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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Natural gas pipeline projects are stalling or dying in the Mid-Atlantic, Northeast and New England regions because of market forces, developers' inability to secure financing, or local opposition to the projects. Given the region's heavy dependence on natural gas for generation, industry observers wonder about the long-term impact on electricity prices if pipeline projects continue to be delayed or cancelled.
Many of these pipeline projects were designed to bring natural gas from the Marcellus Shale to North Carolina, New York, Connecticut, Massachusetts and beyond. Gas production continues to surge in the Marcellus, which lies underneath Pennsylvania, West Virginia, Ohio and Maryland. But options for transporting that gas to end-use markets are dimming.
Gas production in the Marcellus Shale exceeded 16 billion cubic feet per day (Bcf/d) last month, according to the U.S. Energy Information Administration (EIA), the independent statistical and analytic branch of the U.S. Department of Energy (DoE) (Washington, D.C.). That represents a 75 million-cubic-foot-per-day (MMcf/d) increase over February production. At March's rate of production, the Marcellus accounted for about 18% of overall U.S. gas production. Gas production from the Marcellus has surged during the last five years, and industry experts expect gas production from that formation to continue growing.
Click on the image at right to see rising natural gas production from the Marcellus Shale.
One big-ticket project that fell victim to market forces was the planned, $800 million liquefied natural gas (LNG) import terminal, which was slated to be built in Maine. That project, the Pleasant Point LNG Receiving Terminal, on hold since mid-2010, was cancelled earlier this year. Originally proposed in 2004, it pre-dated the U.S. shale revolution.
Eleven years, ago, the widespread assumption was that U.S. demand for gas would outstrip domestic supply, leading to increased imports, either via pipelines from Canada or LNG import terminals. Several LNG terminals that were originally proposed as import facilities have pivoted into export terminals, after horizontal drilling and hydraulic fracturing led to a surge of new domestic gas production. Several other LNG export terminals have secured licenses, and the much-anticipated fallout of LNG terminals has begun, claiming the Pleasant Point project. For more on the LNG shakeout, see March 5, 2015, article -Low Prices, Increasing Global Supply Plague LNG Producers.
Earlier this year, inability to secure financing caused Transcontinental Gas Pipe Line Corporation (Houston, Texas) to cancel its planned, $470 million, 430-mile Atlantic Access Pipeline Project, which would have brought gas from the Marcellus to various places in Pennsylvania. That project was slated to carry gas produced by Cabot Oil & Gas Corporation (NYSE:COG) (Houston), the largest gas producer in the Marcellus.
Inability to secure finances also led to the cancellation of the $1 billion Algonquin Incremental Market (AIM) Pipeline Project in February 2014. That project, developed by Spectra Energy Corporation (NYSE:SE) (Houston), would have expanded the company's existing Algonquin pipeline through the Northeastern U.S.
Another large Spectra project in the region, the $4 billion, 427-mile Carolina Pipeline Project, was placed on hold this past February. That project is scheduled to transport at least 1.1 billion cubic feet of gas per day (Bcf/d) from Bedford, Pennsylvania, to Robeson County, North Carolina.
Yet another large pipeline project in the area that is on hold is the $960 million Commonwealth Grassroot Natural Gas Pipeline, which has been in limbo for two years. The proposed, 200-mile pipeline, being developed by Crestwood Midstream Partners LP (NYSE:CMLP) (Houston, Texas), is scheduled to transport up to 800 million cubic feet of gas per day (MMcf/d) of gas from Lycoming County, Pennsylvania, to Rockville, Maryland.
In addition to projects that have been formally cancelled or placed on hold, there have been news reports that several other proposed gas pipelines in the region, including the Northeast Energy Direct (NED) Pipeline and Constitution Pipeline, have encountered heavy local opposition that could delay their respective kick-off or in-service dates.
Northeast Energy Direct is being developed by Tennessee Gas Pipeline Company (Houston), a subsidiary of Kinder Morgan Incorporated (NYSE:KMI) (Houston). It is scheduled to run between Wright, New York, and Dracut, Massachusetts. According to a recent Associated Press report, the route proposed for the Massachusetts portion of this project so angered local residents that Kinder Morgan then proposed routing that portion through New Hampshire, which irritated residents of the Granite State. People living in the nine towns in New Hampshire that would be affected by the revised pipeline route voted to oppose it.
Another proposed pipeline drawing fire in the area is the Constitution Natural Gas Pipeline, a 120-mile project that is scheduled to carry up to 650 MMcf/d of natural gas from northeastern Pennsylvania to New York and New England. The project, which received approval from the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) late last year, is expected to help the region avoid the natural gas shortages experienced in early 2014, which caused severe price spikes. But in seeking right-of-way agreements with landowners along the proposed route, roughly 20% refused to sign, forcing the developer to initiate condemnation proceedings--never a popular step.
"We know that not all projects that are proposed will get built according to their original schedule," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Typically there are two, if not three, projects proposed for each one that gets built. And the siting options in the Northeast and New England are particularly difficult, as there's not a lot of open land to run pipelines through. Homeowners, businesses and utilities in the Mid-Atlantic, Northeast and New England have a keen need for the gas, and producers in the Marcellus have a keen need to sell the gas they are producing. But getting the gas from Point A to Point B is proving to be a bit of a challenge."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
Many of these pipeline projects were designed to bring natural gas from the Marcellus Shale to North Carolina, New York, Connecticut, Massachusetts and beyond. Gas production continues to surge in the Marcellus, which lies underneath Pennsylvania, West Virginia, Ohio and Maryland. But options for transporting that gas to end-use markets are dimming.
Gas production in the Marcellus Shale exceeded 16 billion cubic feet per day (Bcf/d) last month, according to the U.S. Energy Information Administration (EIA), the independent statistical and analytic branch of the U.S. Department of Energy (DoE) (Washington, D.C.). That represents a 75 million-cubic-foot-per-day (MMcf/d) increase over February production. At March's rate of production, the Marcellus accounted for about 18% of overall U.S. gas production. Gas production from the Marcellus has surged during the last five years, and industry experts expect gas production from that formation to continue growing.
Click on the image at right to see rising natural gas production from the Marcellus Shale.One big-ticket project that fell victim to market forces was the planned, $800 million liquefied natural gas (LNG) import terminal, which was slated to be built in Maine. That project, the Pleasant Point LNG Receiving Terminal, on hold since mid-2010, was cancelled earlier this year. Originally proposed in 2004, it pre-dated the U.S. shale revolution.
Eleven years, ago, the widespread assumption was that U.S. demand for gas would outstrip domestic supply, leading to increased imports, either via pipelines from Canada or LNG import terminals. Several LNG terminals that were originally proposed as import facilities have pivoted into export terminals, after horizontal drilling and hydraulic fracturing led to a surge of new domestic gas production. Several other LNG export terminals have secured licenses, and the much-anticipated fallout of LNG terminals has begun, claiming the Pleasant Point project. For more on the LNG shakeout, see March 5, 2015, article -Low Prices, Increasing Global Supply Plague LNG Producers.
Earlier this year, inability to secure financing caused Transcontinental Gas Pipe Line Corporation (Houston, Texas) to cancel its planned, $470 million, 430-mile Atlantic Access Pipeline Project, which would have brought gas from the Marcellus to various places in Pennsylvania. That project was slated to carry gas produced by Cabot Oil & Gas Corporation (NYSE:COG) (Houston), the largest gas producer in the Marcellus.
Inability to secure finances also led to the cancellation of the $1 billion Algonquin Incremental Market (AIM) Pipeline Project in February 2014. That project, developed by Spectra Energy Corporation (NYSE:SE) (Houston), would have expanded the company's existing Algonquin pipeline through the Northeastern U.S.
Another large Spectra project in the region, the $4 billion, 427-mile Carolina Pipeline Project, was placed on hold this past February. That project is scheduled to transport at least 1.1 billion cubic feet of gas per day (Bcf/d) from Bedford, Pennsylvania, to Robeson County, North Carolina.
Yet another large pipeline project in the area that is on hold is the $960 million Commonwealth Grassroot Natural Gas Pipeline, which has been in limbo for two years. The proposed, 200-mile pipeline, being developed by Crestwood Midstream Partners LP (NYSE:CMLP) (Houston, Texas), is scheduled to transport up to 800 million cubic feet of gas per day (MMcf/d) of gas from Lycoming County, Pennsylvania, to Rockville, Maryland.
In addition to projects that have been formally cancelled or placed on hold, there have been news reports that several other proposed gas pipelines in the region, including the Northeast Energy Direct (NED) Pipeline and Constitution Pipeline, have encountered heavy local opposition that could delay their respective kick-off or in-service dates.
Northeast Energy Direct is being developed by Tennessee Gas Pipeline Company (Houston), a subsidiary of Kinder Morgan Incorporated (NYSE:KMI) (Houston). It is scheduled to run between Wright, New York, and Dracut, Massachusetts. According to a recent Associated Press report, the route proposed for the Massachusetts portion of this project so angered local residents that Kinder Morgan then proposed routing that portion through New Hampshire, which irritated residents of the Granite State. People living in the nine towns in New Hampshire that would be affected by the revised pipeline route voted to oppose it.
Another proposed pipeline drawing fire in the area is the Constitution Natural Gas Pipeline, a 120-mile project that is scheduled to carry up to 650 MMcf/d of natural gas from northeastern Pennsylvania to New York and New England. The project, which received approval from the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) late last year, is expected to help the region avoid the natural gas shortages experienced in early 2014, which caused severe price spikes. But in seeking right-of-way agreements with landowners along the proposed route, roughly 20% refused to sign, forcing the developer to initiate condemnation proceedings--never a popular step.
"We know that not all projects that are proposed will get built according to their original schedule," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Typically there are two, if not three, projects proposed for each one that gets built. And the siting options in the Northeast and New England are particularly difficult, as there's not a lot of open land to run pipelines through. Homeowners, businesses and utilities in the Mid-Atlantic, Northeast and New England have a keen need for the gas, and producers in the Marcellus have a keen need to sell the gas they are producing. But getting the gas from Point A to Point B is proving to be a bit of a challenge."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
