Don't get starry-eyed over all that projected shale-gas.
It's one thing to dig it out. It's another to transport it. And at least
one trade group says that massive amounts of investment must now go
into creating the pipelines that would carry that fuel.
That's a
huge task. But add in the concerns of community organizations that fear
such development would not just disrupt their local ecologies but also
increase the dangers from pipeline accidents. While that angst is
legitimate and must be addressed by pipeline companies, shale-gas has
the potential to supply energy here for the next century.
"The
good news is that the natural gas industry has a proven track record of
constructing and financing this level of infrastructure," says Don
Santa, chief executive of the Interstate Natural Gas Association of America.
Santa's organization commissioned ICF International
to review the country's anticipated pipeline infrastructure needs in a
world where unconventional forms of gas such as shale gas are expected
to make up two-thirds of the total natural gas mix by 2035. It makes a
few assumptions that range from a price of $4-$7 per million Btus as
well as an increase of 1.3 percent in the expected electricity demand
per year for at least a decade.
To get there, the United States
and Canada will require an average yearly investment of $8.2 billion, or
$205 billion over the next quarter century. Santa notes that the
industry has invested $8 billion during a three year period from 2006 to
2010 -- a "strong indication" that it will continue to make the
necessary capital allocations if the regulatory environment permits.
By
2030, the U.S. and Canada will need approximately 29,000 to 62,000
miles of additional natural gas pipelines as well as 370 billion to 600
billion cubic feet of additional storage capacity, says the study. If
the country does not to rise to the challenge, it would create supply
disruptions and price volatility would increase.
But developers
are hard-pressed to invest if the impediments to construction are too
onerous and there is not enough gas to keep the new lines filled to
capacity. Developers also want to make it easier for gas distributors to
enter into long-term contracts that help pay for the lines.
Regulators
are, largely, sympathetic. They are concerned about potential energy
shortages and any subsequent rolling blackouts. To cope, the Federal Energy Regulatory Commission
is trying to get all regulatory agencies to coordinate their schedules
and reviews. The goal is not to subvert the permitting process but
rather, to streamline it.
"To meet the growing demand for natural
gas, the Commission must continue to respond quickly when companies
propose to expand and construct needed pipelines and related
facilities," says FERC. "The Commission has expedited the certification
of natural gas pipelines by having Commission staff actively participate
in projects (that pre-file)."
More conciliation
The
first step for developers is to determine whether new pipelines are
needed and whether the price of natural gas supports construction such
that companies can obtain firm contracts to finance them. The next step
is to propose a route the line will take.
Overall, there still
must not be any significant affect on either the natural habitat or the
landowners who lease their rights-of-way. Those precautions will
inevitably lead to the rerouting of any pipeline system, although in
some cases the federal government may exercise its right of eminent
domain.
Under the best of circumstances, the opposition to new
construction is intense. The process to get the permits and to overcome
the environmental and zoning questions is lengthy and expensive. And in
the aftermath of a gas pipeline explosion that killed 7 people in
Northern California a couple years ago, the outcry for reforms has
magnified.
"The American public is apprehensive about natural gas
pipelines - and understandably so," says Santo, with the Interstate
Natural Gas Association of America. "One accident is too many. Still,
despite recent accidents, pipelines are the safest way to transport
energy -- safer than rails or roads -- according to the U.S. Department
of Transportation."
Generally, the need for new gas supplies and
the infrastructure to carry the gas remains a top priority. Achieving a
consensus among stakeholders is key. Shale-gas producers are at the
heart of this debate and have been asked to be more conciliatory and
share the chemicals they are using to drill. Likewise, the pipeline
developers that will transport the fuel must acquiesce to safety and
environmental concerns. Only then can the natural gas sector fulfill its
promise.
EnergyBiz Insider has been named Honorable Mention
for Best Online Column by Media Industry News, MIN. Ken Silverstein has
also been named one of the Top Economics Journalists by Wall Street
Economists.
