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Thursday, August 30, 2012

New Northeast gas pipeline projects needed; at what cost?

Platts reports that there are more than a dozen natural gas pipeline projects going into service in the Northeast United States by year's end.  While these projects are seen to spread out the supply glut caused by huge increases in Marcellus Shale production, there are still bottlenecks in the distribution system that, combined with weather, are likely to cause continued natural gas price volatility for several more years.  Analysts say that the gap between demand for low-price gas and pipeline capacity is huge.  Platts quotes one industry analyst:  "You probably need 10 times more [pipeline expansions] than that to take a significant chunk out of the price spikes we see during those times of concentrated cold."

Ten times the pipeline may or may not be built, and if built may impact gas prices.  But more pipeline construction will certainly have a more than ten-fold impact on the land and our natural resources.

Site clearing for roads, wells, staging areas, and other infrastructure associated with drilling activity industrializes the landscape.  It profoundly impacts a state like Pennsylvania, where 17 million acres of the state’s 28 million acres are comprised of forests.  Some of that impact, however, is temporary, as well pads and select other disturbances are eventually reclaimed.  When and how that happens - whether and for how long, for example, the wounds on the land are kept open by periodic refracking of wells, and the extent to which sites are sensitively reclaimed – will significantly influence the long term impacts of the shale gas era on Pennsylvania.

But getting shale gas to market, and the market demand for more pipeline and gathering line miles, represents a much more permanent category of landscape change. Pipeline rights of ways in forests, once cleared, stay cleared.

They may shrink a bit from their widths during construction, but they remain as long as the gas flows. They permanently fragment habitat and introduce changes that impact far into a previously intact forest. 

The Nature Conservancy has done some early thinking on what that could mean for Pennsylvania.   The sobering news is that the cumulative impacts from pipeline development in Pennsylvania will likely exceed the impact from well pads and roads. TNC’s preliminary estimates, based on a very conservative case of 60,000 wells drilled over the next 20 years – the number of Marcellus wells alone have been estimated by some at more than three times that amount - are that as many as 15,000 miles of new gathering lines will be built, clearing as much as 120,000 acres of natural habitat and damaging up to 900,000 acres of adjacent forest. Further, at least 1,700 miles of new pipelines are projected, with an estimated loss of 14,000 acres of natural habitat and damage to 50,000 acres of adjacent forest. That totals well over a million acres of forest damaged – over 6% of all forested acres in Pennsylvania - from a very conservative development case.

Pennsylvania’s forests should not pay such a high price to modulate gas prices. And the good news is, there are ways to reduce the impacts.

Smart planning by the drilling and pipeline industry is the key to avoiding and minimizing the impacts of getting shale gas to market.  And it makes business sense.  The International Energy Agency’s Golden Rules for a Golden Age of Gas report estimates that more sensitive environmental planning - minimizing or eliminating environmental risk,  improving efficiency, optimizing drilling and infrastructure costs, and taking advantage of economies of scale - could yield overall cost savings of 5 percent for the gas industry. Saving this money will have the added virtue of saving forests and fields.

Industry leaders are acknowledging the need and opportunity to embrace better planning.  But the market is not waiting. The industry must respond.

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