Danger: Market Access, Storage Challenges Ahead
Market access issues are becoming a major challenge for
transmission and distribution markets, which face unprecedented
growth and increased deliveries, and while it's still unclear as to
who will be willing to finance and construct the required new
facilities, a huge capital investment has to be made just to meet
demand, an industry analyst said last week.
Blaise Poole, who manages strategy and business development for
El Paso Energy Corp., told the International Association of
Drilling Contractors in Houston that the natural gas transmission
and distribution market faces inherent infrastructure problems
because of increasing demand. Fundamental market changes, along
with shifts in U.S. demographics, are creating challenges for the
distributors, he said.
"The rules are changing," said Poole, who has worked with the
National Petroleum Council on market studies. "The operational
aspects of gas-fired electricity generation drives the need for new
services, and that changes the risks for T&D." Restructuring,
Poole said, has changed the roles of market participants - the
LDCs, electric utilities and the marketers - and changed the makeup
of who makes investments in new transmission and distribution.
"Restructuring has resulted in the demise of LDCs and utilities
markets" from the way they were a few years ago, he said.
Restructuring also has led to other changes. "Generators now are
reluctant to enter into long-term contracts because they consider a
long-term contract too risky. Shippers view long-term obligations
as risky too." And because of the hesitation, there's more
hesitation from companies stepping forward to make investments in
The capital investments for new facilities, pipelines and
transmission lines are needed at the rate of about $2.5 billion a
year through 2015 just to keep up with the anticipated demand, said
Poole. High on his list of "to do" are more transmission and
distribution systems and more storage capacity.
"Access will be severely limited in the Rockies and Gulf of
Mexico without them. California has the largest commitment to
pipeline construction, but increased storage demand will be needed
throughout the West Coast and in the Gulf."
Comparing distributors with his drillers in the audience, Poole
told them that while they complained about needing more land to
drill on and the right-of-way access to get the energy out of the
ground, transmission and distribution companies needed the
right-of-way access to "bring it out."
Getting that access, though, is becoming more difficult. Because
of urban sprawl, companies now deal with more rights-of-way issues
than ever before. "We're not dealing with farmland anymore. People
have moved out where we used to be able to obtain access. Now we
are dealing with landowners."
On top of that, he said, "misinformation" sometimes leads to a
public awareness problem, which in turn limits companies' abilities
to build. "There's more restrictive permitting, and that's driven
by environmental and safety concerns."
Without access, companies faced a diminished capability to route
the transmission lines and it has made construction a lot less
efficient. That, he said, has to change, and he suggested that more
coordination by federal agencies could be the answer.
Carolyn Davis, Houston