More natural gas – but can Pa. access the low-cost variety?

February 15, 2017

Guest editorial by Tony Cox, UGI Energy Services, PennEast Pipeline Member Company

Pennsylvania is at the center of America’s natural gas revolution – an era that has brought economic benefits to the state and Greater Lehigh Valley.

Looking ahead to the rest of 2017, natural gas production and usage are expected to increase nationally.

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However, most Pennsylvanians cannot access the state’s natural gas – and lower price – until more pipelines are built to deliver it to them.

Despite low natural gas prices in Pennsylvania’s producing areas, particularly the northeast and southwest corners of the state, production has remained strong.

In 2015, Pennsylvania’s production hit 4.6 trillion cubic feet – roughly 14 percent of America’s total production. While 2016 data are incomplete, through October, production is on pace to exceed 2015 levels.

As natural gas production has climbed, carbon dioxide emissions have fallen. Carbon dioxide emissions from America’s power generation sector are at their lowest levels in 25 years – all thanks to power plants opting for cleaner-burning natural gas, a trend that will continue in 2017 and beyond.

The U.S. Energy Information Administration forecasts natural gas production to increase 2 percent this year and by 3.8 percent in 2018.

EIA attributes the anticipated production increases to “higher Henry Hub natural gas spot prices as well as pipeline build-out, particularly in the Marcellus and Utica natural gas-producing regions.”

While the EIA forecasts higher prices at the Henry Hub, a pipeline nexus in Louisiana, the cost of Pennsylvania natural gas likely will continue to be much less in some areas.

Because of congestion in the existing natural gas pipeline network, most Pennsylvanians are unable to access the gas at the low costs where it’s produced. The lower price of Pennsylvania’s natural gas is only an advantage if more pipelines are built to deliver it to communities in the Greater Lehigh Valley, Philadelphia area and beyond.

Progress is being made, albeit slowly, in pipeline capacity.

Nationwide, EIA reports that nearly 5.9 billion cubic feet per day of capacity were placed into service in 2016. However, significant constraints remain.

Recent local success stories include UGI Energy Services’ Auburn Gathering System. The system is a 37-mile pipeline network in Susquehanna, Wyoming and Luzerne counties that moves natural gas north and south, providing low-cost natural gas to UGI Utilities’ distribution system.

In central Pennsylvania, UGI Energy Services’ new 35-mile Sunbury Pipeline went into service at the beginning of this year. This line not only reinforces local utility customers’ natural gas service along the way, it will support the region’s electric grid once the new 1,124-megawatt Panda Hummel Station is placed into service.

These two projects address regional pipeline capacity, but much more needs to be done. Constraints are evident when there is a wide disparity between prices in the areas where the gas is produced and prices in the populated areas where demand is growing rapidly.

Take the proposed PennEast natural gas pipeline of which UGI Energy Services is a member company. This project was developed in response to significant price differences between natural gas available in northeast Pennsylvania and that available in eastern Pennsylvania and New Jersey.

In fact, natural gas prices in New Jersey have been upward of 70 times higher during peak periods – such as the winter – compared with nonpeak periods, and the price differences in the demand region have been 30 times higher than prices in the production region, a mere 100 miles away, on those same cold days.

The outlook for businesses and families is bright, assuming production remains strong and pipelines come into service to deliver low-cost natural gas to market.

EIA expects natural gas use will increase slightly in both 2017 and 2018. As this increased use of natural gas displaces other fuels, greenhouse gas emissions and air pollution will continue to decline.

In fact, electric power generation sector carbon dioxide emissions are now regularly below transportation sector carbon dioxide emissions – something that hasn’t occurred since the 1970s.

Greater natural gas electric generation also supports the growth of renewables. Between 2017 and 2018, EIA expects utility-scale solar generation capacity to grow by 8.5 gigawatts and wind capacity to increase by roughly 13 gigawatts.

No fuel is better suited to complement solar and wind power generation than natural gas, which can quickly come online when the sun isn’t shining or wind isn’t blowing.

Affordable natural gas will help rejuvenate local manufacturing and attract new employers. Affordable energy is critical for energy-intensive companies and their good-paying jobs.

To this end, Pennsylvania’s new Pipeline Investment Program will encourage the build-out of new distribution lines, as business parks, manufacturers and others can apply for grants up to $1 million to help offset the costs of new distribution pipelines.

Meanwhile, Pennsylvania now boasts 44 public compressed natural gas fueling stations for cars and trucks, including one in South Whitehall Township and others in southeast Pennsylvania.

More stations are on the way, thanks in part to the state Department of Transportation’s natural gas fueling stations project.

From homes to hospitals, manufacturers to fleets and schools to electric generators, natural gas touches nearly every part of our economy. As new pipeline infrastructure is added the next several years, Pennsylvania’s energy success story will continue.