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Gas Production Outpacing Pipeline

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The Northeast power grid is the most natural gas-dependent of all US regions, and the Appalachian Basin is setting record highs for gas production. But pipeline construction and expansion projects, bedeviled by regulatory challenges and legal activism, have failed to keep up, and takeaway capacity continues to lag production.

Natural gas now fuels more than half of the Northeast’s growing electricity consumption, but environmentalists in the region have declared war on natural gas and the pipelines that deliver it, stalling projects that could have reduced winter price spikes and supply disruptions.

“There is no question that it is becoming more difficult every year to move projects forward with regulatory siting as a key challenge for all energy infrastructure – not just natural gas,” said Charles Crews, president and CEO of the Northeast Gas Association (NGA), noting opposition to projects ranging from electric transmission lines to wind turbines.

Notable pipeline casualties in recent years include Kinder Morgan’s Northeast Energy Direct project, which was to have added 1.3 Bcf/d of incremental capacity to its Tennessee Gas system, and the Access Northeast Pipeline, which Enbridge sidelined due to “a lack of policies to support project financing in the region.”

In February 2020, Williams and its partners Duke, Cabot Oil & Gas and AltaGas also halted investment in the proposed 650 MMcf/d Constitution Pipeline project, which would have extended 124 miles from Pennsylvania to the Iroquois Gas Transmission and Tennessee Pipeline systems in New York. Despite positive court decisions and permit applications, the developers concluded that “the underlying risk adjusted return for this greenfield pipeline project has diminished in such a way that further development is no longer supported.”

Despite delays and cancellations, pipeline operators continue to chip away at capacity shortages with innovative expansion programs and rare greenfield projects.

But while pipeline expansions continue, albeit more slowly, the Northeast’s aversion to energy projects means most new capacity is going to other regions, and future capacity additions seem as likely to warm homes in Beijing as in Boston.

“The Appalachian Basin remains the most productive shale gas region in the country,” said Crews, whose NGA represents 36 member companies across the six New England states, New York, New Jersey and Pennsylvania.

“Last year, during the COVID pandemic and economic shutdown, US gas production declined by 2 percent, but growth actually continued in Appalachia,” Crews said. “So, the production outlook remains strong, particularly in the current price environment.”

Dry natural gas production from the Appalachian Basin’s Marcellus and Utica shale formations has been growing annually for more than a decade, and monthly production has recently set new record highs.

Production in the region reached 32.5 Bcf/d in December 2020, and it averaged 31.9 Bcf/d during the first half of 2021 – the highest average for a six-month period since production began in 2008 – according to the US Energy Information Administration (EIA).

In fact, on its own, the Appalachian Basin would have been the third-largest natural gas producer in the world for the first half of 2021, behind Russia and the rest of the United States, EIA statistics show.

“Record-high dry natural gas production in the first half of 2021 was made possible by growth in pipeline takeaway capacity that allows natural gas produced in the Appalachian Basin to reach other demand markets …” the EIA wrote in September.

“From 2008 to 2020, total pipeline takeaway capacity from the Northeast increased from 4.5 Bcf/d to 24.5 Bcf/d, alleviating some congestion and supporting higher wholesale natural gas prices in the region,” the EIA said.

Most of the increase in takeaway capacity happened between 2014 and 2020, when pipeline capacity increased by 16.5 Bcf/d, much of which was directed to the Midwest.

For more information www.northeastgas.org