Can the Energy Industry Get a Piece of the $1 Trillion Pie?

by Christina Nagy-McKenna, Enerdynamics Facilitator

Infrastructure is the new buzzword for 2017. Whether it’s a highway project, bridge project, or water and energy infrastructure project, the Trump administration has sounded the horn: It wants to strengthen United States’ infrastructure to the tune of $1 trillion. What form this large-scale renovation and expansion will take is unclear, however the energy industry is a ready and willing participant. 

Robert Powelson, new president of The National Association of Regulatory Utility Commissioners’ (NARUC), spoke to this point recently at the organization’s winter meetings, stating: “…one of the things NARUC is advocating for is: let’s not forget energy infrastructure.” [1] However, the recent events in Massachusetts concerning the Access Northeast project described below are a good reminder that pipeline expansions must overcome environmental, financial, regulatory, and political hurdles while proving they are necessary for the public good.

Many in the energy industry hope some of the proposed infrastructure investment money comes their way. Gas pipeline companies are already linking shale fields to parts of the East where capacity is tight and winter supply prices are vulnerable to severe price spikes. More is needed, they say, particularly in New England where memories of the winter price spikes of 2014 and 2015 are still fresh. Clean energy advocates are hoping to see new electric transmission lines get built and integrate with renewable projects that reduce the industry’s carbon footprint. The urgency to do both of these is further driven by the closure of coal and nuclear power plants and the christening of new natural gas-fired power plants in their place.

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Source: U.S. Energy Information Administration, 2016

Who pays for new natural gas and electric transmission lines is still up for debate as is exactly how the financing will come together. Officials within the new administration have mentioned tax incentives to stimulate infrastructure spending and possible public-private partnerships. In the regulated utility world, distribution and transmission companies historically have recovered costs from their utility ratepayers, however a recent Massachusetts Supreme Court ruling flatly turned down the idea that electric rate payers fund a natural gas pipeline project. The August 2016 decision put an immediate chill on Spectra Energy’s (now Enbridge) Access Northeast pipeline project. The expansion of the Algonquin pipeline and new LNG storage was to provide enough gas to make 5,000 megawatts of power. After the Supreme Court ruling, utilities Eversource and National Grid pulled out of the project as did four additional area utilities. Enbridge will continue to try build the project, but the uncertainty of the pipeline’s funding has slowed progress. 

The Access Northeast pipeline project uncovered another issue: the tension between those who believe that more natural gas pipelines are needed and those who believe that no new pipelines should be built and that demand side management (DSM) is the key. In this case, the Attorney General of Massachusetts, Maura Healey, not only disagreed that the electric utilities interested in the Access Northeast project should pass the costs onto their customers, she also questioned the need for more natural gas pipeline capacity in the area. She commissioned a research study, “Regional Electric Reliability Options Study,” that found the region could maintain current reliability standards until 2030 without making infrastructure changes.  The study also found that demand response programs and energy efficiency programs would help reduce customer demand while keeping customer risk low. 

Lurking in the background is the strength of the public protests TransCanada's Keystone Pipeline and Energy Transfer's Dakota Pipeline projects faced before being issued permits by the new administration. Even though both pipelines were meant to ship oil, there is a concern in the natural gas industry that its pipelines may be subject to increased environmental scrutiny simply because they too are pipelines like Keystone and Dakota. A Dakota-like protest camp recently arose in opposition to Trans-Pecos, a natural gas pipeline under construction from the Waha Hub in Texas to the Mexican border. [2]

Recently, however, Federal Energy Regulatory Commission (FERC) staff found that Dominion Energy’s Atlantic Coast Pipeline should move forward even though it will mean impacts to the surrounding environment. Opponents do not believe that mitigation measures will make up for the damage, and others have questioned whether the 1.5 Bcf/day of natural gas is necessary. This tension between those who would build and those who would preserve the environment will likely continue. 

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Source: U.S. Energy Information Administration, 2017

Ultimately, pipeline projects that can show they are necessary and in the public interest will likely be built regardless of the new administration’s $1 trillion plan and the failure of the two aforementioned oil pipelines. So far in 2017, before it lost its quorum, FERC certified 7 Bcf/d of pipeline capacity. This is in addition to the 17.6 Bcf/d of pipeline capacity it certified in 2016. FERC certification does not guarantee that a pipeline will be built, thus the industry will need to continue to be aware of environmental, regulatory, and customer issues. 


Footnotes and references:

[1] Shallengerger, Krysti, “NARUC 2017: A Little Less Climate and a Lot More Infrastructure,” Utility Dive, February 16, 2017, available at http://www.utilitydive.com/news/naruc-2017-a-little-less-climate-and-a-lot-more-infrastructure/436334/.  

[2] “New Pipeline Protest Models Itself On Dakota Access Fight, Huffington Post,  January 12, 2017 available at http://www.huffingtonpost.com/entry/trans-pecos-pipeline-protest-dakota-access_us_58754bc4e4b092a6cae388f6.

“Regional Electric Reliability Options Study,” The Analysis Group on behalf of Office of the Attorney General Maura Healey, 2015.

“FERC Certifies Several New Natural Gas Pipelines in 2017,” U.S. Energy Information Administration, March 7, 2017.

“NE Natural Gas Pipeline Capacity Increases for First Time in 6 Years,” Oil and Gas, February 2017, Vol. 244, No. 2.

Moran, Paul, “Northeast Natural Gas Pipelines:  Is More Capacity Needed?”, Oil & Gas, February 2017, Vol. 244, No. 2.

“P&GJ’s 2017 Worldwide Pipeline Construction Report, Oil & Gas, January 2017, Vol. 244, No. 1.

Shallenberger, Krysti, “NARUC 2017:  A Little Less Climate and a Lot More Infrastructure,” Utility Dive, February 16, 2017.

Walton, Robert, “As Utilities Ramp up Gas, Enbridge Play for Spectra Highlights Increasing Value of Pipelines,” Utility Dive, September 16, 2016.

Walton, Robert, “Constitution Pipeline Court Case Could Open Path to More Challenges from Greens,” Utility Dive, November 23, 2016.

Walton, Robert, “Eversource Mulls Pipeline Funding Options Following Massachusetts Court Setback,” Utility Dive, September 7, 2016.

Walton, Robert, “FERC Staff:  Atlantic Coast Pipeline Should Move Forward Despite Environmental Impacts,” Utility Dive, January 3, 2017.

Walton, Robert, “Massachusetts Court Bars Electric Utilities from Charging Ratepayers for Gas Pipeline Construction, Utility Dive, August 18, 2016.

Walton, Robert, “National Grid, Eversource to Pull Out of Access Northeast Gas Pipeline Project,” Utility Dive, August 24, 2016.

Walton, Robert, “New Study Says Atlantic Coast, Mountain Valley Pipeline Projects Unnecessary,” Utility Dive, September 14, 2016.