Why The U.S.’ Largest Shale Gas Basin Misses Out On The LNG Boom

Editor OilPrice.com
Sun, October 16, 2022 

Regulatory hurdles are stymieing growth in natural gas production in the Marcellus-Utica basin, the largest U.S. gas-producing region, which is set to miss out on the expected boom in American liquefied natural gas (LNG) exports in the coming years.

Not only is Marcellus-Utica missing the opportunity to export and monetize natural gas in a world scrambling for LNG supply, but it is also unable to provide more natural gas to the regions close to it in New England, analysts and the pipeline industry say.

In one of the most ironic twists in American energy these days, the U.S. Northeast is importing LNG from foreign producers to meet its gas demand.

New England’s predicament is the result of the regulatory hurdles the U.S. states in the Northeast have posed to natural gas pipeline infrastructure, the Interstate Natural Gas Association of America says. The association calls for permitting reform and regional support to pipeline companies that are ready to build infrastructure but have seen a lot of projects delayed and tied up in lengthy court battles, which have swelled costs.


One such project was the Atlantic Coast project, a pipeline from West Virginia to North Carolina along a route that had to pass through the Appalachian Trail in Virginia. In the summer of 2020, despite a major win on the right-of-way issue at the U.S. Supreme Court, the developers of the pipeline definitely scrapped the project due to ongoing delays and major cost overruns.

“This announcement reflects the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States. Until these issues are resolved, the ability to satisfy the country’s energy needs will be significantly challenged,” the top executives of Dominion Energy and Duke Energy said at the time.

Over the past few years, developers haven’t proposed many new gas pipelines in the U.S. Northeast due to permitting issues and bans from states such as New York.

The midstream infrastructure capital has shifted from Marcellus-Utica down to the U.S. Gulf Coast, Kevin Little, senior vice president for natural gas at Macquarie Energy, said during Hart Energy’s America’s Natural Gas conference.

Projects for LNG exports are now being developed in Texas and Louisiana, and despite the fact that greenfield natural gas projects are tough to develop even in Texas and Louisiana, America’s LNG exports are set to double by 2027, Little said.

On the East Coast, the hurdles are greater.

“If you have to get an act of Congress to get your permits to build a pipeline, if you’ve got to go to the Supreme Court and you still can’t build a pipeline, this is not a great environment to build midstream infrastructure,” the expert said, as carried by Hart Energy.

In the U.S., LNG export capacity is growing as new trains at Sabine Pass and Calcasieu Pass came online this year. But in order to continue growing, the LNG industry will need more domestic midstream infrastructure - pipelines - to carry natural gas from production centers to LNG export terminals on the U.S. Gulf Coast and demand centers on the Eastern Seaboard.

More pipeline capacity is also needed for New England’s energy demand, the Interstate Natural Gas Association of America said last month as energy prices spike in the region.

“Without additional energy infrastructure, New Englanders will continue to face uncertainty and the risk of future energy shortages,” INGAA said in September.

“BandAid fixes” to New England’s gas supply such as suspending the Jones Act to temporarily ease receipt of more LNG imports and federal assistance in paying for New England consumers’ energy bills, “are not lasting or affordable solutions to addressing electric reliability concerns,” INGAA president and CEO Amy Andryszak wrote in an op-ed in Boston Herald last month.

“While all eyes have been on Europe for how their energy crisis will play out, the reality is many American consumers face similar reliability issues here at home, particularly in New England,” Andryszak said, but noted that there’s one significant difference between New England and Europe.

“The U.S. is the No. 1 gas producer in the world, and New England is a stone’s throw away from the most prolific natural gas resource basin in the country — the Marcellus and Utica shale formations in Pennsylvania, Ohio and West Virginia,” Andryszak wrote.

“Rather than hoping to get their hands on an LNG tanker when in a bind, New England could expand American energy infrastructure and change course for future generations.”

By Tsvetana Paraskova for Oilprice.com