communities.  

Stephanie Ritenbaugh: sritenbaugh@post-gazette.com or 412-263-4910

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