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Why Our Climate Needs Pipelines



In round numbers, America is currently producing about 90 bcf per day (which is shorthand for one billion cubic feet per day). This, by the way, is up from 75 bcf/d in 2017 - growth of almost 22% in 2 years. Of that, about 30 bcf/d goes to electricity production, 23 to factory and industrial use, 23 to residential and commercial, and 10 to export - half by pipeline to Mexico and half for LNG.

Of that total, about 80 bcf/d comes from the 7 largest shale basins, and 32 bcf/d of that is from the biggest-producing region - the Appalachian Basin.

Now let's look at liquefied natural gas - or LNG - as that is shaping up to be the biggest factor in natural gas infrastructure going forward. We are in the midst of a rapid expansion in the global LNG market. This is being driven not only by low-cost and abundant supplies, but increasingly by huge energy-starved populations, particularly in China and India, trying to raise their standards of living by gaining access to basic energy services. For example, while the average American consumes about 12,000 kWh per year, the average Chinese enjoys about 4,000 and the average Indian only 900 kWh.

Both countries have huge reserves of high-carbon coal, and even though they're trying aggressively to integrate wind and solar, they cannot do so nearly fast enough. So as they grow they will either add gas-fired generation capacity or they will burn coal. Today China and India together have more coal generation capacity under construction than the US has in operation. And theirs is growing rapidly while ours is declining. On current trends, by 2030 China and India will account for 42% of global CO2 emissions, compared to the U.S.'s 12%.

That's why our natural gas wealth, in the form of LNG, can be key to global climate change mitigation. Keep in mind natural gas emits less than half as much CO2 as coal. So let's look at America's potential for LNG exports and what that could mean for production, pipelines and exports, not to mention global CO2 emissions.

Right now US exporters are in the process of a huge build-out of export capacity. Starting from zero in 2016, our LNG export capacity recently grew to about 10 bcf/d, with a couple of major projects just now coming online. Another 4 projects with 9 bcf/d are under construction to come online between 2020 and 2024. Seven more projects that would add another 9 bcf/d have been fully permitted and are awaiting Final Investment Decisions. Still 17 more with 16 bcf/d capacity have been announced or are at some point in the permitting process, from pre-filing to having been issued a Final Environmental Impact Statement by FERC. This total includes 2 projects in Mexico just south of San Diego that will draw their gas by pipeline from the Permian.

That's a huge amount of new capacity. Even if half of it is put in service, and if global demand will absorb their LNG, it could easily drive an incremental 30 bcf/d, or a 30% - 50% increase, in US production over the next seven years.

But with nearly all the current and projected export capacity situated on the Gulf Coast, where will that much gas come from? Surely the Permian, Haynesville, Eagle Ford and Anadarko basins will contribute heavily, because of their close proximity to the Gulf Coast.

Supporting this, nationwide there are 31 major new interstate natural gas pipeline projects either under construction or in the permitting process, with total capacity of 49 bcf/d. Fully two-thirds of that capacity will run between nearby producing basins and the Gulf Coast.

But the nation's monster field is the Appalachian Basin, now producing about 40% of our shale gas. And shale is where the production growth will come from. So if we are going to export that much natural gas, we'll have to get a big share from Pennsylvania, West Virginia and Ohio.

What does that mean for midstream capacity? How will we get another 10 or 15 bcf/d from the Northeast to the Gulf Coast? Most current operating capacity is already fully subscribed. Two big lines (ACP and MVP) now under construction are struggling through permitting purgatory, and in any case their gas is primarily destined to replace coal and supply manufacturing customers in the Middle Atlantic.

So, on the back of the envelope, we will need at least 5 and as many as 8 new greenfield transmission pipeline projects in the 2 bcf/d range to get the job done. Given the difficulty and delays existing projects have experienced, none of this capacity has even been hinted at by prospective operators. Permitting delays and endless litigation have added greatly to costs for developers and their suppliers. For example, the Atlantic Coast Pipeline started life as a $4.5 billion project and is now estimated at $7.5 billion.

Again using ACP as an example, along its path, just about every major permit issued - whether for water quality, air quality, biological, land use or viewshed - has been challenged in courts in the three states it passes through - West Virginia, Virginia and North Carolina. Right now, the project's permit to cross the Appalachian Trail is pending before the U.S. Supreme Court, with the petition for certiorari to be heard in October.

If the 4th Circuit's denial is upheld, the net effect would be to establish the Appalachian Trail as a 2,000 mile blockade preventing additional natural gas from moving from the Marcellus and Utica to the Gulf Coast. The process has been a nightmare and without doubt, other operators are watching closely and assessing whether to start down that path or just do business elsewhere.

To the extent the motivation is to prevent production and combustion of natural gas in order to mitigate greenhouse gas emissions, the effects of success would be just the opposite. We will have prevented our natural gas from replacing coal not only here at home, but in other areas of the world where most of the energy consumption growth is happening, and where most of that growth will served by coal if natural gas is unavailable.

Tying this back to pipeline permitting, I'd like to finish by mentioning a badly needed update to rules for implementation of the Clean Water Act Section 401's provisions for state water quality certification of infrastructure projects.

Last week EPA initiated a proposed rulemaking to clarify the scope and timing of state water quality certification reviews.

The rule provides clarity, consistency and regulatory process certainty, not only to pipeline project proponents, but indeed of any infrastructure project that intersects water. We cannot take full advantage of our natural gas wealth for the benefit of the climate, consumers and the economy unless we build the necessary infrastructure. We should not impede investment in that infrastructure by continuing with a permitting process, that because of ambiguity in the underlying statute, can be applied unevenly from state to state in ways that add risk and uncertainty to a project.

Speaking of constraining access to natural gas here in the U.S., a current situation is playing out in New York where two major local distribution companies have imposed moratoria on accepting new consumer and business hookups to their system. This is because a proposed new transmission line was denied water quality certification, and as a result the LDCs have insufficient supplies to accommodate new customers in the metropolitan New York City area. As a result, real estate development has been impacted. Because consumers are complaining, now some of the same people who demanded the project be stopped are attacking the LDCs for denying new connections and claiming that the needed gas could have come from other unidentified sources.

The case for not erecting unreasonable barriers to the private sector's ongoing investment in natural gas infrastructure is compelling, from environmental, economic and consumer interest standpoints. Increased use of natural gas for power generation has resulted in the US lowering its CO2 emissions back to levels of the early 1990's, a better record than any other major country. Let's keep it going.


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