Pipelines should have little trouble complying with carbon policy — analysis

By Hannah Northey, Jean Chemnick | 02/10/2015 12:59 PM EST

A new report that finds only “modest” natural gas pipeline additions would be needed to comply with a national carbon policy could throw cold water on objections to U.S. EPA’s Clean Power Plan.

A new report that finds only "modest" natural gas interstate pipeline additions would be needed to comply with a national carbon policy could address a key concern some regulators and industry executives have raised with U.S. EPA’s Clean Power Plan.

The Energy Department commissioned Deloitte MarketPoint to analyze demands on the power sector and the nation’s gas pipeline complex under a "simple, illustrative" national carbon policy — not EPA’s proposal. The report found that a shift from coal to gas would require an infrastructure expansion that would be "modest, relative to historical capacity additions."

Deloitte reached that conclusion after analyzing three scenarios using the North American Integrated Model: a reference case that assumed no carbon policy, an "intermediate demand case" that assumed a carbon policy would be applied to the power sector, and a "high demand" case that assumed a carbon policy would be applied to both the power sector and accelerated coal-fired generation retirements.


Even under the scenario in which gas demand is high due to coal plant retirements, pipeline capacity expansion would not exceed the rate of construction seen during the past 15 years, according to the report. Specifically, Deloitte found that under both scenarios of increased demand, the United States would need only an additional 42 billion cubic feet per day of gas capacity through 2030. In comparison, the nation added almost 127 billion cubic feet per day of gas pipeline capacity from 1998 to 2013, according to the report.

The need for new interstate gas pipelines will be tempered by the fact that demand is distributed over a broad geographic footprint and that cheaper alternatives — expanding existing pipes, re-rerouting gas flows and using spare capacity — could avoid the need for new interstate pipelines, Deloitte said.

The findings could provide a key talking point as members of the Federal Energy Regulatory Commission delve into the implications of EPA’s climate proposal next week. The EPA proposal has prompted some regulators to question whether enough pipes and power lines will be built in time to replace a raft of coal plant closures.

In its draft rule, EPA assumes that states can run their existing combined-cycle natural gas units at 70 percent, displacing coal-fired generation and cutting emissions. The agency uses this assumption to assign many states tough interim emissions-reduction targets under the rule that would phase in beginning in 2020.

But industry and many states said in comments to EPA that this tight deadline does not allow time for the permitting, planning and construction of new natural gas pipelines that would allow plants to increase their capacity to meet the rule. And EPA released a supplemental document last November asking for comment about whether it should revise its assumptions about what states can achieve through fuel-switching in the near term, a change that would reduce the stringency of the rule in its early years.

Missouri Public Service Commissioner Robert Kenney said at a recent event hosted by the Bipartisan Policy Center that his state would find it difficult to meet EPA’s near-term goal, in part because it would need more time to arm gas plants with additional pipeline infrastructure. "We’ve asked in our comments that EPA consider eliminating the interim goal," he said.

Missouri’s current natural gas infrastructure — both within the state and between states — "is designed to accommodate winter heating loads and doesn’t accommodate generation," he said. EPA should not assume that current pipelines are available to service electric utilities.

But today’s DOE report highlights that an increasing amount of gas is coming online as production increases at shale plays around the country and that existing pipelines are underused and can expand their capacity, a finding that could throw into question whether EPA needs to revise its interim targets to allow more time for interstate pipelines to be built.