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Danger: Market Access, Storage Challenges Ahead

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 new infrastructure.

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

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