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July 15, 2019

What Happens When Pipelines Aren’t Built? Energy Prices Rise

In an investigative article last week, The Wall Street Journal noted, “U.S. [natural] gas production rose to a record of more than 37 trillion cubic feet last year, up 44 percent from a decade earlier. Yet the infrastructure needed to move gas around the country hasn’t kept up. Pipelines aren’t in the right places, and when they are, they’re usually decades old and often too small.”

The practical result of this problem is that natural gas prices are uneven and unpredictable around the country. In Texas, for example, where pipeline infrastructure is plentiful, prices “dropped as low as negative $9 per million British thermal units—meaning that producers were paying people to take it off their hands.”

In other places, including New York where lawmakers have placed severe restrictions on pipeline construction, prices are much higher. The Journal notes, “Around New York City, the dearth of gas has cast uncertainty over new developments and raised fears of stifling economic growth.”

National Grid PLC, which serves parts of the city, reportedly stopped processing new customer requests in May 2019 after state officials denied the company a permit to add capacity to a supply line. Keith Rooney, director of community and customer management for the company, has said the decision to deny the permit “will basically put economic growth at a halt … It’s going to start with the big customers and go all the way down to mom-and-pops.”