Natural Gas Pipeline Approval

Brian Hicks

Written By Brian Hicks

Posted November 25, 2013

The House recently approved a bill, called the Natural Gas Pipeline Permitting Reform Act, that requires the Federal Regulatory Commission (FERC) to approve natural gas pipeline projects within a 12 month time frame.

But you may not want to get your hopes up too soon.

pipeline obamaPresident Obama has already vowed to veto the bill, and it stands no chance in the Democratic-controlled Senate. Also, the bill does not force the FERC to green-light applications – only to make a more hasty decision that could go in either direction.

Critics believe the bill would actually do more harm than good, since speeding up the process could lead to the rejection of more applications.

However, the bureaucratic process is not exactly known for efficiency and haste. I defer to the Department of Energy’s long, arduous process in approving natural gas exporting facilities.

Supporters of the bill, including Representative Ed Whitfield (R) of Kentucky, cite the East Coast as a goldmine of natural gas supply – especially during the winter season. The Marcellus is proving to be a natural gas treasure trove.

But demand is still quite high, so prices may rise from a lack of supply – which would be a huge benefit to producers. It remains to be seen if companies see enough of an incentive to build permanent infrastructure to satisfy seasonal demand.

Instead of focusing on East Coast demand, one region that needs more attention is in the Bakken of North Dakota.

Drillers there flare a third of natural gas – mostly because there is not enough pipeline infrastructure to store and transport the gas to available markets.

More natural gas pipelines in the Bakken would allow producers to capture the gas and gain an extra channel of revenue for transport to high-demand areas like the East Coast.

But lawmakers also need to think outside of our national borders.

Natural Gas Exports

Prices are rising domestically, but not enough to fully engage the natural gas market. The real income is in exporting liquefied natural gas abroad to places like Asia.

However, Congress can do little in this situation.

Sure, the House could pass resolutions and feel-good legislation demanding the FERC and the DOE approve more projects faster, but only the President has the real clout to put pressure on these agencies to get the ball rolling.

Even if natural gas pipeline infrastructure existed at full capacity, the issue of export approval is another thing altogether.

The White House and DOE will not concede this in the open, but they are placing an unofficial cap on natural gas exports abroad so prices do not soar too high.

Things have changed with the shale oil boom, and the lack of infrastructure is holding us back, particularly in energy-producing havens like the Bakken.

If some Bakken producers were to forge LNG partnerships in Japan (as Dominion Resources (NYSE: D) has done with its Cove Point facility in Maryland) and convert natural gas that would otherwise be burnt into the atmosphere into a liquefied in-demand commodity, this would prove to be a fantastic money-making venture.

Pipeline Investing

Here are some companies that have won approval from the DOE to export to non-FTA countries:

  • Dominion Resources

  • Cheniere Energy (NYSE: LNG)

  • Freeport LNG

However, these approvals are limited, and exports are more of a long-term reach in the future.

But the following companies are investing heavily in pipeline construction – a more accessible change to the energy landscape.

Kinder Morgan (NYSE: KMI) has a pending application with the DOE for LNG, but it is also the largest pipeline gatherer of natural gas in the country – having over 70,000 miles of pipelines in some of the most important energy hotspots, including the Eagle Ford, the Marcellus, and the Haynesville.

Anadarko Petroleum (NYSE: APC) and its partners received the go-ahead in Adams County, Colorado for the construction of a 30-mile pipeline from Colorado to Texas. And this approval will mean eventual completion of the entire 435 mile system.

On the other side of the coast, Sunoco (NYSE: SUN) of Pennsylvania is set to resurrect a decommissioned pipeline that runs under Lancaster County. This pipeline once transported gasoline, but it has been flushed out with nitrogen and is ready for another form of commodity transport once again – this time carrying up to 70,000 barrels of natural gas liquids (NGLs) a day.

Company reps are already surveying the towns of Clay and West Cocalico in preparation. All commodities will be transported from the Marcellus and Utica regions to the borders of Pennsylvania and Delaware.

Further east, Texas-based Spectra Energy (NYSE: SE) won approval from the FERC to transport 800 million cubic feet of natural gas per day from Linden, New Jersey to Manhattan through a pipeline that runs under the Hudson River. Spectra already completed its extension aspirations for the existing pipeline on November 1 of this year, and it will supply 2 million people with heat in their homes.

Even though the House bill is dead in the water, the idea behind the legislation would have increased the chances of more infrastructure to support the new and growing energy economy. Forcing the FERC to make a decision within a year is a reasonable piece of legislation, something that needs to be done as the U.S. increases energy production.

With the U.S. already surpassing Saudi Arabia in liquids production, at this point we are only holding back ourselves.


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