Natural gas producers, suppliers, marketers and buyers – the industry’s gamut – gathered in Boston last week and sounded alarm bells in unity, calling for the construction of vital infrastructure.
Failing to get more pipelines and storage facilities in the works risks a perilous energy delivery disruption, soaring prices and eventually national security risks, industry leaders warned at the LDC Gas Forums Northeast.
“If we expect to be reliable and resilient, we need to address the infrastructure problem,” Kenneth Yagelski, Southern Company Gas’ supply director, said at the forum.
Front month Henry Hub futures settled at $2.881/MMBtu on Friday, down on the day but still near-late spring highs. NGI’s Spot Gas National Avg. finished the week at $1.985, also down on the day but up more than 60% from the start of June trading. Recent bullish progress represented healthy upward momentum heading toward the peak cooling season, participants at the conference said. But prices in coming years could spike exponentially from current levels and cause widespread affordability challenges if new supply routes are not built this decade and early next.
At issue: Energy demand is mounting domestically and globally alongside growing populations, advancing technologies and diversifying economies. While wind, solar and other renewables are broadly expected to play increasingly important roles, they are intermittent sources of energy. In the wake of the Ukraine war and now the surging prominence of artificial intelligence (AI) in the United States, it is abundantly clear that natural gas will long be needed to ensure energy reliability – and to meet both emerging needs and traditional demands to cool and heat homes, several speakers said.
However, many U.S. policymakers, eager to transition away from fossil fuels, have yet to embrace the enduring role of natural gas in what, from a practical view, is bound to prove a decades-long energy transformation, Yagelski and others said. This has resulted in a years-long – and costly – process to get new pipelines and storage facilities in place.
Race Against Time
The window to build infrastructure necessary to meet demand is rapidly narrowing. Without a streamlined approval process, natural gas may not be available in some regions to complement renewables and advancing technologies such as energy-efficient manufacturing systems and in-home appliances. As a result, air conditioners and furnaces could be idled.
“Once it gets cold, all the appliance efficiencies go out the window,” Yagelski said.
Brian Fitzpatrick, principal fuel supply strategist at PJM Interconnection LLC, echoed that sentiment. “It causes me to lose sleep some nights,” he said at the conference.
The solution, according to Fitzpatrick and a long string of colleagues at the event, is to lobby hard in Washington, D.C., and in state capitals for permit reform legislation that could hasten approval processes and usher in a new era of natural gas construction projects. Such efforts have hit roadblocks in recent years, but industry advocates are optimistic that the myriad signs of genuine need for natural gas are steadily swaying lawmakers’ opinions.
PJM operates the electric grid in 13 states across the East, balancing supply and demand. In the mix of energy sources, natural gas overtook coal nearly a decade ago and has only widened the gap since. It accounts for nearly half of PJM’s supply, while renewables make up just 4%, Fitzpatrick said.
He said the United States has an abundance of gas – and producers ramped up to record levels around 107 Bcf/d this year. Lower 48 supply creates room for substantial growth ahead. But demand is rapidly increasing, too, with five new LNG facilities in the works along the Gulf Coast to export liquefied natural gas to, among other areas, Europe. Demand there surged after the continent railed against Russia’s 2022 invasion of Ukraine and largely parted ways with Kremlin-backed energy. Asia and other corners of the world are eager to displace coal with cleaner fuels and also are clamoring for LNG.
At the same time, traditional domestic demand is holding strong while new consumers are entering the fray, adding to energy needs. Most notably, data centers that power AI are popping up around the Lower 48, creating islands of intense energy demand that ultimately will require natural gas to keep power on, Fitzpatrick said.
“We’re definitely seeing a large increase in demand growth,” Fitzpatrick said. “Trying to balance it is very, very challenging.”
‘Important Signals’
Paul Ruppert, president of Berkshire Hathaway Energy’s gas transmission and storage division, put it this way: “Natural gas is the reliability fuel that keeps the lights on.”
Ruppert, who is also chairman of the Interstate Natural Gas Association of America, said at the forum that his firm’s East division saw a three-day natural gas peak winter throughput record in January 2024. It hit an overall all-time high last year.
This year, power generation deliveries in the Northeast for the industry hit record levels in May. Nationally, in 2023, domestic gas consumption reached all-time monthly and annual highs, bolstered by rising demand for power generation, he said.
“These are all important signals” of not only lasting natural gas demand, but increasing long-term need, Ruppert said. “We could talk all day about data centers,” he added.
However, “we’re seeing a lag in very important infrastructure that’s required,” Ruppert said.
Importantly, key projects neared or crossed the finish line over the past couple years, including pipeline expansions in the Permian Basin and the new LNG facilities.
In the East, critically, the Federal Energy Regulatory Commission authorized the Mountain Valley Pipeline (MVP) to begin operations this month. At more than 300 miles in length, Equitrans Midstream Corp.’s MVP can move up to 2.0 Bcf/d of natural gas from Appalachia to an interconnection with Transcontinental Gas Pipe Line Co. LLC (Transco) in Virginia. It began service last week. Transco delivers natural gas through a pipeline system extending from South Texas to New York.
But the MVP project took nearly a decade to complete, and more such infrastructure is sorely needed long before another decade passes, said Steve Bruns, senior vice president of natural gas origination for Tenaska Energy’s marketing arm.
He noted at the forum that, “we anticipate within five years, LNG exports alone will be 27 Bcf/d,” or roughly double today’s levels. In that same span, he estimated production would need to approach 120 Bcf/d – but there is not enough pipeline capacity to deliver that much gas after accounting for inevitable down time for maintenance work.
Blair Hastey, an Enbridge Inc. business development specialist, cited an ISO New England analysis that found winter peak power demand will require nearly as much gas in 2050 as today. More pipes and storage to support flows in periods of high demand are vital, he said.
“It’s extremely critical for us to stay engaged in this conversation,” Hastey said. “We have a lot of work to do.”
