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Challenges Mounting as Demand for Appalachian Infrastructure Increases, Panelists Say

A group of panelists on Tuesday from Appalachian midstream companies said state and federal regulations combined with soaring costs and challenging construction are making it increasingly difficult to get pipelines built to serve producers and end-users in the region within a reasonable amount of time.

But as the national economy bounces back, volumes continue to rise in the Utica and Marcellus shales and markets grow in the Mid-Atlantic and New England states, demand for infrastructure is even more pressing now than it has been in recent years, they said.

Those are just some of the reason's Pennsylvania-based UGI Energy Services LLC paired-up with two other companies to launch the PennEast Pipeline, UGI Director of Midstream Development Anthony Cox said. The 100-mile line will begin in northeastern Pennsylvania and end at Transco's Trenton-Woodbury interconnection in New Jersey (see Shale Daily,Sept. 5). An existing power plant and several delivery points in Pennsylvania and New Jersey are being considered. The project's open season attracted 965,000 Dth/d of bids.

Industry and power generation demand, coupled with the roughly 12,000 homes in UGI's service territory that are converting annually from oil, electricity and propane to heat with natural gas helped get the utility-backed project off the ground, he said.

But like others who spoke at Penn State's Natural Gas Utilization Conference in Canonsburg, PA, on Tuesday, Cox said pipeline construction is looking more daunting as demand for infrastructure continues to increase. Along with the factors driving projects in the basin, which Canaccord Genuity in July estimated is home to no fewer than 43 major pipeline projects, a number of challenges continue aligning to slow their progress, he said (see Shale Daily, July 17).

The time it takes to make major projects a reality is considered extremely long by many, Cox said, with anywhere from one to two years or more anticipated to construct a pipeline and get it operating. A large part of that reality, he said, are federal and state regulations. For example, last week UGI submitted PennEast’s preliminary application for FERC approval, but a formal application won't be submitted until next summer, and the company doesn't expect to get final approval from the Federal Energy Regulatory Commission until late 2016.

"And that's just the permitting process," he said. "The actual construction process, by comparison, is the easy, or short part. The regulatory process is extremely long. Then, if the project requires an environmental impact assessment, which ours does, that only adds to the amount of time it takes."

But in Pennsylvania, midstream companies have repeatedly said that building pipelines is no easy task. Jeremy Zeman, manager of commercial development in Pennsylvania and New York for Williams, said his company pays particular attention when plotting a pipeline's course in the state. The steep terrain, rivers and streams that dot the countryside have Williams grading each plot of land on a scale of 1-10 to determine its best course, which is time-consuming but necessary.

The outdoors also plays host to an abundance of wildlife in the state, which Cox said takes extreme care to protect endangered species. With more being added to the list next year, pipeline companies will have to take extra caution during construction operations.

"All these things mean only one thing, and that is in order to build a project, it has to be big," he said. "These projects aren't 200,000 Dth/d, they're 1 Bcf or 2 Bcf a day."

Dante Bonaquist, chief scientist at Praxair, said it costs roughly $200,000 per diameter inch to construct large pipelines. He stressed the importance of virtual pipelines, or alternatives like truck and railroad, that can deliver liquefied natural gas to end-users and help loosen the region's bottleneck.

What's worse, Cox said, is a growing chorus of opposition to pipelines and the compressor stations that help move natural gas through them. He said midstream companies have recently noticed that environmental activists are increasingly turning their attention from horizontal hydraulic fracturing (fracking) to infrastructure projects instead.

"The environmental lobby, the folks looking to increase use of solar and wind, which of course we all support, but we also understand there's limitations, are increasingly moving their fight to the end-use.

"Everybody says, ‘I want clean energy;’ everybody thinks that electricity is clean," he added. "The reality is that there are very few people that understand the connection between when they flip on a light switch,or when they plug something into a wall, and what it takes to get that electricity there. It's not just the pipeline, it goes all the way back to the wellhead. This all part of a bigger picture, but people are part of the picture too when it comes to siting wells and obtaining the right-of-ways for these projects, which are becoming more important."

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