New England gas pipelines: need versus greed

Brookline residents may have heard about protests over a natural gas pipeline in a rural area or found a diatribe on the needs for or the evils of pipelines. As with many energy issues, information from state governments, industry sources and advocacy groups may be compromised: patronizing, frozen into agendas or blind to practical affairs.

New England gas pipelines: New England has no natural gas resources, and until 1953 it had no natural gas distribution. In Brookline and other urban areas, fuel gas was manufactured by heating coal with water, producing a flammable but poisonous mix of carbon monoxide, hydrogen and hydrocarbons–leaving toxic coal ash. The current New England land-based supply of natural gas, up to 3.6 billion cubic feet per day (Bcf/d), is provided by five long-distance pipelines (listed with delivery capacity to New England):

Name of line Bcf/d Start Sources
Tennessee 1.26 1953 Gulf, Southwest
Algonquin 1.09 1953 Gulf, Southwest
Maritime & NE 0.83 1999 Canada east
Iroquois 0.22 1993 Canada west
Portland 0.15 1999 Canada west

 

Major New England gas pipelines

NewEnglandPipelines2000
Source: U.S. Department of Energy

In addition, New England is served by four ocean import terminals for liquefied natural gas (LNG), with total capacity about 3.2 Bcf/d. However, because of high prices in overseas markets, during 2011 through 2014 only the Distrigas terminal in Everett, adjacent to Boston Harbor, received deliveries. The operator, GDF Suez, had long-term contracts at favorable prices.

A west-to-east pipeline entering through Connecticut was built by Algonquin Gas Transmission Co. of Boston, a partner with Texas Eastern Transmission Co., operating lines from the Gulf and Southwest. A west-to-east pipeline entering through Massachusetts was built by Northeastern Gas Transmission Co. of Springfield, MA, a partner with Tennessee Gas Pipeline Co., also operating lines from the Gulf and Southwest.

Fierce competition over rights to New England territories was resolved in 1953. The former Federal Power Commission (since 1977 FERC, the Federal Energy Regulatory Commission) allowed both companies to operate in separate territories. By that point, they had substantially completed the two pipelines.

The Northeastern line was later acquired by Tennessee Gas Pipeline, now a division of Kinder Morgan of Houston, TX. It is currently designated as part of the Tennessee pipeline system. The Algonquin line now operates as a division of Spectra Energy of Houston, TX. Since 1954, the two lines have been interconnected at Southington, CT, where they cross, tending to limit monopoly power of either company.

New gas pipeline capacity: In recent years, owners of the two largest New England pipelines began new competition, proposing major expansions. As Prof. Christopher Castaneda of California State at Sacramento described in his 1993 book, Regulated Enterprise, during the early 1950s Tennessee Gas Pipeline aimed not only to dominate New England markets but also to export natural gas to Canada.

Under Kinder Morgan management, the Tennessee pipeline company appears to have begun playing the same games again. Its current play, up to 2.2 Bcf/d, most recently called Northeast Direct, has been promoted for over three years to state and local governments and modified at least twice but still not formally proposed to FERC.

Northeast Direct needs major new rights of way. It was first proposed across northern Massachusetts. After strong protests, it was rerouted early this year, partly through southern New Hampshire. As of April, 2015, according to Northeast Gas Association, Northeast Direct had customers for only about 23 percent of the proposed capacity. Excess capacity appears useful mainly to reverse flows along the Maritime & Northeast line, sending U.S. gas northward into eastern Canada, where there are few current, underserved customers.

Proposed and current New England gas pipelines

NewEnglandPipelinesProposed2015
Source: U.S. Federal Energy Regulatory Commission

Instead of one big play, Spectra developed three smaller ones, mostly using existing rights of way for the Algonquin line. Its Algonquin Incremental Market (AIM) was approved by FERC in March, 2015, and is now underway. AIM will provide 0.34 Bcf/day increase in capacity, adding about 37 miles of pipeline and raising compressor power at stations in New York, Connecticut and Rhode Island.

Another Spectra play called Atlantic Bridge, not yet formally proposed to FERC, would add compressor power at two stations in Connecticut and at Weymouth, MA. The latter connects to Beverly, MA, and to the Maritime & Northeast line via the Hubline–completed under Boston Harbor in 2003. Apparently unable to attract enough customers, this spring Spectra reduced proposed capacity from 0.22 to 0.13 Bcf/d. The Hubline was built for north-to-south flow, supplied from Canada, but Atlantic Bridge appears intended to reverse the direction, sending U.S. gas northward, potentially into Canada.

The largest Spectra play is called Access Northeast, also not yet formally proposed to FERC. It would add up to 1.0 Bcf/d through changes along current Algonquin rights of way. New England’s largest two electricity distributors, Eversource (formerly NStar) and National Grid, recently proposed to invest in 60 percent of that project.

Involvement in a long-distance gas pipeline is outside the charters of Eversource and National Grid. They are local electricity distributors, not generation companies, transmission companies or long-distance pipeline operators. It would tend to put them into gross conflicts of interest, selling wholesale gas delivery to generating plants from which they buy wholesale electricity.

More natural gas capacity?: Does New England need more natural-gas pipeline capacity? The most prominent evidence from pipeline companies and their business allies has been electricity price spikes in mid-winter–strong during early 2013, 2014 and 2015.

Monthly electricity prices, Jan. 2010 through Jul. 2015

IsoNeMonthlyHubDayAhead2010to2015
Source: ISO New England data, August, 2015

Long-term contracts caused natural gas to be allocated to heating customers, limiting supplies at combined cycle, natural gas-fired plants that generate the largest share of New England electricity. During 2013 and 2014, ISO New England coordinated “winter reliability programs”–installing burners and filling tanks with refined fuel oil and liquefied petroleum gas at some generating plants.

The ISO New England pilot program in early 2014 was ineffective, but the next one in early 2015 appeared to moderate price spikes. That program was helped by a milder winter and by prices of crude oil falling since July, 2014, which lowered worldwide prices of natural gas and led to renewed ocean imports. The annual average wholesale electricity prices through March 31, from April 1 of the previous year, show the sway of the ISO New England price bulge in early 2014 and the more moderate average prices before and since.
Through March 31, 2011……..$0.051 per kWh
Through March 31, 2012……..$0.040 per kWh
Through March 31, 2013……..$0.050 per kWh
Through March 31, 2014……..$0.071 per kWh
Through March 31, 2015……..$0.050 per kWh

Pipeline promoters claim New England suffers from a shortage in natural gas delivery capacity of 2 Bcf/d or more. However, their estimates are for worst cases, they apply to only 5 to 7 weeks in deep winter and they assume no added ocean imports. Operators of natural-gas ocean import terminals say they have more than enough capacity to supply winter needs and say lower worldwide gas prices make that financially reasonable.

Since spring, Maura Healey, elected last year as attorney general of Massachusetts, has urged caution on gas pipeline projects. Assistant Attorney General Christina Belew of the Energy and Telecommunications Division called the proposed projects “an inefficient expense…units added would be minimally utilized.” Ms. Healey’s office contracted with Analysis Group of Boston for a comprehensive study of “energy resource options to meet [electrical] reliability needs” through 2030, now underway and to be completed by October.

Industry greed: For about 60 years, starting around 1950, New England natural gas prices remained higher than prices elsewhere in the U.S. In the 1970s and 1980s, imports of natural gas to Boston Harbor from Algeria and later from Jamaica proved favorable. Starting around 2010, gas from Appalachian shale began to reduce prices in the Northeast. Recent natural gas prices in New England and New York have often been lower than U.S. averages.

U.S. natural gas prices, September, 2014

NaturalGasSpotPricesFerc20140930
Source: U.S. Federal Energy Regulatory Commission

As oversupply emerged in Appalachian shale gas and prices started to fall, pipeline companies began to see opportunities. In 2013, FERC allowed Millenium Pipeline Co. a capacity enhancement for the Empire line into the New York City area. In December, 2014, FERC approved an application from the Williams Co. of Tulsa, OK, to build a new Constitution pipeline from the eastern Pennsylvania gas fields to Wright Township, Schoharie County, NY–a major pipeline interconnection junction.

In February of this year, Repsol, which has operated the Canaport ocean import terminal for LNG in New Brunswick since 2008, applied for a permit to build an export terminal, at 0.75 Bcf/d. The terminal is connected via the Brunswick pipeline to the Maritime & Northeast pipeline. Declining gas production in eastern Canada could not sustain Canaport exports. Instead, the recent proposal appears to be a year-round opportunity for the Spectra and Kinder Morgan projects to ship gas for international export.

In August of this year, the National Energy Board of Canada awarded a license to Pieridae Energy to export LNG from Goldboro, Nova Scotia. Like Canaport, Pieridae would lack a reliable supply of Canadian gas and need to draw on U.S. pipelines. The U.S. Department of Energy previously approved a permit allowing Pieridae to export 0.80 Bcf/d of U.S. natural gas through its Nova Scotia facility.

Traditionally, pipeline promoters tend to wrap themselves in patriotic garb and promise prosperity, but history indicates they have only been interested in profit. Low prices for Appalachian shale gas and high overseas prices obviously point toward setting up ocean exports from the East Coast. Such a process would couple Appalachian gas into international markets–likely raising prices for New England.

New England is unlikely to be well served by encouraging new natural gas pipelines, when it can probably manage demands for electricity through conservation, increased efficiency, added renewable sources, short-term fuel substitution and ocean imports of natural gas. Utility sponsorship of a pipeline project could be disastrous, loading ratepayers with year-long costs in exchange for only month-long benefits and enriching pipeline promoters through public subsidies–feeding industry greed instead of meeting public need.

– Craig Bolon, Brookline, MA, August 29, 2015


Natural gas in New England, New Hampshire Public Utilities Commission, 2015

Thomas Dukes, The expanding role of natural gas imports in meeting increased gas demand in New England, U.S. Department of Energy, 2000

Paul L. Joskow, Natural gas: from shortages to abundance in the U.S., American Economic Review, 103(3):338-343, 2013

Tux Turkel, Deliveries of liquefied natural gas, Portland (ME) Press Herald, February 1, 2015

New England spoils, in Christopher James Castaneda, Regulated Enterprise: Natural Gas Pipelines and Northeastern Markets, 1938-1954, Ohio State University Press, 1993, pp. 144-166

Tennessee Gas Pipeline div., Kinder Morgan, Natural gas delivery capacity, Massachusetts Department of Public Utilities, June, 2015

Tom Kiley, Regional gas market update, Northeast Gas Association, April 22, 2015

Order issuing certificate (Spectra AIM project), U.S. Federal Energy Regulatory Commission, March 3, 2015

Kinder Morgan confirms anchor shippers for Northeast Energy Direct project, Kinder Morgan (Houston, TX), March 5, 2015

Atlantic Bridge project, Spectra Energy (Houston, TX), 2015

Access Northeast project, Spectra Energy (Houston, TX), 2015

2014 Annual Markets Report, ISO New England, May 20, 2015

Planned pipeline enhancements, Northeast Gas Association, July, 2015

Jon Chesto, Report disputes need for more gas pipelines, Boston Globe, August 23, 2015

Analysis of alternative winter reliability solutions for New England energy markets, Energyzt Advisors (Boston, MA), August, 2015

Winter reliability analysis of New England energy markets, Energyzt Advisors (Boston, MA), October, 2014

Andy Metzger, Attorney General Maura Healey urges caution on building new natural gas pipelines, Springfield (MA) Republican, June 17, 2015

Jay Fitzgerald, Distrigas says fuel deals should prevent future gas shortages, Boston Globe, May 10, 2015

Office to lead regional gas capacity study, Office of the Massachusetts Attorney General, July 6, 2015

Christina H. Belew to Mark D. Marini, Investigation by the Department of Public Utilities into the means by which new natural gas delivery capacity may be added to the New England market, Office of the Massachusetts Attorney General, July 6, 2015

Winter 2014-2015 energy market prediction, U.S. Federal Energy Regulatory Commission, October 16, 2014

Repsol subsidiary files application to import U.S. gas supplies for export as LNG from Canaport terminal, Sutherland, Asbill & Brennan (Washington, DC), February 13, 2015

U.S. DOE export decision moves Nova Scotia LNG project ahead, Platt’s Oilgram, May 26, 2015

J. Craig Anderson, Maine’s plan to lower energy costs too expensive, says consultant, Portland (ME) Press Herald, July 15, 2015

Craig Altemose, Emerging reality of gas infrastructure: destination export, Huffington Post, July 10, 2015

Craig Bolon, New England energy: wobbly progress, Brookline Beacon, January 12, 2015

Craig Bolon, Fall town meeting: pipe dreams, Brookline Beacon, December 4, 2014

Craig Bolon, New pipeline across Massachsetts: gas produces hot air, Brookline Beacon, July 11, 2014

Craig Bolon, Brookline legacies: Olmsted and coal ash, Brookline Beacon, June 6, 2014

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