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Taking Stock of Opportunities In Energy Infrastructure

America's amazing oil and natural gas production growth, and the investment in related infrastructure this has driven, have exceeded anyone's imagination of just a few years ago. We hope you'll take a few minutes to look at the big picture we've painted below, consider its consequences to your business or your job, and recommit to helping ensure this bright future plays out, through your own efforts and your support of EEIA.

Crude oil production is now at an all-time high of about 12 million barrels per day and is forecast to reach 13 million by the fourth quarter of 2019, more than double 2010 production. Growth is driven in part by exports, forecast to reach 4.5 million barrels per day by 2020, growing from essentially zero in 2015 following the end of the export ban that had been in place since 1975.

Similarly, U.S. natural gas production grew by 10 billion cubic feet per day (bcf/d) in 2018 to 89.6 bcf/d, an 11% increase from 2017. The growth was the largest annual production increase in history, reaching a record high for the second consecutive year.

Those records make the U.S. the world's leading producer in both categories, compliments of incredible output growth from U.S. shale.

A second phenomenon has gone hand-in-hand with this result: the growth of energy infrastructure. That story is still playing out, and the numbers are equally amazing.

Oil and natural gas infrastructure are critically inter-connected throughout the value chain. Upstream infrastructure includes production complexes and gathering systems; midstream includes pipelines, compression, pumping and storage; downstream includes LNG and crude oil export terminals, processing plants, power generation and local distribution. Each segment is dependent on all the others.

Infrastructure must expand in lock-step with production growth. Gas, oil and other liquids cannot be produced without the supporting infrastructure to move product from the well-head to the point of consumption, whether in the U.S or the global marketplace. That means more pipelines, storage facilities, export terminals, processing plants, power generation and local distribution systems.

The scale of business opportunity and job creation in building and operating this new infrastructure is staggering, especially in the supply chain, which includes construction, equipment, materials, services and supplies. Here are some rough metrics of that opportunity:

- EEIA is following $85 billion of new investment in 52 major liquids and natural gas pipeline projects, proposed or under construction, totaling 17,000 miles - and this includes only the big projects in the $400+ million range. Contact if you'd like a list.

- We also track another $185 billion of investment in 27 LNG export terminal projects applied for, on the drawing boards or under construction.

- None of this includes countless smaller projects, including pipeline laterals to export terminals, power plants, storage facilities, processing plants, manufacturing facilities, and local distribution systems.

- In a May 2019 report, "Chemical Investment Linked to U.S. Shale Gas", the American Chemistry Council reports $204 billion of natural gas-dependent chemical processing plants under construction, planned or built since 2010, including new facilities, expansions and factory re-starts.

Driving this robust infrastructure investment is the outlook for continuing rapid growth in natural gas demand - for both domestic consumption and export:

- EIA forecasts additions to U.S. natural gas-fired electric generating capacity will add up to 235 gigawatts by 2050, up about 50% from today's in-service capacity of 475 gigawatts, as we continue the switch toward lower-carbon fuels.

- Current generating capacity consumes about 30 bcf/d of natural gas, which means the new capacity additions will require 10 to 15 bcf/d of additional production along with necessary new pipeline delivery capacity.

- Another 15-20 bcf/d of natural gas will be needed to supply fifteen LNG export terminals already under construction or fully permitted, with most coming online between now and 2024. Another twelve projects with up to 17 bcf/d of additional capacity have been applied for.

- Pipeline exports to Mexico, now about 5 bcf/d, have the potential to double over the next several years. According to EIA, existing cross-border capacity, primarily from Texas, already equals 11 bcf/d. Mexican natural gas consumption for power generation and industrial uses continues to grow while domestic production declines. U.S imports will fill the gap as Mexico adds needed new internal pipelines.

- This all adds up conservatively to at least 35 bcf/d of new production on top of the 90 bcf/d of current production - a roughly 40% increase in production over the next 2 to 3 decades. Over half of this will come in the next 5 to 7 years from exports alone.

So, with easily more than $500 billion of oil and gas-driven infrastructure investment in prospect over the next decade, what could possibly go wrong? Here are a few candidates:

- Climate change politics and zero-carbon proponents are gaining strength, resources and political allies throughout all levels of government. The debate around the "Green New Deal" will intensify as the election gets closer. An adverse 2020 outcome isn't out of the question and could put much of this picture at risk.

- Adding to the opposition's deep pockets, Michael Bloomberg recently announced he is spending $500 million to influence state and local policymakers to stop building any new natural gas-fired power plants and retire all remaining coal-fired power plants.

- Opponents are targeting pipelines because they are essential to natural gas and petroleum production and consumption. Tactics include attacking federal, state and local construction permits through court challenges. Several major projects have been brought to a halt.

The irony is that natural gas for power generation has lowered carbon emissions in this country to the greatest extent anywhere in the world - back to levels of the early 1990's - putting the U.S. on track to meet what would have been our Paris climate goals.

US LNG exports can help mitigate greenhouse gas emissions from the world's worst culprits: China and India. China today emits four times more CO2 than does the US, and India's is equal to ours. Both countries' emissions are growing, while ours are declining. But to help other countries emulate our successes, we need substantially more production, pipelines and export capacity here at home.

Add the fact that fast-ramping natural gas plants are essential to bringing intermittent wind and solar generation into the grid. These are strong climate-related arguments for expanding our natural gas production and associated pipeline, generating and export infrastructure.

Yet to be heard from are U.S. consumers increasingly suffering the real-life consequences of their elected leaders restricting pipeline capacity. One of New York's main gas distribution companies, Con Edison, has begun refusing new connections or expanded service in Westchester County and Manhattan. Another, National Grid, has done the same in Brooklyn and Queens. Both cases are largely because the Northeast Supply Enhancement pipeline project's permits have been denied by both New York and New Jersey, and the Constitution pipeline, carrying gas from the Marcellus, has been denied by New York. This is also preventing new natural gas power plants from being developed to replace retiring nuclear and coal capacity, foreshadowing growing energy shortages and inevitably higher costs to consumers.

Look for the debate to continue and intensify as we approach the 2020 elections.

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