PCCA Journal|1
st
Quarter 2010
14
sions there dropped 50 percent, and by 2007 they had
essentially ended.
11
Over the long-term, FMI expects growth in the
construction of gathering lines to be directly related to
the upstream gas sourcing and drilling efforts. More
stringent environmental and permitting requirements
will slow or lengthen this effort. According to Neil
Ellerbrook, chairman and CEO of Vectren Corp., “Our
industry will probably see more regulation, especially
in the area of access to new natural gas supply. On
the other hand, given the fact that our customers have
been leaders in energy efficiency and conservation for
the past 40 years, we are well positioned....”
12
Gas Transmission
Transmission and large-
diameter pipe will see 6 to
10 percent growth, particu-
larly to support the natural
gas fired power generation
market. As of fall 2009, 74
natural gas-fired generation
projects valued at more than
$20 billion were scheduled for
construction kickoff during
2010 alone.
13
Many of these
will require significant pipe-
line construction to supply the
facility with fuel.
Much of the current spend-
ing for 2010 is carry-over proj-
ects begun in previous years.
According to Jeff Wright,
director of energy projects
for FERC, 2009 had 172 miles of transmission
pipe approved for construction and was a slow
year compared to 2008, in which 2,140 miles
were approved. Many of the larger projects that
fall under FERC jurisdiction follow multi-year
timelines, and therefore construction activity
cannot always be directly tied to permitting.
Wright said the recent decline is likely a result
of the market catching up from the blazing rate
of permitting, approval, and construction activ-
ity over the past few years, and he is optimistic
that 2010 will be much stronger. There are cur-
rently 2,600 miles of pipeline under review or
in pre-filing stages.
Rock-bottom natural gas prices and expand-
ing domestic supply result in varied construc-
tion activity. Though extraction activity has
slowed as the natural gas price has fallen,
pipelines are still being constructed to support
additional generation capacity from a cheap,
relatively clean fuel source. The various forms
of natural gas have very few or only one carbon
atom, making it the cleanest fossil fuel in terms of
carbon emissions (Exhibit 6). More than 17,000 of the
27,000 miles of pipeline planned or under construc-
tion before 2012 will transport natural gas.
14
Domestic
pipeline construction is driven by low commodity
prices, which slow some distribution construction but
accelerate gas use in power generation. Many 2009
projects, however, have been pushed to 2010 due to the
economic downturn, declining energy demand, and
financial constraints (Exhibit 7). Case in point, U.S.
crude oil production for the month of October 2009
averaged 5.36 million barrels per day, a five-year low
last seen in 2005.
15
Pipeline owners and operators are particularly wary
of the federal government’s more widespread regula-
Market Forecast
Continued from page 13