Getting gas out of the ground is all very well, but to get it to the consumers, you need pipelines and these – especially in the prolific Marcellus area – are few and far between. As cash-strapped operators press for more pipelines to get their product to market, pipeline construction has become a new battle ground between the industry and anti-fracking groups. With the recent spate of regulatory obstacles it seems that environmentalist are gaining ground. The post-Keystone world seems an increasingly hostile place for pipeline operators.
Here are three pipeline projects which hit regulatory hurdles just last week:
One of the major pipeline projects to connect Marcellus Shale with huge demand centres in Boston and the rest of New England is the Constitution Pipeline backed by Williams Partners and Cabot Oil and Gas. The 124-mile pipeline was to have been completed in 2015, but suffered years of delay as it struggled to obtain necessary regulatory approvals.
Finally, on April 22, the project was as good as killed off when the New York state Department of Environmental Conservation denied key permits to the pipeline project, arguing that the pipeline does not meet the state’s water standards. William Partners said it’s considering whether to appeal the decision.
“We are very disappointed by today’s decision,” the company said in a statement. “We remain absolutely committed to building this important energy infrastructure project. We are in the process of analysing the stated rationale for the denial. Once that review is complete we will assess our options, which may include an appeal to the U.S. Circuit Court of Appeals.”
Atlantic Sunrise Pipeline
The Atlantic Sunrise pipeline is another pipeline backed by Williams and an extension of the 10,000 miles-long Williams-operated Transco system.
The Atlantic Sunrise project includes construction of 197.7 miles of new pipeline, most of which would be in Pennsylvania, and designed to move Marcellus Shale gas from Northeast Pennsylvania as far south as Alabama. The new lines would cross through ten Pennsylvania counties.
On Thursday, the project won preliminary approval from the Federal Energy Regulatory Commission, however this regulatory success was quickly marred by a federal lawsuit filed on the same day by environmental groups objecting to the pipeline.
The Delaware Riverkeeper Network has challenged state water quality permits in federal court, filing a lawsuit on Thursday in the Third Circuit Court of Appeals calling the Pennsylvania Department of Environmental Protection’s issuance of water quality certificates for the Atlantic Sunrise project a violation of the federal Clean Water Act.
NEXUS Gas Transmission Project
The third pipeline that came across opposition in recent days is the NEXUS Gas Transmission Project – ran by DTE Energy, Enbridge Inc. and Spectra Energy. The 255-mile pipeline is to transport Appalachian shale gas to consumers in northern Ohio and southeast Michigan, as well as hubs in Chicago and Ontario.
Washtenaw County commissioners have opposed the pipeline on the grounds that it’s unnecessary and would have negative environmental, health and economic impacts. On Wednesday, the county board voted 6-1 in favour of a resolution opposing the NEXUS pipeline which would cut through residential areas and areas of natural beauty.
“In many parts of Michigan and Washtenaw County, recovery in home and property values are just starting from the previous market crash,” the resolution states. “With 4 existing pipeline corridors of various commodities already running through the county, additional pipelines would only contribute to property values once again declining in the areas impacted.”
How will all this impact natural gas prices in the U.S.? It’s not clear. On the one hand, the current shortage of pipelines to get Marcellus shale gas from the wellheads to consumers means rock bottom prices for producers. On the other, as Reuters points out, for those who do manage to get their gas to market, the shortage of pipelines may mean that they get better prices at the consumer end.
UBS and Raymond James say recent delays to key pipeline projects in the Marcellus in Pennsylvania and West Virginia will prevent trapped gas getting to the energy-starved upstate New York and New England winter-heating markets, cutting U.S. output by more than many expect and tightening supplies.
“The continual string of regulatory road bumps plaguing pipeline projects slated to burrow through the Empire State add another layer of bullishness to 2017 gas sentiment,” Raymond James analysts said in a note last week.
The analysts believe that the inability for many of the producers to get their product to market will mean that they will be forced to cut production. They expect production to decline in 2017 by about 1-2 billion cubic feet per day (bcfd) from 2016 due in part to the slowdown in new pipeline takeaway capacity from the Marcellus.
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