Pipelines

Jim Willis on NGL Pipelines
Editor & Publisher, Marcellus Drilling News (MDN)

[Editor’s Note: Pipelines are needed to ensure energy supplies and avoid the crisis Europe has brought upon itself but elitist special interests have connived to thwart them.]

According to a Bloomberg article, the energy crisis that’s led to electricity shortages and blackouts in Europe and Asia may be heading for the U.S. Utilities in New York and New England are warning customers to expect higher residential heating bills this winter due to surging global natural gas demand and prices. The fact is the U.S. has plenty of natural gas. The problem with high prices and potential outages is lack of pipelines to flow natural gas from where it’s extracted to where it’s used.

You won’t see pipelines mentioned in two of the three stories we excerpt below, but the truth is lack of pipelines is the sole reason for higher gas and electric prices in New York State and New England. Cheap, abundant, clean-burning natural gas is plentiful in Pennsylvania and could be cheaply transported to NY and New England–except the politicians in those states have repeatedly rejected new pipelines. Now they get to reap the bitter seeds they’ve sown.

From Bloomberg (emphasis added):

The energy crisis that’s led to electricity shortages and blackouts in Europe and Asia may be heading for the U.S.

Electric companies are alerting customers about winter price hikes and an energy hedge fund warned of potential gas shortages. Ernie Thrasher, chief executive officer of Xcoal Energy & Resources LLC, said utility executives have told him they’re anxious that fuel shortages this winter could trigger blackouts.

“These utilities are worried the assets that they have can’t get enough fuel,” Thrasher said in an interview. “There are people of high authority at large utilities that are deeply concerned.” He declined to name the companies, saying they come from almost every region in the U.S.

The global economic recovery from the pandemic has driven up demand for power, triggering shortages and higher prices for natural gas, especially in Asia. That’s prompted utilities to use more coal, which as a result is also now in short supply around the world. U.S. utilities are switching away from gas and expected to burn about 23% more coal this year.

The U.S. has enough gas to get through a normal winter, said James Shrewsbury, co-chief investment officer of e360 Power LLC, a gas and power hedge fund in Austin, Texas. But sustained low temperatures could create gas shortages. “If we get a prolonged cold this winter, there will be problems.”

Increased demand is bumping up against mine output that’s been falling for years. The growing urgency to fight climate change has made suppliers reluctant to increase production capacity for the dirtiest fossil fuel. Now, U.S. utilities’ stockpiles are shrinking and it’s not clear whether U.S. miners will be able to meet their increasing calls for more fuel.

Power producers including Duke Energy Corp. are already warning customers that bills will spike this winter. Duke’s Piedmont Natural Gas unit said Tuesday that high gas prices and low production will raise customer bills by about $11 a month in North and South Carolina. And Xcel Energy Inc. told Colorado regulators last month that its natural-gas customers will also see price hikes of about $11 a month due to tight supplies, an increase in gas exports and damage from Hurricane Ida.

A representative for Edison Electric Institute, the trade group for U.S. investor-owned electric utilities, didn’t respond to a request for comment.

The New York State Public Service Commission is monitoring utilities in the state to ensure they have enough fuel this winter but said it expects they’ll be in position to meet demand.

“The utilities have hedged approximately 70%” of their residential electricity needs, which should protect against price swings, the agency said in a statement.

From NGI’s Daily Gas Price Index:

Utilities in New York and New England are warning customers to expect higher residential heating bills this winter amid surging global natural gas demand and prices.

National Fuel Gas Distribution Corp. said Thursday that for its residential customers in Western New York, it expects the average winter heating bill, i.e. for November through March, to be $714. This is up 43% from last winter’s $498 average, when temperatures were about 10% higher than normal, the National Fuel Gas Co. subsidiary said.

“Market prices for natural gas supplies have increased significantly from the historic lows experienced in the winters of 2019-2020 and 2020-2021,” the company said, citing that New York Mercantile Exchange natural gas pricing for winter delivery recently topped more than $6/MMBtu. This is more than double last winter, when prices averaged under $3.

“This rise – driven by several economic factors, including global demand for domestically produced liquefied natural gas, disruptions in domestic production, and lower-than-average national storage inventory levels – has caused an increase in the cost of natural gas purchased and placed in storage by the utility to meet customer heating needs for the upcoming winter,” the company said. “As required by state regulations, the utility is required to purchase sufficient quantities of reliable, least-cost natural gas supplies to meet customers’ demands during a colder than normal winter.

“Natural gas supply costs are passed along to customers dollar-for-dollar with no mark-up or profit to National Fuel.”

Again, it’s lack of pipelines, not lack of supply, that is causing higher prices.

The following Reuters story *does* mention lack of pipelines as contributing to the problem:

New York utility regulators said on Thursday the state’s utilities will have enough natural gas and power to meet demand this winter, but that energy costs will likely be higher this year than last due to higher commodity prices.

The New York State Public Service Commission (PSC) made its comments as natural gas prices around the world have soared to record highs, prompting some manufacturers in Europe to shut operations and power shortages in several Chinese provinces.

On average, a residential customer using 600 kilowatt-hours (kWh) per month is expected to pay about $43 per month for supply, but the amount varies by utility, the PSC said.

Meanwhile, the average residential customer using 740 therms of natural gas can expect to pay about $935 from November through March, up from last winter, which was milder than normal.

The PSC said that between financial hedges and gas held in storage, gas utilities have hedged approximately 53% of their estimated statewide customer needs.

The PSC said it will closely monitor areas of the state where demand is growing at a faster pace, and where existing distribution systems are becoming constrained.

Some in the energy industry have criticized the state for causing those gas constraints by not allowing gas companies to build new pipelines in recent years, including Williams Cos Inc’s (WMB.N) proposed Constitution pipe from Pennsylvania to New York and the Northeast Supply Enhancement in Pennsylvania, New Jersey and New York.

Both of those projects would have boosted the state’s ability to pull in more gas from Pennsylvania.

The PSC also said it contacted power plant owners in Southeast New York with about 12,000 megawatts (MW) of dual fuel generation and found the companies increased their on-site fuel reserves and have firm contracts with fuel oil suppliers.

There’s no short-term fix for installing new pipelines. A backup plan that would help meet demand in NY and New England *this winter* would be to allow LNG to be shipped via special rail cars. The Trump administration approved such a system. As soon as bumbling Biden seized power, he axed the LNG-by-rail plan (see What Biden’s First Two Days on the Job Mean for the O&G Industry).

We hope NY and Boston enjoy paying sky-high prices this winter for energy, and sitting in the dark on some cold winter days.

Editor’s Note: I bolded a paragraph in two of the stories above quoted by Jim, so as to illustrate some key elements of the approaching energy crisis. First, note the Edison Electric Institute offered no comments. That’s because it is part of the problem. it represents the non-competitive monopolistic side of the electricity generation industry; the grifters who hope to suck off the public teat. I also highlighted the paragraphs in the Reuters story commenting on the Constitution Pipeline and the NESE project. There is now also the PennEast and, before all these, the Kinder Morgan pipeline to New England. And, the Northern Access Pipeline still languishes. All these projects faced organized opposition from gentry class special interests using shills such as Delaware PovertyKeeper a/k/a Riverkeeper to do the dirty work as they sought to grab land, power and profits in the form of green government rent. They haven’t cared what would result.

Where have all the pipelines gone?
Rich men have killed them everyone.
Oh, when will they ever learn?
Oh, when will they ever learn?

For more great articles on natural gas development every single day, subscribe to Marcellus Drilling News using this convenient link.