For Natural Gas in the Northeast, First You Need the Pipe

Northeastern states are suffering from a “natural gas trap,” The New York Times reported last week — one in which residents are forced to weather not only the winter chills, but also the wildly unpredictable market for natural gas supplies. Electricity prices are rising, and to The Times, the blame for that rests squarely on the region’s “extreme reliance on natural gas.”

Of course, we know low natural gas prices have allowed folks across the country to spend less of their hard earned money (billions of dollars, in fact) on heating and electricity. Heck, even President Obama, in his recent State of the Union address, said that we’re producing abundant supplies of clean natural gas, and “nearly everyone’s energy bill is lower because of it.”

Why is the Northeast so different, then?

If we dig a little deeper into the Times’ report, we find a pretty important fact: the need for additional infrastructure, including “the inadequacy of existing pipelines,” is actually the bigger problem. The much bigger problem.

It sounds so darn simple, but it’s worth explaining: To get natural gas to market, we have to build pipelines. And in order to build those pipelines, companies must gain approval from several different regulatory authorities. The most notable of these is the Federal Energy Regulatory Commission (FERC), which requires a very public process that solicits comments from all interested parties. During these comment periods, the commission considers a range of issues, including potential environmental impacts.

It’s also worth noting that the industry is proposing – right now – to build pipelines with literally billions of cubic feet per day of new natural gas capacity. Some of these have gained FERC approval, but others have fallen victim to delays, which in turn postpone construction of the infrastructure necessary to deliver natural gas to consumers.

What causes these delays is really a variety of factors, ranging from all-too-common bureaucracy and institutional stasis within regulatory agencies, to the always challenging task of raising the capital required to finance the projects. But pipeline companies are also met with opposition, typically led by well-funded environmental groups, to literally every project they propose.

Often times, this opposition goes beyond simple NIMBYism and manifests itself in courtrooms, with groups like Earthjustice bringing lawsuits on behalf of a coterie of activists to stop construction. Part of the FERC approval process also includes public comment periods, during which environmental groups flood submission boxes with form letters and assertions of future impacts, regardless of whether those theoretical damages are even plausible.

Indeed, the same groups that have led the charge to stop shale development are also trying to block the pipelines necessary to get that fuel to Northeast families. Their reasoning? If they can’t stop companies from producing natural gas, maybe they can at least prevent them from actually selling it to consumers who want to buy it.

For example, the Northeast Supply Link, proposed by Transcontinental Gas Pipeline Co., would bring natural gas to Pennsylvania, New York, and New Jersey. It has a capacity of 250 million cubic feet (MMCF) per day. But in 2011, as reported by a local newspaper, the Sierra Club did its level best to stop the project:

“Many area residents in attendance as well as a representative from the Sierra Club’s New Jersey Chapter said they are skeptical that there is sufficient demand for natural gas, especially in a weak economy, to warrant construction of the proposed pipeline.” (emphasis added)

Although the project was eventually approved by FERC, this example is instructive. A major environmental organization suggested there was not sufficient natural gas demand in the region to warrant construction of a pipeline. But we know demand has been increasing in the Northeast; in fact, increasing demand is what prompted the latest New York Times report. Right?

Here are some more:

  • The MARC I Pipeline, which would be built by the Central New York Oil and Gas Company, has a stated capacity of 550 MMCF per day. It was also approved by FERC, but not before being challenged by Earthjustice and other environmental groups.
  • The Northeast Upgrade Project, with approximately 630 MMCF per day of capacity, is facing efforts by environmental groups to get a federal court to halt construction. Perhaps bowing to those special interests, U.S. Sen. Bob Casey (D-Pa.) is also trying to force a reroute.
  • During a hearing last fall about the Constitution Pipeline (capacity: approximately 640 MMCF per day), one local opponent went so far as to suggest the project would destroy the United States:

“Kristina Turechek of Oneonta, N.Y., told the panel approval would consign portions of America to a ‘third-world nation’ and turn the nation backward. Other opponents yelled, cursed or called for the arrest of gas industry executives.”

  • Spectra Energy is also in the process right now of constructing a $1.2 billion pipeline (capacity: 800 MMCF/d) that, once finished (Nov. 2013 is the current target), will help feed growing demand in New York City and elsewhere across the metro region. Estimates suggest the pipeline would help save customers more than $650 million per year in energy costs. Amazingly, the project has even earned the full-throated support of the League of Conservation Voters, in addition to picking up Mayor Bloomberg’s endorsement and the support of a dozens of other local civic and labor leaders. Playing to type, and right on cue, the Sierra Club, Food & Water Watch and others of that ilk continue to file lawsuits (all to this point have failed) aimed at stopping construction from moving forward.

These are, of course, only a snapshot of projects and the efforts to oppose their construction. Once in operation (if they are not tangled up in lawsuits), these pipelines alone would increase the region’s capacity by nearly 2.9 billion cubic feet (BCF) per day. To put that in perspective, in 2009, the two large natural gas distribution companies that serve New York City delivered a combined average of about 1.3 BCF per day to the city’s customers.

FERC also maintains a list of major pipelines awaiting approval, and demand is large enough in the Northeast that companies are constantly making new plans to grow regional infrastructure.

This is not to say that environmental groups are necessarily the biggest contributor to the region’s energy woes. To be sure, a diverse energy mix is important, much like the wisdom we gained from our parents that we should not “put all of our eggs in one basket.” The Times report indicates that the same mentality should be adopted by the Northeast.

Nor is it the case that utilities are uninterested in having a diversity of supply, either. Remember, New York has been delaying a decision about whether to allow responsible shale development for four years. A report for New York City, meanwhile, found that “Marcellus Shale gas production will have a significant effect on pipeline flows across the United States and in the Northeast.” Delaying shale development, by extension, places even more unnecessary constraints on the supplies of energy that consumers demand.

Who’s also leading the fight against diverse energy supplies? The same folks who have avoided culpability in delaying, opposing, or even blocking progress throughout the region.

To wit: Riverkeeper, an environmental organization in New York, wrote in the New York Times in 2010 that the state should shut down the Indian Point nuclear plant and replace it with a natural gas-fired plant. Ironically, Riverkeeper is also leading the charge to oppose responsible natural gas development in New York, and has even dispatched people across the country to try to undermine the safety record of hydraulic fracturing. As you probably could have guessed, Riverkeeper has also voiced opposition to natural gas pipelines.

Nationwide, natural gas and nuclear power generate approximately 50 percent of our electricity. But with environmental groups trying to take both of those off the table (along with coal, which generates the bulk of the remaining electricity), how can we possibly expect to meet growing energy demand?

Regardless of the source of the delay, areas such as the Northeast that need new pipelines are not getting them. That’s not because natural gas is a flawed energy option, and it’s certainly not due to a lack of interest in building pipelines. Companies are continuing to explore options for additional capacity – all the while dealing with irrational activist opposition. And given the fluctuating regulatory framework in New York, the barrier of uncertainty also casts an enormous shadow over future investment.

To understand the effect, we need to understand the causes. Unfortunately, The Times chose not to examine the latter, even though that story is clearly worth telling.

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