Natural Gas Expansion Projects Hit Obstacles

Utilities in New England have already benefited from thousands of heating oil customers switching to natural gas, and the last thing the Oilheat industry needs is a massive expansion of the region’s natural gas infrastructure. But pipeline expansion appeared imminent this year after New England’s six governors developed a plan to encourage construction of new gas pipelines with the lure of built-in ratepayer subsidies.

It is a nightmare scenario that is intended to connect New England directly to the Marcellus Shale gas wells in Pennsylvania and drive down New England’s natural gas prices, which are considerably higher than what consumers pay in states closer to the source.

But in a welcome bit of good news, the governors’ plan has suffered a last-minute setback. After five of the six New England states approved a plan to petition ISO-New England, the operator of the regional electric grid, to seek a tariff to subsidize energy supply projects including natural gas pipelines, Massachusetts balked. The state Legislature recently declined Gov. Deval Patrick’s request for a Clean Energy Resources Bill that included the tariff proposal.

New England States Committee on Energy (NESCOE), the governors’ energy planning organization, minimized the problem in an announcement on its website, stating, “A brief extension of the process provides Massachusetts state officials time to evaluate options associated with moving forward with other states on regional solutions to the regional energy infrastructure challenges that have significant reliability and economic competitive implications for New England consumers.”

That brief extension might not be enough, however, because there is dissension in the ranks of the Patrick administration. Three members of the Global Warming Solutions Act Implementation Advisory Committee resigned recently, citing differences with Patrick over the handling of energy policy.

The New England governors’ initiative was no slam-dunk, even before the Massachusetts Legislature snubbed Patrick. The Conservation Law Foundation has criticized the governors and NESCOE for excessive secrecy, while the New England Power Generators Association sees the plan as the government interfering in markets.

Meanwhile, a private sector pipeline plan is also running into heavy opposition. Kinder Morgan’s proposed 180-mile pipeline connecting the Marcellus Shale to a terminus in Dracut, Mass., is under intense fire from property owners and conservation groups throughout the state.

These challenges do not mean that natural gas pipeline capacity to New England won’t expand, but they could buy time for heating oil dealers, supported by the American Energy Coalition and the National Oilheat Research Alliance, to defend their turf. Demand for natural gas is growing across multiple sectors – power generation, manufacturing, transportation and, soon, LNG exports – while state and federal regulators are considering new regulations to curb methane emissions. A combination of those factors could drive up the cost of natural gas and eliminate the price disparity that has attracted customers to natural gas.

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